A Silver Lining In The Obama, Gates, Crowley Beer Debacle…

With all of the punditry out there, I didn’t think it at all necessary to weigh in on the controversy brewing over the President’s decision to have beers with the participants in Gatesgate, as it’s being called here in the People’s Republic. Craft brewers from Harpoon to Sierra Nevada have been angling since the beery announcement was made to have their beers served at the unusual meeting. And while I think the obvious choices, after maligning (rightly or wrongly so) Our Fair City, would have been to give something from Cambridge a shot, say a John Harvard’s beer or better yet Benevolence from Cambridge Brewing, I’ll leave other eager pundits-in-training to debate that topic.

Despite Bud Lights, Red Stripes, and Blue Moons all around, I think there may be at least one unintended silver lining in all of this import/foreign owned beer drinking: transparency. Craft brewers often complain about how the corporate origins of faux-craft beers such as Blue Moon float beneath the brand radars of beer consumers. With the rash of public complaints and news articles appearing in the last few days, anyone not previously paying attention will now know that Blue Moon is not a little imported brand but is instead produced by mega-conglomerate MillerCoors and that Bud is owned by a foreign company. American crafts may not have made it into the White House this time, but in the battle over “who makes your beer,” this may very well be some priceless PR time…

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Co-opting Craft, Miller Style…

As we head into December, people in the beer industry start to wonder how their respective channels performed during the year. Overall, it appears that craft beer has weathered the economic downturn pretty well, albeit with an expected decrease in sales compared to recent year juggernauts. While increased sales and volume are two important ways of measuring the craft beer industry’s performance, they are not the only measuring sticks. How the craft beer industry’s competitors have responded to its performance is another way to judge how well it is doing.

Take for instance the recently unveiled website for MillerCoors, the joint venture between the American brewing divisions of SABMiller and Molson Coors. After getting through its buggy age verification system (took me four tries over a three week period to finally gain entrance), I perused the Our Beers section, which breaks down the company’s brands into four curious categories. The first category, Domestic, is pretty self-explanatory. The second, Import, is a little more unusual and a sign of how global the brewing industry has become and how involved these two powerhouse corporations have become. The final two categories caught my attention. Under the heading of Craft, the website promotes the Blue Moon, Henry Weinhard’s, and Leinenkugel’s line of beers. The final catchall category, titled Specialty, includes other brands such as Killian’s Irish Red, Fosters, and the recently departed Zima.

The website doesn’t detail the distinctions to be drawn between the final three categories and they remain a bit of a curiosity. I’m not at all clear of how the company defines ‘craft’ or ‘specialty’, why Killian’s qualifies as a specialty brand while Blue Moon is a craft, and why Fosters isn’t an import. I could make some educated guesses on these points (Killian’s was once an Irish brand purchased and long-produced by Coors in the United States, while Blue Moon was created by Coors and Foster’s is brewed in Canada and brought into the United States as opposed to being brewed outside of North America).

I’m also not sure how I feel about the brazen use of the word ‘craft’ to promote its products. While this attempt at co-opting the cool of craft is no new trick, the Big Two have given up on any pretense of trying to muscle in on the success of craft beer. This is a bit ironic considering the underwhelming public response to Budweiser American Ale and to the suspended Miller Lite Brewers Collection a line of “craft-style” beers.

With that said, these beers continue to do well at the Great American Beer Festival and excluding their numbers from consideration considerably undersells the growing popularity of craft beer, better beer, or however you want to define the consumptive phenomenon.

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The Other Shoe Finally Drops On Old Dominion…

The news of Old Dominion’s impending closure has finally hit the Internet beer sites and I doubt many are surprised. For several months or more, the question of closing the brewery’s Ashburn location has only been one of when, not if. And the only sub-question was, “How long is the company’s lease?” Not quite two months ago I wrote of the closing of the brewery’s pub:

I think at this point the real question for Old Dominion fans is what will become of the brands and the brewery in the future. As Coastal runs another brewery in Dover, Delaware*–one that is large enough with expansion to cover all the company’s brands–the inefficiencies of running two small facilities will inevitably lead to a consolidation of production. As the company’s corporate parents are located in Annapolis, and the pub is now closed, it’s not difficult to see where things are headed. I don’t know how long Old Dominion’s lease on the property runs (a sufficiently long time I would venture from Coastal’s attempt to salvage the pub) but I wouldn’t expect Old Dominion’s Ashburn brewery to remain open any longer than Coastal can control.

So today it was announced that in a “consolidation” of brewing operations, co-owner Coastal Brewing Company will move all brewing operations to the company’s facility in Dover, Delaware, in 2009. At least for the moment, Coastal claims that its full line of beers, including brands under both the Old Dominion and Fordham names, will continue to be brewed, marketed, and distributed throughout the Mid-Atlantic region. This position isn’t likely to continue and the deal, which gave Coastal access to the distribution system of its new partner, Anheuser-Busch, is even more of a head scratcher now then when it went through last year. In the press release, Coastal specifically name-checks the Dominion Ale, Dominion Lager, and Oak Barrel Stout, so I’d expect to see these continue. And Coastal may continue a few seasonal products, perhaps the Octoberfest and the Millennium Barleywine, but I’d get ready to say goodbye to more than 3/4’s of the brewery’s products.

With the closing of the Ashburn facility, Old Dominion’s story really comes to an end. I’ve enjoyed many good times and beers in Ashburn and am sad to see the brewery go, although the passing was a slow and painful one. One thing is clear out of this situation: Virginia is in strong need for a regional brewery and it’s open season for brands from Pennsylvania, Maryland, and other nearby states.

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Anheuser-Busch, InBev, and the Changing Face of American Beer…

The King is dead, long live the king. After more than a year of rumors, analyst whispers, and convenient press leaks, corporate brewing giant InBev finally made its move on America’s largest brewery. Founded as a small St. Louis brewing operation in 1860 by a German immigrant, the Anheuser-Busch Brewing Company would in less than a century grow to become the country’s dominant brewing business and one of its most iconic brands.

In the days following InBev’s offer for A-B, even otherwise detached Joe Sixpacks tipped their recliners forward and took notice of history being made before their damp eyes. The unthinkable had occurred; the American eagle had fallen prey to a foreign hunter. Once laying claim to half of the American beer market, A-B has long served as a national monolith, imposing its 100-percent share of mind campaign from the Atlantic to the Pacific. The brewery’s television ads dominated the airwaves, its brands omnipresent on the taps of every neighborhood bar and in the cooler at the corner gas station.

A-B’s executives, including the recently installed August Busch IV, tried to put a brave face on a fight they knew they would lose. Wielding xenophobic appeals and feeble court actions, the tough, “not on my watch? rhetoric quickly crumbled in the face of a stagnant stock price, a failure to embrace international expansion, and a tumbling dollar that made the giant brewing company affordable.

What happens after this anti-climactic, first round knockout is anyone’s guess. While InBev has publicly stated that it will not immediately sink its cost-cutting teeth into A-B’s bloat, including its twelve American breweries, this pledge rings hollow for the long term. Ironically, America’s loss may very well turn out to be the world’s gain as Budweiser is now set to become the combined brewery’s international flagship brand. Dethroned as America’s king of beer sales by sibling Bud Light and then later demoted by Miller Lite, Bud will enjoy a renewed focus in a bevy of new markets around the globe. Cousin Stella Artois will inevitably take a backseat to an international icon known even in the world’s smallest villages.

The bigger and lesser understood concern is how the deal, which will create the world’s largest brewery, will affect smaller outfits. We know that Pabst and the Boston Beer Company are left to fight over which brewery is now the country’s largest American owned brewery, but the toll on craft breweries is difficult to determine. While Anheuser-Busch InBev will undoubtedly continue to wield considerable distribution power, better beer fans can rejoice that this deal happened in 2008 and not 1998. A decade ago, craft brewers fought fruitless daily battles for the attention of wholesaler and beer buyers. Today, many craft brewers can’t find the time to field calls from people lined up to bring their flavorful and well-priced beers to new markets.

While hard core beer geeks would argue to the contrary, the loss of Anheuser-Busch should also be seen as a setback to the cause of better beer. Driven by the success of craft brewers, A-B has been a high profile advocate of flavorful beer in recent years. Through its highs and lows, A-B’s attempt to elevate and enhance beer’s public image with its “Here’s to Beer? campaign was a welcomed addition to the good beer praising craft chorus. And while this campaign was scheduled to end within the next year, it’s difficult to picture InBev replicating the promotion in the future. We can also expect the company to reconsider the future prospects of the newly formed Michelob Brewing Company and its line of flavorful beers.

One final consequence of the deal, assuming it survives regulatory review, is that breweries such as Old Dominion, Widmer Brothers, Redhook, and Goose Island will become distant members of the global InBev family. In InBev’s drive to focus on its core brands, these historic craft brands may find a cool reception in the boardrooms of Leuven, Belgium.

–Article appeared in Volume II, Issue VIII of BeerAdvocate Magazine.

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The Ominous Lesson Behind The Old Dominion Pub Closure…

I know that things have been pretty quiet, what with no posts this almost finished month. I’ve been traveling quite a bit, including several weeks in Seattle and Alaska (including interviews with Geoff Larson and Dick Cantwell). And my return has been filled with legal catch-up. And so it was the news today that Old Dominion Brewing has closed its on-site pub that punctures the silence.

I’ve written quite a bit about Old Dominion and its pub over the years as I’ve long enjoyed the place. I had one of my first tripels here about a decade ago and can remember the experience. I’ve returned many times since then and have shared the trepidation felt by other Old Dominion fans over the brewery’s roller coaster last year-and-a-half. In the beginning, the changes experienced after the sale by Jerry Bailey and investors to Coastal Brewing (51/49 split of Fordham Brewing and Anheuser-Busch) were actually smaller than expected. The pub closed for a while and underwent some needed cosmetic changes. Staff were required to wear uniforms, loud live music was added, and Anheuser-Busch’s product line appeared in the bar. I was even impressed during a visit this summer to see how the brewing staff, which is made up of many new faces, exuded a sense of excitement over future projects (including special weekday releases, small batch offerings, and perhaps the longest lagered Octoberfest in the world).

Long time regulars, however, never really got over the changes, however small they might have been. Attendance at the pub slowed to a crawl and the writing was on the wall. The departure in July of Scott Zetterstrom, Coastal’s vice-president of Brewing Operations who had a long history with Old Dominion, was a sign portending recent events that many of us missed.

So it was with mild surprise but not shock that I learned of the closing this morning. I think at this point the real question for Old Dominion fans is what will become of the brands and the brewery in the future. As Coastal runs another brewery in Dover, Delaware*–one that is large enough with expansion to cover all the company’s brands–the inefficiencies of running two small facilities will inevitably lead to a consolidation of production. As the company’s corporate parents are located in Annapolis, and the pub is now closed, it’s not difficult to see where things are headed. I don’t know how long Old Dominion’s lease on the property runs (a sufficiently long time I would venture from Coastal’s attempt to salvage the pub) but I wouldn’t expect Old Dominion’s Ashburn brewery to remain open any longer than Coastal can control.

Beyond the physical brewery, the future of the Old Dominion brands is another questionable issue. Reports on the availability of the brewery’s products following the Coastal acquisition have been mixed. Old Dominion has always had distribution problems and a real inability to grow, despite substantial, industry-wide success in the craft segment. According to statistics provided by the Brewers Association, Old Dominion produced 24,306 barrels in 2003, 26,827 in 2004, 27,517 in 2005, 22,421 in 2006, and an anemic 19,000 in 2007, a 34-percentage drop in the last two years of production despite double-digit growth among its craft competitors.

Coastal itself may have some issues to deal with as well. As I write about in the next issue of BeerAdvocate Magazine and elsewhere on this site, craft beer partners of Anheuser-Busch have to be concerned about the effect the merger with InBev will have on their operations and place in the corporate pecking order. In a business sphere where the corporate parent is producing several hundred million barrels of beer per year, how much interest do you think the company, especially one with InBev’s track record towards small breweries, will have for a measly 19,000 barrels? Or even for one with 88,000 barrels (Goose Island), 253,000 barrels (Widmer), or 206,000 barrels (Redhook)?

We now live in an era where craft consolidations, either within the niche or outside of it, will become the rule rather than the exception. From the biggest breweries to the smallest nano-outfits, corporate and estate transitions will require greater discussion and consideration in the near future. Change is coming; Old Dominion is just an early warning.

*Correction: The article originally referenced Annapolis, Maryland, instead of the Dover, Delaware brewery.

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