A Quick Look Back at 2007…

Posted on Posted in Coors, Craft Beer, GABF

The beer world recently gathered again in the welcoming environs of Denver, Colorado, to celebrate the success of the craft brewing industry and to witness its continued growth. Hosting the 26th annual Great American Beer Festival (GABF), the Colorado Convention Center packed in beer lovers and industry workers from all fifty states and dozens of countries.

The Festival Succeeds

By all objective business measures, the event was a tremendous success. This year’s GABF celebrated the feat of selling out the entire event before the first beer was poured in the opening session on an unseasonably warm Thursday evening near the Rockies. The event all broke nearly every other record it had previously set. While final numbers are not yet available, more than 46,000 people attended the four sessions of the festival, where they enjoyed 1884 beers from 408 breweries. This event is a long way from its incarnation as an annual event in 1982. Held at the Harvest House Hotel in Boulder, Colorado, the first GABF welcomed 800 attendees who enjoyed 40 beers from 22 breweries.

Managing the event’s popularity continues to pose challenges for the festival’s organizers at the Brewers Association. While the event remains a must attend, today’s GABF is no longer the simple, cozy event of years past. The GABF is a slickly produced show, tightly coordinated, and business first. Limited by the space available at the convention center, the event appears to have reached its maximum attendance. Every inch of the convention floor was occupied this year, with educational seminars, cooking demonstrations, and a silent disco floor where dancers with headphones silently grooved. Brewers and owners from breweries large and small participated in forum discussions about beer styles, the experience of women in beer, and the future of extreme beer.

The event also served as an opportunity for the beer industry to mourn the recent passing of pioneering beer writer Michael Jackson. The author of whol sold more than two million copies of his numerous books on beer, whiskey, and English pubs, Jackson, 65, died of a heart attack at his home in London, England, on August 30, 2007. A long-time fixture at the festival, with his tape recorder and ruffled appearance, Jackson consulted with founder Charlie Papazian about the first GABF while the latter was in attendance at the Great British Beer Festival. When Papazian pondered aloud that Americans should stage a festival like the British event, Jackson is reported to have quipped, “Yes, but where will you get the beer??

Fast forward more than a quarter of a century and Papazian stood on the GABF’s awards stage to eulogize Jackson, known as the Beer Hunter, in front of an audience of thousands of American brewers and beer lovers. The usually reserved Papazian delivered a rousing oratory for his friend, telling stories of Jackson’s early travels around the world in search of new beers. The tribute culminated in a tasteful video homage to the writer, including clips of his appearances on American late night television.

The Awards

After paying the proper respects, the Brewers Association began the much anticipated awards presentation. Over the course of three days, more than 100 judges sipped, smelled, and evaluated 2793 beers from 473 breweries in an unbelievable 75 beer style categories (up from 67 in just 2004). In the end, the judges awarded 222 medals to 142 breweries. Thirty-percent of all breweries participating left with a medal, with 62 breweries, or 13-percent of the total participants, winning a gold medal. Only 19 New England breweries participated in this year’s festival and the region continued to experience some difficulty in the competition, bringing home only five medals. Cambridge Brewing Company’s Cambridge Amber won a silver medal in the Cellar or Unfiltered Beer category, Allagash Brewing Company’s Victor won a bronze medal in the Experimental Beer category and a its Four won a bronze medal in the Belgian Abbey Ale category, Portsmouth Brewery won a silver medal in the Wheat Wine category, and Boston Beer Company won another gold medal for its Samuel Adams Double Bock in the German-style Strong Bock category.

The fiercest competition continued to be in the American style categories, with the American-style India Pale Ale drawing 120 entries and the Fruit and Vegetable Beer category growing from 46 entries in 2006 to 94 entries this year. The Large Brewing Company of the Year Award went to Pabst Brewing Company; Mid-Size Brewing Company of the Year Award to Firestone Walker Brewing of Paso Robles, California; Small Brewing Company of the Year Award to Port Brewing & The Lost Abbey of San Marcos, California; Large Brewpub of the Year Award to Redrock Brewing Company of Salt Lake City, Utah; and Small Brewpub of the Year Award to Montana Brewing Company of Billings, Montana.

The Big Guys Take Notice

Beyond the numbers, the real story of the festival was the continued success of the American craft brewing industry and its effects on the country’s largest brewing companies. In August, the Brewers Association released mid-year numbers that demonstrated that craft brewing is far from a tech stock bubble campaign. The volume of craft beer sold in the first half of 2007 rose 11-percent compared to the already explosive growth of 2006 and dollar growth increased 14-percent, leading craft beer to exceed 5-percent of total beer sales for the first time.

The response of the larger brewers to the success of the craft brewers has been mixed to date but their interest has clearly been piqued. SABMiller’s American brewing unit continues to push its Leinenkugel’s brands, including the Sunset Wheat, and the Coors Brewing Company aggressively leverages its popular Blue Moon brand. While the festival stood as a testament to the continued strength of the craft brewing segment, two events that quietly occurred before the event served to put craft brewers on notice that the big brewers do not plan to cede ground.

A few weeks before the GABF, America’s third largest brewery announced plans to form a specialty beer unit to develop high-end beers. As part of an internal news release, the Molson Coors Brewing Company informed workers and distributors of the creation of a new “brand incubation company,? called the AC Golden Brewing Company, LLC. The company refused to comment on when or where any new brands might be released. The announcement is another example of how Coors is directing greater focus and resources to the changing American beer marketplace. The brewery has a long history of developing and nurturing better beer brands, including the Blue Moon brand that it created in 1995 at its own brewpub, the SandLot Brewery at Coors Field. The Blue Moon Belgian White and its off-shoot brands have enjoyed great success and now account for more than 650,000 barrels of production.

In rejecting a national rollout, Coors plans to follow the Blue Moon playbook by slowly developing new brands under the AC Golden Brewing Company label. While the company refuses to discuss brands under development, several recent trademark and label application filings have raised speculation about the unit’s possible new offerings. Coors’ latest filings include applications for Pale Moon and Pale Moon Light, which are possible offshoots of the Blue Moon brand. The brewery has also filed a trademark application for Herman Joseph’s. Named after Coors co-founder Adolph Herman Joseph Coors, the brand was first released as an above-premium ale in 1980 before being discontinued in 1989. Buoyed by its success in the craft beer category, the brewery may be ready to take another run with this namesake brand.

The Rise of MillerCoors

Two days before the festival opened, a quiet bombshell was dropped on the beer industry. On October 9, America’s second and third largest breweries agreed to combine their U.S. operations to create the second largest brewer behind Anheuser-Busch. The joint venture between SABMiller and Molson Coors is projected to generate around $500 million in annuals cost savings by the third year after completion of the deal, which still must pass muster under anti-competition laws. The new company, which will be called MillerCoors, will have annual combined beer sales of 69 million U.S. barrels and net revenues of approximately $6.6 billion. SABMiller and Molson Coors will both have a 50-percent voting interest in the joint venture and have five representatives each on its Board of Directors. While touted as a “merger of equals,? SABMiller will have a 58-percent economic interest in the joint venture while and Molson Coors retains a 42% economic interest, reflecting their respective financial contributions to the new venture. Pete Coors, Vice Chairman of Molson Coors, will serve as Chairman of MillerCoors, while SABMiller’s CEO Graham Mackay will serve as Vice Chairman of MillerCoors. Leo Kiely, current CEO of Molson Coors, will be the CEO of the joint venture, and Tom Long, current CEO of Miller, will be appointed President and Chief Commercial Officer.

While rumors of the deal have floated around the beer industry for some time, the news of its consummation leaves many open questions for craft brewers and Anheuser-Busch alike. In seeking to secure cost reductions through ‘synergies,’ the new venture will likely seek to reduce redundant sales and distribution operations in markets where both maintain strong presences. This reality, together with the combined portfolios of both breweries, may tighten the distribution channels for some craft brewers who will be required to fight for places on fewer delivery trucks.

For its part, Anheuser-Busch quickly responded to the news. In an October 9, 2007, memorandum, A-B’s President and CEO August Busch IV called on all A-B wholesalers and employees to redouble their focus on the new competition. “We are studying the implications of this competitive move further—but we must not lose sight of the fact that this joint venture represents an attempt by these companies to better compete against us,? he wrote. “We believe this new structure presents a timely opportunity for all of us—as most game-changing incidents do,? he wrote. “This new entity does not match our size or portfolio of beers, yet there are undoubtedly synergies that this new company will eventually realize. At the same time, there will be significant transition confusion from this change, and it’s up to us to capitalize on this disruption now.?

The New Beer Sommelier

With the festival’s emphasis on education, one long-time GABF supporter recently announced plans to start his own beer testing program. Created by author and Brewers Association employee Ray Daniels, the Cicerone Certification Program will soon be available to test the knowledge of individuals who sell and serve beer. The Cicerone program will certify beer industry employees on a variety of subjects, including beer styles, culture, tasting, ingredients, and pairing beer with food. To encourage students of varying interest levels to participate, the program will offer three separate levels of certification, including Certified Beer Server, Certified Cicerone, and Master Cicerone, with costs ranging from $49 to $495. “Only those who have passed the requisite test of knowledge and tasting skill can call themselves a Cicerone,? Daniels says.

As a past director of craft beer marketing for the Brewers Association, Daniels is no stranger to the brewing industry. A graduate and faculty member of the Siebel brewing school, Daniels has written, edited, and published more than a dozen books related to beer and organized the now defunct Chicago Real Ale Festival.

While the concept of a beer sommelier is not new, beer enthusiasts have never been able to find a word that captures the essence of a certified beer expert. Daniels chose the word cicerone, which means a guide who explains matters of archaeological, antiquarian, historic or artistic interest, after rejecting several other possibilities. “My hunt covered a good bit of ground from things like ‘Savant de Beer’ to made-up words like ‘Cereviseur,’ but none rang true,? Daniels says. “As many in the beer industry who I talked to objected to association of the word ‘sommelier’ with beer, some new word was needed.?
With the development of his eccentrically named certification program, Daniels hopes to foster a greater sense of respect for beer while avoiding some of the snootiness and pretension associated with wine stewardship.

Article appeared in December 2007 issue of Beverage Magazine.

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