Brookston Beer Bulletin

Jay R. Brooks on Beer

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Beginning of the End for Small Beer Businesses?

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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?

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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.

Green Valley Brewing: Origin of the Name?

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I ran into a friend of mine last week who’s a sales director for a Bay Area brewery who’d been following the Wild Hop Lager story. He mentioned something I hadn’t realized. Since he travels extensively throughout the greater Bay Area and beyond, he frequently is driving up Interstate 80, which runs past Anheuser-Busch’s Fairfield Plant, which is located at 3101 Busch Drive in Fairfield, California. I’d wondered how much time and money A-B had spent coming up with the perfect name that evoked just the right image for their organic stealth micro. Turns out it may not have been that difficult to come up with, after all. According to my friend, the exit on I-80 just before the Bud Plant in Fairfield is Green Valley Road. That’s pretty funny. While it doesn’t prove they got the name from a nearby road that most of the employees probably drove by twice a day, it certainly is an amazing coincidence. Too coincidental, I’d say.

The red star toward the right is the Anheuser-Busch Fairfield Plant located at 3101 Busch Drive, Fairfield, California. The green arrow toward the left shows Green Valley Road just down the street from the plant. If it’s hard to see, click on the map above for a larger view.

UPDATE: I drove by this exit sign just before passing thre Fairfield Bud Plant on my way to tour the Ball Can Factory, where 21st Amendmet is having their new beer cans made.

California Wins Big at World Beer Cup

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California came up big at the World Beer Cup this year, winning 25 of the 159 medals awarded to American breweries. The next closest state — Wisconsin — won 14. Held every two years, the World beer Cup is becoming one of the world’s most prestigious worldwide competitions. Personally, I’d like to see more breweries from abroad competing but that will likely take a little more time. For now, smost likely because it’s judged in the United States, the majority of entries — a healthy 64% — were from American breweries. But the 36% of overseas breweries also nabbed 36% of the medals so there’s no reason more shouldn’t be entering. There were 2,221 beers entered from 540 breweries in 56 countries. And while that’s impressive, I imagine there are many, many more who did not enter. So it would be great to see this event grow into an event that almost every brewery in the world entered. That would, I think, make it even more meaningful, not to take one iota away from any of the winners because certainly a representative sampling of brewing countries did participate. Happily, it does seem to be going in that direction.

Here is a list of the winners from California breweries:

  • Pure Hoppiness, Alpine Beer Co., Silver, Imperial or Double India Pale Ale
  • Dorado Double IPA, Ballast Point Brewing Co., Bronze, Imperial or Double India Pale Ale
  • Nit Wit, BJ’s Restaurant & Brewery – Chandler, Silver, Belgian-Style White (or Wit) / Belgian-Style Wheat
  • Old Grind Porter, Etna Brewing Co., Gold, Brown Porter
  • Firestone Pale Ale, Firestone Walker Brewing Co., Gold, American-Style Pale Ale
  • IPA Nectar, Firestone Walker Brewing Co., Gold, American-Style Strong Pale Ale
  • Firestone IPA, Firestone Walker Brewing Co., Silver, American-Style Extra Special Bitter or Strong Bitter
  • Mission Street Pale Ale, Firestone Walker Brewing Co., Silver, American-Style Pale Ale
  • Hemp Ale, Firestone Walker Brewing Co., Bronze, American-Style Brown Ale
  • Green Flash Extra Pale Ale, Green Flash Brewing Co., Silver, English-Style Summer Ale
  • Green Flash Nut Brown Ale, Green Flash Brewing Co., Silver, English-Style Brown Ale
  • Epiphany, Iron Springs Pub & Brewery, Bronze, American-Style Amber / Red Ale
  • Centennial Ale, Lengthwise Brewing Co., Silver, English-Style India Pale Ale
  • Sharkbite Red Ale, Pizza Port Carlsbad, Gold, American-Style Amber / Red Ale
  • Night Rider Imperial Stout, Pizza Port Carlsbad, Silver, Imperial Stout
  • Dawn Patrol Dark, Pizza Port San Clemente, Silver, English-Style Mild Ale
  • Shark Attack, Pizza Port Solana Beach, Gold, Imperial or Double Red Ale
  • Bottom’s Up Kolsch, Rock Bottom Brewery – Campbell, Gold, German-Style Kölsch / Köln-Style Kölsch
  • Blind Pig IPA, Russian River Brewing Co., Gold, American-Style India Pale Ale
  • Pliny the Elder, Russian River Brewing Co., Gold, Imperial or Double India Pale Ale
  • Temptation, Russian River Brewing Co., Gold, Other Belgian-Style Ale
  • Old Woody, Schooner’s Grille & Brewery, Silver, Wood- and Barrel-aged Beer
  • Stone Ruination IPA, Stone Brewing Co., Bronze, American-Style India Pale Ale
  • TAPS Irish Red, TAPS Fish House & Brewery, Gold, Irish-Style Red Ale
  • Trumer Pils, Trumer Brauerei Berkeley, Gold, German-Style Pilsener

Congratulations to all of the California winners.

For a full list of all the winners, see the Brewers Association.

Russian River Wins Triple Gold

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Vinnie and Natalie Cilurzo, the owners of Russian River Brewing Co. in Santa Rosa, California were beaming Friday night at the Gala Awards Dinner for the 2006 World Beer Cup. And with good reason, they’d won not only three gold medals but also World Beer Cup Champion Brewmaster and Brewery of the Year for Large Brewpub.

The three gold medals were for Temptation (in Category 48: Other Belgian-Style Ale), Blind Pig IPA (in Category 79: American-Style India Pale Ale), and Pliny the Elder (in Category 80: Imperial or Double India Pale Ale).

Vinnie and Natalie, with BA President Charlie Papazian, accepting one of their three golds.

Back on stage for the big award.

Natalie leans in for a celebratory kiss. Congratulations to Vinnie and Natalie and Russian River Brewing.

Lagunitas Undercover Investigation Shut-Down Ale

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I was fortunate enough today to have a preview taste — from the tank — of the newest beer from Lagunitas Brewing in Petaluma, California. Bottling will likely begin next week and should be in stores shorty thereafter. The new beer is called Undercover Investigation Shut-Down Ale, a homage to the troubles Lagunitas has recently faced with the state ABC. And yes, they have already received label approval, believe it or not. As is common wth many beers from Lagunitas, it is quite singular and defies easy style classification. After discussing it with owner Tony Magee and trying a sample directly from the tank, the best way I can describe it is a well-hopped imperial mild! It’s around 10.2% abv and the alcohol presence is definitely felt as is the big hop character. But it has the light body of an English mild that’s easy drinking with a clean, refreshing finish. These seeming contradictions, however, work and the beer has great potential. It will be interesting to taste the finished product.

The label for Lagunitas’ newest beer.

Anheuser-Busch Bud: Live By the Sword, Die By the Sword

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world-cup06
The 2006 World Cup, soccer’s Super Bowl, World Series and Olympics rolled-up into one, is just two months away. Because it only takes place every four years, advertisers pay huge sums to be the official whatever of the games. This year the World Cup will be held in Germany, one of the most important beer countries in the world, which until quite recently had more breweries than any other country (The U.S. unseated them) and they remain the third largest beer market worldwide (after China and the U.S.). They passed the first beer purity law in 1516, the Reinheitsgebot, and fought to keep beer out of their country that didn’t meet its standards as recently as a few years ago. So it came as quite a shock last year when Budweiser became the offical beer of the 2006 World Cup by paying around $40 million to become one of fifteen premium World Cup sponsors. German citizens were up in arms for a while after that, but since their young people have short-sightedly started drinking Bud in rebellion against their parents — and tradition — in huge quantities, there wasn’t reallly much that could be done about it. According to a report on The Independent, a UK newspaper, “because of a long-running trademark row with the Czech brewer Budvar, which owns the rights to the name” Budweiser in some countries and Anheuser-Busch, which has won court battles in others, “the Budweiser brand will not appear on the hugely important pitch-side hoardings.” In addition to the contentious Budvar—A-B dispute, “the German brewery Bitburger, who sells its beer in the German stadiums, has complained that the name was too similar to its Bit brand.” As a result, “[t]he US giant has now been forced to use the name Anheuser-Busch Bud during the course of the tournament.” Of course, the A-B spin machine kicked into high gear, calling this an “excellent opportunity to continue to build our brand,” said Tony Ponturo, vice-president of global media and sports marketing at Anheuser-Busch. The World Cup begins June 9 and will end with the cup final on July 9. Personally, I think this is what happens when you sue everybody who gets in your way. Eventually, it’s going to catch up with you.

Spiral Glasses Reduce Carbonation?!?

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I can’t quite tell if this interesting idea would actually work or not, but it’s certainly piqued my interest. The idea in a nutshell is a glass with “raised ribs set parallel apart in a spiral pattern that extends down the interior surface.” According to the inventor, “the spiral pattern of the ribs ensures that any fluid poured down the inside surface of the glass swirls around, oxygenating the beverage and releasing trapped carbon dioxide in the process.” He further indicates swirling it around will release more CO2, “while at the same time enhancing the aromatic attributes of the beverage.” My only real critiscm of the idea is that it would break up the view, so to speak. Because of the ribbed lines, you wouldn’t get a clear view of the beautiful color that beer often exhibits, but that may be small price to pay if it works well. Who knows? You can also download a pdf of the patent data which has more detailed information and diagrams.

An artist’s rendering of the glass design, since apparently none have yet been made.

New Brewery: Crabtree Brewing

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According to a story in today’s Greely Times, Crabtree Brewing, located at 625 3rd St., Greely, Colorado, will open for business on May 5 of this year. The first batch of beer is in the tank now, also preparing for its debut. Jeff Crabtree, a local resident, has been planning for this day for many years and seriously working on it for the last two. From the quotes in this story, one can sense his enthusiasm and passion and it is that very quality that makes this business such a unique one, I think. Good luck, Jeff. I look forward to trying your beer soon.