For more than a decade, Full Sail Brewing Co.’s sales have been sinking, and now it’s up to a new CEO to try to right the ship. Pat Tiernan, who joined the Hood River, Oregon brewery in January after serving as COO of Stone Brewing, says that he believes it’s possible to return the company to growth. That’s despite years of declines that have nearly halved its production of beer, and an increasingly competitive market that has made it hard for Full Sail to connect with drinkers.
How does Tiernan think that reversal is going to happen? By charting a modern course with more new beer releases, raising prices to be in-line with craft competitors, cutting unsuccessful packages, brewing flavored malt beverages (FMBs), and contract-brewing ready-to-drink cocktails (RTDs) at Full Sail’s facilities.
It’s a plan not too dissimilar from the one other long-tenured breweries like Boston Beer Company are following, but the key difference for Full Sail is how rough the waters have been:
In 2007, Full Sail ranked ninth on the Brewers Association’s (BA) list of the U.S.’s largest craft breweries.
By 2019, it had dropped to number 45, with the most precipitous decline in its ranking coming between 2017 and 2018, when Full Sail tumbled 15 spots. Last year, Full Sail chose not to report its production numbers to the BA at all. The brewery says it produced 110,000 barrels last year, though not all of that was beer.
Sales in grocery, convenience, and other chain stores tracked by market research company IRI have been in decline since 2017, including a -23% decline in 2020, when craft beer increased +14%.
Though he’s only been at the helm a month, the new CEO will need to act quickly to reverse course for this struggling legacy brewery—if in fact drinkers are still interested.
Tiernan’s plan involves examining and potentially altering almost every aspect of the company—from what it brews to how those products are priced and where they’re sold—all while expressing confidence in Full Sail’s current staff to make the necessary changes. It’s a tall order for a 34-year-old company that has to compete with brands from the largest domestic breweries (like Anheuser-Busch InBev and Molson Coors Beverage Company), which it’s historically been priced and shelved near, as well as the thousands of new breweries that have been more responsive to consumer preferences and brewing trends than Full Sail has.
While working to stop the leaks from Full Sail’s core beer business, Tiernan says he’s been “eagerly engaging” with new partnerships, like one Full Sail launched last summer with Reed’s, a non-alcoholic ginger beer company, to produce a 7% ABV Reed’s-branded Craft Hard Ginger Mule FMB. Seeing excess capacity, Tiernan says such partnerships with other brands “are something we can be good at.” It’s also a necessary move: At its peak in 2007, Full Sail produced 120,000 BBLs of beer, but made just over 67,000 BBLs in 2019.
Unless the next year or two mark a sea change for Full Sail’s core beer business, its future might resemble that of another large legacy brewery. The Boston Beer Company has turned to Truly Hard Seltzer and Twisted Tea, drifting further from its former beer anchor. Similarly, success for Full Sail may just lie in the warmer waters beyond beer.
The last decade has been a dire one for Full Sail’s beer sales. Its 2020 sales in IRI-tracked chain retail stores, including grocery stores and pharmacies, were $3.3 million, just a third of what they were in 2016. With three-quarters of this year already over, Full Sail has yet to crack $2 million in IRI-tracked sales.
Keg sales aren’t propping up the company, either; Tiernan admits the brewery has “historically not paid a lot of attention to draft.” It’s not clear why that is, even for Tiernan.
“The data shows that years ago … draft business was more hardy than today, but why [it’s declined] in the last five years I really do not have the context on,” he says.
Tiernan sees current challenges as twofold: Full Sail hasn’t successfully positioned itself against competitors in the beer marketplace, and it’s also failed to keep pace with styles and packages contemporary drinkers demand, though he didn’t elaborate on why that’s been the case. Full Sail hasn’t had a large, lasting new product launch since its Session series of beers, which debuted in 2005. The Session line of beers have been declining in IRI-tracked sales for three years or more.
“Since [Full Sail] was founded, there have been at least a few generations of beer drinkers that have come of age. … It’s got a loyal following, but it’s also got a real opportunity to improve upon its innovation record and appeal to new audiences,” Tiernan says.
When Full Sail did innovate over the years, the effort seemed haphazard or uninspired. Writing on his Beervana blog in 2018 about the brewery’s then-new beer debuts, Portland, Oregon-based beer writer Jeff Alworth lamented this very lack of character and appeal.
“The new beers in Full Sail’s portfolio may look superficially like they would attract younger drinkers, but I think their lack of character—call it life or spark or soul or whatever you want—will leave drinkers cold,” Alworth wrote.
His opinion hasn’t changed much over the past three years since he wrote that, though Alworth does credit the brewery for being a pioneer of Oregon beer and a training ground for some of the best brewers in the Pacific Northwest today. That legacy, though, feels like it’s faded.
“I suppose a few folks are still kicking around who feel warmly about [Full Sail], but not many,” Alworth says.
Full Sail’s non-beer lineup offers better news. KYLA Hard Kombucha in particular, produced by Full Sail at the same facility where it brews beer and Reed’s RTDs, could be a potential growth-driver for the company.
Through Aug. 29, KYLA brought in nearly $1.5 million in IRI-tracked sales, three-quarters as much as the $1.9 million Full Sail’s beers netted. KYLA is still less than 10% of total production at Full Sail’s facility, though Tiernan calls the brand “a top priority in a growing category.” Hard kombucha has indeed been on the rise, growing from $1.7 million in 2017 to more than $12 million in 2019, according to Shanken News Daily.
The KYLA line also includes hard kombucha-based RTD cocktails—a Pom Pom Collins and Shiso Mint Mojito, for example—designed to have crossover appeal with the white-hot spirits-based RTD cocktail segment.
Tiernan says sales volumes and rates of sale for Reed’s Craft Ginger Mule have also increased this summer, and he’s targeting larger national sales to build on the success of that product. After debuting last June, Reed’s FMBs have sold more than $830,000 in the past 52 weeks in mass retail stores tracked by Nielsen, about the same amount as Owl’s Brew hard teas and Unity Vibration hard kombucha. Those sales are just under half of what Full Sail’s beers have made this year.
Reed’s Craft Ginger Mules are packaged in cans, but bottled products are where Tiernan is most looking to find other beverage partnerships. He says Full Sail is currently only using about half its bottling capacity, though he hints at unspecified partnerships “in the works” that will take advantage of that excess space.
While it continues to struggle to find its next homegrown beer hit, Full Sail can at least counterbalance some revenue losses with brand partnerships that will keep its existing staff and machinery working. But it will have to offset sizable declines: In 2020, Full Sail sold $7 million less in IRI-tracked beer than it did in 2015.
The external partnerships strategy is one that Boston Beer Company has jumped headfirst into this year, signing deals to produce FMBs for liquor giant Beam Suntory and PepsiCo, as its core Samuel Adams beer products decline in importance within its portfolio.
Tiernan is still betting that Full Sail can survive as a beer-focused company, despite the fact that KYLA and Reed’s are together outselling Full Sail beer so far in 2021. Reviving the beer portfolio, he says, will require going back to basics: Brewing what drinkers want, and selling it strategically. These are business fundamentals that, it seems, the company had sorely neglected for years.
“One of my priorities is stabilizing and repositioning the beer business,” he says. “What packages? On what shelves? What channels haven’t we been into, and really who are we listening to?”
To the latter point, Full Sail has begun to solicit greater feedback from its distributors. Tiernan says he wanted to hear “the ugly, the bad, and the good—in that order.” He says distributors told him Full Sail’s beers weren’t being placed on shelves in desirable places, primarily because low prices on the Session line of beers led them to be shelved next to light beers, while the drinker Full Sail wants to attract might only be shopping in the craft section.
“Where it was placed in our core markets was, let’s say, suboptimal at best,” Tiernan says. Slashing prices, particularly on the Session line, was intended to boost volume sales, but that didn’t pan out in the short- or long-term.
To correct this, Full Sail raised prices on June 1 on most of its beers by a couple dollars per pack to bring them more in line with other regional and national craft breweries. Though it goes against the laws of supply and demand, the switch led to an +11.5% boost in sales on Session beer in Oregon and Washington markets three months after the price change. (It also led to a -2.5% decline in sales for other Full Sail beers in the same markets.)
Tiernan says part of the boost for Session is shelf placement next to other craft breweries, and part of it is a more strategic approach to the idea of “value.” With the price increase, Session also began selling in 18-packs rather than standard 15-packs, which encourages shoppers to see that they’re still getting good value for their dollars, Tiernan says.
It’s also boosted by adding new products to the lineup, which include a Session brand Hazy IPA and Hefeweizen. In IRI-tracked retail Session’s other three brands—Premium Lager, Cerveza Mexican-style Lager, and a variety pack—finished 2020 on a downswing with a combined -30% decline in 2019-2020. That trio is set to be down again in 2020-2021.
Distributors told the brewery they were seeing success with Strong Current, a series of Double IPAs the brewery launched last November, bolstered by consumer demand for high-ABV offerings such as Double IPAs. This is encouraging to Tiernan, because he’d like to see Full Sail’s portfolio offer more of what modern craft beer drinkers want. He also says the company has a goal to sell more in independent beer shops, rather than focusing solely on chains, because small shops are where the most curious and engaged craft beer drinkers shop.
But winning over those drinkers begins with the beer itself. To the savviest beer drinkers, Full Sail has lost its luster, and it’s also not making up volume gains among average drinkers who shop in grocery and big-box stores. The brewery, over the last decade, hasn’t shown that it’s capable of creating beers that capture the interest of beer nerds or mainstream shoppers.
“We’ve not had a huge indie presence to highlight innovation, to drive some of the buzz,” Tiernan says. “But how are you going to engage, regardless of whether it’s old-school or new-school … you’ve got to have something to talk about.”
That’s Tiernan’s goal for Full Sail in the next year: Giving drinkers something to talk about, something the brewery hasn’t done in a long while.
Words by Kate Bernot