Entries Tagged 'Beer Industry' ↓

On December 10, 2007, the Wall Streeet Journal reports that “Small Brews Show They’re Not Weak Beer” by flexing their new-found muscle with their distributors.  As the Journal states, “[h]istorically, craft brewers have made relatively little fuss over distibutors, in part because they have been happy to have companies willing to hawk their brands.  But now, at a time when craft beer has become the industry’s fastest-growing segment, some small brewers are taking greater control over their destinies.  They are attempting to dump their distributors or fighting moves to sell distribution rights–often over allegedly poor services.”  Craft brewers seem “to be feeling their oats a bit,” says Benj Steinman, editor of Beer Marketer’s Insights, an industry publication.

Since the repeal of Prohibition in 1933, there have been laws generally requiring beer to be sold through distributors, which truck the beer to the bar, restaurant or store.  The laws are intended to keep alcohol producers from running bars and restricting consumer choice.  Many states have enacted franchise laws to protect distributors from being dropped arbitrarily by a brewer after they have spent a lot to develop a brand.  Whereas distributors can sell distribution rights whether the brewer likes it or not, brewers can only terminate a distributor for specific reasons, like fraudulent business practices.

Disappointed with sales in upstate New York, Brooklyn Brewery has terminated its agreement, dating back to 2001, with one of its distributors, alleging that the distributor made late deliveries and delivered stale beer.  The distributor responded by suing Brooklyn Brewery in state court, alleging that it did not properly notify it of any problems.  The new distributor reportedly has rapidly increased sales.  The brewer’s president,  Steve Hindy, says trying to switch distributors ”is a big gamble for a small company like ours, because these lawyers are not cheap and you want good representation.” He also says heightened consumer demand for craft beers is giving small brewers confidence to “assert our rights more forcefully.”  As the Journal reports, “Also emboldening them: Many distributors that once ignored craft beers are now clamoring to add them to their lineup to increase profits.  It ‘is a whole different world for us than has existed in the last 20 years,’ Mr. Hindy says.”

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Today’s NY Times  article An Ancient Medicine (Enjoy in Moderation), by Natalie Angier, states that according to the World Health Organization, 39 nations out drink us with Luxembourg topping the list.  Patrick McGovern, archaeological chemist at U. Penn says that “[a]s far back as we can look, humans have had a love affair with fermented beverages. And it’s not just humans. From fruit flies to elephants, if you give them a source of alcohol and sugar, they love it.”  Natalie Angier reports that “[o]ne of the oldest known recipes, inscribed on a Sumerian clay tablet that dates back nearly 4,000 years, is for beer.  Chemical traces inside 9,000-year-old pottery from northern China indicate that the citizens of Jiahu made a wine from rice, grapes, hawthorn and honey, a varietal recently brought back to life by the intrepid palates at Dogfish Head Brewery in Delaware.”

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Dogfish Head Brewery’s Chateau Jiahu, “uses pre-gelatinized rice flakes, Wildflower honey, Muscat grapes, barley malt, hawthorn fruit, and Chrysanthemum flowers. The rice and barley malt were added together to make the mash for starch conversion and degredation. The resulting sweet wort was then run into the kettle. The honey, grapes, Hawthorn fruit, and Chrysanthemum flowers were then added. The entire mixture was boiled for 45 minutes, then cooled. The resulting sweet liquid was pitched with a fresh culture of Sake yeast and allowed to ferment a month before the transfer into a chilled secondary tank.  Truly a unique beer!”

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Entrepreneur.com  recently wrote an article about the merits of craft beer.  Highlights include:

“Once upon a time, beer drinkers only had three major choices when looking to pop a cold one: Budweiser, Miller and Coors. Now the market is flooded with imports, seasonal brews and variations of the old classics. Choosing which beer to drink may have been easier back then, but now it’s much more fun.” 

“According to the Brewers Association, there are more than 1,400 craft brewers in the U.S., including microbreweries. Craft beer industry sales have increased nearly 31 percent over the last three years, outpacing beer, wine and spirits in supermarket sales.”

“‘Twenty years ago, people would have laughed at you if you talked about pairing beer with food, but now I think the average consumer has a better understanding of the breadth and variety [of beer] available today,’ says Ray Daniels, president of the Craft Beer Institute and founder of the Cicerone Certification Program, the first official beer sommelier certification program, launched in October 2007. ‘Unlike wine sommeliers, beer sommeliers are less about the snooty tableside presentation and more about better quality beer in the consumer’s glass.’”

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Time Magazine reports this week (12/10) on how to survive the expected recession.  Among the several specific tips is one interesting general insight.  Sam Stovall, chief investment strategist at Standard & Poor’s, recently looked at stock performance during the 10 recessions we’ve had over the last 60 years.  The only three true bright spots–stocks that actually gained ground during a recession–were tobacco, household products and ALCOHOLIC beverages.  According to Stovall, “when the going gets tough, the tough get eating, smoking and drinking.” It rings true.  

The Wall Street Journal on 10/26/07 has an article about how the major brewers generally avoid using the parent company’s name on the labels for their craft beers. Anheuser-Busch, for example, lists Green Valley Brewing Co. as the maker of its Wild Hop Lager, an organic beer. “Any brand put into the marketplace with an intentional lack of affiliation with the brewery brewing it, I consider that a faux craft,” says Tom McCormick, executive director of the California Small Brewers Association. “It’s intentional deception.”

Miller Brewing reportedly has been the most aggressive of the three big domestic brewers in trying to expandi ts craft beers over the past year, introducing its Leinenkugel’s portfolio of brands into 17 new states, giving it a presence in 42. Mr. Leinenkugel says “[c]onsumers are so willing and wanting to try new things, especially in beer styles.” He also credits the mobility of American society and the “power of the Web” for raising awareness of the brand.

Blue Moon apparently began to attract fans in the Midwest because of some hard working Coors distributors who taught bartenders to serve Blue Moon in a glass with a slice of orange, which caught drinker’s attention. This year Blue Moon, led by the Belgian White variety, increased sales by more than 80% at U.S. grocery, drug and convenience stores, according to Nielsen data.

Anheuser-Busch lacks a star craft brew but it owns big stakes in several craft brewers, including approximately 40% in Oregon’s Widmer Bros. Brewing Co.

The article concludes: “Some craft brewers say the giants’ move into the category is a good thing because they’re bringing new legions of craft drinkers into the fold. Even if the independent brewers’ market share falls, they may enjoy higher sales and profits as the category grows. “Go Blue Moon,” says Greg Owsley, chief brand officer at Colorado’s New Belgium Brewing Co., the maker of Fat Tire Amber Ale, a leading craft beer.”

In his op-ed article titled Don’t Fear Big Beer, Brooklyn Brewery brewmaster Garrett Oliver today writes:

JUST 10 years ago, the proposed merger of SABMiller and Molson Coors into MillerCoors would have worried craft brewers. Back then, “American beer” was thought of as a cheap product with very little beer flavor. But today the United States has by far the most exciting beer culture in the world, and America’s 1,500 craft brewers are undaunted by the prospect of a juggernaut that would have 30 percent of the domestic market. The age of American industrial brewing is over.

Craft brewers used to be called “microbreweries,” but many of us are not so micro anymore. And the people who once thought the craft brewing movement was a fad can now see it for what it really is — a welcome return to normality.

In the 19th century, there were more than 4,000 breweries in the United States, brewing almost every sort of beer made in Europe and a few indigenous American varieties besides. By 1870, Brooklyn was one of the great brewing capitals of the world, with 48 breweries. People bought meat from the butcher, bread from the baker, coffee from the roaster and beer from the local brewer.

But by 1970, almost everyone shopped at the supermarket, frozen food and “TV dinners” were godsends, and we had about 40 breweries left in the entire country, all making the same bland beer.

Now Americans are moving away from spongy industrial bread, watery coffee, plasticized “cheese” and other wonders of modern food science. The top maker of white supermarket bread went bankrupt a few years ago.

Industrial beer is still the vast majority of the American market, and it’s not going away tomorrow, but there is no future in it. While industrial beers suffer flat or declining sales, craft brewers are experiencing double-digit growth. The big brewers now try to copy craft beers. European brewers, who once laughed at watery American beer, now look to the United States for inspiration.

MillerCoors is not a threat to craft brewers but a warning: we should not walk the road of overexpansion or be tempted by the lowest common denominator of the mass market. Miller, Coors and Anheuser-Busch were once small breweries making fine local beer, too.

If we truly want to restore the vibrant beer culture that flourished in this country before Prohibition, craft brewers need to retain the values and goals — creating beers that are flavorful, interesting to drink and made from proper beer ingredients — that put us on the map in the first place. Let’s not undo American beer again.

So how is this for a job? “Chief Beer Taster.”  In an interview appearing in the Wall Street Journal on 10/1/07, Leo Kiely, the 60-year-old, Harley riding, self-described Chief Beer Taster and CEO of Molson Coors Brewing, acknowledges that small batch “craft” beers are snatching U.S. market share from mainstream brewers.  Some of what he said:

WSJ:  How have American beer tastes been changing?

Mr. Kiely:  What’s probably changed the most in a generation is the variety-seeking nature of today’s beer drinker.  I sort of grew up as a beer drinker in the late 1960s, early ’70s, and my brand set was an import, Heineken, and a domestic brand, Schlitz.  Today I watch a beer drinker in his late 20s, and he’ll have an import brand, maybe two, he enjoys.  He’ll have a craft-brew brand.  And the bulk of his beer drinking will still be a light lager.

WSJ:  Someone mentioned that you felt the craft-beer craze has been good for the beer business overall.  Is that right?

Mr. Kiely:  It goes back to consumers.  If consumers are interested in beer, we’ll find our way to get our fair share.  I think the craft brews bring a really important interest among beer drinkers in how beer’s made, why beer’s special.  I am astounded with how curious consumers are about beer, the process of beer.  And lots of guys like to try to make their own beer.

On whether beer can start to take back market share from wine and spirits in the U.S.:

Mr. Kiely:  I think beer is very viable when you head into the future.  You look at it as the alcoholic beverage of moderation.  Beer is growing like crazy in Russia right now, because they’re looking to be able to be more in control.  I think these things go in very long cycles.

On the company forming a new subsidiary, AC Golden Brewing, to develop high-end brews:

Mr. Kiely:  We see enormous potential in beer, especially for strong brands . . . AC Golden will focus on patiently introducing a new brand and allowing it to grow over time.  Look, we introduced Blue Moon 13 years ago and today it is one of the fastest growing craft-style beers.  We like to call it our 13-year overnight success story.

If he said how one gets to be a Chief Beer Taster, the WSJ left it out….