Why the Anheuser Busch InBev – Goose Island Deal Is Good For Craft Beer…

Now I have in the not-so-recent past been accused of being a Goose Island-apologist and even a touch sycophantic when it comes to my hometown brewer. And I have made clear my respect for Goose Island and its founding family, including John and Greg Hall. To their credit, the Hall’s have made no bones about their decision to enter into an equity agreement with the Widmer Brothers Brewery and to their participation in the Anheuser-Busch distribution channels.

Despite all of Goose Island’s successes, [Chicago’s] s notoriously competitive distribution challenges in part led to the brewery’s decision in 2006 to enter into an equity agreement with the Widmer Brothers Brewery and the Craft Brewers Alliance, which has ties with Anheuser-Busch InBev. With their decision quickly came harsh words from self-appointed craft beer purists. Greg Hall quickly dismisses the criticism by noting that the big guys give them better access to market but “zero direction whatsoever” as to the beer. For others he jokes, “Can’t you taste the beechwood in there? Don’t you think it makes it taste better?” Simply put, “the beer is coming on a different truck now, but it’s the same beer from the same brewery and people.”

I’ve visited the Fulton Street brewery twice in the past two years and have been continually impressed by Goose Island’s dedication to pushing the brewing envelope and to developing some very interesting beers. If you expected Goose Island to go on autopilot after the 2006 Widmer deal or to fall prey to some flavor-killing influence of Anheuser-Busch, you’ll have to take you beer geek insecurities elsewhere. Goose Island has done nothing but improve its operations, both in terms of efficiency and creativity, since the inking of those big deals. The brewery has also enjoyed unprecedented access to a notoriously rough market in Chicago.

For the doubters, you need only consider what Goose Island has done since 2006 and then ask whether your local, “independent” brewery has fared as well. GI has introduced Sofie, Fleur, Juliet, Madame Rose, Pepe Nero and Nightstalker, as well as a number of variations on Bourbon County Stout. It has instituted a sustainability project meshed with a session beer offering through Green Line. Matilda is now widely available throughout the city on draft and the brewery is fast becoming known for anything other than its flagship Honker’s Ale (which remains excellent).

Despite industry criticism and snarky beer geek attacks, Goose Island has proven its dedication to producing world-class beer and to being inventive. And despite the departure of longtime brewmaster Greg Hall, I expect the brewery will continue to innovate. The future will tell on how a full AB-InBev owned and Greg Hall-less venture proceeds.

After getting beyond the initial surprise of the deal, I’m left with the thought that the A-B deal is actually good for craft beer (and certainly for Goose Island). As I noted in last month’s BeerAdvocate Magazine, it is time for the big brewers to signal their intentions towards craft beer. To date, Anheuser Busch’s entries have largely come across as a series of half-hearted, faux-craft brands that have tried to co-opt craft’s cool while simultaneously portraying the trend as cartoonish. While a few of the offered A-B brands have been respectable in terms of flavor (such as the Michelob Porter or the brewery’s dunkelweizen), the rest have been busts.

The Goose Island deal looks like a more focused approach for AB-InBev. According to the Wall Street Journal, the brewing behemoth intends to focus on a few core brands (as it does elsewhere around the world), including the Blue Moon-killer Shock Top (a cartoon brand in my opinion) while purchasing a handful of successful craft brewers. This latter approach, more in line with the InBev model, allows the company to bet on already successful brands instead of undertaking a throwing things at the wall approach that long seemed to dominate the A-B releases.

The Goose Island sale to AB-InBev in one sense must be seen as a victory for craft brewers. Instead of simply trying to knock-off or belittle their efforts, the world’s largest brewery clearly appreciates some of the nuances of the American marketplace. And it is certainly vindication for the hard work and efforts of the Goose Island family.

I also expect that this will signal the end of the half-hearted, Budweiser American Ale stabs at flavorful beer that we have seen in the past. Better to have the behemoth support, promote, and deliver flavorful craft beer than to crowd tap handles with flavorless and embarrassing knock-off brands (beyond the handful that will remain, such as Shock Top).

The deal also gives us hope that AB-InBev will finally take baby steps towards getting serious about supporting better beer. I expect Goose Island will receive a helpful infusion of cash and greater access to more markets as the division grows. As the industry continues to gray, it’s inevitable that many other craft brewers will find a buyer in AB-InBev, which will in turn lead to craft brewers comprising a greater percentage (however negligible globally) of the AB-InBev brewery portfolio. Assuming craft beer drinkers do not abandon their favorite but now-sold craft brewers, AB-InBev will experience pressures to continue to brew brands and keep local breweries in operation that they have not before faced in places around the world, including in Belgium.

To the extent that craft brewers can maintain an ownership, controlling, or operational interest in their breweries, using AB-InBev’s capital resources to expand their breweries will also lead to a greater availability of craft beer in markets across the nation. We have all seen our favorite breweries quickly expand their footprints across the country, only to have to pull back to a few or even a single state due to the inability to meet demand. This will continue to be a challenge for breweries for many years to come.

There are of course dozens of questions remaining to be answered in determining what effect AB-InBev’s growing involvement in the craft beer sector will have. We have no idea whether AB-InBev will be content to take a hands-off approach, as it has so far with Goose Island, and just see fit to help great craft brewers grow and showcase their brands or whether the large brewer’s shark-like corporate culture will cannibalize brands and move to shutter breweries and centralize brewing operations.

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Craft Beer, All Growed Up…

All grown up and ready to don his crown, the prince busily makes plans for the future. All hail the new king of beer. If you read the beer press lately, you’d be forgiven for thinking that craft beer has conquered all. The Brewers Association’s recently released half-year numbers demonstrate that despite the economic downturn, craft beer sales continue to boom by double-digits, to the enduring shame of macro beer producers. Without question, no other brewing industry segment can touch craft’s fire.

But before we start the next round of mutual back-slapping and pint raising, America’s smaller brewers should stop and consider the decidedly unsettled course of American beer’s future. We have lived through the Age of Extreme and experienced the Era of Collaboration, reveling in years of unparalleled success. Yet the toughest times lie ahead as craft brewers move from the lighthearted teenage growing years to the increasingly responsible adult decades.

For one, succession issues will continue to pose challenges for brewers small and big. As brewers continue to merge or purchase their craft brethren (and competitors), brands and brewing histories may become diluted or lost. In the wake of the recent transitions of Anchor, Magic Hat, Old Dominion, and others, consumers are learning the painful truth that beer is a business and craft brewing is not some fun hobbyist project. Your favorite beer of today may become a fond memory tomorrow in someone else’s brand portfolio.

Growth also brings its own challenges and has already contributed to some serious identity crises in the industry. After years of predicting the event, the Boston Beer Company appears poised (if not already there) to exceed the magic two million barrel mark that the Brewers Association uses to define the size limits for craft brewers. While many recoil at the suggestion of disinviting Sam Adams from the craft beer party, the truth is that many craft brewers are far from small operations. How the industry defines itself, while caring for its pioneering elders will continue as a rolling boil.

Beyond trying to define “craft”, the industry’s success also challenges the consumer’s understanding of what the whole industry stands for. As growing pains set in, brewers find themselves stretched increasingly thin. Due to demand and quick sales, brewers send beer to markets thousands of miles from home, sometimes while their local patrons can’t find their favorites. To date, only a handful of brewers (craft or not) have chosen to brew their beers in distant breweries to satisfy new markets, but this trend will rise. But if Goose Island brews its Honker’s Ale or 312 in New Hampshire, is it really still Goose Island? Many consumers don’t think so.

Craft brewers also have to contend with the increasing interest of macro brewers in their profitable and growing market segment. As I predicted several years ago, Blue Moon has become the nation’s best selling craft/faux-craft beer. It’s a sales juggernaut that shows no signs of slowing, especially with MillerCoors’ creation of the new Tenth and Blake Beer Company spinoff. Expect the big guys to be more aggressive as they spend more time playing in the craft beer sandbox.

Finally, craft brewers need to get their own houses in order. In the very first issue of BeerAdvocate Magazine, I took craft brewers to task for refusing to put bottling or brewing dates on their packaging. While we have seen some progress in recent years, freshness dating continues to be a problem that many of the industry’s biggest players refuse to adequately address. While I personally love Bell’s Two Hearted Ale and included it in Great American Craft Beer, I shouldn’t have to go to the brewery’s website and enter a batch code to find out when it was made. A few stale bottles have caused me to rethink buying this longtime favorite and many others from craft brewers that should know better.

–Article appeared in Issue 48 of BeerAdvocate Magazine.

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The End is Nigh or Time to Enjoy a Bells Batch 6000…

As I type the final words in the draft that will hopefully become my second book, tentatively titled Great American Craft Beer, I’ve decided to quietly celebrate with some sharp Vermont cheddar and a Bells Batch 6000 from the cellar. In doing a quick Google search to determine when the beer was released, one of the early entrants was, to my surprise, my own words from some time in 2003.

After brewing its 5000th batch, Bells decided to celebrate by producing a special smoked beer. With its 6000th batch, the brewery decided to celebrate again by producing an utterly sublime and wonderful beer. Put plainly, Batch 6000 is the best beer I sampled during 2003. It is a phenomenal barleywine-style ale, with deep, rich malt notes and an incredible balance of hops and alcohol. The flavor continues strong throughout the brew, finishing with some sizable malt notes and some tinges of hoppiness. After sampling the first bottle of this expensive six-pack, I had grand plans to cellar the rest of these brews to enjoy their developing complexity with age. Unfortunately, Batch 6000s smooth flavor and wonderful blend of alcohol and hops proved too great an enticement and sadly I’ll never know what the future holds for an aged version of this product.

I have no idea what happened after I typed those words but I came across four bottles of this delicious nectar while perusing my cellar for a celebratory beer this evening. And I have to say, reading some early reviews on the ratings websites, everyone talked about just how potent and strongly flavored the beer was and how it would mellow over time, including this particularly colorful reference:

If this beer had balls, you’d need a fucking wheel barrel to haul them around.

Well, six years later, I can report that things haven’t mellowed very much and this beer is still a bruiser. It has something to do with the proportion of dark malt, which imparts such a marked bitterness. The aroma is slightly oxidized, a bit sherry, but it generally tastes and smells just as I remember it, only darker and more roasted.

And as much as I love the beer, it pains me to see people selling bottles of it on eBay, with a reserve starting at $20/bottle…That is about twice as much as I paid for the six-pack but really, what kind of an a-hole do you have to be to sell such a great beer on-line?

Anyways, raising a glass to Bells and to the achievement of personal goals.

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The Case Against Carrying Every Craft Beer In Your Local Store…

Craft beer enthusiasts around the United States know something exciting is happening. They trade emails and blaze Internet forum pages with news of their favorite, distant breweries coming to their home states. Local beer stores, from Tempe to Tampa, teem with attractive new brands. But behind the scenes, the craft brewing industry is at a difficult crossroads, anxiously trying to balance robust growth with pleasing consumers and distributors. And it’s only going to get harder.

The availability of a diverse range of great beers has long been standard fare in big market cities, such as Seattle, Chicago, and New York. But travel to some cities less well-recognized for better beer offerings and you’ll see something unexpected: the same brands you can find in Philadelphia, Boston, and Denver. And while it’s exciting for a beer lover to try beers from thousands of miles away, some craft brewers and distributors have concerns about the future.

In the beer business, growth is achieved in one of two ways, organically, where breweries expand sales within their current markets, or through geographic expansion into new markets. Organic growth is difficult. It involves battling in your core markets to gain new draft handles and shelf space. Breweries work with their distributors to fight on the front lines, selling their stories and educating retailers about the values of their products. While demanding, the resulting sales, if supported, provide a strong base for the brewer’s operations to grow. In comparison, geographic expansion is much easier. Five years ago, craft breweries had to fight for the attention of distributors. Today, brewers frequently receive unsolicited inquiries from wholesalers anxious to sign up new brands. So if a brewery wants to expand, it need only look to sending a few pallets of beer to a new state.

When distributors were giving craft brewers the cold shoulder, they dedicated themselves to the organic growth model. With the change in fortunes, breweries of all sizes are increasingly rejecting it. In early 2003, Colorado’s New Belgium Brewing Company sold beer in twelve states, focused on the western U.S. By the end of 2009, that number will hit twenty-five, including South Carolina. For a brewery of New Belgium’s size, selling around a half-million barrels per year, that model may make sense. But what about the neighboring Avery Brewing Company, which sells only 16,000 barrels in thirty-three states and parts of Europe? Or crazier yet, tiny producer The Bruery sending its less than 1000 barrels to eight states. Contrast these models to those of local breweries, such as Berkshire Brewing and Wachusett Brewing, which sell 20,000 barrels in three or four states, or better yet, New Glarus Brewing, which sells 80,000 barrels in just one state.

While craft beer fans love having new beers to try, the geographic expansion model has some built-in problems. For one, as with land in real estate, we’re not making more states. So expansion can only go so far before you start eyeing Canada or Belize. Second, after the initial surge of enthusiasm, consumers often find dusty bottles sitting neglected on store shelves far from the watchful eye of the distant, absent brewer. And consumers and distributors are off to snag the next great thing to come along. Finally, while sending pallets of beer to new markets is an easy way to grow, keeping that pipeline filled when you’re over-extended is proving difficult. Even larger craft brewers, such as Bell’s Brewery and Dogfish Head have had troubles keeping popular beers, such as Two Hearted IPA and 90 Minute IPA, available in many markets. Other smaller breweries, such as Sixpoint Craft Ales, have entered markets with an initial bang only to withdraw a few months later due to lack of product availability.

While there is perhaps no greater concern for a craft brewer than access to market, especially after years of tough battles with large, entrenched macro breweries and a distribution system built upon volume sales and slanted against smaller operations, the sudden wholesaler interest in their products and promises of quick sales should give weary brewers pause. And craft beer drinkers should give some long term thought to whether it’s a good thing have every craft beer available at our local stores.

–Article appeared in Issue 29 of BeerAdvocate magazine.

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Why Midwestern Beer Rocks…

When beer enthusiasts ponder great American craft breweries, their minds often wander to the coasts. West Coast brewers are deservedly renowned for their experimentation, especially in all areas hoppy. On the East Coast, craft brewers boast big reputations for their extreme acts and style defining efforts. But when it comes to dishing out respect, Midwestern breweries get very little for their impressive efforts.

I have a public confession to make. I think Midwestern breweries make the best beer available in the United States today. That’s a bold statement to be sure, but let’s take a closer look at this underappreciated beer region to test its accuracy. For starters, the Midwest has some of the strongest and longest operating craft breweries in the country. While names such as August Schells, Boulevard Brewing, Great Lakes, and Summit may not ring in the ears of ardent beer geeks, these breweries have provided strong leadership for the industry and solid, diverse beer lineups at reasonable prices. In stark contrast to their brewing compatriots on both coasts, these Midwestern breweries, and many others, appreciate the worldliness of beer. In contemplating their portfolios, these brewers recognize that the brewing playbook extends beyond the comfort zones of brewing and the hum-drum ubiquity of the big three: blonde, pale, and wheat ales. The lineup of top-notch lagers produced by Midwestern brewers, such as the Capital Brewery with its four seasonal doppelbocks, is unparalleled elsewhere in this country.

I’m not saying that the Midwest lacks its share of beer geek friendly breweries, far from it. Some of the region’s leading breweries, including Bell’s Brewery and New Glarus Brewing, bring a reserved, steady hand to the idea of extreme beer. From Larry Bell’s anniversary batch series and his former ’10 Stouts of November’ campaign to Dan Carey’s classic fruit beers and his phenomenal ‘Unplugged Series,’ Midwestern brewers know that pushing the envelope means more than simply turning the hop and alcohol dials up to 11. If the edge is where you need to live, then you can always try Three Floyds, Surly Brewing, and Kuhnhenn Brewing to get your adventure fix.

When I think about beer in the Midwest, one state clearly comes to mind, and I don’t mean Wisconsin. While the Badger State boasts dozens of excellent craft breweries, Michigan is perhaps the region’s most impressive brewing state. While it has but one brewery (Bell’s) in the top 50 craft brewers by volume, Michigan is home to more than 70 breweries and brewpubs, just behind Wisconsin for sixth most in America. The litany of Michigan’s small, local breweries and pubs include Short’s Brewing, the Livery, Dark Horse, Founders, New Holland, and of course, Jolly Pumpkin. With perhaps less flash than their coastal counterparts, these breweries produce beers that are anything but reserved.

Midwestern breweries also appear to better appreciate the value of providing fresh beer close to home. While many fledgling craft breweries struggle to contain their wide-eyed expansion plans, many of the breweries mentioned here practice a very different distribution system. Beyond the small breweries, which service their local communities, even the big guys do things a bit different. The Summit Brewing Company of Saint Paul sells nearly 90-percent of its beer in its home state of Minnesota. Boulevard Brewing was modeled on the historic local brewery system and limits distribution of its 130,000 barrels to the Midwest. The best example of this careful growth method is New Glarus, which famously pulled out of all other markets, including Chicago, because it could not make enough beer for its home state of Wisconsin.

With all of the region’s successes and the outstanding and diverse beers available, I think it’s about time we give Midwestern brewers the praise due to them. They’ve got my vote for best in the industry.

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

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