The Graying Of The Craft Beer Industry…

I was hoping for a slow day at the office but that foolish idea was dashed with the news that Anheuser-Busch InBev planned to purchase a full ownership interest in Chicago-based brewer Goose Island. The news certainly sent shock waves through the industry and even started trending worldwide on Twitter. I was even surprised at the turn of events. But in hindsight, I shouldn’t have been.

The time for reckoning with the future of craft beer in America is now. I am among many writers who have opined on the graying of craft brewers and the effects such demographics could have on the craft beer industry. As I have often written about in the past, including as long as two and a half years ago, many craft beer pioneers are now elder industry statesmen. Fritz Maytag bought Anchor Brewing 45 years ago; Ken Grossman started Sierra Nevada 30 years ago; Jim Koch toted his briefcase from bar to bar 26 years ago. Beyond these well-known figures, many founders of regional breweries have been in the business for 20 years or more now. And as with any other small business, many are owned by one person or a small group of aging entrepreneurs who’ve long been toiling in the brewhouse, glad-handing distributors, and hawking product every weekend at beer festivals. For these hard working individuals, vacations are few and downtime almost non-existent.

And as with any other hard driving profession, it eventually wears you down. With high debt levels and decades dedicated to building up their companies and employees, these brewery owners can’t just walk away. Not to the mention the disappointment felt by their loyal customers who they’ve worked so hard to gain. Craft beer fans will have to adjust to an uncertain future where the only certainty will be corporate shakeups and where change will be a constant.

As I wrote in 2008:

Craft breweries are run by people not corporations and these folks can’t continue in this tough business forever. Shareholders eventually want their initial investments back, owners want to retire, and if they don’t have kids ready to take over the business, end game options remain limited. Consolidation, either with other craft breweries or with larger brewing concerns, will be the norm not the exception. And while we can all appreciate how far craft beer has come since its early days, it’s time to contemplate the business realities that lie ahead.

Fast forward to last month and I wrote:

“[w]ith craft beer continuing to grow in dollar and market share, the big guys can’t be expected to sit back and watch their brands get ridiculed and become culturally irrelevant…

A watershed moment in the history of craft brewing, it’s time for the macro brewers to acknowledge the new role flavorful beer plays in this nation, the strength of its future prospects, and help raise the bar for beer in America. Instead of trying to demean, ignore, or dismiss characterful beer, A-B InBev and MillerCoors should endeavor to help usher in the next era of great American beer. Because one thing remains clear for the big guys in the midst of all this uncertainty: those meddling craft brewers aren’t going anywhere.

Craft beer is a young man’s (or woman) game. In this watershed moment, where America now plays host to more than 1,600 craft brewers, the future of craft beer is unfolding before us. For many of craft beer’s pioneers, a crossroads stands before them. Do they double (or quadruple down) and take on very substantial debt loads in order to load up with the stainless necessary to face the onslaught of future growth prospects? Or do they stay put, cap their growth, and enjoy their regional or local success? Or do they seek an exit strategy? The traditional exit options for these often closely-held corporations include 1) selling to other inside investors, 2) handing the reins to younger family members, 3) sell to another brewery (be it macro or micro), or 4) sell some or all of the shares to a private equity group. To date, many craft brewers have not yet had to contemplate such decisions but expect that they will be coming fast and furious in the next five years.

When craft beer was only growing a few percentage points per year, or even losing growth, craft brewers could feel secure in their decisions to take things slowly. With sustained, year-after-year double-digit growth, even in horrible economic times, craft brewers largely no longer have that luxury. Many feel that standing still is no longer an option. Yet the prospect of undertaking what is necessary to meet even a fraction of their growth prospects understandably scares the shit out of them. It’s a great problem to have in theory until the interest payments on the capital investments come due every month. When you we’re just getting used to brewing five or ten thousand barrels of beer per year, expanding capacity to 250 or 400,000 barrels has to, on some level, seem insane.

Some craft brewers have jumped headfirst into this situation, such as Bell’s Brewery $52 million expansion announcement. Many others are trying to figure out what to do.

With all the available options for craft brewers, one thing remains clear: a lot of your favorite breweries are probably going to be owned by someone else in the next ten years. It’s time that we reconcile ourselves to this prospect.

So where does that leave us? I can only speak for myself by saying that I look forward to my next pint of Goose Island Honker’s Ale when I visit Chicago this summer.

I look forward to hearing your thoughts on these issues and more.

Be Social:

Chicago’s Craft Beer Pioneers: Goose Island’s John and Greg Hall

Despite its name, the Goose Island Beer Company’s headquarters and main production brewery is not located on the miniscule, 160 acre artificial island splitting the Chicago River. Instead, the brewery’s Near West Side industrial location acts as a fitting tribute to the bare-knuckled nature of the city’s beer trade and to the dedicated family behind it.

Founder John Hall, of the paper packaging trade, opened Goose Island’s first brewpub on Clybourn Street in 1988, where the flagship Honker’s Ale eventually led to the opening of the Fulton Street production brewery and a Wrigleyville pub. Greg Hall, then a college student studying creative writing, joined his father’s team as a lowly brewer’s assistant, doing grunt work, before attending the Siebel brewing school and eventually becoming the brewmaster.

Together, the pioneering Hall’s make a formidable pair, balancing business acumen and a love of flavorful beer. Far removed from the days of Hex Nut Brown Ale, Goose Island now produces some of the most flavor-forward craft beers available in America. The brewery also runs one of the nation’s largest barrel aging programs, which sprawls out through warehouses on both sides of Fulton Street. In these wooden vessels sleep Bourbon County Stout and other rare treats.

Beyond building a solid portfolio of core brands, including President Obama’s favored 312, the Hall’s have focused much of their recent efforts on developing an eclectic line-up of Belgian-style ales. Devoted proponents of the joys of bringing beer and food back to its rightful place at the table, Goose Island hosts frequent beer dinners, cheese tastings, and has even brewed a beer for one of celebrity chef Rick Bayless’s restaurants.

Despite all of Goose Island’s successes, the city’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.”

With such an enviable and bold line-up of top-notch beers, good luck convincing the happy patrons at the brewery’s pubs that they aren’t drinking craft beer. You’d get a better response rooting for the White Sox on the corner of Clark and Addison.

-Article appeared in Issue 49 of BeerAdvocate Magazine.

Be Social:

The Return of Old Style?

Every beer lover over a certain age has one iconic brand etched into their youthful memories. For some in New England, it’s Narragansett, Rainier in the Pacific Northwest, or Grain Belt in the upper Midwest. For me, the brand was Old Style. Look at old family photos from the 1970s and deep in the background (if not in someone’s hand), you’ll see cans of Heileman’s Old Style beer. With its distinctive red, white, and blue label, its gothic lettered shield and red badge, the Old Style brand was omnipresent at family gatherings, available en masse in the fridge, and in our hands at Wrigley for Cubs games. The exteriors of Chicago bars were littered with Old Style signs, often with nothing more written on them than ‘cold beer’ in a half-dozen languages, usually Polish (‘zimne piwo’). Although I don’t recall it, I’d venture to say that my first sip of beer was probably Old Style. That last part probably explains why I didn’t start drinking beer until college.

Old StyleFor all the nostalgia I feel for the brand–and it is a considerable amount–it’s really not pleasant to drink. Not even at Wrigley on a hot summer day when the Cubs are kicking the Cardinals’ or Brewers’ asses. Well, maybe then, but never elsewhere. So it is with some interest and trepidation that I received the news that Old Style’s owner, Pabst Brewing, has decided to renew its focus on the brand. First brewed in La Crosse, Wisconsin in 1902 by Gottlieb Heileman, Old Style fell victim to the crushing beer wars and was eventually sold to the Stroh’s Brewery before its purchase by Pabst in 1999. Pabst recently announced that it would return to krausening Old Style for the traditional thirty day period at the City Brewing Company in La Crosse (home of the original Heileman’s brewery and previous home to Old Style). The Old Style’s brewers hope that krausening will “provide more body, flavor and a cleaner finish to Old Style – things we believe our loyal drinkers and our new beer drinkers will both appreciate and enjoy.” Beyond this new brewing step, Pabst plans to fashion a new advertising campaign to herald this relic/throwback brand and market it to the usual 25-29 year-old “tweener” market.

Pabst has done a good job with its tepid, controlled marketing of its signature brand and it’s a macro-product that I actually enjoy from time to time. So I’ll happily try the newly fashioned Old Style when I return to Chicago next to find out if the lack of krausening was really the culprit for my early aversion to macro beer…

Be Social:

Reflections on Beer in Chicago…

After ten days in Chicago, I have to admit that the first thought on my mind is that I hope I don’t come across another stout or porter before Spring. I don’t usually gravitate towards any one particular style of beer but my sub-conscious buying choices led me to have a fridge full of roasty, dark beers. Now this was no explosion of beer geekery. With the exception of the Bourbon Barrel Aged Imperial Stout from America’s Brewing Company in Aurora, all of my stouts were standard session fare, be they oatmeal, dry Irish, or coffee-infused. I believe I had at least three different stouts from Dark Horse in Michigan. And commensurate with its name, this brewery really came out of nowhere to be a real hit this trip. The tasty Scotty Karate scotch ale was available at several local bars and each of the offerings, including the Perkulator coffee doppelbock (which I expected to hate) was top-notch. I’m beginning to think that Michigan may be the world’s capital of quality stouts and I look forward to visiting the state this summer or fall.

The holiday beer drinking experience was an especially difficult transition for me as I’ve recently experienced an unparalleled period of beer brand monogamy. During my recent trip to Philadelphia, I became enchanted with a particularly sharp and attractive little number. With golden waves and floral hints, this one knocked me over right away. From the first sip, I was enamored with the Pikeland Pils from Sly Fox. Better yet, the beer comes in a handy suitcase of cans that is easily transported and stacked in the fridge. I almost shed a tear when I finished my last can before leaving for Chicago. Happily, on my return, I was reunited with my new found friend and she brought along a companion, a case of Dunkel Lager cans from Sly Fox. I look forward to sampling this potent one-two hop malt punch for the next month or two before I have to start bugging friends to smuggle cases back for me.

While back in Chicago, I was once again reacquainted with how great a drinking city it is. We spent part of Christmas Eve at the recently reopened Berghoff Restaurant and Goose Island’s recently saved Clybourn pub, as well as pints at Delilah’s, the Hop Leaf, Map Room, Piece, Sheffield’s, and a half-dozen other great places. With the addition of a new package brewery, a soon-to-be opened new brewpub, and the emergence of strong nearby contenders and several new beer bars, such as the Local Option, I may have to revise my most recent BeerAdvocate column (recently posted here) as Chicago is making a run for the title of America’s best beer drinking city. And while I was very pleased to find Bell’s back in the area, I still longed for some Two Hearted, which was nowhere to be found. I was also disappointed that Summit was completely absent from everywhere I went (from bar to pub and grocery store to package store) and surprised that Summit’s twin city sibling, Surly Brewing, was nearly everywhere. I was also disappointed that the city’s global warming nose thumbing weather caused me to cancel a meeting I had at Miller’s pilot brewery in Milwaukee. I hope to reschedule a visit during a return trip to Wisconsin this June.

While shopping in local package stores and perusing tap handles throughout the city, I was amazed at how national the beer industry has become. The selection at Binny’s, Sam’s, or the Hop Leaf in Chicago looks like the selection at Downtown Wine and Spirits in Somerville, MA or the Foodery in Philadelphia and area bars. While we have several more years before nationalization really becomes an issue, I’m curious to see how breweries achieve growth and sales increases when they run out of new markets to conquer. My financial advice for the several business industry analysts who have been trying to contact me lately: Bet the farm on breweries in the 10,000 to 50,000 barrel range that are in fewer than five to seven states.

I’m looking forward to heading back to Chicago this June for a further review of local places, including Lunar Brewing on the city’s west side and the new Metropolitan Brewing Company.

Be Social:

The Great Beer City Debate…

In the United States, we’re obsessed with debating the respective merits of just about everything and then assigning it a blue ribbon or gold medal. We have pig beauty pageants, pumpkin chucking contests, and the Summer Redneck Games. In the brewing world, the drive to judge things extends far beyond the usual beer competitions and festivals.

In the last two years, cities around the country have promoted their local beer offerings by touting their ranks as America’s best beer town. In Philadelphia, local supporters of Philly Beer Week extol their virtues in “America’s Best Beer-Drinking City.” Denver offers the “the Napa Valley of Beer,” San Francisco represents “America’s Original Craft Beer-Drinking City,” and Portland, Oregon proclaims itself “Beervana.”

In the past year I’ve had the good fortune to travel around to most of America’s top-tier beer cities and after quite a few pints, tasters, and tours, I’ve come to one conclusion: there actually is no such thing as America’s best beer city. While this may be the inevitable end result of a hopelessly theoretical comparison of some highly competitive locales, the intellectual exercise of debating America’s best beer cities demonstrates the remarkable strength and diversity of our burgeoning regional beer cultures.

To the extent possible in our mental gymnastics, we should try and define the criteria underlying a great beer city. The core of a great beer city revolves around a handful of passionate breweries and brewpubs. Add to that a few superior beer bars focusing on diverse craft taps, fair prices, and offering events promoting better beers. Finally, throw in a few less tangible criterions, including how well craft beer and better beers integrates into the local scene and the number and quality of local beer festivals.

When beer drinkers toss around potential candidates, a few names always make the top-tier, including those mentioned above along with Seattle and San Diego. While these big cities pack some serious punch, size is hardly the denominating factor. America’s three largest cities, for instance, almost never get a mention. Between them, New York, L.A, and Chicago, all good drinking cities, offer fewer than ten breweries and brewpubs. By way of comparison, Portland (OR) has less than 4-percent of their population while offering three times as many brewpubs and breweries.

Size does matter and it’s another factor to consider when assessing smaller cities. Sure it’s easy to support a few good beer establishments when you have a couple million customers nearby. But it’s when you start taking a look at some of America’s smaller towns that you get a full appreciation of what constitutes a great beer city. While medium sized towns including Milwaukee, Austin, and Pittsburgh all have impressive offerings, let’s get even smaller. How about we nominate Portland, Maine, or Grand Rapids and Kalamazoo, Michigan, or Fort Collins, Colorado, or Madison, Wisconsin? And where else but Burlington, Vermont (population 40,000), can you hit three brewpubs in a three block radius and still have two breweries to visit?

The creation and celebration of citywide beer appreciation festivals is a significant development in the history of American craft beer and they should be supported. But it doesn’t take the aid of local chambers of commerce or tourist bureaus for people to help develop, nurture, and promote their local beer scenes. Although a handful of quality craft beers may not be available at average, budget Chinese food restaurants in our area, as is the case in cities throughout Oregon, but that doesn’t mean we have to continue to support prefabricated pubs with run-of-the-mill beer offerings. Instead, it’s time to think before we drink and pledge our support for local places that appreciate the diversity of craft beer while respecting their customers with fair prices. Because looking inward and celebrating our local beer scenes is the only way to make every American city a great beer city.

–Article appeared in Volume II Issue XI of BeerAdvocate Magazine.

Be Social: