BeerScribe Interview

The BeerScribe Interview with Jeff Becker of the Beer Institute…

Posted on October 22, 2007

For more than two decades, the Beer Institute has served as the beer industry’s voice before legislatures and governmental agencies across the country. The group represents the diverse interests of breweries, importers, and industry suppliers on alcohol policy issues ranging from tax and trade to reducing underage drinking. As president of the Beer Institute since 1999, Jeff Becker has seen the face of the beer industry sustain some serious changes. In the face of the increasing popularity of the import and craft segments, the Beer Institute has broadened its focus to include the interests of new members. I recently had the opportunity to speak with Jeff Becker about the Beer Institute, federal labeling initiatives, and the rise of the smaller brewer.

Andy Crouch: How is the Beer Institute’s relationship with smaller brewers?

Jeff Becker: I like to that one of the things we’ve been able to do, at least over the last seven to eight years, is the policy stuff where there is interest among the smaller guys at getting involved. I think we’ve gotten them more involved and will continue to do so. The issues are usually not big versus small until somebody decides they want to change the definition of what a craft beer is. We have very few disagreements, certainly on the bigger issues. The three tier stuff is going to be something we continue to work with the Brewers Association on. We have the tax and labeling issues with them on as well. But on the big stuff, we do tend to be 90-percent in alignment. Across the smaller issues, I think there is a challenge and an opportunity to get together, say in keg loss or working to develop better draft standards. There is a variety of those things that in the development of the relationship over the last seven or eight years has made a conversation a whole lot easier. I think it’s been real helpful to get their perspective as well.

AC: Tell me about the Beer Institute and how you joined the organization.

JB: The Beer Institute was the outgrowth of the United States Brewers Association, which was out predecessor organization. It went out of business in 1985 and the brewers felt they needed a forum to deal with public policy issues. So the Beer Institute was formed in 1986 and at that time the major members, some of which are no longer in business, included Anheuser-Busch, Miller, Coors, Heileman, and Stroh. In 1986, the craft brewers were very small. I came in 1988 to run the Alcohol Issues Department, which dealt with advertising and tax policy issues. I was elevated the next year to vice-president and several years later to president.

AC: The Beer Institute has a lot of different responsibilities and plays many roles. Tell me about some of the group’s main areas of focus.

JB: Right now we are very focused on the Tax and Trade Bureau’s labeling issue because it is not only an important issue for our industry but for others as well. For example, the liquor industry is trying to use equalization in the labeling debate. Whether it is TTB labeling or the equalization stuff, it will always be something that we pay attention to. Advertising is always something that provides fodder for the critics or litigation. Advertising is consistently going to be an issue we focus on for two reasons. One, you have critic groups that try to use misinformation to create public policy. Our role is in the public policy vein is to be the spokesperson for the industry. For example, [the Center for Science in the Public Interest] came out the other day and said that we shouldn’t be advertising in the NFL. So we put together a statement and sent that out to the persons who are interested. So advertising is always going to be an interest of ours. Tax policy is another. We have a federal government right now with quite a deficit and I think you’re going to see some leadership changes in the next few years and people are going to have to come to grips with the deficit. The last time they did this, we got thrown into the mix and it’s something we are working on right now.

AC: The TTB’s proposed rulemaking on labeling is an important issue for the beer industry and one that began with a push from several consumer groups, including some that are considered to be neo-prohibitionist. Talk about how the Beer Institute is handling the proposed labeling issue.

JB: In the case of labeling, we actually have the liquor industry encouraging these consumer groups based upon their agenda, which was not about consumer information but equalization and the normalization of liquor products versus beer and wine products. My initial reaction to the National Consumer League and the CSPI was that they were shilling for certain members of the liquor industry instead of standing up for giving consumers more information. We’ve been putting a statement of average analysis on all light beers since light beer was born thirty years ago. That information has long been available for light beer, which is now about fifty-percent of the market. If it was all about providing information to consumers then there would have been a logical place for the industry to start. The illogical place to start is with the graphics that we believe are misinformed and could misinform the public. Our concern is that when there are issues like this or with advertising and tax policy, we first have to determine the motivation behind the move. Clearly with the labeling issue the motivation was on behalf of the liquor industry trying to get the consumer groups to promote their equalization agenda. That is why you saw us come out pretty strong right away in making sure that people understood the difference between providing consumers with information that is good for them to have and simply furthering the equalization campaign. I think you have to balance these things. When you look at what the CSPI did the other day in saying that we shouldn’t be advertising in the NFL and it’s ridiculous. Something like 88-percent of that audience is twenty-one years of age or older so what better audience is there for beer? We have to continue to be vigilant and I think smaller brewers are starting to play a role at their community level and are starting to be more concerned about what the advocacy groups are doing. I’m very happy they are as interested in the labeling issue. We cannot let groups like CSPI and others feel like they have an open field to play in where no one will rebut what they are saying. If you just leave it out there, people will believe it is true and we can’t do that.

AC: In the last year or two the Brewers Association has stepped up its legislative advocacy efforts. How do you think the Brewers Association has been doing?

JB: I think the small brewer caucus is a very good idea. It gives both them and us a different way to talk about the industry. In some instances, the beer industry is defined as the large brewers and we know there are many others. It’s been very good for all of us to have different beer styles when we are up on the Hill. It expands for people in Congress what they think about the beer industry. Not just to think about the large brewers but about the small brewers who are adding a lot of different flavor profiles, entrepreneurship, and domestic jobs that in this economy are very important. We want to continue to work with [BA President Charlie Papazian] and the folks at the Brewers Association. A lot of their board members are on our ex officio board as well. We think we’ve got a great story to tell about the strength and diversity of our industry today. It’s a very different story than it was even four or five years ago. They bring a lot to the table and certainly add some new sex appeal to the industry and that is always a good thing.

AC: What efforts have the Beer Institute undertaken to solicit new craft beer members?

JB: We’ve had quite a few of the smaller brewers on our ex officio board since I’ve been president. We have now people like Jim Koch, Steve Hindy, Gary Fish, Kim Jordan, Ken Grossman, and now Larry Bell. These people are leaders and will continue to be leaders in that industry. Our board voted at our annual meeting last week for the management committee to put together a proposal for them to add to our voting board a small brewer member who will have full voting rights. Our challenge is to continue to work on the level that we do, work with Charlie and the Brewers Association, and then to keep the conversation going and the relationship development between the larger and smaller companies through our organization. In terms of soliciting membership, we did sent out a mailing this year for the first time trying to get small brewer members. We haven’t sent one out to every small brewer but we will be doing that. We see the value in being able to identify to a particular member of Congress a person in their district who they can feel like they have a personal relationship with. Down the road we’ll be looking at how we can help with the Small Brewers Caucus and also how we can get some more small members into the Beer Institute so that they can appreciate what we are doing on a policy and political level because it’s important for their business as well.

AC: Has the internationalization of the beer industry in the last few years, including the mergers between SAB and Miller and Molson and Coors, changed the way the Beer Institute operates or its focus?

JB: It is clear that as soon as our members became more international and global, not only in selling their products but also in their relationships, that it was incumbent upon us to do more in the global policy arena. The World Health Organization has been contemplating for about two years whether to develop a global strategy on alcohol as it has with tobacco. Our concern is that alcohol and tobacco is not the same product and they are clearly different. We’ve been trying to get the beer side of things to be more cohesive around the globe so that we are looking at these things from a beer perspective. Generally how we’ve dealt with these issues is to deal with them on a beer, wine, and spirits perspective and not just from a beer perspective. As we look at developing countries and the development of policy of beer, wine, and spirits, we think it is important that people remain aware that beer is the most moderate of alcohol beverages. There are preferential opportunities for selling and marketing here because we are a more moderate beverage and these should be considered in other countries where they are developing policies. We firmly believe that we need to be diligent on the international and global levels then we are not doing the best we can. Clearly, our activities will continue to expand in that regard, particularly because the United States plays such an active role at the WHO.

AC: In looking long term, do you think that craft beer as part of the market is stable and something that is here to stay?

JB: I certainly do. In the last twenty-five years, you’ve seen a sustained growth in the craft brewing segment. You have a lot of individuals there who got into it because they thought it was fun and interesting but have turned it in to quite a business. It’s definitely here to stay. People are thinking about succession planning and getting their kids involved and that’s a wonderful thing. It is phenomenal to see the wealth of talent we have available to us, some of which got into this for fun. And now to see them as thriving businesses I think is terrific. The import segment is going to continue to grow and we hope the domestic segment will continue to grow. I think what we are starting to see now is slowly everybody is starting to come back and that is a very encouraging sign for everyone. I think imports and craft beers definitely have a place to stay and I think you see some of the larger brewers doing those same sorts of things. I’m very encouraged about the future and I think that anybody in the industry right now should be.

–Article appeared in the November 2007 issue of Beverage Magazine.

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The BeerScribe Interview with Hugh Sisson of Clipper City Brewing…

Posted on September 27, 2007

Hugh Sisson has long been a pioneer in the Maryland beverage alcohol industry. Starting with his eponymously named pub in Baltimore, he has actively worked in the beverage alcohol business since 1980. In the mid-nineteen eighties, Sisson decided he wanted to add a brewpub to his restaurant. After determining that Maryland law did not allow for on-premise brewing, Sisson and others petitioned the state legislature to change the law. By 1989, Sisson’s was Maryland’s first brewpub. By 1995, Sisson left the restaurant business and decided to open the Clipper City Brewing Company, along with a group of investors. Opened in December of 1995, Clipper City brews several successful lines of ales and lagers, along with a substantial contract brewing operation. In his free time, Sisson writes his own blog of the beer industry and has co-hosted a regular radio program on wine and beer, called Cellar Notes, since 1992.

Clipper City is dedicated to promoting a broad portfolio of beer at the local level, especially in its home market. Named for the clipper ship, first built in the port of Baltimore, the brewery integrates the region’s nautical and maritime heritage into its packaging and promotional materials. The brewery now distributes in eighteen states, including Massachusetts.

I recently spoke with Sisson about the Clipper City brands, freshness dating, and why craft brewers should be leery of growing too big, too fast.

Andy Crouch: How did you decide to move from the pub side to the package side of the beer industry.

Hugh Sisson: There were two reasons. First, I really enjoyed my run in the restaurant and pub side and the place was pretty successful. The hours are really tough and I wanted to get into the manufacturing side because I foolishly thought that was going to simplify my life. The hours are just as long, I just start a little earlier in the day and end a little earlier in the evening. So I don’t know that I’ve improved my quality of life. It’s been an interesting transition. In my heart of hearts, I’d like to find some way to get another pub. I underestimated the value of that as a marketing platform for the brand. That would bring me full circle.

AC: By my count, Clipper City has three sets of brands.

HS: We do. We have three distinct product groupings or brands. Part of it was an evolution of our initial business philosophy. We got started in 1995 to 1996, when the craft segment of the beer market, which had been experiencing enormous growth, started to level out. Clipper City Brewing All of a sudden we found ourselves in a market environment where getting distribution anywhere outside of your backyard was extremely difficult. So we we’re forced to go to a business strategy where we were going to get local and deep. Everything we did was focused around being locally named and positioned and in some ways more mildly profiled flavor styles. Those brands have evolved into what we call the Clipper City brands. There are four brands, BaltoMärzHon, McHenry Lager, and Clipper City Gold and Pale. The second group is Oxford. The first microbrewery in the Maryland area was a company called Oxford Brewing Company. It was built around doing classic English style beers. I believe their slogan was, ‘American beers with a British accent.’ It was started by two gentleman, one of whom is no longer in the industry. The other is Steve Parkes, who is now of Otter Creek and Wolaver’s. That company had its ups and downs. In 1997 or 1998, we acquired them. It’s been developed into a line of wheat beers, including a raspberry wheat and a hefeweizen. We’re still looking at changing that branding portfolio. Four years ago, we felt there was a need to create something that would allow us to expand our geographic footprint. The Clipper City products wouldn’t do that, frankly because they were just so locally positioned it didn’t make sense. There was probably not much interest from a distributor in Florida for a beer named for Baltimore. So we created the Heavy Seas brand with a richer flavor portfolio. It’s targeted at the real beer aficionados. I probably should have done it two or three years before I did. That’s worked really well. There are currently eight beers in that line, with three year-round and five seasonals.

AC: How are these three sets of brands distributed?

HS: As it stands right now, the Clipper City brands are only in Maryland, D.C., and Virginia. We’re pretty much going to stick with that…The thought process behind that is the Chesapeake Basin. I don’t think it makes much sense to take them beyond that. Heavy Seas is currently in eighteen states plus Washington D.C. Ultimately, we’d like to have it in twenty-three or twenty-four states and then we’ll probably stop. We want to make sure we can supply the sales support and marketing infrastructure, which is critically important. I think that’s where a lot of people fouled up in the late nineties. We’re kind of sitting on the Oxford brand for now. When we finish making our changes, I think we’ll try and put that in all eighteen states as well.

AC: How has your experience been outside your home market?

HS: Some markets are more challenging than others. The New England market is at first glance a little more difficult than if we work south and west. With our North Carolina, South Carolina, and Georgia sale, we’ve been able to get to a certain sales volume much faster there than in Pennsylvania, New Jersey, Connecticut, and Massachusetts. I think the southern markets tend to be more chain driven, while the northern markets are more independent. And there are pluses and minuses there. We’re continuing to roll up our sleeves and adding more staff as we need to provide the level of support that is requisite in this market environment.

AC: When did you first enter the Massachusetts market?

HS: We first came into the Massachusetts market about three years ago. We were relatively short-lived in our first foray. There was a gentleman we were working with who was starting his own distributorship and approached us. I think he made a serious effort but was under capitalized and it became evident that it wasn’t going to work. After six or seven months, we terminated that relationship. It then took us probably sevent to nine months to figure out who to work with. We’ve been back in the market for two years now.

AC: How have your attempts fared in trying to enter the Boston market?

HS: The Boston market is very, very competitive. There’s an interesting path that we need to follow…We’re making inroads but it’s scratching and clawing. There are no slam dunks in this business. To be successful, you have to get faucets in on-premise accounts. That’s not the easiest thing to do. By virtue of fact we’re not local, you’re going to get out-flanked by your local players. They’ve got the forces in the market to do it and they should. So you have to find other ways to get your foot in the door. One way we’ve tried, though we can’t do it on the scale we’d like, is that we’ve been bringing up cask-conditioned beers. There are a small number of high-end beer accounts that if you can bring them a firkin of cask-conditioned beer, they may give you a place. That’s a good way to get your foot in the door. Hopefully you can turn that into a regular faucet.

AC: Between all the brands, is there a distinct flagship.

HS: Without question, it’s the Loose Cannon Hop3 IPA. That beer is far and away our best-selling product. It’s part of the Heavy Seas portfolio. All of the Clipper City brands do well, but it’s all local. The Heavy Seas brands should do better by virtue of the fact they are more widely distributed.

AC: How important is freshness dating?

HS: I think it’s pretty important from thew standpoint that it gives you some credibility with consumers. The only thing that is tough about it is that quantifying anything in one simple measurement is typically misleading. For example, because of the nature of the dark malt in darker beers, there is a good resistance to oxidation. Dark beers could be dated a hell of a lot longer than they are. One of the things that people don’t understand is that the most delicate beer we make is the Loose Cannon because of all the hops that are in it. The hop compounds will oxidize quite quickly and that’s kind of counterintuitive. Many people think IPA’s will wear like iron. Guess what, they’re wrong. At least doing something that gives the consumer some sort of criteria in determining whether something is fresh is a good idea. Anything we can do to give a consumer a way of determining whether the product is as it should be is good.

AC: Craft beer has enjoyed substantial growth lately. Where do you see the craft market going in the next five years?

HS: I think a couple of things. First off, despite what the major brewers may say, I think it’s pretty well demonstrated at this stage that craft beer is not a fad. It’s not going away and it’ll continue to develop. Having said that, I’ve been in this industry for twenty-five years and things run in cycles. Right now, we’re in a good cycle. Do I think it will stay at this level? No. I fully anticipate a slowdown at some point in time. Then we’ll have a few years where growth will be difficult to attain and then I think it will pick up again. That’s just the natural flow of business. I’d like to see the numbers stay fifteen percent or below because that’s pretty sustainable growth. The base we’re working on is still relatively modest. If it drops to seven and five percent, that is still a real number. If it heats up to 30-percent again like in the late nineties, then the category starts to overheat. Not to take a Greenspanian perspective, but I think you have to be aware that it will attract people who have no business being in the industry and who are looking for a quick dollar. I think that is what happened in the early to mid-nineties and why we had a bit of a Darwinian correction.

AC: The Brewers Association has begun to assert itself more in the last year, both in promoting craft brewers in Washington D.C. and abroad. It also redefined ‘craft brewer’ to exclude breweries that are owned in part or in full by larger companies, such as Anheuser-Busch. What are your thoughts on the politics of this and the renewed interest of larger breweries in the craft category?

HS: I’m kind of on the fence about this. I don’t think it makes sense to exclude Goose Island and Widmer or Old Dominion from what we consider to be craft beers only because of a business affiliation they have. It was a business move made to open up distribution and market share and I think that’s good. Having said that, I’m not thrilled that most consumers don’t know that Blue Moon is brewed by Coors…I’m not really sure what Anheuser-Busch is trying to do. I’m not sure that their involvement is ultimately good for the craft brand because the people who are interested in what people like me are doing are not interested in anything Anheuser-Busch. The Widmer numbers, however, are a good story of success…I think a lot of this has to do with the maturation of the industry. This is not hobbyist any more. Even for people like me for whom this began as a hobbyist venture, this is what we do. We are professionals in this industry. My fear is that people become so exclusive that we become beer snobs. I don’t think that’s beneficial to anybody.

Article appeared in the September 2007 issue of Beverage Magazine.

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