A sad day for Chicago beer lovers as the Chicago Tribune is reporting that Goose Island’s first brewpub, located on Clybourn Street in Chicago, will close at the end of the year due to an inability to renew its lease. Although Goose Island’s production brewery and Wrigleyville pub will remain open, this is a bad day for beer in Chicago. Chicago remains one of the biggest American cities to have so few brewpubs, and this is yet another loss. As the location also houses some of the Siebel Institute’s activities, it will likely see change as well. I’ve spent some time in the pub enjoying GI’s beers and will have to make a return trip before it closes for good.

For the last several weeks, Stan Hieronymus’s website, Appellation Beer, has played host to a bit of a rarity, a debate over journalistic ethics. What started as a few riffs on the notion and purpose of criticism quickly devolved (in part my own fault) into a larger debate on the proper role of writers in the beer trade. I’ve written and spoken a number of times in the past about my concerns over what I perceive to be a serious lack of professional ethics in the area of beer writing. The recent debate among a number of well-known professional beer writers, amateur writers, and consumers has started me on the project of trying to delineate a set of guidelines for ethical beer writing that I hope will (or should) garner some acceptance.

Before I suggest some protective measures, I thought it prudent to first raise a few of the ethical quandaries that I see in our industry in order to illustrate the need for some guidelines. Like any other industry, beer writing’s ranks include amateur hobbyists who pen the occasional article or column for their local ‘brewspaper,’ full time reporters who either cover beer as a beat for major newspaper or magazine, and professional writers who focus exclusively on covering beer and brewing. These different groups of writers have very different interests, restrictions, and levels of training. While your average journalism school graduate will have to take and pass a class involving a discussion of journalistic ethics, and the professional newspaper reporter is bound by his or her employer’s code of conduct, the hobbyist writer lacks any true ethical guideposts beyond their own creation or adoption.

It is my belief that this lack of ethical guidelines has caused beer writing to lack professionalism. This state of affairs contributes to a general absence of respect for the trade of beer writing. And where beer writing is not respected, the subject of coverage, namely the business of brewing, suffers. For a long time, it seems as if writers and brewers didn’t quite know what to make of one another. Sometimes hesitant to interact, brewers expected positive coverage from the writers. In return, writers quietly expected special treatment, be it the occasional free beer, meal, or access to events. The relationship eventually grew quite cozy, with the two groups serving each other’s interests quite well. The problem with this incestuous relationship is that the consumers never figured into the equation.

Positive coverage has so long been the expected standard in beer writing that what little inclination towards criticism or coverage aimed at bettering the consumer’s experience was quickly lost. For a long time, beer writers have believed that criticism means writing that Young’s Old Nick Barley Wine is actually more an old ale than a barley wine (and self-gratifyingly thinking that this is a radical and brave opinion).

While the average and even above-average consumer might never take a moment to think of the ethics or critical skills of those whose reportage they are reading, that doesn’t mean that those souls providing the reporting shouldn’t consider the issues themselves. Despite the dozens upon dozens of beer niche based publications that we have, America has no beer journalism/writing/reporting group or association where people can discuss these issues. Our counterparts in Britain indeed do have such an organization and it has a set of agreed-upon ethical rules that it expects members to follow.

While the debate over the proper principles of ethical writing should address the dozens of thorny issues, my interest in this subject was recently revived by an old issue of All About Beer Magazine that randomly (or serendipitously) crossed my path. While recently sipping a 2007 Alaskan Smoked Porter at the beer friendly bar at the Wine Exchange of Sonoma, I pulled a dusty, old January 1996 issue of All About Beer off the shelves. Turning to the letters section, I was pretty surprised by its contents. But first, please permit me a brief aside in order to provide some context.

As part of the Appellation Beer debate, I offered one obvious example of an ethical quandary relating to All About Beer’s Beer Talk section, which includes reviews from beer luminaries across the globe. For some time, the list has been comprised on John Hansell (editor of Malt Advocate Magazine), Steve Beaumont (beer writer/restaurateur), Charles Finkel (beer importer/distributor, brewery owner), Stan Hieronymus (beer writer/Appellation Beer), Charlie Papazian (president of Brewers Association), Jeff Evans (British beer writer), Roger Protz (British beer writer), and Garrett Oliver (brewer at Brooklyn Brewery). Each writer reviews four beers per issue for a total of sixteen products covered.

While there are many ethical guides and policies available for journalists to review, perhaps aspiring (and present) beer writers should review two basic sets. As one of the oldest organizations dedicated to representing the interests of a broad range of journalists, the Society of Professional Journalists (SPJ) has created a straightforward and accessible Code of Conduct. Formed in 1909 and boasting nearly 10,000 members, I think it’s pretty safe turf on which to start a discussion of journalistic ethics. At the hear of SPJ’s code is the principle that “Journalists should be free of obligation to any interest other than the public’s right to know.” Now what exactly does this mean? The code goes on to explain that:

Journalists should:
—Avoid conflicts of interest, real or perceived.
— Remain free of associations and activities that may compromise integrity or damage credibility.
— Refuse gifts, favors, fees, free travel and special treatment, and shun secondary employment, political involvement, public office and service in community organizations if they compromise journalistic integrity.
— Disclose unavoidable conflicts.
— Be vigilant and courageous about holding those with power accountable.
— Deny favored treatment to advertisers and special interests and resist their pressure to influence news coverage.
— Be wary of sources offering information for favors or money; avoid bidding for news.

In its brief tenure, the now defunct North American Guild of Beer Writers existed “to encourage writing that is informed, accurate and fair-minded on the subject of beer.” The NAGBW promulgated its own ethical code and asked members to “uphold professional standards through conduct that is legal, fair and honorable.” The NAGBW’s code, in part, suggested that members should:

Avoid conflicts of interest. Examples of conflicts of interest include (but are not limited to) the following: a) Writers, while employed in a public relations or spokesperson capacity, also writing about clients, client’s products, client’s competitors, or sponsoring organizations, in an editorial capacity, without also disclosing current employment;

Each of the SPJ and NAGBW points raise some red flags for many beer writers but let’s stick for the moment with the All About Beer Magazine example. In journalism, the law, and other professions, the standard one is held to is not an actual conflict but the appearance of a conflict of interest. It’s not that someone is inherently biased but that their position or particular situation might create the appearance of bias. As such, most publications (outside of the beer world) have stern rules about such conflicts. While I do not dispute that the eight men who participate in All About Beer Magazine’s Beer Talk section are not qualified to write reviews (I do question why the panel lacks one of dozens of similarly qualified women writers), that several of the panelists have at minimum a clear conflict of interest in reviewing the products is problematic. Of those listed, it appears to me that Finkel, Papazian, and Oliver probably should not be writing reviews due to their professional situations (Papazian as the professional organization leader of all small brewers) and Finkel and Oliver because they are reviewing the products of their competitors (or their own products if so assigned it is possible). To my mind, while these gentlemen might very well be good souls who can put aside any possible bias or conflict, this is not the applicable journalistic standard. Having brewers sit on tasting panels or allowing them to write articles in magazines and newspapers is a little like letting the vice-president of design for the Ford Motor Company write reviews of the newest line of Chevy’s in the pages of Car and Driver or the Detroit Free Press. The VP might really love the Chevy but if s/he criticizes it, you’ll never know whether their position influenced the opinion.

This has all been a very, very long-winded way of getting to that January 1996 issue. From its pages, I learned that the Beer Talk section gained some new members in the previous issues. Of these members, several of the above-named individuals joined the panel’s ranks. The response by consumers and members of the trade was surprisingly hostile, especially to Finkel’s participation. Here follows the text of some of the comments.

“Perhaps the AAB panels should be composed exclusively of non-partisan reviewers, like Fred Eckhardt and Charlie Papazian. Surely Daniel Bradford must feel confident about the panels, but there is obviously a potential for conflict of interest.” — Jim Dorsch

“Has anyone noticed that the prez of Merchant du Vin always trashes the best examples of his competition in All About Beer reviews. This month he spews about how Piraat (grand champion at this year’s California Beer Festival and heartily recommended by the other panelists) is a disgrace to Belgium and smells like rotten potatoes. Come on, this is not a matter of differing opinion but a commercial vendetta.” — Robert Rogness

“You might consider using judges that are not competing with the beers they are tasting.” — John Thomas, Gourmet Beer Society, Temecula, California

To his credit, Finkel was not shocked by the response. Allowed to respond, Finkel crafted a smart and honest defense.

“As you recall, when you first invited me to be a reviewer, I explained that I might not be the best choice since some readers might question my sincerity in reviewing competitive beers. I further explained that, no matter one’s commercial interest and level of expertise, a review of taste in which the critic sees the labels is never as good as a “blind review. We are all influenced, like it or not, by commercialism.

…I apologize if I have caused any ill feeling. That is never my intention. I refuse to be influenced by commercial greed… — Charles Finkel.

Daniel Bradford, editor and publisher of All About Beer Magazine, also added his thoughts on the conflict issue.

“Ed Note: When we purchased the magazine two years ago one of the biggest complaints about AABM was the lack of strong criticism by the reviewers. Most are writers and, contrary to popular opinion, writers are not universally disinterested. We invited Charles on board, fully familiar with his take-no-prisoners approach to beer reviewing, to balance out the other reviewers… — Daniel Bradford.

In terms of avoiding conflicts of interest, All About Beer Magazine’s Beer Talk section does a poor job. As the beer world is presently inhabited by a number of talented, independent writers, it would be quite easy to find suitable and experienced replacements. Beer Talk is a case where even disclosure of the conflict fails to alleviate the perception of bias, especially where the perception is entirely unnecessary (and well known, since at least January 1996). The conflict, perceived or real, is further puzzling and ironic as All About Beer Magazine’s publisher, Daniel Bradford, founded and administered the North American Guild of Beer Writers and likely had a hand in writing that organization’s ethical code.

I find it interesting that while All About Beer Magazine initially experienced some resistance to the conflict inherent in having a business person review the products of his competitors in a trade publication, the song remains the same more than twelve years later. And we no longer even give a second’s thought to the issue. I hope the issues raised on Stan’s website continue to be debated in much larger forums in the future. Along the way, I look forward to receiving the thoughts of brewers, consumers, amateur hobbyists, and my fellow beer writers.

–In the interest of full disclosure, I presently write for BeerAdvocate Magazine, where I pen the ‘Unfiltered’ column, and I also write a bi-monthly feature for Beverage Magazine. I occasionally also write for a series of other magazines, a list of which can be found on the ‘about Beerscribe’ page.

The Hop Crisis

The celebrations of craft beer producers have a darkening cloud hanging over them. The talk among brewers and distributors in recent months has turned from their recent successes to the possibility of a severe shortage of raw materials for use in the brewing process. While craft brewers produced a greater number of so-called fresh hop beers, those brewed with hops fresh from the field, hop growers and traders were becoming increasingly concerned about the sorry state of the world’s hop supply. The first whispers focused on a poor hop harvest in the Yakima Valley region of the Pacific Northwest and in the Hallertau region of southern Germany.

Despite recent increases in American demand for hops, worldwide hop production is significantly reduced from previous years. Between the late 1990s and early 2000s, an excess of hop production caused price depression. According to a recent seminar developed by the Brewers Association, overall hop production today is now ten to fifteen percent below the current demand, which has caused a tightened market. Worldwide hop acreage has dropped almost fifty percent in the last ten years, from 203,000 acres to 113,000, as farmers have chosen to plant crops other than hops. In 1996, the United States boasted 44,161 acres of hops. By 2006, that number had dropped to 29,435.

In addition to the loss of hop acreage, the remaining stocks are subject to poor weather, fires, and other catastrophes. A slight loss of the existing hop crop can cause reverberations and volatility throughout the hop marketplace. In Slovenia, which is a leading grower of the Styrians variety, hop growers may have lost as much as half of their crop to a hailstorm. A devastating warehouse fire in Washington State and fires at two hop-drying kilns caused a twenty percent decline in available hops.

The result has been a substantial increase in hop prices on the spot market for those who did not secure long-term contracts with suppliers. In the recent past, brewers could pay as little as $1.70 for a pound of the popular Cascade hops. This price hurt growers whose costs exceeded the sale price. Prices have now reached historic levels, with Cascade hops hitting seven dollars per pound and more, and with other varieties exceeding ten dollars per pound on the open market. The scarcity of hops has caused increase competition among world brewers. Many high alpha acid American grown hops, as well as aroma hops, are going abroad for brewers in China and Europe that now can benefit from the American dollar’s dropping value.

The difficult situation has resulted in two different reactions depending upon which side of the crisis you are facing. According to Ralph Olson, General Manager and Owner of HopUnion LLC, the growers who remained in the hop growing business are now enjoying their present situation. Dr. Johann Pichlmaier, president of the Association of German Hop Growers based in the Hallertau region of Germany, agrees. “The market is quite tight and times are good again.”

Things are not so good for the brewers who now have to meet higher hop prices. Olson concedes that he foresees that some brewers may have to shut down due to a lack of available hops. The danger is most present for those brewers that failed to contract enough hops before the shortage, according to the Brewers Association. While larger breweries buy options on raw materials several years in advance and existing customers will likely continue to receive their hop orders, smaller brewers may find their access to specific and favored hop varieties limited. This may lead some brewers to have to switch varieties and alter the flavors and aromas of their beers.

At the Brewers Association seminar, Olson counseled craft brewers to seek contracts with hop suppliers to combat against future price increases. “What we really need is for brewers to understand that it is OK to have longer than a year’s supply of hops…An extra inventory of hops can come in handy should sales go better than normal during a given year.” Olson also reported to brewers that he does not see the situation improving in the near future. “It is not going to get better soon, but will be likely just as bad, or worse, for the crops from 2008 and 2009, in other words, for beers brewed from now through 2010.”

The Malt Crisis

In addition to the global hop shortage, brewers are also starting to get hit with price increases for malt as well. Barley crops have taken a hard hit in recent years. In the last two years, North American brewers and producers have seen a significant decrease in their supplies as the demand for barley has risen. Poor global barley yields for two consecutive harvests have resulted in a barley shortage. Some meager worldwide harvests, which have largely occurred due to poor weather conditions, have sent European and Australian brewers to North American suppliers for barley. Due to high corn prices and demand, a shift in feed grain has caused farmers to move away from corn and towards barley and oats, further stressing the amount of barley available for malting. Recent poor returns for growers and maltsters has led to either a move away from barley planting or the use of barley crops in the production of bio-fuel, which results in a forecast of further reduction of barley acreage in the future.

Brewers have already seen the price of several varieties of base malt increase 5 to 10 cents per pound. Despite these increases and dire warnings, Ian Ward, President for Sales and Marketing at the Brewers Supply Group, counsels that the situation is likely to improve in the next season. “Most maltsters have by now purchased all the barley requirements they are likely to need since they have had to make contracts for malt with brewers,” he said at the recent Brewers Association seminar. “As the inquiries from maltsters have fallen, farmers who have grain left to sell have found themselves having to be somewhat less bullish. What this means for the brewer is that prices are not likely to rise further in 2008 based on barley cost.” There is, of course, always the possibility of price increases looming, warns Ward. “The upward trend in oil prices and currency may play a role in spot purchase malt, especially from overseas. What is important now is what futures are trading for in the 2008 crop and how the growing season plays out from April next year.”

So What Does It All Mean?

The increases will certainly affect smaller producers and those brewers who did not secure the necessary contracts in advance. But while hop and malt prices have increased on the spot market in recent months, many brewers have contracts for their raw materials that will serve them for several months if not years to come. There is no agreement how the prices, or the perception of price increases, will affect six pack and keg prices and when the effects will be seen. It is possible that some small producers may use the perception of the raw material cost increases as cover for a desire to increase the prices of their products. In the dozen or more informal conversations I have had with brewers over the last few weeks, not one has expected to keep his prices stagnant. Most expect to implement a price increase of anywhere from fifty cents to one dollar per six-pack by Spring 2008.

The Birth of A Craft Conglomerate

After years of working together in a sales and marketing joint venture called the Craft Brands Alliance (CBA), the Widmer Brothers Brewing Company and the Redhook Ale Brewery have announced their intention to merge into one company. The new brewery, which will be called the Craft Brewers Alliance, will create one of the nation’s largest craft breweries. Kurt Widmer will serve as the company’s chairman of the board and Paul Shipman will serve as chairman emeritus, effectively starting his retirement from the beer trade. Redhook’s current president and chief operating officer Dave Mickelson and Terry Michaelson, president of the Craft Brands Alliance, will serve as co-CEOs of the new company. The deal with also include Widmer’s forty-percent share of the Goose Island Brewing Company of Chicago, Illinois.

“I believe that the merger will allow us even greater opportunity to deliver unique and great-tasting beers for our customers,” said Kurt Widmer, president and brewmaster of Widmer Brothers. “The two companies have a common goal—we both strive to brew the best possible beer for our customers.” “Our combination of talented people, high-quality beers and first-class brewing operations presents tremendous advantages for the combined company,” said Paul Shipman, founder and chief executive officer of Redhook. “The two breweries have worked well together over the past few years, and I’m confident that we will be even stronger as one company.”

Relations have not always been so rosy between the two companies. In a 2006 filing with the Securities and Exchange Commission, Redhook complained that its brands were getting shortchanged in the sales and marketing alliance it forged with Widmer in 2004. In that filing, Redhook said, “The Company believes its third quarter sales in CBA territory have declined due to CBA’s unsuccessful execution of its sales and marketing strategy for Redhook’s core and emerging products. During this same period, CBA has been very successful selling the Widmer and Kona products.”

While the two breweries have agreed to merge, the deal remains subject to shareholder and regulatory approval, which includes the voice of Anheuser-Busch, which owns a significant percentage of both Redhook and Widmer. The breweries hope to complete the merger by first quarter of 2008 and expect to maintain both the Redhook and Widmer brands in the marketplace. The all stock transaction will result in Widmer shareholders and existing Redhook shareholders each holding approximately fifty-percent of the outstanding shares in the new company.

Widmer has by far been the more successful of the two breweries, growing from 199,000 barrels in 2004 to 269,000 barrels in 2006. Redhook produced 271,600 in 2006, on weak to stagnant sales. After releasing news of the merger, Redhook announced a decline in profits for the first three quarters of 2007. As a private company, Widmer does not release sales figures.

Aftermath of the Deal

After years of toiling as the little kids, it is now clear that craft brewers must view themselves as nearing adulthood. With the renewed interest of domestic macro-breweries and the merging and distribution alliances of larger craft breweries, regional breweries will have to consider their strategic visions for the future. What was once for many just about the beer and fun is now about serious business.

–Article appeared in January 2008 issue of Beverage Business Magazine.