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Costco Beers

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In related Costco news, Miller’s Brew Blog is reporting that the big box store chain will be creating three private label beer brands under the Kirkland name: a hefeweizen, amber ale and pale ale. The Gordon Biersch production brewery in San Jose, California — who also makes competitor Trader Joe’s private label beers — will be brewing the beer for Costco. Private label products tend to have higher profit margins than regular brands, so undoubtedly that’s the motivation here, as well. Given that most Costco stores carry only a very few beers, and even fewer craft beers, this strikes me at first blush as another bad omen for better beer. I doubt they’ll be increasing the number of beer skus each store will carry but more likely will shove less well-established local brands out the door to make room for these.

 

 

Appeals Court Reverses Washington Costco Decision

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According to a breaking news press release I received from the National Beer Wholesalers Association (NBWA), the Ninth Circuit Court of Appeals has reached a verdict in the lower court’s earlier decision in Costco v. Hoen (Washington State Liquor Control Board), reversing a majority of it, which, according to the NBWA, “thereby affirm[s] the right of the states to regulate alcohol under the 21st Amendment – a system that works to protect the citizens of each state. While NBWA is still reviewing the totality of the Court’s opinion, it appears that state regulation has been validated.”

Disappointingly, the Seattle Post-Intelligencer’s report on this begins with the following loaded sentence. “A federal appeals court Tuesday dealt Costco Wholesale Corp. a setback on whether the giant warehouse club operator could lower prices of beer and wine for its customers.” I realize that was in the business section, but so much for impartiality. Swallowing Costco’s propaganda entirely, to say they sued the state so they could lower prices to consumers is at best not telling the whole story and at worst and out and out fabrication.

Of the nine laws and regulations Costco claimed restricted competitive practices, U.S. District Court Judge Marsha Pechman agreed and ruled over a year ago in their favor. Today’s appeals ruling reversed eight of those, with the exception of the post-and-hold requirement. It appears likely that it may now be appealed to the Supreme Court. According to the PI, “The 9th Circuit Court of Appeals said the state Liquor Control Board could prohibit discounts, ban central warehousing of beer and wine by retailers, require wholesale distributors to charge uniform prices to all retailers and require a 10 percent markup. The state had said if Costco won it could put into question the systems other states use to control alcohol consumption and safeguard the collection of taxes. At least 30 other states or jurisdictions had filed briefs in support of Washington.”

Reuters, on the other hand, more even-handedly stated that Costco “lost a bid on Tuesday to overturn Washington state liquor rules that control pricing and discounts.”

The Seattle Times and the Wall Street Journal have also now weighed in with stories of their own.

From the Wall Street Journal:

Costco’s 2006 triumph attracted a lot of attention because it suggested that major changes might be in store for the nation’s complex system of regulating alcohol sales. Changes in Washington state could have a ripple effect, because most states have similar laws.

Costco is challenging a regulatory architecture that dates to the repeal of Prohibition and was designed partly to discourage overconsumption of alcohol. Makers of alcoholic beverages sell to a distributor, which marks up the price and trucks it to a bar, restaurant or store, which then sells it to a consumer.

Costco is deciding whether to appeal the ruling. “We are pleased that the central part of the anticompetitive restraints provisions was struck down,” said David Burman, a Seattle-based lawyer handling the case for Costco, referring to the “post and hold” provisions. “It will be good for Costco members and other consumers.”

Seventeen other states have post-and-hold laws, Mr. Burman said. He added that he thinks Washington lawmakers “will likely” consider overturning other provisions.

Washington alcohol regulators may appeal the part of the ruling favoring Costco. “The state got a pretty good deal. It has to decide whether it can live with a regulatory scheme that sort of has one component plucked out and thrown away,” said Richard Blau, a lawyer who specializes in alcohol law with GrayRobinson, a Florida law firm. Regulators could leave it up to state lawmakers to address that aspect of the court’s decision.

The other reason that this so-called “regulatory architecture” was partly created, in addition to discouraging overconsumption, is to level the playing field among different sizes of businesses so that advantages were not given to larger businesses by virtue of their superior bargaining position and resources to make larger buys. That was the real reason Costco went after these laws, not because they were concerned that their customers might be paying too much for the beer and wine they sold. You’d have to be pretty blind to reality to swallow that one as their motivation, yet in mainstream media story after story that continues to be the reason stated.

 

Cognitive Branding

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This is slightly off topic — it’s more about advertising — but since Anheuser-Busch’s Super Bowl ads are singled out, and also because it’s quite interesting, I thought I’d pass it along just the same. An article in yesterday’s Advertising Age by a Lisa Haverty, titled Don’t Flush Your Ad Down the Super Bowl: Unless Your Spot Has Fundamental Cognitive Elements, No One Will Recall Your Brand, begins with this ominous warning. “If you’re not Bud, don’t bother.” Ouch, if I were spending $2.7 million on an ad promoting the Bulletin during the Super Bowl I wouldn’t be very happy to read that. But apparently unless I’m careful to incorporate “some very fundamental cognitive elements” in my ad, people will end up remembering it as another Bud ad. The Cognitive Science Conference — doesn’t that have fun time written all over it? — held last August in Tennessee (and sponsored by the Cognitive Science Society) revealed in a study that “[a]ds with poor ‘cognitive scores’ were misattributed by consumers, and beer ads were attributed to the huge Super Bowl presence that is Budweiser.” There are ways to avoid this from happening. As Haverty suggests, you have to follow the basic principles of cognitive science to make people remember who you are, or in the jargon, reliable brand recall.

Here’s an interesting example:

Take, for example, the concept of “working memory.” Information has to go through working memory to get into long-term memory, where brand awareness and loyalty reside. One of the principles of cognitive science is that a person can hold and process only about seven items in working memory at any given moment. This actually varies from about five to nine in the general population. If your ad has so much information that it exceeds working-memory capacity, you’ll lose control over what consumers are able to remember. Cog-sci lesson: Respect working memory.

There are a few other examples, read them if you find this sort of thing as fascinating as I do. What I really take away from all this, apart from the simple fact that one must be careful in how to spend $2.7 million, is something I always suspected about any large company’s approach to blitzkrieg advertising. By year after year being the biggest advertiser during the Super Bowl, A-B has set themselves up in a very enviable position. Any other beer or related commercial runs the risk of having their own ad remembered by consumers as being for the competition. Talk about a gamble. They’ve effectively made it almost impossible for any other beer company to reach their audience during one of the most-watched television events of the year. In essence, they now own the event, ad-wise. The cynic in me thinks that if they paid for it, they should reap the rewards, but my idealistic side hates that any big company with vastly more resources than all of his competition can just use a bludgeon to maintain his market position. But that’s what’s happening in virtually any industry you can name. Once upon a time, hundreds and thousands of small local and regional businesses competed more or less on a level playing field, at least more fair than today’s environment. Go anywhere in America today, and the number of national chain stores and other businesses dominating and squashing local competitors is astonishingly near completion. And that’s not good on so many levels. As the science of advertising gets better and better, we’ve truly been manipulated into thinking what’s good for GM is good for America. If that idea is allowed to run its course there will be two or three brands, at most, for literally every type of good you can name, and even at that each will be remarkably similar to one another. Only the cognitive branding, advertising and marketing will be able to identify any difference, and they’ll do so by the most dishonest of methods possible. Geez, I need a beer.

As an aside, there’s a very funny critique of this AdAge article by AdHurl, which as far as I can tell is by a thirty-year veteran of the ad game, George Parker. He calls out Haverty for her overuse of the word “cognitive” throughout her piece. It’s snarky and hilarious. A kindred soul.

 

Here Comes the Stagecoach

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It seems like there’s been a number of brewers taking the next bog step into packaging, and the latest one comes from Mantorville, Minnesota, a small town southeast of Minneapolis and not to far from the border of Iowa. Mantorville Brewing was founded in 1995 and, according to a story in their local Post-Bulletin, has had a difficult road to production. But now the Stagecoach Amber Ale, named for stagecoach stop that is a part of the small town’s history, has started to be delivered to local retailers throughout the area.

 

Price vs. Value

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It’s been said that when you buy something, the price is what you pay and value is what you get. But if you want to get people’s attention, charge an astonishingly high price for something. Case in point, ever since Bloomberg News on Friday did a story about Carlsberg’s new $400-per-bottle beer, touting it as the world’s most expensive, it’s been burning up the blogosphere, online news outlets and forums. And with good reason. There’s a lot not to like about this story, and very little to suggest the $400 price tag is anywhere near reasonable, as many, many have already pointed out, from A Good Beer Blog’s Are You An Utter Fool? to Beer Advocate’s forum responding to the question, Are massively expensive beers good for the craft brew world?

What I find curious about this new beer is that, as far as I can tell, Carlsberg is almost completely silent about it. There’s nothing about it on their website, nothing under media or press releases. Wouldn’t you expect at least some PR information on the supposed release of something called the world’s most expensive beer? But all of the press this has gotten seems to be coming from a single source, the Bloomberg piece, which even more oddly appears to be aimed at the Latin American market.

The beer itself may be called Carlsberg Vintage No. 1, and all we know about it is that it’s 10.5% abv and “contains hints of prune, caramel, vanilla and oak tree from the French and Swedish wooden casks in which it [was] stored. It has a chestnut brown color, little foam and goes well with cheeses and desserts.” That’s according to Jens Eiken, the brewer at the Jacobsen Brewhouse (the small boutique brewery housed in the Visitor’s Center), who created the beer. Given that it’s so expensive, he’s surprisingly tight-lipped about giving any details that might convince one that it’s worth that hefty price tag. He says it’s relatively cheap, “considering the amount of time the brewery spent developing it.” Naturally he’s not saying how long that was, but does add “[w]e’re trying to raise the bar for what a beer can be,” which is maddeningly infuriating since he refuses to say how or to where he thinks this beer has moved the “bar” to.

But unlike other efforts to “raise the bar” where the process and rationale for a higher price tag have been spelled out somewhat convincingly, making beer of great value doesn’t appear to be the point one iota. Price appears to be the driving factor, which at least explains the lack of persuasion or transparency. The $400 price is a conversion from the price in Danish kroners, which is 2,008 — a figure arrived at simply to coincide with the year. Next year, the price will go up to 2009 kroners and 2010 the year after that. The 600 bottles initially being sold in three high-end Copenhagen restaurants aren’t even very large. Each bottle is only 37.5 centiliters, which at 12.68 ounces is just north of our standard beer bottle.

The beer was created for no better reason than to “challenge luxury wines in the gourmet restaurant market and capitalize on rising individual wealth.” You can see the visible hand of marketing in every step of this project. Maybe I’m old-fashioned, but I think the way to challenge wine’s perceived supremacy is to make beers that rival the quality of fine wines, not arbitrarily price them as if they did. Frankly, I think one of the best selling points of better beer is precisely that in many cases it really does already rival that of fine wine, and does so at a spectacularly more reasonable price and one which bears some relation to the ingredients and process of manufacture. In other words, it’s a good value. Even Utopias, at $100 or more, because we know what’s involved and how it was made doesn’t seem too out of whack. Carlsberg Vintage No. 1 on the other hand? Whack job, all the way.

Beyond that, look at the tortured way they arrived at the title “world’s most expensive.” From the Bloomberg news article:

Vintage No. 1 will be the world’s most expensive beer, according to Eiken. That title is currently held by Boston Beer Co.’s Utopia, which costs about $100 for a 72 centiliter bottle, according to the Web site Most-expensive.net.

Bierodrome, a London bar, sells Belgian beer Vielle Bon Secours for 635 pounds ($1,260) per 15 liter bottle, which is 12 times less than the liter price of Vintage No. 1.

And according to The Longest List of the Longest Stuff at the Longest Domain Name at Long Last:

A New Zealander paid $2,595.00 USD for a beer in a Hong Kong bar. He must have had one too many and thought the credit card slip read $2.45 when he signed it, but he claims the bar tampered with the bill. Nevertheless his credit card company did not reverse the charges and the man only known as Mr. B paid $2,595.00 for a beer.

But while I don’t think an accidental over-charging can be more than a footnote in this discussion, reducing it to the price per ounce, liter, or whatever measurement doesn’t really work either. The Bon Secours is still the most expensive bottle, no matter how large it is. I guess if your goal is to have the most expensive anything, and you’re a large enough company, you’ll figure out a way to make that happen.

Is it enough that there are only 600 bottles (50 cases at 12 per or 25 cases at 24 per) to justify the price? Certainly supply and demand is a time-honored economic method of determining fair market value. But in this case while the supply is indeed low, the actual demand is non-existent, completely artificial and will have to be manufactured from scratch.

You have to wonder about what they’re not telling us, because a 10.5% beer that’s been aged on wood is not exactly newsworthy. I can find any number of beers similar to that description. There are entire beer festivals here in the U.S. devoted to wood-aged beers. I judged at the Bistro’s Barrel-aged Beer Festival in my own backyard last year and had at least a dozen beers fitting the description of Vintage No. 1, without having to travel to Denmark. So what could be so different about this one to not only justify the cost but also their claim that even at this price they’re losing money. If I wanted people to plunk down a previously unheard of amount for something I made, I’d go out of my way to justify that high price.

 

But I think the difference between Vintage No. 1 and other high-priced beers, like Deus, Vielle Bon Secours and Boston Beer’s Utopias is the following. I’ve talked to Jim Koch about his Utopias, their earlier Millennium Beer and even the Triple Bock they made in the 1990s. All of those beers are or were relatively expensive beers. But the fact of their high price was at best a secondary consideration, a factor of the cost or making them. Vintage No. 1, from what little we know about it, was just the opposite. The price was created first, as a marketing gimmick (being the same as the year), and specifically to fill a demand by the nouveau riche for something expensive to spend their money on. Jim Koch, on the other hand, at least was truly passionate about the beer he and his team of brewers had made. Love it or hate it — and I’m in the former camp — you have to admit Utopias really does push the boundary of what beer is and can be. Can the same be said of a 10.5% beer aged on wood, without knowing anything more about how it was made?

 

To give my take on the question of whether or not expensive beer is good for the craft beer industry, I think in general it can be. I think that for the most part the price of beer has been kept artificially low for too long and has helped to maintain the image of beer as a cheap, mass-produced commodity not worthy of respect. There is something to the idea of charging a higher price for something giving it more perceived value by that fact alone. Though I think it’s gotten out of hand, wine has been using perceived value for years instead of a cost of goods to mark-up ratio to come up with a fair market price. Beer, especially among the big breweries, works on volume sales rather than a high mark-up per bottle or per package. And to keep volume up, the big breweries have kept their prices low even as their cost of manufacture and for ingredients has steadily risen. This has also forced craft brewers to likewise keep their profit margins thinner, which has had the effect of keeping perceived value lower, too. Now that there are shortages to both hops and malt, that will have to change and it will be interesting to see how consumers react. I think as long as they perceive that for the price they’re still getting a good value, things shouldn’t be too bad.

That’s where I think Carlsberg’s Vintage No. 1 goes off the rails. There’s just no sense that there’s any reasonable value for the exorbitant price they’re asking. I’m sure there will be someone willing to buy it just to show off or impress others with their success. After all, there’s never been a shortage of fools with more money than sense. That doesn’t justify the price, of course, and in this case the utter lack of perceived value could indeed damage the cause of making fine beer more highly prized and priced. I’d pay almost any reasonable price for something I highly value. But I place almost no value in being tricked into paying ten times (or more) for something just because someone thinks they can get away with it.

 

UPDATE 1.29: I’ve found a bit more about what the bottle will look like. “Each bottle is labeled with a hand stenciled original lithographic print by Danish artist Frans Kannike, making the empties worth about $100 apiece.”

 

 

Stout & Cheddar Soup

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This tasty looking recipe was featured on Chicago’s ABC Channel 7, created by Michael Pivoney, Executive Chef at Marion Street Cheese Market.

 

Stout & Cheddar Soup (makes 6 servings)

 

  • 2 Tbsp. canola oil
  • 1 stick unsalted butter
  • 3 stalks celery, diced
  • 2 jumbo carrots, diced
  • 1 medium white onion, diced
  • 1 stalk of leek, diced
  • 4 cloves garlic, minced
  • ½ cup all-purpose flour
  • ½ cup rye flour
  • 2 bottles of stout beer (premium quality such as Guinness)
  • 1 quart chicken stock (vegetable stock may be substituted)
  • 1 tsp. thyme
  • dash of Worcestershire sauce
  • dash of tabasco
  • 2 cups finely-shredded cheddar cheese (premium quality)
  • Kosher salt and fresh cracked pepper

 

Method:

In a large soup pot, heat the oil and butter then saute the celery, carrots, onion, leeks and garlic over medium-high heat for approximately 10 minutes – until the onions are translucent Add the flour and saute over medium-low heat for approximately 8 minutes until flour is slightly brown and has a nutty scent. Whisk-in the stout beer and simmer for five minutes, then add chicken stock and thyme and dashes of Worcestershire sauce and tabasco. Continue to simmer and when mixture begins to thicken, slowly add the cheese, whisking constantly until well-combined. Season to taste with salt and pepper, then allow the soup to simmer over low heat an additional 30 minutes.

Puree the soup in a blender and serve hot.

 

 

New Boscos Labels

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To continue the impromptu beer label theme to today’s posts, here are the mock-ups for new labels for five of Boscos regular beers, which I got last week along with the new brewery pictures my friend Chuck sent me. I think they’re pretty cool looking. I like the simple retro look to them. They remind me of vintage travel posters from the 1920-30s. What do you think?

 

 

Symphony in Suds

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I’m not one to pimp beer commercials very often, but I found this one pretty clever. It’s simply the Melbourne Symphony Orchestra, on stage in their tuxedos, performing the theme song for Foster’s most popular beer in Australia, Victoria Bitter. But instead of their normal instruments, the song is played on beer bottles. Believe it or not, when I first started college my major was music theory/comp (composition) and I had aspirations to write classical music, so it was fun to see the inventive ways they found to make sounds from the beer bottles. Simple and with no catch phrases, animals or mud-wrestling. If only the beer was better.

 

 

Free As In Freedom

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While searching for a generic beer label for my previous post, I stumbled upon the Free Beer organization, a Danish art project applying the open source or Creative Commons idea to beer. The Creative Commons is a more open approach to copyright law, created by people who think copyright law as it exists today does more to stifle creativity than allow it to flourish. If that seems at first counter-intuitive, I would recommend you read Lawrence Lessig‘s wonderful book, Free Culture: The Nature and Future of Creativity and/or see the film Revolution OS, which has as much to do with this fascinating idea as it does with the history of computer operating systems (and it details the contributions of Richard Stallman). Anyway, the idea of a looser way to reserve some rights but allow people to build on previous efforts to collectively come up with better solutions and products because they’re designed in the open by dozens, hundreds or even thousands of people working on them is at the heart of this idea. Originally, of course, this notion was applied to software. This blog you’re reading, for example, runs on WordPress, an open source blogging software that is essentially free to use and has been created by untold numbers of programmers who are working constantly to make it better.

From the Free Beer website:

The project, originally conceived by Copenhagen-based artist collective Superflex and students at the Copenhagen IT University, applies modern free software / open source methods to a traditional real-world product — namely the alcoholic beverage loved and enjoyed globally, and commonly known as beer.

It seems to me that homebrewers already share recipes fairly freely, and I know of instances where commercial brewers have all made the same beer (using the same hops or to celebrate Ben Franklin’s 300th birthday, for example) so I’m not sure how novel this is, but it’s still a worthwhile idea to promote, at least in my opinion.

 

The English version of the Free Beer label.

 

Random Beer Names

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I’m not entirely sure why this exists, but I did have fun with it — so perhaps that’s enough of a reason — but Strange Brew, a Canadian software company that makes programs for homebrewers, also has an online Random Beer Name Generator. My first beer name:

Flying Squirrel-Mash Oud Bruin

Being a huge fan of Rocky & Bullwinkle, I thought this one was a great name for a beer. But some others were equally intriguing, such as Craptacular Loch Ness Monster Tripel, Barney and Spiderman’s Transgendered Bière de Garde and even The Squid Formerly Known As Winston Churchill’s Unbefreakinglievable Pilsner. I don’t know how many names are in there. I tried quite a few and never got a duplicate. Give it a try. Let me know your best ones.