Brookston Beer Bulletin

Jay R. Brooks on Beer

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Boston Beer to Build Brewery?

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Boston Beer Co., the makers of Samuel Adams beer, bought a brewery about ten years ago. It was a somewhat well-known one, the Hudepohl-Schoenling Brewery in Cincinnati, Ohio. They were a large regional player probably most famous for their Little Kings brand and the Christian Moerlein line. Like many breweries in the past two or so decades they also kept themselves afloat by doing contract work, most notably for Whitbread and Sam Adams. Then in 1997 Jim Koch, perhaps having grown tired of constantly being criticized for being a “just a contract” brewer and not owning a one, purchased it. After recently investing heavily in upgrades, the company expects to brew roughly two-thirds of Sam Adams beer there. ProBrewer reported today that they’re now considering building yet another brewery, this time from scratch with the ultimate goal of brewing all their own beer themselves.

From the ProBrewer report:

Boston Beer said in the report that it’s evaluating its long-term production strategy and could decide to make all of its own beer. Until it bought the Hudepohl-Schoenling brewery 10 years ago, almost all of its beer had been made under contract since the company’s founding in 1984.

Back then, there was idle brewing capacity in the industry from smaller regional breweries. In recent years, many of those regional breweries that had excess capacity have seen increased sales due to the popularity of the craft beer segment, and there’s less capacity available for contract brewing.

If Boston Beer decides to make all of its own beer and build a new brewery, it would likely require an investment of $70 million to $90 million and yield improved operating and freight costs, it said. Company officials told analysts during a conference call this week that the evaluation of its production strategy was ongoing and that they hadn’t developed full economic estimates yet.

CEO Martin Roper said freight costs, beer freshness, and quality control as some of the factors that they’re looking at.

Anheuser-Busch Picks Up Another Import

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Anheuser-Busch announced today that they would be extending their portfolio of imports to include Singapore’s Tiger Beer, a product of Asia Pacific Breweries. This is the scond such announcement in less than a month, when in late February A-B also announced distribution of the Dutch beer Grolsch.

From the press release:

Anheuser-Busch will become the U.S. importer of Tiger Beer, a leading premium brew from Singapore, expanding the American brewer’s portfolio in the growing U.S. import category, the two brewers jointly announced today.

The agreement gives Tiger Beer access to Anheuser-Busch’s broad marketing and sales expertise and to its wide-reaching U.S. distribution network, which is considered the best in the industry. The deal follows the recent announcement of a similar partnership with the Dutch brewer, Grolsch, continuing an aggressive push by Anheuser-Busch into the high-end beer category.

“Tiger Beer is recognized as one of Asia’s finest beer exports,” said August A. Busch IV, president of Anheuser-Busch Inc. “Tiger Beer is a high-quality, premium brand that is a perfect complement to our growing portfolio of import beers.”

….

Imported beers represent approximately 12.4 percent of the total U.S. beer market, selling 25.6 million barrels in 2005.* The segment grew about 7.2 percent in 2005* and has experienced an average growth rate of 5 percent over the past five years, making it one of the fastest-growing segments of the U.S. beer market.

* Department of Commerce Data provided by the Beer Institute [who we already know cannot be trusted — editor’s note. See my previous rant about the Beer Institute’s being in thrall to A-B via the Here’s to Beer ad campaign.]

The agreement will be effective May 1, 2006. Terms were not disclosed. The imported Tiger Beer will continue to be brewed at Asia Pacific Breweries’ Singapore brewery for export to the United States.

Anheuser-Busch is focused on expanding its participation in the import and high-end beer categories as a key growth strategy for its U.S. business. Anheuser-Busch brews and sells two of Japanese brewer Kirin Brewery’s beer brands in the United States – Kirin Ichiban and Kirin Light. In some areas of the country, Anheuser-Busch wholesalers carry Corona and the other beer brands of Mexican brewer Grupo Modelo.

So if you’ve been following along, this is just the latest by an increasingly desperate looking Anheuser-Busch. It’s not that Tiger Beer is bad — it really isn’t — but taken together with all the mischief the King of (Flavorless) Beers has been up to lately to get revenue and the share price back up after a truly disastrous 4th quarter last year, it’s just becoming more and more painful to watch. In my fantasies I’d like to believe this is their death rattle, but I know better. They’re not only not going away any time soon, they’ll be around long after I shake off my mortal boil. But that doesn’t change the true enjoyment out of watching them squirm and struggle, even if it’s only a very little bit.

Gambrinus Company Loses Corona

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Grupo Modelo, the brewery that makes Corona beer won an arbitration against its longtime importer for the Eastern United States, the Gambrinus Company of San Antonio, Texas. When Modelo announced last year that they would not be renewing Gambrinus’ contract, the importer took the dispute to the Paris-based International Chamber of Commerce for arbitration. The contract is set to expire in 2007.

Gambrinus also owns or imports several other brands, including Moosehead, Shiner, Pete’s Wicked, Trumer and BridgePort. Anheuser-Busch also owns 50% of Grupo Modelo.

Beer: “Official Drink of Knuckleheads”

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At the annual Nightclub & Bar Show held — where else — in Las Vegas, Miller Brewing CEO Norman Adami made some surprising admissions in a speech he gave last night. Perhaps they weren’t that remarkable when you consider that he was speaking to a group that consisted primarily of bar owners and it was reported by MarketWatch, a trade magazine that is read almost exclusively by the same people. If you want to know what’s really going on, a good place to start is to read what business people are saying to one another in the business press. There they generally speak with a great deal more candor because their audience is almost exclusively the business community. Since there’s less need to spin the news for the general populace of consumers, you can therefore often find some excellent nuggets of uncommon honesty.

Adami followed the line of reasoning Anheuser-Busch has recently taken that beer drinkers are switching to wine and spirits as they are “significantly outpacing the growth of beer.” He did, at least, acknowledge that craft beer and imported beers “continue to grow at a good clip.” A reasonable person at this point might look to the taste and more flavorful character of craft beers and many imports and conclude that perhaps it was time to stop making bland, flavorless mockeries of beer. Silly you. It’s the fault of marketing. It can’t be the product, it must be the way it’s presented. Adami said that in the mid-1990s, “brewers fell into a pattern of sameness in message, sameness in look and sameness in our products.” Oh, that must be it. He continued. “We were promoting sameness and increasingly going lowbrow. It is as if we were promoting beer as the official beverage of the knuckleheads.” He claimed the consumer “was looking for more diversity and style.” Diversity and style, huh? That sure sounds like a cry for flavor to me. Since the bland American-style pilsners that the big breweries continue to churn out like a bad science project gone awry are the very opposite of diversity and literally have no real style, wouldn’t the logical conclusion be to take a look at the products you’re offering?

Nobody says the big breweries can’t make a decent beer, which is why it’s all the sadder that they no longer do. There’s almost no one left alive who can remember what big brewery beer tasted like before World War Two. That’s when the slide toward mediocrity really began. The U.S. government asked the breweries to make watered-down versions of their beer because they didn’t want soldiers to be drunk while bullets were whizzing all around them, which is quite sensible. Of course, not drinking at all might have also made sense but those were different times and attidtudes were also different, to be sure. But the unfortunate result was that when the soldiers returned many of them also brought back a preference for the blander beers they had in the war. And every brewery was happy to oblige them since a watered-down beer is also a cheaper beer to make, which means more profits. So what began innocently, continued for decades of slowly making beer more and more bland until it reached its zenith in the early 1980s with the popularity of light beers. It’s hard not to see the ensuing microbrewery revolution of that same time period as a backlash to the bland beers of the day.

But as if you needed more proof that profit is king, Miller will not be improving the taste of its beer by the reintroduction of flavor to fight this crisis. Instead they will be “overhauling the packaging and marketing of its big domestic brands, including Lite, Genuine Draft and High Life, while heavily promoting imports including Pilsner Urquell and Peroni.” Well that ought to do it. Whew, dodged a bullet there. That should keep the shareholders happy.

He concluded by commenting that there are signs of “a reawakening in the American beer business. I believe the industry is going to get its marketing mojo back.” Well, what a bold prediction. That’s just what the American beer business needs: better commercials, better billboards, better sports sponsorships, better methods of selling but decidedly NOT better beer. If there was ever a better opportunity for craft beer to step in and fill the public demand for “diversity and style,” this is it.

Achouffe to Import Double IPA

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Brasserie d’Achouffe, a relatively recent addition to the scores of excellent small Belgian breweries (they began in the mid-1980s) will become the second Belgian brewery (after Urthel) to create a Double IPA to import to the American market. Their new Houblon Chouffe IPA Dobbelen Tripel will reportedly be available in the U.S. through B. United beginning later this month. Shaun O’Sullivan, brewer and co-owner of 21st Amendment Brewery & Restaurant in San Francisco, California, became the first American to try the beer during a brewery visit last week. I have to say that I like this trend. For years, American brewers have been paying homage to the wonderful beers of Belgium. It’s nice to see that trend beginning to reverse even on a small scale. It means at the very least that we’re doing something right, even if the majority of our own consumers are largely oblivious. I for one look forward to giving this one a try.

Jean Louie, Marketing director of Brasserie d’Achouffe leads Shaun O’Sullivan on a tour of the Achouffe brewery.

Drinking the Dobbelen IPA, Jen Garris and Shaun O’Sullivan were the first Americans to try this beer. They took pictures of Shaun drinking it. The Imperial IPA will be sold only for the American Market. According to Shaun, it’s a very bitter beer with the Achouffe yeast aroma. Chris, one of two owners is on the far left. Jean Louie is next to him and then Christopher. Shaun also brought two bottles of his Double Trouble Imperial IPA and it blew them away.

Jen Garris and Shaun O’Sullivan trying the range of beers from Brasserie d’Achouffe in their new tasting room.

Jen Garris and Shaun O’Sullivan toasting with Achouffe’s Dobbelen IPA.

Bay Area Brewer in Belgium

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Last night on his Lufthansa flight back from belgium, 21st Amendment brewer Shaun O’Sullivan e-mailed me some of his photos from his trip to Belgium, so I thought I’d share them with everybody.

With the bartenders at the Koln Karnival at the local Pfaffen Brewery in downtown Koln.

Shaun with Jen Garris of Magnolia Brewpub and a local clown.

Shaun with another local at the Koln bar.

Touring Chimay with Pierre, a civilian that works in the brewery.

Outside of Rochefort brewery.

According to Shaun, the gate was open at Rochefort, so they just walked in and took pictures. Nobody said anything to them because of the vow of silence.

Science News: A Skunk Walks Into a Bar …

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I stumbled upon this news item from last December that appeard in Science News, the Weekly News Magazine of Science. The article, by Aimee Cunningham, entitled A Skunk Walks into a Bar . . . Fighting Beer’s Fouler Flavors was a pretty good overview of the history of identifying and codifying the individual flavor compounds found in beer. Some of the information is necessarily simplified but it still contains a lot of worthwhile and interesting information.

Watermelon Funk: A Collaboration

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21st-amend russian-river
The fruit beer craze is definitely over, not that that’s a bad thing. Most of the remaining fruit beers are very worthwhile and quite tasty. Beers such as New Glarus’ Raspberry Tart, Unibroue’s Quelque Chose or Great Divide’s Wild Raspberry Ale spring to mind. But a local favorite has to be Shaun O’Sullivan’s Watermelon Wheat, that has become as much a sign of summer as the first robin is of spring. A ubiquitous sight at 21st Amendment during the warm weather, Watermelon Wheat is very refreshing with strong watermelon aromas and flavor from the many pounds of watermelon added to each batch.

Shaun has now given several barrels to Vinnie Cilurzo at Russian River Brewing and he’s put them in oak barrels and sparked them with the Belgian yeast Brettanomyces. Nobody knows what this experiment will taste like, but I for one hope to be around when we find out. It should, at the very least, be quite interesting.

Amazing A-B Turnaround! Wow, That Was Fast!

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Wow, these guys are good. Just a few weeks ago A-B was talking about their earnings dip like the sky was falling, running around doing anything they could think of. “Pick up more imports” (Grolsch), try to buy up some microbreweries, “create an ad campaign to celebrate beer” (Here’s to Beer), and “introduce new products” (Michelob Ultra Amber). Well I guess it was all worth it because yesterday it was anounced that Anheuser-Busch was “restoring sales and earnings momentum.” Whew, I’m glad that’s over and we can all relax.

Of course, I can’t help but wonder what “Restoring Sales And Earnings Momentum” actually means. Just on a purely semantic basis, how can you restore momentum? Merriam-Webster defines momentum as “strength or force gained by motion or through the development of events.” Is it even possible to “restore” so quickly something that by definition takes time. Momemtum must be gained slowly, it’s not like a race car weaving through the business landscape. But that’s propaganda for you. Frame something in a positive light and the facts or common sense hardly matter.

Frankly, if I were a shareholder I’d be concerned about these wide swings. First we’re up, then we’re down, now we’re up again all in the space of a few months. You’d think people would be more concerned with fixing any problems (not that any have been admitted, it’s always someone else’s fault) on a long term basis so they wouldn’t resurface. But shareholders are apparently a finicky bunch afflicted with a economic form of ADD. They want growth and earnings and they want it now dammit, or they’re selling. It’s the adult equivilent of play-my-way-or-I’m-taking-my-ball-and-going-home. They’re not in it for the long haul. So it’s not terribly surprising to see A-B float some small positive numbers and then spin it so they’re magically back on the road to recovery. Nothing will really change, but the share price goes up and everybody’s happy.

From the press release:

Through a number of new sales initiatives, the company restored its domestic beer volume and market share growth in the second half of 2005. Anheuser-Busch’s wholesalers’ sales-to-retailers increased 0.8 percent in the second half and grew 2.7 percent in the fourth quarter (both on a comparable selling day adjusted basis). Anheuser-Busch brands gained six-tenths of a share point at the consumer level in both the third and fourth quarters, according to IRI supermarket data. The company’s sales momentum has carried over into 2006, with wholesalers’ sales-to-retailers up 2.9 percent through mid-February.

Watch out any time you hear the euphemistic “new sales initiatives” which most likely means lowering prices. Most beer companies already do this a bit more in January and February, because they are traditionally the slowest months for beer sales. But lowering prices also has the curious effect of raising volume but lowering profit, and wasn’t that A-B’s problem in the first place?

And check out these numbers they’re crowing about. People tend to read headlines and maybe the first paragraph, studies have shown. So it’s no surprise the actual numbers that indicate restoring of momentum are in paragraph two, where it’s finally revealed that “wholesalers’ sales-to-retailers increased 0.8%” and “grew 2.7 percent in the fourth quarter (both on a comparable selling day adjusted basis).” Woo hoo. Now I know in terms of dollar amounts, because A-B so large, that even small percentage gains probably equal millions, it’s still not exactly the sort of numbers you expect people to start sending out press releases about. But also look at the paranthetical information. “Comparable selling day adjusted” is basically a trick to compare periods of time that have different numbers of days in them, that is it’s another way to potentially lie with statistics or at least show things in the most favorable light possible.

More from the press release:

Restoring cost stability is expected to take longer than restoring volume and pricing. Over the last three years, the domestic beer company has experienced substantial increases in commodity costs, most recently from aluminum, glass and energy. Commodity cost pressures continue in 2006. Commodity costs tend to be cyclical over the long-term and the company is actively working on a number of productivity initiatives to improve the cost outlook.

Just as an aside, I love the language that corporations use. Craft brewers use ingredients, supplies, etc. A-B uses “commodities.” Small brewers pay higher electric bills, big corporations experience substantial increases in commodity energy. That just cracks me up.

Normally, when supply costs go up you’d expect that prices to consumers would also rise. And while there have been modest increases, A-B and to some extent the other big breweries (because they’ve had to align their pricing with A-B to stay competitive) have minimized these as much as possible due to perceived consumer resistence to paying more for beer. Over the years this has kept big beer prices relatively low, especially compared with craft beer (which is generally much more expensive to produce). So their complaints about costs seems more like whining to me. They could raise prices to a percentage of actual supply costs anytime they wanted, but over the years they’ve trained their customers to expect low prices and now this strategy is starting to backfire. Plus, of course, profits would also suffer further indignities.

The other effect of keeping their prices artificially low is that the gap between a six-pack of Bud and a six-pack of something with flavor is necessarily higher. This has been a bone of contention of mine for quite some time. If A-B’s pricing reflected the same markup as craft brewers then the difference between their beer and something worth drinking would be substantially lower, making it much more possible for craft brewers to persuade consumers to trade up to their beers. But any consumer that is driven by price alone needs a lot more education about what he’s buying before he’ll be willing to change his buying patterns.

But the general meaning of this latest missive from Anheuser-Busch is, I think, yet another attempt to change their recent fortunes. When I wrote earlier that big companies will do anything to get the share price up, this is one of those “anythings.” I think we’ll see a lot more of these smiley face upbeat press releases over the next few months. We just have to remember to take them for what they really are: propaganda.

Anderson Valley Goes Solar

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Anderson Valley Brewing Co. of Boonville, California announced today the completion of an almost one million dollar project to generate their own solar power to brew beer. A final inspection was successfully completed today by PG&E and their new state-of-the-art photovoltaic system went on-line immediately thereafter.

“We‚ve got solar powered beer going on here,” said Peter Suddeth, longtime brewery employee (and press release author). “You can drink it and feel good that you’re helping to preserve the environment.”

From the press release:

The $860,000 project includes two arrays; a 175 ft. by 53 ft. array on the south facing roof of the brewery’s cellar and packaging facility, and a separate 120 ft. by 24 ft. ground-based freestanding array. The 125 kWh system is the largest privately owned PV system north of the San Francisco Bay Area, and among the largest in the western hemisphere. The brewers hope that the system will produce as much as 40% of their annual electrical needs.

The project underscores the brewery’s longstanding commitment to keeping its environmental impact as low as possible. “We feel an obligation, specifically to this pristine valley in which we’re located, but to the rest of the world as well, to be responsible with resources. We recycle as much of our waste as we can; paper, plastic, glass, cardboard. We have our own waste water reclamation system, and now we can greatly reduce our reliance on outside electricity,” said brewery president, Kenneth Allen “Solar is the future. We’re proud to be getting a jump on it,” Allen continued, citing statistics showing that almost 75% of the electricity used in California is generated with nonrenewable resources such as coal, natural gas, and uranium. Solar energy is currently California’s most abundant source of electricity, and yet, at under three tenths of a percent, it is the most under utilized. (Source: 2004 Net System Power Calculation Report, Energy Commission Publication # 300-04-001R)

The installation of the first 391 solar panels of the large array (592 panels; 175 ft. by 53 ft.) on the roof of the brewery’s cellar and packaging facility back in June of 2005. [photo by Peter Suddeth, AVBC]

From left: Pete Gregson, of Advance Solar in Calpella, California, and Rod DeWitt, Director of Plant Engineering & Process Control at Anderson Valley Brewing, discuss the completed smaller array (176 panels, 120 ft. by 24 ft.). The Roof of the Brewhouse, and about half of the large array can be seen behind. [photo by Peter Suddeth, AVBC]