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09.2007

Massachusetts Beverage Business

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Article By: Andy Crouch

Starting with his eponymously named pub in Baltimore, he has actively worked in the business since 198O. In the mid-nineteen eighties, Sisson decided he wanted to add a brewpub to his restaurant. After determining that Maryland law did not allow for on-premise brewing, Sisson and others petitioned the state legislature to change the law. By 1989, Sisson's was Maryland's first brewpub. By 1995, Sisson left the restaurant business and decided to open the Clipper City Brewing Company, along with a group of investors. Opened in December of 1995, Clipper City now brews several successful lines of ales and lagers, along with a substantial contract brewing operation. In his free time, Sisson writes his own blog of the beer industry and has co-hosted a regular radio program on wine and beer, called Cellar Notes, since 1992.

Clipper City is dedicated to promoting a broad portfolio of beer at the local level, especially in its home market. Named for the clipper ship, first built in the port of Baltimore, the brewery integrates the region's nautical and maritime heritage into its packaging and promotional materials. The brewery now distributes in eighteen states, including Massachusetts.

I recently spoke with him about the Clipper City brands, freshness dating, and why craft brewers should be leery of growing too big, too fast.

ANDY CROUCH How did you decide to move from the pub side to the package side of the beer industry.
HUGH SISSON There were two reasons. First, I really enjoyed my run in the restaurant and pub side - and the place was pretty successful. The hours are really tough and I wanted to get into the manufacturing side because I foolishly thought that was going to simplify my life. The hours are just as long, I just start a little earlier in the day and end a little earlier in the evening. So I don't know that I've improved my quality of life. It's been an interesting transition. In my heart of hearts, I'd like to find some way to get another pub. I underestimated the value of that as a marketing platform for the brand. That would bring me full circle.

AC By my count, Clipper City has three sets of brands.
HS We do. We have three distinct product groupings or brands. Part of it was an evolution of our initial business philosophy. We got started in 1995 to 1996, when the craft segment of the beer market, which had been experiencing enormous growth, started to level out. All of a sudden we found ourselves in a market environment where getting distribution anywhere outside of your backyard was extremely difficult. So we were forced to go to a business strategy where we were going to get local and deep. Everything we did was focused around being locally named and positioned and in some ways on more mildly profiled flavor styles. Those brands have evolved into what we call the Clipper City brands. There are four brands, BaltoMarzHon, McHenry Lager, and Clipper City Gold and Pale. The second group is Oxford. The first microbrewery in the Maryland area was a company called Oxford Brewing Company. It was built around doing classic English style beers. I believe their slogan was, 'American beers with a British accent'. It was started by two gentleman, one of whom is no longer in the industry. The other is Steve Parkes, who is now of Otter Creek and Wolaver's. That company had its ups and downs. In 1997 or 1998 we acquired them. It's been developed into a line of wheat beers, including a raspberry wheat and a hefeweizen. We're still looking at changing that branding portfolio. Four years ago, we felt there was a need to create something that would allow us to expand our geographic footprint. The Clipper City products wouldn't do that, frankly because they were just so locally positioned it didn't make sense. There was probably not much interest from a distributor in Florida for a beer named for Baltimore. So we created the Heavy Seas brand with a richer flavor portfolio. It's targeted at the real beer aficionados. I probably should have done it two or three years before I did. That's worked really well. There are currently eight beers in that line, with three year 'round and five seasonals.

AC How are these three sets of brands distributed?
HS As it stands right now, the Clipper City brands are only in Maryland, DC and Virginia. We're pretty much going to stick with that. The thought process behind that is the Chesapeake Basin. I don't think it makes much sense to take them beyond that. Heavy Seas is currently in eighteen states plus Washington, DC. Ultimately, we'd like to have it in twenty-three or twenty-four states and then we'll probably stop. We want to make sure we can supply the sales support and marketing infrastructure, which is critically important. I think that's where a lot of people fouled up in the late nineties. We're kind of sitting on the Oxford brand for now. When we finish making our changes, I think we'll try and put that in all eighteen states as well.

AC How has your experience been outside your home market?
HS Some markets are more challenging than others. The New England market is at first glance a little more difficult than if we work south and west. With our North Carolina, South Carolina and Georgia sale, we've been able to get to a certain sales volume much faster there than in Pennsylvania, New Jersey, Connecticut, and Massachusetts. I think the southern markets tend to be more chain driven, while the northern markets are more independent. And there are plusses and minuses there. We're continuing to roll up our sleeves and adding more staff as we need to provide the level of support that is requisite in this market environment.

AC When did you first enter the Massachusetts market?
HS We first came into the Massachusetts market about three years ago. We were relatively short-lived in our first foray. There was a gentleman we were working with who was starting his own distributorship and approached us. I think he made a serious effort but was undercapitalized and it became evident that it wasn't going to work. After six or seven months, we terminated that relationship. It then took us probably sevent to nine months to figure out who to work with. We've been back in the market for two years now.

AC How have your attempts fared in trying to enter the Boston market?
HS The Boston market is very, very competitive. There's an interesting path that we need to follow. We're making inroads but it's scratching and clawing. There are no slam dunks in this business. To be successful, you have to get faucets in on-premise accounts. That's not the easiest thing to do. By virtue of fact we're not local, you're going to get out-flanked by your local players. They've got the forces in the market to do it and they should. So you have to find other ways to get your foot in the door. One way we've tried, though we can't do it on the scale we'd like, is that we've been bringing up cask-conditioned beers. There are a small number of high-end beer accounts that if you can bring them a firkin of cask-conditioned beer, they may give you a place. That's a good way to get your foot in the door. Hopefully you can turn that into a regular faucet.

AC Between all the brands, is there a distinct flagship.
HS Without question, it's the Loose Cannon Hop3 IPA. That beer is far and away our best-selling product. It's part of the Heavy Seas portfolio. All of the Clipper City brands do well, but it's all local. The Heavy Seas brands should do better by virtue of the fact they are more widely distributed.

AC How important is freshness dating?
HS I think it's pretty important from the standpoint that it gives you some credibility with consumers. The only thing that is tough about it is that quantifying anything in one simple measurement is typically misleading. For example, because of the nature of the dark malt in darker beers, there is a good resistance to oxidation. Dark beers could be dated a hell of a lot longer than they are. One of the things that people don't understand is that the most delicate beer we make is the Loose Cannon because of all the hops that are in it. The hop compounds will oxidize quite quickly and that's kind of counterintuitive. Many people think IPAs will wear like iron. Guess what, they're wrong. At least doing something that gives the consumer some sort of criteria in determining whether something is fresh is a good idea. Anything we can do to give a consumer a way of determining whether the product is as it should be is good.

AC Craft beer has enjoyed substantial growth lately. Where do you see the craft market going in the next five years?
HS I think a couple of things. First off, despite what the major brewers may say, I think it's pretty well demonstrated at this stage that craft beer is not a fad. It's not going away and it'll continue to develop. Having said that, I've been in this industry for twenty-five years and things run in cycles. Right now, we're in a good cycle. Do I think it will stay at this level? No. I fully anticipate a slowdown at some point in time. Then we'll have a few years where growth will be difficult to attain and then I think it will pick up again. That's just the natural flow of business. I'd like to see the numbers stay fifteen percent or below because that's pretty sustainable growth. The base we're working on is still relatively modest. If it drops to seven and five percent, that is still a real number. If it heats up to 3O-percent again, like in the late nineties, then the category starts to overheat. Not to take a Greenspanian perspective, but I think you have to be aware that it will attract people who have no business being in the industry and who are looking for a quick dollar. I think that is what happened in the early to mid-nineties and why we had a bit of a Darwinian correction.

AC The Brewers Association has begun to assert itself more in the last year, both in promoting craft brewers in Washington, DC and abroad. It also redefined 'craft brewer' to exclude breweries that are owned in part or in full by larger companies, such as Anheuser-Busch. What are your thoughts on the politics of this and the renewed interest of larger breweries in the craft category?
HS I'm kind of on the fence about this. I don't think it makes sense to exclude Goose Island and Widmer or Old Dominion from what we consider to be craft beers only because of a business affiliation they have. It was a business move made to open up distribution and market share and I think that's good. Having said that, I'm not thrilled that most consumers don't know that Blue Moon is brewed by Coors. I'm not really sure what Anheuser-Busch is trying to do. I'm not sure that their involvement is ultimately good for the craft brand because the people who are interested in what people like me are doing are not interested in anything Anheuser-Busch. The Widmer numbers, however, are a good story of success. I think a lot of this has to do with the maturation of the industry. This is not hobbyist any more. Even for people like me for whom this began as a hobbyist venture, this is what we do. We are professionals in this industry. My fear is that people become so exclusive that we become beer snobs. I don't think that's beneficial to anybody.

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