Brookston Beer Bulletin

Jay R. Brooks on Beer

Socialize

All It Takes Is More Fun: The Clueless Business Press

By

Those of us who have been writing about and/or closely following the craft beer industry for any length of time are often left exasperated by the mainstream media’s coverage of beer. If they cover beer at all, the number of amateurish mistakes that are made are legion. In fact, I’d go so far as to say mainstream beer coverage contains more errors than correct information. It’s that bad most of the time. They sometimes do more harm than good because spreading bad information is sometimes worse than ignoring us entirely. There are exceptions, I know, but they are just that: exceptions to the rule. Usually mainsream media outlets, again if they write about beer at all, tap one of their food or wine writers. Occasionally, that writer cares about about beer or even — dare I say it — likes the stuff. But not usually. More often they feel as if they’re being punished for some other misdeed, as if pulling beer duty is akin to being sent to a kind of literary Siberia. And more often than not the writing reflects that. It drives us more than a little nuts. When beer writers get together at events it’s usually the number two subject (number one is the location of the free food) that’s discussed time and time again. Tom Dalldorf, publisher of the Celebrator, and I have talked endlessly about this problem. Lew Bryson recently ranted nicely about it in his monthly Buzz column.

Don’t expect anything that broad here, I just read something that got me pissed off again and it started me thinking about this subject again. It was by an AP business writer by the name of Libby Quaid. A quick search reveals she writes about a disparate range of subjects from beef and madcow disease to Condeleeza Rice rebutting Colin Powell. The piece that got me going is called “Once-flat beer sales beginning to revive” and in it she’s billed as, of all things, an “AP Food and Farm Writer,” whatever that means. Apparently it means she doesn’t know anything meaningful about beer.

The gist of her story is that beer sales have “gone flat” but are now trending up again. But by “beer sales” she actually means beer sales from the large breweries since craft beer sales have had good positive growth over at least the last two years.

She begins:

Beer sales had gone flat, while wine was flying off the shelves. So beer makers decided to steal a page from wine’s marketing manual and create new packaging, flavors and drinks. Now beer is coming back.

 As her only evidence, she cites ACNielsen figures and the article includes a graph. Now I’m not an AP writer so perhaps I missed the class on how to read one of these complicated graphs, but look at the figures for “mainstream beer” which is what she’s talking about when she cites only A-B, Miller and Coors in the early part of the article. Is it just me, or are the fgures for sales this year over last year showing sales declining? But beer is coming back, she says. She continues.

Now, brewers are pitching their beer as cooler, classier and healthier, trying to do for their beverage what Starbucks has done for coffee. The result is that people are finally buying more beer.

But not beer from major breweries. It’s imports and craft beer that are showing growth, even according to the only evidence she cites for the opposite conclusion. This “strong sales” is due to “new packaging, flavors and drinks.”

For additional authority she quotes Nick Lake, who’s a Vice President of New Business Development at ACNielsen. But she refers to him first as a “beer expert at ACNielsen.” That’s laughable especially when he claims “[t]he major brewers ‘blended, became the same,'” as if it just happened. It’s hard for me to place much stock in a “beer expert” who doesn’t know that the major brands have been making American-style light lagers that have pretty much tasted the same for decades, perhaps beginning as long ago as post-World War 2 or some sixty years ago. But in the context of this article, he makes it sound like something the breweries did last year as a business tactic that’s now backfired and they’re in the process of reversing themselves again.

While beer is still preferred by more than half of all Americans, wine and spirits drinkers have been increasing. This is happening, our esteemed food and farm writer tells us, because, as she puts it, “[b]asically, wine seemed to have gotten more fun.” Now I like wine. I drink it reasonably often. And I’ve been to organized wine tastings, wine festivals, and commercial wine competitions. But they are all quiet, serious affairs compared with even the average beer festival. Saying wine is more “fun” than beer can only be said with a straight face by someone who does not really know what good beer culture is and has the potential to be. I just spent the weekend camping at a brewery with hundreds of brewery people and their families, drinking, eating, talking, laughing, playing disc golf, and enjoying the sunshine outdoors. Down the road at the several Anderson Valley wineries that dot the area you could probably hear actual crickets chirping, it was that quiet by comparison. Now I realize she’s talking about just the big guys again, but that also means she’s missing the whole picture. She’s talking about three breweries and ignoring what’s going on at fourteen hundred of the rest of the breweries across the country.

Oh, and I think she defines “fun” as “cute critters on the label, easy-open screwcaps and cans and party-friendly boxes.” My mistake, at first I thought she meant actual fun, not that kind of fun. Even so, a walk down any decent beer aisle and you’ll see that beer labels have been defining that kind of fun for years, too.

But then she contradicts herself again, saying:

For beer, new packaging includes Heineken’s keg can for the fridge, which gives people draft beer at home. Coors sells a cooler box with 18-ounce plastic bottles that is ready to be filled with ice and taken to the beach or a barbecue. And Budweiser comes in new sturdy aluminum bottles that are like a cross between a can and a glass bottle.

So even under her strained definition of packaging as fun, beer is “fun,” too. Although Heineken’s keg can has been around for years, maybe even a decade, and doesn’t give anyone anything near “draft at home.” It’s the same horrible beer they sell in a regular can or bottle.

Ms. Quaid continues. “Beyond packaging is flavor.” Really? How astute. But wait, it gets better. “For Anheuser-Busch, maker of Budweiser, that means Bud Select, a light beer with a more robust taste.” Stop, I’m laughing too hard now. Bud Select … robust taste … ha ha ha …. If that’s what passes for robust flavor kill me now.

My point is that this so-called journalism is so bad that it paints a completely distorted picture of an entire industry. The author may know business. She may know the food industry. She may even know a little about the big breweries. But she appears to know absolutely nothing about beer. Now perhaps I shouldn’t be so harsh. Perhaps she didn’t ask for this assignment and did the best she could. Perhaps. But if this is the best the Associated Press could muster then I weep for the state of journalism today. Of course, I do that almost every day anyway.

But is it really too much to ask that our mainstream media pay even some attention to what more than half of their readers drink? And when they do deign to cover it that they do so with at least a modicum of accuracy. But most newspaper people will tell you that beer drinkers don’t read newspapers. Wine people do. So that’s the general reason given for why beer gets such short shrift. Because they’re bowing to what their readers want. In their mind, people want to read about wine but don’t want to read about beer. It reflects the same general prejudice that beer is not worthy of study, that it is inferior to wine or that it has no story to tell. Once upon a time, people thought the same thing about American wine. When small wineries in Napa and Sonoma counties began making world class wines, the press took up their cause is still talking about it today. When the same thing happened with beer beginning in the early 1980s, the press did cover what they then called the microbrewery revolution. But for reasons I’ve never understood they abruptly stopped, as if it was a novelty or fad whose time had passed. Of course, while they weren’t paying attention craft beer continued to grow in size, quality and prestige. Small American breweries today make some of the finest beers in the world and have the international medals to prove it. Yet nowadays, getting a newspaper or television station to regularly, consistently, fairly and accurately cover beer is as rare as a 1968 vintage bottle of Thomas Hardy’s Ale. If our mainstream media cared about beer even a fraction of the way they feel about wine, then more people would know how rare that is.

Sire, Sire Pants on Fire

By

vs.

It was reported that “on Wednesday, Miller paid for an airplane to tow a banner over Anheuser-Busch’s St. Louis headquarters that read, ‘Sire, sire pants on fire.'” That was the same day a front page Wall Street Journal article appeared in which Anheuser-Busch finally admitted making changes to the formulas for their two most popular products, Budweiser and Bud Light. I just love the idea of this public fracas between the two big American brewing giants devolving to the level of a schoolyard fight. Obviously, Anheuser-Busch has long played the role of bully in this fight and bitter rival (pun intended) SABMiller wasted no time in all but using the “L” word in about as public a way as I can imagine. I presume “sire” is a reference to A-B’s vainglorious claim that they are the king of beers. But it’s still a little odd that Miller didn’t go the extra step to use the “L” word, though of course it was undeniably implied. My only regret is that I haven’t been able to find any photos of the plane flying over the brewery. Surely somebody must have taken a picture of so odd a sight as that.

Two days later Miller ran a full-page ad in USA Today claiming that A-B lied (this time apprently using the “L” word) when it had continually denied that its recipes had been altered over the years.

From the article:

The newspaper story also quoted Anheuser-Busch executives as denying that any changes were made in response to increased sales over the past three years by Miller Lite, Miller Brewing’s No. 1 brand.

The issue first surfaced in November, when Miller began running three TV ads that said Miller Lite has more taste than Bud Light despite changes in Bud Light.

Anheuser-Busch said then it had not changed the beer’s formula, and it complained to TV networks about the commercials.

Miller, however, said last fall it could substantiate its claims through documented increases in “bitterness units,” which measure the amount of hop bitterness in beer.

Advertising Age on Thursday, April 27, the day after the Wall Street Journal expose, ran an article entitled Miller Moves Quickly to Exploit Rival’s Revelation, in which they report that Miller’s ad agency has been challenged to begin using the information revealed in Wednesday’s Wall Street Journal article as soon as possible, and perhaps as soon as Friday. Apparently Miller’s ad agency, Crispin Porter & Bogusky, was up to the challenge given the full page ad in Friday’s USA Today.

From the Ad Age article:

The Journal’s report said that, in August 2003, A-B Chairman August Busch III told hops growers in the Pacific Northwest he intended to increase the proportion of hops used in A-B’s beers in order to give the beers more taste after decades of gradually lightening their flavor to adjust to changing consumer tastes. “I told the growers of our desire to use more hops in our brewing for the purpose of delivering more amplitude and hop flavor in Budweiser,” Mr. Busch told the paper.

While brewers tweak their beers all the time, that admission provides significant marketing ammunition for Miller, the No. 2 brewer behind A-B. Miller ran ads in November 2005 saying it detected a “changed” Bud Light, citing increases in bitterness and carbonation. That attack followed a 2004 campaign by Miller claiming its beers had “more taste” than A-B’s.

Funny stuff. I can’t wait to see what happens next.

UPDATE 5.5: I finally found a photo of the banner.

Photo by Bill Stover, Associated Press

Budweiser Admits Flavor “Drifted” Over the Years

By

bud-red
As I read the fascinating article in yesterday’s Wall Street Journal (subscription required to view the article) about how the flavor of Budweiser has drifted or “creeped” (as head brewmaster Doug Muhleman called it) over the years to become more bland, I was reminded of a conversation I had standing in line for food in the brewers’ lounge area at the Great American Beer Festival seven years ago. The GABF, when it was in the old building next to the new Convention Center where it’s now held, had a lounge where brewers, media and staff could go to relax and get away from the crowds. Standing in line for the free buffet lunch, in front of me, according to his badge was a brewer from Anheuser-Busch — I can no longer recall his name — and we began chatting amiably. Shortly before I’d left for Denver I’d received a gift at my office of a special 750 ml bottle of Budweiser that had been created to celebrate the millennium. My A-B chain rep. at that time explained to me that they were filled with everyday Budweiser, not a special brew to mark the occasion. So I mentioned this fact to my line buddy and asked why they didn’t do something special for the millennium bottle and I suggested they should have done a batch based on the original 1876 recipe. I’ll never forget the look on his face and what he said to me next. This brewer from Anhesuer-Busch looked me straight in the eye and said. “The Budweiser we make today is the same as it was then. We use the same recipe.” It was all I could do to not laugh in his face, because I really wasn’t trying to pick a fight. But it took a fair amount of restraint on my part not to call him on his statement.

And the reason for that is simple. No one in the beer industry believes that Budweiser today is the same as it was in 1876. Nobody. No one even thinks it’s the same now as it was at the end of World War Two. Nobody. And few people, if any, think it’s the same now as it was in the 1970s. But that’s been the party line at A-B for as long as I can remember. I recall Fred Eckhardt, a well-respected beer writer from Portland, talking about this fact in his various writings for many, many years. And I can’t recall a single conversation about this subject that came to a different conclusion over several decades. So for Anheuser-Busch to finally come clean and admit that the beer has changed feels like a vindication of the criticsms that have been leveled at them over the years.

The Wall Street Journal article states that “Anheuser[-Busch] concedes Budweiser has changed over the years. It quietly tinkered with its formula to make the beer less bitter and pungent, say several former brewmasters, a byproduct of the company’s desire to create a beer for the Everyman.” Apparently Triple Sticks, the affectionate nickname for August Busch III, in the 1980s ordered that sample bottles of A-B’s beers be cryogenically frozen, using the same method human tissue is frozen.

From the Wall Street Journal article:

Mr. Muhleman, who is officially Anheuser’s group vice president for brewing and technology, says the company didn’t set out to make the beers less bitter. He calls the change “creep,” the result of endlessly modifying the beer to allow for changes in ingredients, weather and consumer taste. “Through continuous feedback, listening to consumers, this is a change over 20, 30, 40 years,” says Mr. Muhleman, gesturing toward the row of Budweiser cans. “Over time, there is a drift.”

The five Budweiser cans in front of Mr. Busch, dating from 1982, 1988, 1993, 1998 and 2003, were pulled off the production line shortly after they were brewed. They were cooled to minus-321 degrees Fahrenheit over 16 hours and stored at that temperature in a secret laboratory in the company’s headquarters.

The sample cans demonstrate how “creep” works. The difference in taste between two beers brewed five years apart is indistinguishable. Yet, the difference between the 1982 beer and the 2003 beer is distinct. “The bones are the same. It is the same structure,” says Mr. Muhleman. Overall, however, “the beers have gotten a little less bitter.”

That may be part of it, but it sounds a bit disengenuous to me. They “listened to consumers?” How convenient that all these consumers wanted them to use less ingredients and make their beer more profitable. Because that’s the part of this “drift” that goes unmentioned. The WSJ article states that “[f]rom 1950 to 2004, the amount of malt used to brew a barrel of beer in the U.S. declined by nearly 27%, and the amount of hops in a barrel of beer declined by more than half, according to Brewers Almanac.” Well, guess what? They didn’t lower the price to reflect the use of less materials, did they? I certainly doubt it. According to the Siebel Institute: “Over the past twenty years the IBU’s of most American-style lagers has dramatically declined, from roughly 15-20 IBU’s to fewer than 10 today.”

Again, the article attributes this to outside influence, as the author writes. “Nonetheless, beer’s taste became steadily lighter.” (my emphasis.) This is driven home a second time by Graham Stewart, director of the International Centre for Brewing and Distilling at Heriot-Watt University in Edinburgh, Scotland when he states. “The North American palate has become lighter and lighter.” (my emphasis again.) They make it sound like it just happened as if it were accidental and beyond their control. But all of their advertising emphasized the “drinkability” of their beer as one of its greatest virtues. Through the slow manipulation of their formula to use less and less ingredients and careful advertising that de-emphasized that fact over time it was A-B (and the other big breweries) that changed their customers taste, not the other way around.

And this was done for one very sound reason, from their point of view — profit. Using less ingredients lowers your per item cost and increases profitability. Making the beer lighter has one other economic advantage and is explained rather straighforwardly by the article.

Again, from the WSJ article:

One key to Budweiser’s popularity is that it produces no “palate fatigue” after several drinks. The bitterness in stronger beers tends to build up, causing a drinker to tire of the taste. Bud’s appeal is what people in the industry call “drinkability.” (In the U.K., it is called “sessionability,” for how many beers one person will drink in a session.) Budweiser tests drinkability in “pub tests” in which the brewer rents a pub or a bar and invites people to drink free. Afterward, Anheuser drives the drinkers home.

For Mr. Busch, the definition of “drinkability” is simple: “I want the next beer!” he says. “You stop drinking because you know it’s time to stop but you don’t want to: That’s drinkability.” … “We’ve been tasting these beers for 50 years,” says Mr. Busch. “If we can’t sit down and drink three or four of them, then it’s not right.”

You’ve also heard this called “poundability,” and I think this admission runs quite contrary to the “responsible drinking” campaigns they’ve been using to keep the neo-prohibitionists off their back. A-B has their Responsibility Matters at beerresponsible.com, Miller has its Responsbile Drinking print campaign and Drink Aware in the UK. And you can download their Alcohol Manifesto at the Promoting Alcohol Responsibility section of the SABMiller website, and Coors‘ website has its own alcohol responsibility section. The point is that despite their hollow attempts at telling people to drink responsibly, a direct result of making their beer lighter is that people will drink more of it thus increasing sales. This is not so much a by-product as a carefully designed and predictable outcome of increasing “drinkability.” I love Busch’s own definition, which implies that if people stop drinking when they know they should stop then the Budweiser brewers haven’t done their job. How responsible is that?

According to the article, this strategy may finally be starting to backfire as craft beer has been showing consistent positive growth over the last few years. “As a result, rivals and some industry analysts blame Anheuser’s recent lackluster financial performance on the very foundation of Budweiser dominance: its light, bubbly formula, which has been mocked for years by beer snobs and beer drinkers outside the U.S.” So the economic indicators seem to be that people might actually be starting to demand that their beer have actual flavor. “I think you’re seeing an increased consumer acceptance that bitter is a positive characteristic in beer,” says Keith Lemke, vice president of the Siebel Institute. Another side benefit of craft beer, according to the big breweries’ logic (and one which should be embraced by the neo-prohibitionists), is that they claim craft beers’ strong flavors will create palate fatigue which lead to increased responsibility. This is because these full flavors will then cause people to drink less beer. That means that craft beer by its very nature is the better choice because it all but guarantees more responsible drinking. I realize it doesn’t actually really work that way, but it is a logical conclusion from A-B’s assertions. And I like the idea that from their own analysis craft beer is the best choice for drinking responsibly.

The article ends with a delightful coda from Abita Brewing’s president, David Blossom:

Many smaller brewers in the industry scoff at the idea there’s any difference between the two beers. “I sit back and chuckle at them going after each other,” says David Blossman, president of microbrewery Abita Brewing Co. in Abita Springs, La., which makes brands such as Purple Haze and Turbodog. “It’s like comparing Bunny Bread to Wonder Bread.”

And that’s an excellent observation, I think. We’re witnessing two giants duke it out over who has the better marketing claims. American-style lagers and American-style light lagers are all but indistinguishable from one another. So who wins the sales contest comes down to one thing: marketing. And how successful their marketing efforts have thus far been in misinforming their consumers about what beer is may be the saddest legacy of all.

More Thoughts on the Costco Decision

By

I got the following sunny comment to my analysis of the Costco decision from SeattleBeerGuy:

Interesting analysis but I’m not sure I agree with the conclsuions. I think the change has the potential to earn wider distribution for many smaller breweries as they can now sell directly. The price issue does not seem terribly pressing as people who drink beer are generally willing to pay slightly more for a better beer anyway–ever plunk down $3 for 12oz? More than twice what you would pay for a macro-lager.

So yes, the big boxes will outcompete smaller stores on cases of Budweiser or Killian’s but that should only encourage smaller breweries to reach sweetheart deals with local, smaller stores. I see a rosy horizon over which small, local groceries sell beer from small, local breweries. Not a bad thing.

I was just going to post a comment responding to his thoughtful, if overly optimistic, take on the judge’s ruling but the more I thought about, the more I realized it required a more lengthy answer. This is necessary, I think, because it is the opinion that many people will likely hold. I want to be clear that I have no disrespect for this opinion but having been directly involved in the beer business at the retail level, I have a unique perspective on how things generally work from brewery to distributor to retailer. It is for this reason I hold a different opinion than SeattleBeerGuy and is why I can not be as sanguine and positive about the future.

So let’s look at SeattleBeerGuy’s assertions:

1. “The change has the potential to earn wider distribution for many smaller breweries as they can now sell directly.” That sounds good on paper but probably won’t work for a couple of reasons. First, that would require each small brewery to have a larger sales force to sell directly to retailers, including trucks to deliver to them, and merchandisers for support. Most small berweries simply won’t be able to afford to add the staff required. You could argue that one of the current brewery employees or the owner could do it, but given the number of locations that would now have to be sold to directly, that doesn’t seem remotely feasible. Second, buyers would be too busy to meet with a different salesman for each individual brewery. They simply don’t have that kind of time. That’s why having just a few distributors representing the majority of the brands makes sense, especially for the smaller players. Buyers only have to meet with a few people to meet all their needs. So that means distributors will still be the most efficient method for both small breweries and retailers. As it stands now, distributors sell to smaller retailers and larger chain stores are called on by what are called “chain reps.” or “chain salesmen” who give presentations to the larger chains. These more than likely already include “special deals” not made available to smaller retailers but now that it will be legal it will undoubtedly get worse. That’s not likely to change, except that the law will now give even more of an advantage to the big box stores. So buying direct will really only benefit these large stores who have trucks to pick up product and store it in their own warehouses. Those retailers will have an enormous advantage at every stage of the distribution path. Will wider distribution be possible for the smaller breweries? There may be a few medium or middle tier retailers looking for a way to distinguish themselves but I can’t see how that would create enough increased business to make much of a difference. At best, it seems like it might be something of a wash if that happens to balance the loss of business that I believe will eventually be caused by this decision.

2. “The price issue does not seem terribly pressing as people who drink beer are generally willing to pay slightly more for a better beer anyway–ever plunk down $3 for 12oz? More than twice what you would pay for a macro-lager.” This assertion ignores one inescapable fact, which is the people “willing to pay slightly more for a better beer” make up only 3.5% nationally of the total beer market. The other 96.5% are the ones buying crap for the most part. That number is probably higher in Seattle and it’s probably higher where I live in the Bay Area, as well. But even if it’s as high as 10% that still leaves 90% of consumers who aren’t willing to spend more. If you drink good beer you tend to live in a bubble — at least I know I do — where almost everyone you know also drinks decent beer. But the vast majority of consumers don’t drink craft beer. It’s weird to think about, but for every ten people you pass on the street, only one of them shares your love of good beer in a best case scenario. Depending where you live, it may be much, much worse. That’s why in a naming doublespeak that would make Orwell proud, Budwieser, Coors and Miller Genuine Draft are called “premium beers” and beers like Busch, Natural Light and Miller High Life are called “sub premium.” Imports like Heineken and Corona are called “premium imports.” Craft beer is called “specialty beer” which gives you some idea of how small a portion of total beer sales they represent. Most of the beer sales data is collected by two companies, Nielsen and IRI Scan Data, and both use these broad catagories to describe the beers they’re tracking. Both, as I understand it, only collect sales data from groceries, convenience stores, chain liquor stores and the like and so they’re not reflective of the overall market since they discount one-off liquor stores and other small retailers. But these are the figures used by most beer buyers and is does show some trends and has some value in that context since the sales data can be compared over time. And one of things they do show is how much price does matter to the 96.5% of consumers that buy beer not categorized as “specialty beer.” One of the reasons given for Anheuser-Busch’s recent drop in income is that they’ve been engaging in price wars, meaning they’ve lowered their price to increase sales at the expense of profitability. This has been going on in some fashion for at least five or six years, possibly more. And it’s kept domestic beer prices artificially low. So I think it is actually fairly pressing since the vast majority of beer drinkers do shop on price. What all this legal wrangling will result in, I believe is an even wider gap between domestic beer prices and craft beer. This gap makes it harder to convince the 90-96.5% to trade up to better beer. Forget all the arguments you can think of, some people are just stubbornly going to shop on price no matter what. At least that’s the way I see it.

3. “So yes, the big boxes will outcompete smaller stores on cases of Budweiser or Killian’s but that should only encourage smaller breweries to reach sweetheart deals with local, smaller stores. I see a rosy horizon over which small, local groceries sell beer from small, local breweries. Not a bad thing.” The problem with this, as I’ve said before, is that small breweries are not really in any position to make “sweetheart deals” with smaller retailers. I can’t tell you how many meetings I’ve had over the years when I was a beer buyer with small breweries telling me how they simply couldn’t match the big breweries on post-offs (posted discounts that are scheduled throughout the year), scans or scanbacks (another way to offer discounts that are tied to actual sales during a given period of time) or other incentives for hitting sales goals such as contests for stores, etc. And that’s because their business is tied to hitting some formula of volume of sales to the brewery’s capacity in order to be profitable. The amount of leeway they have for advertising or other sales incentives is miniscule compared to the larger breweries who have exponentially larger volume. Only the regional breweries, such as Anchor, Sierra Nevada or New Belgium have enough volume to do anything meaningful on a regular basis. And actually, Sierra Nevada did not discount their beer very often for many, many years. It really wasn’t until they’d built the new facility and introduced twelve-packs that they began doing a regular year-round schedule of discounts. The other problem is that many smaller retailers are also not going to be beating down their local brewery’s doors looking for them, either. There may be a few retailers who actually care about craft beer but in my experience each community only has a couple and usually only one or two that really specializes in having an outstanding beer selection. In Seattle I only know of Bottleworks. There may be another, but I don’t know of it. There’s probably a couple of stores where there’s an employee who’s really into good beer who’s made a difference at one store and who has a small following of customers. And that’s for a city of a little more than half a million people. In the nine counties that comprise the greater Bay Area there are just under seven million people and no dedicated beer store like Bottleworks, despite a vibrant beer culture. My point is that the number of places truly dedicated to the craft beer culture is fantastically small. And that fact makes it very difficult for me to see a “rosy horizon” when an enormous advantage is handed to a handful of big businesses whose sole goal — like all corporations — is domination of their market. I hope I’m wrong and it’s “not a bad thing” as SeattleBeerGuy believes, but my spidey sense is tingling and I can’t see any good coming from this long term, especially once this decision is used as a precedent and spread by Costco throughout the rest of the states.

A Beer for Menopausal Women

By

While the FDA in the U.S. has been more than a little reluctant to endorse any health claims regarding beer, the EU has been at the vanguard of researching and standarizing such claims. Our governments’ stance on alcohol has been informed more by religious zealotry than any true health concerns. As a result we cannot bring ourselves to acknowledge that the demon alcohol might in fact not be all bad. That perhaps there are some health benefits from moderate drinking, despite study after study that shows just that, is anathema to the puritanical thinking of the neo-prohibitionists who make our country’s drug policy.

Meanwhile, the European Union has quietly created standards for organic beer, gluten-free beer and who knows what else. In most European countries drinking beer and wine in a family setting with meals, as a part of celebrations, and at family events and gatherings is so ubiquitous that they stare at us in wonder and bewilderment when we continually demonize alcohol. So it’s no surprise really that European doctors are studying ways to ease the suffering of women going through menopause by creating a special beer for them.

From the article in the South African iol:

Women struggling with the discomforts of menopause may soon find relief in a cold glass of beer.

Experts in the Czech Republic are working on a beer specifically brewed for women experiencing hot flashes, troubling sleeping and other woes during this phase.

The low-kilojoule, low-alcohol beer being developed by the Prague-based Research Institute of Brewing and Malting contains heightened levels of phytoestrogen, a plant form of the hormone estrogen often lacking in menopausal women, said the institute’s director Karel Kosar.

Phytoestrogen is found in the hops and barley malt used in many types of beer. Kosar said breweries could produce the special beer by increasing the levels of these ingredients.

A gynaecologist working with the institute reported good results from clinically tests with the beer on 20 women. The volunteers who drank three decilitres nightly for two months reported fewer menopausal symptoms.

I certainly hope they perfect it before my wife needs it. But that gives them twenty to twenty-five years which should be plenty of time.

Beginning of the End for Small Beer Businesses?

By

In one of the most watched legal battles in recent years, the judge yesterday in the Costco case in Washington state may have signaled bad times ahead for small retailers and small breweries. Her short-sighted ruling followed most courts’ bias in recent years that favor big business over the consumer or small local businesses.

The specific state regulations dismantled by Judge Pechman are:

  1. Bans on volume discounts and credit sales of beer and wine.
  2. Minimum markup requirements, which force manufacturers to charge at least 10 percent over cost when they sell beer and wine to distributors. Distributors face the same rule when they resell the products to retailers.
  3. Mandates that manufacturers and distributors post product prices with the state, and keep prices the same for a month afterward. Distributors must charge that price to each retailer, and retailers can’t get discounts for paying for freight or picking up the product themselves.
  4. A ban on retailers storing or receiving beer or wine at a central warehouse.

So let’s look at each of these:

1. Volume sales. This, of course, benefits the huge box stores like Costco and Wal-Mart and will make it increasingly difficult for smaller retailers like family-owned mom and pop liquor stores to compete since they cannot buy in the large quantities of a Costco. This gives a huge, unbalanced advantage to the big retailers. Will these small stores go out of business as a result? It’s hard to say, but it certainly won’t make it any easier on them. It probably won’t happen right away, but it doesn’t seem a stretch to say a few years from now consumers will have less choice because there will be fewer places to buy beer. It would be easy to blame this all on the big stores but unfortunately consumers are at least partly to blame for this. The big stores merely exploit most people’s belief that low prices are the only criteria worth considering in purchase decisions. Stores like Wal-Mart could not destroy whole towns if their customers didn’t flock to them zombie-like in search of the latest bargain. As long as people shop on price alone without regard to the consequences of their choices, small businesses will continue to die out and our consumer landscape will become more and more homogenized with the same handful of national retailers dominating. Think I’m paranoid? Look at the state of music radio today now that Clear Channel owns most of the radio stations. The only way to combat this is to think about where you make your purchases and to be willing to pay a few cents more to support small, local businesses. The benefits to your community are huge even if they’re not immediately apparent. But if you don’t, you’d be naive to believe that the low prices that you were lured in by will continue once they’ve put your corner liquor store out of business. Not only will prices shoot up again dramatically but the number of available beers — and especially the non-national, local brands — will shrink precipitously. So if you value good beer, please think as much about where you buy your beer as what beer to buy.

2. Minimum mark-ups. At first blush, this appears to make no sense. Remove it and prices will drop, right? Maybe at first, but not for long, because this is very deceiving. You can see why Costco went after it, since they work on volume sales that allow them to have lower margins overall. Small businesses don’t have that luxury and most businesses don’t — and can’t — use that business model. Even so, 10% is nothing. Most businesses mark up their goods 40-50% and the beverage retailers I know about shoot for a markup of around 20-25%, less for sale and loss leader items. So on a per-item basis, the markup on alcoholic beverages is already lower than the market in general. So what will removing the 10% markup accomplish? It will allow the big box stores to get even deeper discounts which will assist them in their efforts to squash their competition. Will prices to consumers go down? Probably at first, but it will primarily be the big domestic and import brands that will have lower prices. It’s unlikely to have much effect on craft beers and smaller import beers. So the gap between the two will continue to widen, which is bad for everybody.

3. Price posting and freight discounts. Posting prices at a central location is to insure a level playing field. Removing it, of course, makes the playing field uneven. If there is no longer a requirement to post prices, then all manner of back room deals become possible … and legal. Again, this may lower some prices for some retailers for some period of time. But it will hurt the small retailers who won’t be offered any back room deals, and the small breweries who can’t afford to offer any back room deals to retailers. As to the frieight discounts — are you sensing a pattern yet? — this will only benefit the companies large enough to have their own fleet of trucks and you can probably figure out who they are.

4. Central warehouse ban. Again, the only businesses that have central warehouses are the very large, multi-location big box stores. The warehouse allows them to buy in extreme bulk. Not only does this give them yet another unfair advantage, but it also removes any incentive to sell fresh product to the consumer. Of course, since most of the brands that will be effected by this taste pretty bad already, maybe that’s not such a bad thing.

 
 

Both the national press such as AP and the local papers such as the Seattle Times and the Seattle Post-Intelligencer are reporting this as a victory not only for Costco but for consumers as well, saying that the decision will lower beer and wine prices in the state. But that’s just propaganda, it doesn’t really examine the long term ramifications of the decision. Short term, prices may indeed go down but that’s not always a good thing. But selling a bill of goods to the public by saying one thing when another is more likely true is what our media does best. Large city newspapers — who are big business themselves — generally always take the side of business in their reporting and are one of the many ways information consumers receive is managed. This is a terrific example of collective restraint by the media to not actually examine what this decision means for the average consumer preferring instead to spin it in a way that actually downplays its negative aspects.

What’s more troubling is that with this victory, Costco will be examining the remaining forty-nine states to decide if — or more likely when — they can screw consumers in those states, too. Our only hope is to spend a little more for better beer before it’s too late. Support your local businesses as much as possible. Don’t be pennywise and pound foolish.

Euphemistic Craft Brewers Alliance Swells Its Ranks?

By

There’s been talk in the air for months regarding Anheuser-Busch approaching regional craft brewers about aligning themselves with them in some fashion — either by purchasing or other distribution arrangements — and many, many names have been dropped as being potential targets. Most have proved unfounded and because of this I’ve been careful not to name any rumored names. Even so, I’ve gotten several e-mails from friends in breweries letting me know they’re definitely not in negotiations with A-B, which has been appreciated. It’s nice to able to whittle down the list. But several names have persisted and even a few of them have been seen in print. So it was no surprise that more definite rumors abounded at the Craft Brewers Conference last week about which craft brewers might be joining Anheuser-Busch’s Craft Brewers Alliance.

Current members include Redhook and Widmer Brothers. The distribution deal, which is rumored to include a small percentage of ownership by A-B tied to performance standards, has worked wonders for Widmer and their business has grown quite dramatically. Redhook, on the hand, has not fared as well. As I understand it, they did not meet performance goals and as a result A-B exerts greater control over them now then before and owns a greater percentage of the Seattle-based company. I don’t know the actual specifics — does anybody? — but it’s something like that.

Three names kept coming up last week as having signed deals or being close to closing a deal with A-B to join the Craft Brewers Alliance. I want to stress that the exact nature of the deal, if any, is strictly rumor at this point. Though several people I spoke to seem to have it on good authority that this is what is happening. The three breweries consistently mentioned are Firestone Walker Fine Ales of Paso Robles, California, Goose Island Brewing of Chicago, Illinois and Kona Brewing of Hawaii. If true, that would make the CBA five fairly large and prominent breweries. For those breweries it would mean increased distribution nationally. For other craft brewers, especially those currently being distrubuted by A-B distributors, it could spell disaster. If your distributor has five reasonably popular craft brands with a variety of styles that they’re effectively bound by contract to focus on, then the amount of attention other brands will get will certainly be less, assuming they even keep those other brands. There will likely be additional pressure for the distributors to have “100% share of mind,” the name of A-B’s wholesaler exclusivity program, and that will likely result in many A-B houses dropping smaller, local brands in order to accomodate the new CBA brands.

Rich Tucciarone, Director of Brewery Operations for Kona, did confirm that they have had in place for some time now several distribution only agreements in a few states for Bud distributors to carry their products but that no new negotiations or deals have taken place in recent months. From what he told me, this is only new insofar as people are talking about it again and examining relationships between craft brewers and A-B houses involved in distrubting their product.

I wasn’t able to speak with Matt Brynildson, Firestone Walker’s brewmaster, because I only saw him accepting his awards at CBC. I did, however, talk with Mark Cabrera, an old friend and Northern California Sales Manager for Firestone Walker. He told me the rumors are patently untrue. Firestone Walker has, he mentioned, recently switched distributors in southern California to include exclusively A-B houses which may have fueled speculation. But, he assured me, Adam Firestone, though certainly approached, rebuffed A-B’s advances.

Goose Island, on the other hand, does appear to at least be in talks with A-B. As long ago as last December, the Chicago Tribune reported as much. As mentioned in Stan Hieronymus’ Beer Therapy “Goose Island president and founder John Hall confirmed as much, but said discussions have been limited to ‘distribution issues.’ He declined to comment further on the nature of the talks.” I saw Will Turner, who’s a Bay Area brewer who now brews for Goose Island, at CBC but I didn’t get a chance to ask him about this.

Every person I did talk to about this had a certain wearines in their voice, like they’d grown quite tired of talking about this and refuting the rumors. And that makes sense, there’s few things more damaging or harder to defend than an unfounded rumor. They’re a lot like viruses. No one can pinpoint where they started and they’re pretty hard to kill. So it seems that these recent round of rumors amount to virtually nothing, unfortunately, so we really still don’t know exactly what’s going on, who’s making deals, and what the deals are. Until that happens, all we can really do is wonder, speculate and worry.

A Critique of Conan

By

conan-obrien
Last night Michael Jackson appeared on the Conan O’Brien Show. I’d like to say it was a rousing success. Unfortunately, I can’t. Michael was his usual self, soft spoken, a little hard to understand but with a wit still razor sharp. Though it was largely lost on his audience and the host and other guests who continued to lob insults at him throughout the segment. My guess is that someone on Conan’s staff is a fan of better beer and lobbied to have Michael Jackson on the show. Though it came out later in the interview that he had been on before, so who knows. Conan O’Brien seemed very unprepared for the interview, and showed a great deal of ignorance. I don’t think I was expecting too much here. Lucy Liu was the first guest and Conan had obviously seen the new movie she was shilling, was aware of other recent incidents in her life and generally seemed quite at ease and prepared for her. The next guest, Jon Lovitz, went equally smooth, in its way. They appeared like old friends, which they professed to be, and Conan again fielded Lovitz’s barbs with practiced ease and steered the conversation to his new movie, which Lovitz was plugging. Conan also appeared to have seen Lovitz’s new movie, so it didn’t seem too much to ask that he be somewhat familiar with his last guest. But Conan and the two previous guests were, I thought, quite rude at times to Michael and the entire segment could be seen as a metaphor for the general ignorance of the public about beer.

Michael came out wearing, I was happy to see, a new tie and even a new, unrumpled suit. But he had barely settled into his seat before Conan’s first embarassing question oozed out. “Did you ever think of becoming a wine taster instead?” To me, the question inferred that beer is not worthy whereas wine is superior to it. So let’s think about that question. The previous statement had been by way of introducing Jackson to the audience. “You’ve devoted your life to tasting beer.” He began. So basically, Conan said you’ve devoted your life to beer but maybe you should have chosen wine instead. It was like saying his life perhaps had been wasted. Now I may be overreacting here, but I don’t think so. The question, I think, showed a great deal of ignorance and was, on reflection, a mite insulting, especially as a way to begin an interview. Beginnings often set the tone for what’s to come and that was true here, as well.

The next question was equally witless. “How much beer would you say you have in a day, on average?” As if quantity was the hallmark of beer drinking. A moment later, the first decent question was asked. “And what is it you’re looking for in a beer?” To which Michael replied simply. “Taste.” For reasons passing understanding, this made Conan roll his eyes and remark. “I’m sorry I asked.” But Michael continued. “You know there’s so many people out there that drink beers that just taste of nothing whatever and they think ‘this is a great beer.’ Tastes of nothing.” But Conan appeared fixated on something the rest of us couldn’t see. It was clear he wasn’t really listening because he next told him that he believed that Michael’s fly was open. Now if this had been a celebrity who’s fly was open, common sense would dictate that they would have handled it more delicately. They would have panned away from him or zoomed in on a tight shot of Michael or Conan’s face while the embarassing open fly was zipped. It would have gone smoothly. But here they kept the camera on a wide shot the entire time and let us watch him squirm and zip it up, milking it for comedic value. Then Jon Lovitiz couldn’t keep his mouth shut and made a joke of it.

But Michael recovered nicely and asked Conan if he wanted a golden shower, by which he meant the first beer, Dogfish Head’s Golden Shower Imperial Pilsner. While he was pouring the beer into a glass, Conan asked, somewhat awkwardly. “You don’t like people drinking out of a bottle, is that right?” As if it was Michael’s personal crusade. Nobody thinks you should drink wine out of a bottle, but suggest the same thing for beer and people think you’re crazy. Michael’s reply went to the most practical reason for not drinking from a bottle. “It’s a waste of money if you do that. You don’t get the taste if you drink out of the bottle because so much of the taste is in the aroma.” Conan tried Sam’s Imperial Pilsner and declared. “Yeah, that’s beer.” Well, geez, Conan, how discerning. You were able to tell it wasn’t wine or a soda. Was that really the best you could come up with?

Then it turned surreal as Conan asked. “What’s your least favorite beer?” To which Michael immediately replied. “Corona.” Conan sat up in his chair, his eyebrows raised, appearing greatly surprised. “Really!” He exclaimed. At this point the audience actually booed! Now I don’t want to seem like an elitest here, but since I more than likely am, I’ll go out on a limb. Even if you’re unfortunate enough to actually like Corona and drink it willingly, I can’t believe you’d really think it was a fine beer. Think about it this way. You may like Wonder bread, but you know it’s not a fine bread. Or you may like fast food burgers but you know it’s not gourmet food. But apparently the audience was seeded with Grupo Modelo employees last night. If not, then my weeping for our country’s state of beer continues. Conan next turned to his producer, asking. “Does Corona advertise on this show? Oh, they do.” Then, turning back to Michael said. “I disagree with you.” Eliciting a laugh from the crowd. But it shows how his mind was working and just how closely advertising is aligned with a show’s content.

The next topic Conan brought up was malt liquor and whether or not Michael liked it. Apparently he brought this up the last time Michael Jackson was on Conan and he still didn’t like them. But apparently Conan still did and the reason he gave was because they were so cheap. Because when buying beer, price is the number one factor. Maybe Conan really does know his audience, but I found this also insulting. Plus, I’m thinking Conan could probably afford to spend a little more than $1.49 for a bottle malt liquor you could soak your foot in, as he described it. He may be on at 12:30 in the morning, after most sane people are in bed, but I’m thinking he’s still making a bit more than most of us. To bring up malt liquor when there were so few minutes remaining and so much else to talk about, seemed like a complete waste of time.

Next, Michael poured an English beer, Meantime Brewing’s Old Smoked Ale and attempted to explain smoked malt. Then Conan asked to try the Black Chocolate beer from Belgium but they never did identify it. Again, Michael tried to talk about the roasted malt. Conan was disappointed because there was no actual chocolate in it. Michael then recommended he try Brooklyn Brewery’s Chocolate Stout. At that point they mercifully ran out of time. There were three more beers sitting on the table, untried, including Tomme Arthur’s from Port Brewing, which was unfortunate.

I know television isn’t really the best medium to extoll beers’ many virtues, especially in so short a time frame and in front of a seemingly hostile host and audience. But I confess I really was hoping for more. I expected the host to be at least minimally prepared, to have some interest in the guest’s expertise. Conan’s audience, I imagine, is largely a younger one and this might have been a golden opportunity to educate them about better beer. Instead, the Conan O’Brien Show squandered that chance by behaving insultingly toward Michael and better beer in order to get cheap laughs. I know it’s all about ratings and entertainment, but there’s no reason the show couldn’t have been both more educational and entertaining. Michael Jackson, of course, has a wealth of knowledge at his fingertips and could have talked intelligently about any beer questions posed to him but Conan instead wasted his time talking about Corona and malt liquor.

Before this, I was largely ambivilent about the Conan O’Brian Show. I almost never watch talk shows unless there’s someone on I really would like to see, and that, quite frankly, is rare. It’s usually just a parade of overprivileged celebrities hawking their latest project in the hopes of parting you from your money so they can continue their extravagant lifestyle. But after this, I’ll certainly think twice before tuning in again.

jackson

UPDATE: Michael Jackson posted his own reflections on doing the Conan show on his Beer Hunter website.

Organic Beer and Organic Farming

By

Regular readers here know I’ve been following the story of Green Valley Brewing Company’s Wild Hop Lager and its true ownership by Anheuser-Busch. One aspect of this emerging story that hasn’t been touched on yet is the beer’s organic pedigree. A-B went the extra mile to have the beer properly certified organic and an insider told me that the label initially met with some problems, but they were ultimately ironed out. Since only a small percentage of beers are certified organic, it bears consideration as to what was the reason for that decision? The answer, I think, revealed itself by Wild Hop Lager’s presence at the Natural Food Expo West last weekend. It now appears likely that the target market for Wild Hop Lager is the craft beer market in general and the organic beer market in specific. Given the relatively small shelf space devoted to beer in the majority of grocery chains and Anheuser-Busch and their distributors’ strong presence on those shelves already, it seems to me the likeliest outcome is that Wild Hop Lager will begin to replace smaller, more local and regional organic beers. I have heard rumors that placement has already been authorized, at least here in California, for Safeway, Trader Joe’s, Whole Foods and Wild Oats.

So I thought the most logical place to look next was at the Organic Farming Research Foundation, the charity that Anheuser-Busch mentions on the Wild Hop Lager website. In fact, it’s worth looking at the exact language of the website again. Here is what it says:

[w]ith every purchase of Wild Hop Lager, a donation will be made to the Organic Farming Research Foundation to improve and educate people on organic farming practices. Together we can set a better example for future generations.

So I called the Organic Farming Research Foundation (OFRF), which is headquartered in Santa Cruz, California. In their own words, the OFRF is a “non-profit whose mission is to sponsor research related to organic farming practices, to disseminate research results to organic farmers and to growers interested in adopting organic production systems, and to educate the public and decision-makers about organic farming issues.” To a man, every person in the organic community I spoke with thinks very highly of the organization and nothing has shaken that impression in my communications with them or from the information gleaned from their website. They appear to be very much what they claim, a friend to the small organic farmer with a focus on the family farmer.

I left a message for Bob Scowcroft, Executive Director of the OFRF, as he is also listed as the media contact for the organization. Happily, he called me back in a few hours. On the phone, he was a very affable man and gave straightforward, thoughtful answers to all of my questions. I asked Scowcroft if he was aware that Anheuser-Busch was the organization behind Green Valley Brewing and Wild Hop Lager. He was aware of that fact. I then asked whether there was any concern about accepting money from A-B, given that the product they were selling did not disclose that it was owned by them. He explained that the origin of gifts to the organization has been the “source of much discussion over the years” and that the board has ultimately decided that the mission of the group is paramount and therefore all gifts are gratefully received. Scowcroft further explained that 75% of their gifts come from about 50 donors. They receive an average of 1,000 donations each year, with about 40-45% from family foundations, about 20-25% from corporations — large and small — about 20% from individuals, and 5-10% from a special grant-making arrangement with the EPA. Frankly, after talking to him — and a few others — I’m convinced we should all be supporting their efforts. Seriously, think about a donation to the OFRF.

I then asked Scowcroft what he could tell me about the nature of Anheuser-Busch’s donation. What he told me was quite interesting. He explained that it was for a fixed amount, not percentage based, and stated it was a “modest, one-time of gift of less than five figures.” So let’s go back to the wording on the website, which reads, “with every purchase of Wild Hop Lager, a donation will be made to the Organic Farming Research Foundation.” That seems contradictory, but in all fairness it’s possible that A-B is intending to make further donations based on actual sales of Wild Hop Lager. Bob Scowcroft was not aware of any arrangement whereby they’d be receiving a percentage of sales in the future, but believes that the door is certainly open for future gifts.

It’s also worth considering what Anheuser-Busch got for their donation. It seems to me they got a lot for a little. They got to align themselves with a very reputable organic charity. They got the illusion of credibility and the immediate perception of being part of that community. When you consider the millions and millions of dollars spent on NASCAR sponsorships, Super Bowl ads, baseball stadium banners, sports of every stripe, festivals, events, and on and on and on, then under ten grand is pretty much, as an old friend of mine used to say, “chump change.” It’s a pretty paltry sum in the grand scheme of things.

Many consumers will see their claims of being organic and the charity promise as further proof, along with the farmer-friendly graphics on the packaging, that their product is worthy of purchase based upon shared values and the emotional response that produces. I certainly know from personal experience that when faced with a decision to purchase two almost identical looking items, if one of them is supporting a charity I like, that information will often be sufficient to make me choose the product that appears more altruistic. But knowing a little bit more now about how that works will in the future make me question other claims of charity support on product labels. So does that damage the organic movement as a whole? It seems like it might. One analogy I can draw is giving money to the homeless. I often used to give my spare change to a beggar on the street. But once I discovered that some of them were con artists or scammers, it gave me pause and I found myself giving less often as a result. So in that case, legitimate homeless persons in perhaps great need did not get the help they might otherwise have received, as a direct result of the unethical actions of others.

Food based on organic farming is currently “2% of the food economy,” Scowcroft told me. I know my family does our part, and we buy organic produce and other goods whenever we can, at the local farmers’ market and grocery stores we frequent. There are a lot of similarities between the organic food movement and the craft beer movement, I think, not least of which is that craft beer accounts for only around 3.5% of the total beer market. Certainly a lot of craft beer drinkers enjoy organic foods, too, and vice versa, no doubt. But I wonder how many organic food consumers would be pleased to know that the organic beer they unsuspectingly bought was produced by the world’s largest brewer in a plant the size of several football fields and not by a small craft brewer, as is the likeliest inference one can draw from the label and graphics on the package.

I thought at this point I’d like to hear the opinion of someone who already makes organic beer. So I spoke to Morgan Wolaver, whose Wolaver’s Organic Ales have been around since 1997, making them the oldest brewer of organic ales in America. Personally, I think he ought to trademark that before Yuengling has a chance to complain. The two of us tried to remember who was older, but we could only come up with breweries no longer in business. I remembered Humes and he came up with Perry’s Organic but that was about it. Anyway, as it turned out he was not only familiar with the OFRF but has been donating to them for many, many years. And over the years, he and his brother have donated at least more than five figures to them. He explained that he continued to do so because of their good work and simply because “it’s the right thing to do.”

Wolaver also echoed my concern that Wild Hop Lager is a “stealth micro” (a term coined by Celebrator publisher Tom Dalldorf to describe a usually contracted beer that effectively hides its true ownership from the general consumer. A prime example would be Oregon Brewing Co., which was owned by Boston Beer Co. and won few friends in the state of Oregon since, despite the name, was not made there.) And that, I think, really is the crux of the issue.

Wolaver explained that in his view the organic market can be roughly divided into two groups of customers, what he calls core consumers and target consumers. Core consumers he defines as essentially hardcore organic product buyers, people who have been buying organic products for years or even decades. They read labels, front and back, and take their buying choices very seriously. Target consumers are more casual about their buying habits, but for various reasons — perhaps philosophical or because it makes them feel better — will make organic purchases whenever practical, convenient or less expensive. So while the average target consumer may or may not be swayed by who owns the product they’re considering for purchase, the core consumer definitely will be. But neither, I think, will be particularly happy if they discover that the organic beer they bought was a stealth micro and the real manufacturer is a giant corporation. I feel quite confident that the core consumer would be outraged but I also think the taget consumer would at least feel conned or deceived. And it is this very fact, I think, that explains A-B’s decision not to label and market this product as one of their own.

In general, the organic and health food market has already been co-opted by large corporations. Tom’s of Maine was recently bought by Colgate-Palmolive, Odwalla is owned by Coke, Kashi and Morningstar Farms is owned by Kellogg, and on and on. But for every one of these acquisitions, another small entrepreneur enters the fray with idealistic vision. So apparently there’s still hope, at least for those us who like to support small and local businesses. Of course, keeping up with the changes in the marketplace is undoubtedly exhausting and probably explains why there are so few core consumers. So it’s into that climate that Wild Hop Lager is being introduced. Will it ultimately be successful? Probably. As H.L. Mencken put it. “No one ever went broke underestimating the taste of the American public.“

The Fight For & Against Cheap Beer

By

An editorial in today’s Seattle Times discusses what they refer to as the “outdated economics of beer and wine sales.” This is in the context of local lawsuit that was originally filed in early 2004 involving Costco and the Washington State Liquor Board (WSLCB). Costco is seeking to dismantle the three-tier system in place there because to do so would give them — and other large retailers like Wal-Mart and their ilk — an enormous advantage that would effectively let them damage or destroy countless small businesses. The argument against that line of reasoning is, of course, that diversity would not suffer. In an earlier article about the case, “Dave Burman, a partner with the firm Perkins Coie LLP, which is representing Costco in the suit, said, ‘Costco believes that consumers are better off when there is vigorous competition. People who don’t want to compete always say that competition is unfair, but we want the kind of competitive environment where people are rewarded for being smart, not where the state says who should make how much money.'”

The other side replies “that if the regulations were lifted, it would lead to less choice for the consumer. This whole system affords the public a great amount of choice in product. If Costco prevails, they and Wal-Mart will dominate the retail sale of beer and wine, and there won’t be the selection that is currently available.”

“Burman disagrees, stating, ‘It certainly wouldn’t wipe out local businesses. There are plenty if [sic] distributors and small wine shops in California, where this kind of legislation does not exist.'” I mention all this background because I feel compelled to point out what went unquestioned by the Seattle Times, that “this kind of legislation does not exist” in California. California does have a very similar three-tier system, however, and Burman’s statement is about as blatant a falsehood as I’ve seen unquestioned in print.

Of course, it’s not hard to figure out the newspaper’s agenda. No author is listed for the editorial, so I infer that it’s the official position taken by the paper. I don’t have a copy of today’s paper in hand, but I’m willing to bet finding an ad by Costco will be a whole lot easier than finding one by the WSLCB or a local beer distributor. They’re undoubtedly pro-business, like most daily newspapers, because they rely on advertising revenue, which is funded almost exclusively by the business sector.

The editorial accuses the state of “saying it wants to keep wine and beer expensive so that the people will drink less of it. To that end, in the wholesale market the state bans volume discounts, sales at negotiated prices, sales on credit and delivery to a customer’s warehouse.” But of course, that’s not the only reason. The more commonly understood reason is that it levels the playing field for retailers and does not give an advantage to large retailers like Costco. And large retailers generally enjoy a huge advantage in most other types of products since there are few restrictions in other classes of goods that prohibit volume discounts. And that undoubtedly pisses them off, because they naturally want to dominate everything they can. In an earlier editorial piece, I stated that I don’t always agree with the NBWA. Well this is one of the times that I do agree with them. Not allowing large box retailers to bully lower prices for volume buys may indeed lead to incrimentally higher beer prices, but the difference is worth it. Because the real benefit it that small retailers theoretically pay the same wholesale price as the big guys do. That allows at least a consistent price and reduces lowballing and squeezing competition out of the market. I say theoretically, because at least in California I know of several ways in which the big retailers get around these restrictions.

Costco’s paltry beer selection generally favors the big three and a few giant imports like Heineken and Corona. Larger Costco’s in certain places also often carry a couple of regional players like Sierra Nevada or Anchor and maybe one or two local breweries that are chosen on a market by market basis. We’re talking about a dozen or so skus. To give that some perspective, when I was the beer buyer at BevMo, at its peak, I had over 1400 beer skus. So Costco wants to change state law — and is willing to spend legal fees by the keg — over a pretty miniscule percentage of the available packages in the state. Changing this law the way they want to, may have the effect of lowering the price of a few beers, but that will undoubtedly widen the gap between craft beer and large brewery products. And that makes it harder for brewers to induce consumers to trade up for better beer.

I know I may be in the minority on this one, but I think beer should be more expensive. Good brewers make great beer, work very hard and should be rewarded for their efforts. But the drive by large brewers to keep volume up also keeps prices artificially lower than they should be. As I’ve said before, this also has the effect of keeping the gap between craft beer and mass-produced unnaturally wide, and this causes craft beer sales to suffer, in my opinion. But until we can persuade the average consumer that it’s very much worth their while to support good beer by being willing to spend a little more for it, this will continue to be a Sisyphus-like struggle.

I don’t know where the Washington State Brewers Guild, a trade organization of small brewers within the state, comes down in this debate, but in my opinion they should be supporting the three-tier system, at least for now. There are definitely reforms that are needed to the present system, but the changes this suit is seeking will benefit only a small number of businesses, and the state’s craft brewers won’t be among them.

The editorial continues:

The effect of these bans is to keep prices high. Maybe that encourages a few of the penurious to stay sober, though we don’t think the state’s attorneys who make this argument really believe it.

Certainly it is not the motive of the distributors who have lobbied the Liquor Board for years. The Liquor Board does them a favor by forbidding them to cut prices, forcing them to mark up their bottles by at least 10 percent and forbidding them to sell below cost.

These are not health restrictions to benefit the people. They are economic restrictions to benefit the beer and wine distributors at the expense of the people.

…

There will remain a high-end market, though small producers, distributors and retailers may have to scramble. That is business. The extent of changes will depend on how many customers are motivated by price — and that should be up to them.

A fallacious component of their argument is that when they refer to customers with varying motivations by price, they’re talking about the same customer — they’re clearly not. Not all consumers of beer and wine are after the same thing, of course. Some may be looking for the cheapest possible package of lawnmower beer, some for a decent craft beer to pair with a home-cooked meal, while still others may be looking for the experience of enjoying a limited vintage barleywine. While the first may only care about price, the second may have some concerns about it within a certain range and the latter is more interested in acquiring a fine beer, with little regard to the price (within reason, of course). Removing the price controls as Costco envisions will clearly effect the first group, may have some limited effect on the second, but almost no effect on the last group. But the only change we can pretty much guarantee is that cheap beer will get cheaper and good beer will remain largely unchanged, thus widening the gap. And that’s bad news, I think, for the small craft breweries.

The argument that these “economic restrictions … benefit the beer and wine distributors at the expense of the people” certainly sounds like a lofty principle is at stake. But a closer inspection of the way the beer business works reveals that really only the big box retailers like Costco and Wal-Mart will benefit. Things may not be perfect the way they are — and they certainly aren’t — but Costco envisions a world in which they make more money and everybody else loses. And that’s certainly not good for “the people.”