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Southern Oregon Brewing calls it quits

Southern Oregon Brewing Co. will pour its final pint Friday night. 

Just short of nine years after releasing its first batch, the local brewery owned by Tom Hammond will exit the spirited craft-beer marketplace.

"We don't have the resources to compete in today's beer market," Hammond said. "Timing and opportunity are so important in ventures like this, and I guess ours wasn’t the best. We started before the current growth spurt, but we also started at the beginning of the recession."

SOB's first release, simply called Golden Ale, was introduced Nov. 2, 2007, the day the tap room opened. The last batch, delivered earlier this month, was Pin-Up Porter. In between, the company delivered two dozen styles.

SOB production rose dramatically in its formative years. In 2011, SOB sold nearly 1,950 barrels, ranking 23rd on the Oregon Liquor Control Commission list of 110 malt-beverage sales by breweries and brewpubs. Just as quickly, however, the sale of suds fell off as competition both locally and regionally bit into SOB's market share.

"We had a change in the way we sold beer, and that had a dramatic affect on our ability to get our beer to our customers," Hammond said. "The idea of scaling back to be just a local brewery was not a possibility. Our fixed expense was not compatible with that. We needed to have distribution around the state and the western United States."

Last year, the brewery on United Way slipped to No. 57 on the OLCC list, with sales of 1,276 barrels. Through June, SOB wasn't on course to reach sales of 1,000 barrels in 2016, and July figures released this week ranked the company 84th out of 231 sellers.

"There has been a literal explosion of craft breweries in the Northwest during the past five years," Hammond said. "Competition for shelf space and tap handles is fierce."

Anheuser-Busch InBev's acquisition of 10 Barrel Brewing in Bend and a half-dozen other regional craft breweries in the past two years has pressured the microbrew industry, including aspiring regional players such as SOB.

As more local players emerged in the Rogue Valley, SOB lost some of its local base even as it plunged into the ever-intensifying regional fray.

"In trying to go regional immediately, you may lose some of the grassroots support," said Chris Dennett, owner of Beerworks and co-founder of Medford's annual Beer Week celebration. "You look at Ninkasi Brewing, 10 Barrel Brewing or Deschutes Brewery, and what made those powerful breweries was the groundswell of local, popular support. If you can't nail that down, it's difficult to take the next step."

Hammond didn't set out to be a destination for Medford beer drinkers. His idea was to provide a tasting room with a portal into beer production.

"In our heyday, our tap room made up less than 5 percent of our revenue," he said. "It was a place to showcase our beer and for people to see beer being made."

His goal all along was to sell to bars, restaurants and stores, leading to wider distribution.

"I think location was an issue," Hammond admitted. "Being in a smaller market made us very dependent on distribution to other parts of the state and region. Marketing and selling outside our home territory is costly. Also, we were never able to establish and maintain a big enough part of our local market to be stable in the long term."

The distance to market was an obstacle, and so was distribution. 

"About three years ago, we noticed how things were moving in a different direction and started looking at different ways to grow the business; the majority of those were not successful," he said. "We were reaching out and growing distribution to other states, we even shipped to Europe for a while. The average craft-beer drinker is looking for something new and different, and it's expensive to market to them. There are plenty of mediocre and bad beers that sell a ton, primarily because of marketing."

Ultimately, Hammond said, he didn't have deep-enough pockets.

"I think if you can start a brewery with little or no overhead and not expect to grow, you could survive," Hammond said. "In my opinion, it takes big money to be a significant player."

He put SOB on the market in early 2015, but despite two dozen significant inquires and a half-dozen entities performing due diligence, nobody put money on the table.

"I certainly don’t regret starting Southern Oregon Brewery," Hammond said. "It’s been a fantastic adventure, we made some amazing beers and had some of the best fans in the business."

— Reach reporter Greg Stiles at 541-776-4463 or business@mailtribune.com. Follow him on Twitter at www.twitter.com/GregMTBusiness, on Facebook at www.facebook.com/greg.stiles.31

Manager Jenn Brown keeps spirits high for customers Thursday before the final day of operation of Southern Oregon Brewing Co. Mail Tribune / Denise Baratta