Brookston Beer Bulletin

Jay R. Brooks on Beer

Socialize

Frustration Brews Around Gilroy Beer

By

Gilroy’s local newspaper, the Gilroy Dispatch, runs a regular feature entitled the Red Phone, where they reprint phone messages from area citizens to local issues. The following one was printed yesterday about the on-going brouhaha over the Gilroy Garlic Festival’s refusal to allow a local brewery to pour their beer at the festival:

Pour judgment

It is a shame when we allow the greed of one beer distributor to stop the ability of one of our own businesses to participate and actually show their product to the public. If we are really a community that cares, then we should support our local businesses, not give them the only distribution rights, but at least have the decency to let them compete. The quality of the beers offered by Coast Range/Farmhouse is far superior to those that will be distributed at OUR (Garlic) Festival. Have we lost our perspective and the purpose of this fabulous little festival that really puts the spotlight on not only our Garlic, but our city, our amenities and yes, our businesses? Would it make the Chamber of Commerce, the Garlic Festival and the people of Gilroy happy if Coast Range went under?

Olympia Brewery Finds a Buyer

By

Olympia Brewery in Tumwater, Washington has been fallow since 2003, when Miller Brewing shut it down. The following year they sold it to a startup who planning on bottling water at the former brewery. But they ran into financial trouble and were forced into an involuntary bankruptcy. A deal has now been submitted for approval by the bankruptcy court for a Seattle company, the Benaroya Company, to purchase the brewery for $45 million. A hearing will be held July 5 at which time motions will be heard and a decision made. So far, there’s no word as to Benaroya’s intentions for the property, whether they want to refurbish and open the brewery or raze the 120-acres and develop it. It would be nice to see open again as a brewery, but I doubt that’s what will happen. It’s possible that Benaroya could break up the land into pieces and someone could buy the brewery grounds while they develop the rest into something else, it just doesn’t seem likely that buyer will step forward with the resources to bring the brewery back into shape. I’d certainly like to see it saved, for no better reason than the last time I was there was on my honeymoon.

Space Beer?

By

On April 28, 2007, a UP Aerospace SL-2 rocket blasted off into space on a routine mission. It carried the ashes of deceased actor James Doohan, who portrayed “Scotty” on Star Trek (I actually met Doohan once in the early 1980s when I worked for a chain of videostores in North Carolina) along with Mercury 7 Astronaut L. Gordon Cooper and 200 other urns. SL-2 is short for UP Aerospace’s SpaceLoft-2 , a rocket suborbital sounding rocket. UP Aerospace sends up four to six such commercial rockets each year.

In addition to the remains sent into space, the payload consists of photographs, seeds, science experiments, soccer jerseys and the secret payload of Microgravity Enterprises, Inc.. According to their website, Microgravity Enterprises goal is to “develop space-based products and make them available to the general public at low affordable prices.” Currently, the make Space2O, bottled water enriched with electrolytes that were flown in space aboard the SL-2, and Antimatter, an energy drink in which many of the ingredients have likewise flown in space.

All that Microgravity Enterprises, which calls itself a space commercialization company, will say about the latest flight is that their payload contained the ingredients with which they’ll make the “first true space beer”. Company spokeswoman Linda Strine “says said ingredients, the amounts and types of which are secret and patented, will be delivered next week to a ‘production facility’ that in the span of a month will generate an otherworldly brew called Comet Tail Ale. “We flew enough ingredients to support almost a year’s worth of production,” says Darryl Hupfer, VP of sales and marketing for Microgravity Enterprises.

They’re spinning it pretty good, but I suspect it was the yeast that they flew into space. And their client, most likely, is nearby Kellys Brewpub, located in Albuquerque, New Mexico. As reported last year in the New Mexico Business Weekly, Kellys sent some yeast up in one of UP Aerospace’s rockets before but since it failed to reach suborbit (meaning that it didn’t reach the 45 mile-high threshold that defines where “space” begins) they brewed a beer they called “Test Flight Amber Ale.”

I have mixed feelings about this project because it seems so gimmicky and I know that the rocketed ingredients won’t make the beer taste any differently. But I am a former space geek — reinvigorated somewhat by my son Porter’s obsession with all things space-related — so it also seems like a fun idea, too.

So I don’t wish to throw water on the fire or rain or their parade, but it also seems to be that this won’t be the “first true space beer” as the company claims. I’m pretty sure that the Apollo beer that was a contract beer around a decade ago used yeast that had been in space, too. It was in a distinctive blue bottle and they made an ale and a lager which was sold in six-packs. And I know that a German science experiment managed to get some yeast aboard one of the space shuttle flights. I know some of it they then used for research purposes, but I have a hard time believing they didn’t use at least some of it to brew a batch of beer.

Who knows, perhaps Kellys also sent a few hop pellets in the rocket, too. In the end, it may come down simply to how you define a “true space beer.”

 

Spinning the Beer Business

By

On Tuesday, August Busch IV addressed investors at the biannual “Investor Day” and unsurprisingly recent company woes were played down and the future looked so bright they probably should have passed out sunglasses to investors to reinforce the point. Given the less than enthusiastic analysis by Wall Street the week before, it’s not a stretch to consider the rosy predictions to be pure spin to mollify jumpy investors.

As usual, the business press went along with it, mostly reporting the spin without questioning it or even analyzing it to much of a degree. As reported in the New York Times, Busch boldly told investors “that profit would rise more than forecast this year on higher sales of imported beers and fewer discounts of Bud Light and Michelob.” Despite dismal sales gains and worse profits, A-B told its investors that the 1% gain realized in the second quarter was proof enough that things were finally looking up.

More curiously, Busch IV told shareholders “the company [this February] started to import beverages, including Stella Artois and Bass from InBev, to fend off rivals like SABMiller.” What’s odd about that statement to investors is that most conventional wisdom, both internally and externally, doesn’t blame SABMiller at all for A-B’s troubles, but craft beer, wine and spirits.

Busch IV also stated that “Anheuser-Busch is much better positioned for growth than we were just eight months ago,” but neither he — nor the Times — offers any explanation as to why that might be. All A-B said was that “[p]rofit will increase slower than forecast in the second quarter but accelerate in the second half of the year” and “[e]arnings on a share basis will increase this year more than the long-term growth of 7 percent to 10 percent that the company targets.” To me that sounds like code for don’t sell now, don’t bail on us, things will get better … eventually.

CNN Money reported that A-B did indeed see a 1% rise in sales this month, calling that a “rebound” after a poor showing the previous month. That’s a far more optimistic connotation of the word “rebound” than my dictionary allows, but that’s spin for you. In a related CNN Money article, “Anheuser-Busch profit disappoints,” A-B CFO W. Randolph Baker further spins the reasons for poor sales and even blames the weather. It’s this last one that produced in me a rare guffaw. Certainly there is a close and well-documented correlation between the weather and beer sales. The warmer the weather, the better the sales — it’s hardly rocket science. But when I was the beer buyer at Beverages & more and was expected to hit sales targets it was the one excuse for falling short, no matter how legitimate, that I was all forbidden to use. Apparently, I was expected to predict the weather and plan for it — I never quite understood how I could be held responsible for factors outside my control but such was the pressure cooker of retail. Anyway, to hear the CFO of the biggest beer company in the world blame the weather for not hitting their own sales targets strikes me as pretty funny and suggests that A-B doesn’t really have a good idea as to what exactly is causing their sales to remain mostly flat. Baker claims to be “uncomfortable saying it’s only a weather story,” which says to me he’s not supposed to use that excuse any more than I was.

Dow Jones’ Marketwatch also predictably spins it A-B’s way, titling their take “Anheuser says back on growth track.” The MarketWatch take begins accepting Bud’s pronouncements. “Citing a bigger and better beer portfolio [the InBev imports – failing to mention distributor issues], favorable pricing trends [unilaterally deciding not to discount their own products hardly constitutes a trend], international opportunities [despite everyone saying it’s the core brands at home that are the issue] and a modest rebound in domestic sales [the 1% rise in the first half of May], Anheuser-Busch said Tuesday that it is back on a growth track, but perhaps not so much right away [yes, in the future, always the future].

“Busch said that consumers are increasingly ‘active’ rather than ‘passive’ and added that ‘we have to evolve how we do business … to combine our supply-side strength with a new and equally powerful demand expertise.'” While that may be true, Bud.TV (rumored to be shut down shortly), MingleNow and even Here’s to Beer have not exactly taught A-B about the “powerful demand expertise” many consumers are looking for. They didn’t even mention Raymond Hill, their curious new venture with a faux or stealth “craft beer” that’s made by A-B.

MarketWatch lastly detailed A-B’s forays into making spirits, with mixed results:

But with beer continuing to lose share in the alcohol market, he said that the company needs to move beyond the category and into “high-margin segments with exceptional potential. … We will target products and categories where we can drive growth.” That is a not-so-veiled reference to hard liquor, which has been booming just as domestic brew fades. A-B has made some baby steps — and missteps — in that direction, developing both distilled spirits and higher-alcohol malt beverages in a small way.

Last year, the company launched “Jekyll & Hyde,” two “nesting” bottles of spirits meant to be mixed together and downed as a shot. It also rolled out Spykes, a 12% alcohol malt-based product sold in tiny perfume-like bottles. That experiment was a disaster and the company announced it would stop making the stuff last week due to poor sales and attacks by advocacy groups that claimed it appealed to underage drinkers.

It was a little strange that craft beer’s gains were not addressed — at least not by the media as far as I can tell — since they’re the only category of alcoholic beverages that’s showing significant growth at the present time. Perhaps we’re still too small to bring up at investor meetings.

All of this emphasis on international markets, non-beer products and their “packaging and entertainment businesses” as a way out of the morass seems odd given that everybody and their mother cites inattention to their core brands as the biggest problem A-B is facing. A-B’s Tuesday press release does mention the core brands, but it all sounds like doublespeak and gobbledegook to me. Here’s what they had to say about their core product lines:

Senior managers from Anheuser-Busch’s U.S. beer company presented their plans to grow the company’s core trademark brands and actively pursue high-end growth opportunities. The company is making good progress in digesting the series of new growth initiatives recently undertaken and managing the added complexity associated with an expanded portfolio. In citing incremental revenue growth as a key objective, the executives stated that the pricing environment in the U.S. beer industry is favorable.

Now I speak jargon, in fact I’m relatively fluent in it, but “actively pursue high-end growth opportunities,” “making good progress in digesting the series of new growth initiatives recently undertaken,” “managing the added complexity associated with an expanded portfolio,” and “the pricing environment in the U.S. beer industry is favorable” are tortuously vague and unnecessarily convoluted to me. They all sound impressive but don’t really seem to say very much. It’s the same old hackneyed platitudes gussied up in fancy dress words to confuse the hoi polloi. In English, all they’re planning is “to sell as much as they can,” “figure out which new brands are selling and which aren’t,” “rolling out the new import and domestic brands they gobbled up last year,” and “not discounting their prices to wholesalers and retailers as much as in previous years.” Now was that so hard to say?

At the same time Anheuser-Busch is trying to persuade shareholders that everything’s fine and that their stock will be up again, they’ve also announced that they’re “looking to slash hundreds of millions of dollars in costs over the next few years,” according to an article in the St. Louis Post-Dispatch. That’s the sort of thing investors and Wall Street tends to applaud but generally isn’t too great for all the unemployed that such measures leave in their wake. A-B is looking to “trim $300 million to $400 million in costs over the next four years,” and you now that’s got to include layoffs. The increased high-tech robotics that A-B is using in its operations certainly doesn’t suggest more hirings, but less, despite the fact that they’re asking current employees to slash their own throats by submitting ” ideas under a productivity plan called ‘Project Blue Ocean.'”

Also somewhat scary for those of us who don’t relish the idea of A-B buying out craft brewers is the announcement that new guidelines A-B approved last year will allow them to take on more debt, with an eye toward getting “more involved in mergers and acquisitions.” So look for another round of rumors on who might be up for grabs later this year.

None of this spin doctoring is unique to A-B, of course, it’s the stock in trade of all large modern corporations. But this was Augie number IV’s first time in front of the investors since taking over the family business last year so it’s worth noting that things haven’t changed very much under his leadership. I’d say we’re in for more efforts at maintaining the status quo as the year continues to unfold. Buckle up, it’s going to be a bumpy ride.

Style Trends Through April 2007

By

Here is a chart of the latest style trends broken out by the top 10 selling styles, based on a year’s worth of sales as of April 22, 2007, courtesy of DBBB, the Domestic Brewers Bottled Brands. They publish the book, “The Essential Reference of Domestic Brewers and Their Bottled Brands” and have a website, which offers monthly online updates of the book.

The chart is based on IRI Data showing sales of beer for the previous twelve months through April 22nd of this year by beer style. IRI is short for Information Resources, Inc., a company that surveys sales of beer (and everything else) from over 15,000 retailers (mostly groceries) in the U.S. As a result, their data is invariably skewed toward the national and regional brands since it doesn’t take into account direct sales and sales from small mom & pop stores. I used to get IRI data from almost every medium to large brewer who called on me when I was a beer buyer for BevMo. And while it’s not accurate for craft beer in specific, it does give you a general idea of certain trends, especially when you follow it over a period of time.

 

Mainstream Beer Still Suffering

By

According to yet another business article in Forbes, the reason for Anheuser-Busch‘s sales declines are the result of a lack of focus on their core brands, principably Budweiser and Bud Light. And while wine, spirits and craft beer’s rise has been credited with A-B’s decline, this AP article also claims Molson Coors — the #3 American brewer — has also gained ground against their nemesis, largely because they’ve continue to push their core brands. A-B has already suggested they’ll be increasing marketing by at least 8% and the details of this and a renewed focus on their flagships are expected to be revealed at A-B’s bi-annual Investor Day this Tuesday.

Goldman Sachs analyst Judy Hong further advised that what A-B needs to do to remain competitive is “either purchase a large craft brewer or work with distiller Fortune Brands Inc. to buy the Swedish state-owned liquor group that makes Absolut vodka, V&S Vin & Spirit AB, to gain access to the growing spirits market.” On the other hand, William Pecoriello, an analyst at Morgan Stanley, thinks A-B is on the right track, spending more marketing dollars on their core brands. In a memo to clients, he stated “[i]t seems unlikely that Anheuser-Busch can overcome the challenges for its core brands without significant increases in marketing, distribution and administrative spending.”

The troubling pronouncement in of all of this is Hong’s suggestion that A-B “purchase a large craft brewer.” It’s not like they haven’t been trying to do just that for some time now, but when Wall Street raises the spectre of it as a worthwhile idea, people tend to sit up and take notice.

Bud Sales Still Slipping

By

With August Busch IV poised to deliver his first big “State of the Company” address to investors next week, he may have to do a little dancing to satisfy the concerns of shareholders and the financial analysts. According to Wall Street, profits from beer over the past two years have fallen an average of 1%, while Anheuser-Busch‘s profits have dipped around 12% during the same period.

Despite efforts to get the numbers on core brands up, sales did not rebound as hoped, with revenue up only 5%. Goldman Sachs analyst Judy Hong laid the blame on imports and craft beers, though recent reports have indicated that import sales are suffering the same declines and slowing as mainstream beer, leaving the craft segment as the only shining star in an otherwise dismal beer industry snapshot.

Hong also said that “Anheuser-Busch largely sat on the sidelines as the global brewing industry underwent a massive consolidation, and prospects of capturing significant growth abroad appear limited,” which seems strange since they appointed Bob Lachky last fall to specifically manage their international business and snapped up new import brands for their portfolio — including beers from international brewing giant InBev — yet a Forbes article echoed similar worries, suggesting that “the company has focused on operations abroad, though the chance to gain real exposure to international beer markets may have passed.”

A separate Forbes article, meanwhile, placed the blame for A-B’s woes on a “shift in consumer tastes to wine, spirits and microbrews” — there’s the craft beer segment again figuring heavily in business analysis. Staff writer Tom Van Riper also indicated A-B was struggling to overcome its “passé image” by spending wildly to reach a younger customer, presumably on such projects as Here’s to Beer, Bud.TV and Mingle Now.

Celis’ Return to Texas Doubtful

By

In his regular column, The Beer Sphere, in the Dallas/Forth Worth Star-Telegram, Barry Shlachter reports that the “long-anticipated collaboration between Belgian brewing legend Pierre Celis and Texas’ Real Ale Brewing Co. has fallen through.”

From Shlachter’s column:

“Just too many obstacles,” said Brad Farbstein, president of the Blanco-based micro-brewery.

Real Ale’s proposed “Brussels” line of ales based on Celis recipes was scuttled because the state interpreted the deal as violating Texas’ contract brewing regulations.

Complicating the arrangement was Celis investing in his daughter’s drinking establishment in the Austin area, Farbstein said. Texas’ three-tiered system — production, wholesaling and retailing — forbids participation in more than one sector.

Well that’s certainly bad news. It would have been nice to see Pierre return triumphantly to the states.

Water Beats Milk, Ties Beer

By

I wasn’t even aware there was a competition among liquids, but apparently it’s pretty fierce. This year for the first time bottled water beat out milk, according to Beverage Digest, and was roughly equal to beer for the year 2006.

According to an article in the Atlanta Journal-Constitution, “If the trend continues, Americans could be drinking more bottled water than tap water within a few years.”

“Tap water is in trouble,” quipped John Sicher, publisher of industry newsletter Beverage Digest.

Beverage Digest’s figures showed average per capita consumption of bottled water grew from 11 to 21 gallons between 1996 and 2006. Consumption of milk dropped from 22.7 to 19.5 gallons over the 10-year span, while beer consumption was steady at 21.8. Soft drink consumption dropped from 52 to 50.9 gallons, according to the figures.

No word on whether the water in beer is added to the water figures.

Zatec Is Coming

By

In German, the famous hop used in those original Czech pilsners is called “saaz” hops, but in the Bohemian part of the Czech Republic, where they’re grown, the word is “zatec,” named for the town where they were first grown. According to the town’s history, “the name of Zatec was first mentioned in the Thietmar of Merseburg Chronicle in 1004.” Today the town of Zatec has its own hop museum.

There’s also a brewery in town, Zatecky Pivovar, and they’ve been brewing in the same location for a long, long time.

The history of Czech breweries contains only two breweries with proven a tradition of brewing beer in a single location for more than 700 years — Svitavy (1256) and Žatec (1261). The Society of Žatec Privileged Brewers was established in Žatec in 1261. The two beers called “Samec” and “Kozel” were in high demand in Bohemia and at court, requested by nobility and lords, at the table as well as for festive parties.

Merchant Du Vin, the Seattle importer who also brings Ayinger, Lindemans, Orval, Rochefort, Samuel Smith, Traquair House, and Westmalle, among others, into the U.S., will now be distributing Zatec in the States, as well. According to the press release, product should be in the states some time this June.
 

From the press release:

Zatec Bright Lager from the Czech Republic

For a thousand years, the Zatec region west of Prague has been known for the fine quality of hops grown there. Sometimes known to English speakers by the German name — Saaz — this spicy, elegant hop is one of the keys to a beer renowned for centuries.

Brewing in Zatec dates back over a thousand years, as evidenced by records detailing that brewing taxes were paid in 1004 AD. The Society of Privileged Brewers was founded in Zatec in 1261, the cornerstone for the current Zatec Brewery was laid in 1798, and brewing began in 1801.

Made from local Czech two-row barley and local hops, Zatec is produced via very traditional, labor-intensive means: a doubledecoction mash, open primary fermentation, and 45 days of lagering before packaging. It is medium-bodied, with natural, soft conditioning; a hedonistic fresh herbal aroma; and a flavor that is the best of pure grain and spice, with a solid malt middle. Clean, sparkling, and quintessentially thirst-quenching; ABV 4.6%.
In an age of mass production, Zatec is a small, independent brewery upholding classic Czech brewing traditions. Available at bars, restaurants, and stores nationwide after June 1, 2007.

The Zatecky Pivovar in Zatec, Czech Republic.