+ = ??

The rumor of Anhesuer-Busch in talks with Boston Beer left a foul taste in my mouth, and a few short weeks ago would not have given the idea a moment’s thought. The feud between Jim Koch’s Boston Beer Co. and Augie Busch’s little company is, though considerably shorter than Budvar’s, just as legendary. The production company “Ducks In A Row Entertainment Corporation” is supposedly even making a film about their famous feud with the tentative title “Beer Wars.” Last I heard, it was in the editing stage but that was some time ago. The point is, these are two companies that do not feel a great deal of affection for one another.

So my first reaction to this rumor would under normal circumstances be, “no F’ing way.” But that was before A-B inked deals with both InBev and longtime rival Budvar. With those deals, the Earth is already spinning off its axis, so why not Samuel Adams, too?

This particular rumor comes courtesy of Miller’s Brew Blog, who got it from the only other source to mention it so far, Beer Business Daily, a subscription-based beer news service. BBD reported that they have “been fielding about a half dozen inquiries a day from readers with the latest rumor du jour making the rounds out there: A-B and Boston Beer hooking up.” To no one’s surprise, neither side would comment on the rumors. But that was the same as the InBev rumors, at least, so who knows?

I’ve heard Jim Koch speak personally about his feelings concerning A-B and their business practices and given that, and all of the trouble they’ve tried to cause him over the years, it just seems incredibly unlikely that he’d entertain any offers from them. But at the risk of repeating myself, I keep coming back to how often the seemingly impossible has been happening these days.

A regular Bulletin reader (thanks Ben) sent in a link to a short blurb that was in the San Francisco Chronicle on Friday. It was by wine business writer Cyril Penn, who also publishes Wine Business Online. Titled “Regular domestic beer loses its grip on U.S. market” it details another Mintel International research effort. The company does market and consumer research on a large scale around the globe and about big industries. So it’s not surprising they’d leave out an entire sliver of pie in their chart.

The new Mintel study claims that although “American light beers” (low-calorie diet beers) are showing growth, “domestic beers” are not. But by domestic, which should be all beer made within the United States, Mintel means only beers from the large manufacturers, such as Bud, Miller and Coors.

More findings from the Chronicle article:

Volume sales of imported beer have increased 27 percent over the last five years. In contrast, regular (non-light) domestic beer posted a 19 percent decline during the last five years.

According to Mintel’s research, only one quarter of American adults over age 21 drink regular domestic beer, a decrease of 15 percent since 2001.

The Mintel reasearch also found that the “light beer segment is the only domestic segment to gain sales over the last two years, growing 4.8 percent in volume.” Of course, that leaves a bit of the pie chart missing, specifically the craft beer segment, which has shown 11% growth through the first half of last year and 9% for 2005. It may be a small slice, but it is getting bigger. And that means the “light beer segment” is not the only domestic segment growing over the last two years. But that’s the way it is with the business press. Only the big, publicly traded multi-nationals are in their radar. For the craft breweries, the money just isn’t enough for them to talk about, except for a few exceptions like Boston Beer and Sierra Nevada.

And that’s fine if it’s business to business who’s utilzing this information. If one business is looking at this data and using it for their business decisions, then the limitations of the information doesn’t make much of a difference. For example when I was the beer buyer at BevMo, I regularly looked at IRI and Nielsen sales data. In both cases, they collect sales of beer at grocery stores, drug stores, big box stores, convenience stores and other mainstream sellers but ignore direct sales, independent liquor stores, and all sorts of non-chain store sales. That doesn’t make them useless, just incomplete. But knowing their limitations can still give revealing insights and show trends. They give a glimpse of what is happening to a certain portion of the market.

The problem is when that sort of limited research data is reported to the public in a news item without discussing those limitations. It gives the impression that the information is complete, reliable and unbiased. So when Penn’s little piece says that only light beer is growing, he’s not wrong insofar as the Mintel research data he’s reporting on, but that data itself is flawed in that it is not presenting a true picture of reality. It’s not meant to, it’s intention is just to show a very specific snapshot of the major portion of the industry. But as the headline suggests, all American beer is down, losing to imported beer. Maybe I’m not giving the general public enough credit, but how many people know the term “domestic beer” in this context is jargon for just the non-low calorie beers, the regular American light (in color) lagers manufactured by the big and traditional beer companies. They represent just a few handfuls of brands which mostly ignores almost 1,400 craft breweries and thousands of individual beers. And while “domestic beer” represents a large percentage of the total volume for beer sold in the U.S., it’s still not all the beer produced domestically. The stuff I — and hopefully you — love is growing again with wild abandon, and has been for a few years in a row. That’s a much rosier picture than the Chronicle’s piece suggests, at least for fans of the wonderful non-domestic beers made here in America, better known as craft beers.

To Beer or Not to Beer. As Strange Brew was a loose parody of Hamlet, I thought I’d peer crazily into the skull of poor Yorick, and try to divine the future. Let’s see if anything that happened last year can be used to predict what might happen in the beer industry in 2007. Here are five things I think will happen this year. Let’s see how I do a year from now. What are your predictions?

 
Craft beer growth will hit double digits for 2006 and also will continue to rise through 2007.

 
Price wars among the large domestic producers and the popular import brands will heat up again beginning in spring or early summer.

 
Mainstream media attention will increase and will actually begin to improve.

 
A-B’s Here’s to Beer PR campaign will either quietly disappear or if the website remains up will not have any new content added now that Bob Lachky is no longer in charge of the effort.

 
Gluten-Free beer made for the growing number of people with Celiac disease will surprise most predictions and become a bigger niche than expected.

As the year winds down, everybody and his brother has a top ten list for the year and I’m no different. It helps, I think, to stop and reflect on what happened over the previous year which puts the whole year in perspective and makes it easier to prepare for the coming one. So here are my choices for the top ten beer stories of 2006.
 

The 2006 Hop Fire: A Yakima hop warehouse owned by S.S. Steiner of Germany caught fire, destroying 4% of the U.S. hop production for the year. October 2.

Gambrinus Loses Corona: After years of successfully selling Corona and building the brand throughout the eastern United States, Grupo Modelo pulled the rug out from under Gambrinus and declined to renew their contract. March 10.

The Lost Abbey: Stone Brewing moved their operations to Escondido and Pizza Port Brewing (now Port Brewing) bought their old brewery in San Marcos. After getting the brewery up and running, Port launched the Lost Abbey label, one of the most exciting new breweries in years. January 31.

GABF Turns 25: This year marked the 25th Anniversary of the Great American Beer Festival. That’s an important milestone because it signals that craft beer has now been around — and popular — for a quarter century. For almost all of that time, GABF has been the biggest festival in the U.S. and the best place to try different beers in one location. September 28-October 1.

The Ram Closes: In May of this year, Charles Wells and Young’s announced that on October 2 they would be merging their two companies. But the biggest part of the story was the announcement that as a part of the merger they would be closing the 400-Year Old Ram Brewery, one of the biggest losses of brewing heritage and a telling sign of how business in general feels about its own history, which is to say not at all. As the science of business grows in sophistication, profit has never before in history been so singularly important. And never before has business seemed so devoid of emotion, reason or even a sense that people matter at all. May 23.

The Empty Glass-Lined Tanks of Old Latrobe: Anheuser-Busch bought the brand Rolling Rock, previously owned by InBev, in an effort to counteract falling revenues to their core brands and keep up their stock’s share price. They did not, however, buy the Latrobe Brewery where Rolling Rock had been brewed since 1939, placing an entire town’s economy and well-being in jeopardy. Preferring to view their decision as a mere externality, A-B took no steps to back up the company’s rhetoric about being a good corporate citizenship. May 19.

Mainstream Media’s Less-Than-Accurate Beer Coverage: With craft beer on the rise and sales of beer manufactured by the large domestic companies slumping, the media in 2006 began paying a bit more attention to beer in general and craft beer more specifically. At least it certainly seemed that way. Unfortunately, while much of the local coverage was good, a lot of the national coverage from the larger, more mainstream media was not. A common problem was hiring wine and/or food writers wholly unfamiliar with beer while beer writers remained underemployed. Sure there’s some selfishness at work, but those of us in this rarified profession would just be happy if beer was reported with accuracy and even a little passion or feeling for the subject matter. A simple sense of respect afforded beer would go a long way, too. But time and time again various big media outlets did such a poor job and spread such misinformation that many of us could not stay silent and frequently wrote letters to the editors in an effort reverse this trend. Did it have any effect Only time will tell. For example, October 9, October 12, October 13, October 27 and November 3.

A-B Troubles & Solutions: Early in the year, Anheuser-Busch reported a substantial 4th quarter drop in income, a trend which had begun the previous year, but which led to all manner of steps by the company throughout 2006 to keep the share price up and keep their distributors and shareholders happy. Just a few of the things A-B accomplished was starting the questionable Here’s to Beer PR campaign; picked up several import brands for distribution such as Grolsh and Tiger; bought Rolling Rock; tried to add brands to their “Craft Beer Alliance;” test-marketed or debuted new products such as the organic Wild Hop Lager, Redbridge Sorghum Beer, along with many others and even started a spirits division (Long Tail Libations); and finally inked a much-rumored distribution deal with most of InBev’s brands. The sheer number of things A-B flung against the business wall to see what might stick was truly staggering. There was something like fifty new products and line extensions. It seemed every week or so there was a new announcement. And for the most part, it worked, as the share price did indeed continue to improve. A-B had to eat some crow, however, when they finally admitted changing the formula for their most popular beers over the years. But overall, things looked rosy again for the world’s largest malt beverage company.

Craft Beer’s Continued Ascendency: For the second consecutive year craft beer led all adult beverages, and showed growth of 9% over the previous year. And by August it looked like for 2006 craft beer was up 11% for the first half of the year. If that figure holds it will mark three consecutive years of good, solid growth. Ten years ago, in 1996, the industry turned downward in terms of growth and after a few down years growth again began slowly several years ago. But now craft beer is the fastest growing segment of the US beverage alcohol industry and is on track to threepeat. This is obviously great news for lovers of great beer and those who believe smaller and regional breweries can better serve the needs of of consumers. This is also undoubtedly the reason that the media is once more paying beer some attention (See No. 4) albeit not always effectively. It’s also one of the reasons people are drinking less domestic industrial light lagers, the highly engineered chemical food products manufactutred by the ginormous multi-national beer corporations.

The Costco Decision: Few court decisions have as much potential to change the way beer is sold across the country. If Costco gets their way, it will be very bad for small breweries everywhere whose access to market and ability to fairly compete with the larger producers will be severely impaired — possibly fatally in some cases. The Washington State Liquor Control Board has appealed the decision and that appeal will be heard next March. April 22 and April 24.

And what will next year bring? See tomorrow’s post with my predictions for the beer industry in 2007.