State of the Beer Industry…

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If you read the end of the year reports for any major beer producer, the song remains the same: 2009 was a challenging and complicated year in the beer industry, stemming from a depressed economic environment, tightening credit markets, and continuing cost pressures. Overall, beer sales in the United States were down 2.2 percent, a loss of $101 billion, for a total of more than 205 million barrels.

Anheuser-Busch InBev’s Wild Ride

The combined operations of the world’s largest brewing company remains a case study in enormity. When the two companies joined forces, the possibilities for synergy and cost savings were massive. Sure enough, A-B InBev accrued more than one billion dollars in synergies in 2009, from consolidating some brewing operations to merging administrative and marketing efforts. The company expects to benefit from an additional cost savings in the amount of five hundred million dollars in 2010.

Despite the economic downturn, and in light of the cost savings, Anheuser Busch InBev’s revenues increased organically 2.5 percent in 2009, with the company’s “focus brands,? Antartica, Brahma, and Skol in Brazil, the Bud Light family in Canada, Budweiser and Harbin in China, and Stella Artois in the United Kingdom, growing 1.9 percent. With that said, production volumes dropped nearly one percent, with greater growth in the fourth quarter. In the United States specifically, volumes dropped two percent in 2009 and 2.2 percent in the fourth quarter, with sales to retailers falling nearly two percent.

The company’s recent product releases, including the Bud Light brand extensions of Bud Light Lime and Bud Light Golden Wheat, continued to show relatively strong growth, as did Budweiser American Ale, but each suffered substantial downturns in the final quarter of 2009.

Overall, the company expects to see continued declines in 2010, at least until the second half of the year. In his letter to shareholders, A-B InBev’s chief executive officer Carlos Brito reassured employees and others that the company “either met or exceeded the commitments we made at the time of the combination, and our sense of ownership drives us to continue delivering. We accomplished these milestones in spite of a challenging global economic environment, as well as the complexities of uniting two major companies, divesting assets and deleveraging the balance sheet.?

The Molson Coors Experience

As with all big brewers, 2009 was a challenging year for Molson Coors. Five years after the merger of brewing giants Molson and Coors, the breweries are beginning to enjoy real benefits of scale in their operations. For the full year 2009, Molson Coors achieved $92 million of cost savings as part of its now-completed Resources for Growth cost savings program. The company has enjoyed more than $270 million in cost savings through this program, with $24 million in the fourth quarter. Over the entire year, worldwide volume dropped 3 percent.

While the company enjoyed a rise in earnings due to a one-time tax issue, its leadership acknowledged hurdles in the business. “Behind the headline number, our results were affected by weak volumes across all markets, cost inflation in the U.S. and U.K. and brand investments in Canada,? said Peter Swinburn, Molson Coors president and chief executive officer in a press release. “Overall consumer demand remains sluggish, and we see these conditions continuing to impact volume and mix in the near term. Our strategy remains consistent, however. We are focused on investing in innovation and our brands and ensuring we maintain a strong balance sheet, so that when market conditions improve we are better positioned to accelerate our growth and capitalize on opportunities.?

With respect to the future, Molson Coors is hoping to see an uptick in business. “Looking to 2010, we expect volume to remain challenging, especially in the first half, but we are focused on continuing to establish a strong brand base to our business that ensures we not only manage the current market but that we take full advantage of revenue upsides when momentum improves,? said Swinburn.

The Performance of MillerCoors

The separate division of MillerCoors, now two years old, achieved significant additional synergies in 2009, to the tune of $245 million, with a total of $273 million since beginning operations. The company plans to “continue to aggressively optimize production across its breweries over the next few months to realize synergy commitments,? with expectations of achieving $750 million in total synergies and other cost savings by the end of 2012. Sales to retailers declined 3.6 percent in the fourth, due in part to the economic downturn and industry conditions, and were down 1.7 percent for the entire year. The company’s total net revenue dropped 1.6 percent to $1.7 billion compared to 2008 and net sales revenue decreased 2.1 percent to $1.5 billion.

“It’s tough out there, and we saw the effect of ongoing economic pressure and unemployment on beer sales, especially in the fourth quarter,? said MillerCoors CEO Leo Kiely in a press release. “But we stayed focused on our strategy and invested to grow four out of our six national focus brands in 2009. Our people made it happen, delivering strong profit growth and exceeding our synergy commitments in the midst of a recession.?

In a review of the brands at MillerCoors, the fourth quarter saw drops in the biggest flagship offerings for both partners, with Miller Lite and Coors light experiencing mid-single digit declines. The below premium portfolio continued to drop, despite the economic downturn, with losses from Keystone Light, Miller High Life, and Milwaukee’s Best. The company reported slight losses in its craft and imported beer portfolios, with significant drops in Miller Chill and Killian’s Irish Red. On the positive side, Blue Moon continued its growth pattern, with high single digit growth.


Imprted brands continued their declines in 2009, with a drop of nearly ten percent and on a loss of 2.8 million barrels. Category leaders Heineken, Corona, and Guinness all took single-digit hits as the brands struggled to maintain their price points against less expensive domestic brands and to stanch the growing success of the craft brand competitors.

The Craft Brewers Alliance

Primarily comprised of the Redhook Ale Brewery and Widmer Brothers Brewing Company, along with subsidiary brands Goose Island Beer and partner Kona Brewing, the Craft Brewers Alliance managed to turn a profit after years of sustained losses, especially on the Redhook side of the ledger. As expected, the company’s main sales and profits were led by an increase in shipments to Anheuser-Busch, which acts as the primary distributor for the company. The Craft Brewers Alliance shipped 573,200 barrels to A-B in 2009, which represents 61 percent of its total production capacity of 939,000 barrels.

Craft Beer Continues To Surge

Despite the economic downturn and the topsy turvy marketplace, craft brewers managed to maintain the only bright light in the beer category. The volume produced by craft brewers rose more than seven percent in 2009, with an impressive ten percent growth in dollar sales compared to the previous year, all on sales of more than nine million barrels. Craft brewers now enjoy 4.3 percent of the beer market by volume and 6.9 percent by dollars. Craft beers continued to do well in the convenience and grocery store channels as well, accounting for nearly 6 percent of total sales. Craft beer sales rose 12.4 percent in these channels, according to IRI data. The 1,595 craft brewers, the highest total since before Prohibition, accounted for an estimated seven billion in sales in 2009.

“Beer lovers continue to find great value and enjoyment in fuller flavored craft beers,? said Paul Gatza, director of the Brewers Association, in its annual release. “Americans have an increasing appreciation of craft beers, and the growing number of brewers behind them. They’re eager to try the latest seasonal release and to sample a variety of beers from different breweries.?

Craft beer leader Boston Beer Company saw revenues increase in the fourth quarter on a year where the company enjoyed a 4 percent increase in revenue on approximately two million barrels of a beer, a slight decrease from the previous year. The brewery’s success was in part due to continuing increases in the Samuel Adams Seasonal collection and the Brewmaster’s Collection, which helped to offset decreases in Samuel Adams Boston Lager and Sam Adams Light. According to industry data, Boston Beer has also managed to bring nearly 95 percent of its production in-house at its breweries around the country, including Ohio, Pennsylvania, and Massachusetts.

Jim Koch, Chairman and Founder of Boston Beer, told his shareholders in a letter accompanying the annual report, “Looking to 2010, we are excited about the introduction of our new spring seasonal, Samuel Adams Noble Pils, a hoppy pilsner beer brewed with a recipe that calls for all five varieties of Noble hops, which has initially been well received by drinkers, retailers and wholesalers. While it is too early to judge repeat consumption, we believe that its introduction and our twenty-fifth anniversary celebration are helping us start 2010 strongly and our challenge is to maintain this momentum as we continue to face increased competition from expanded distribution of domestic specialty brands and regional craft brands. We continue to explore ways to improve our sales execution, our brand strength and our position within the craft category and remain positive about the future of craft beer and our potential for future growth.?

Martin Roper, the Company’s president and chief executive officer, similarly commented that “[s]ince the end of the first half of 2009, we have seen an improvement in the trends of our brands. The brands may have responded positively to the redesign of our packaging and the increased investment in media advertising and our sales force, but it is also possible that some of the drinkers of the competitive variety introduced in the last twenty four months may be returning to our beers. Looking forward, we have no certainty that these trends will continue, but we feel we are in a good position to compete effectively through the strength of our brands and our sales force.

Closer To Home

Frank Anzalotti, executive director of the Massachusetts Package Stores Association remains on the fence about the prospects for the beer industry in 2010. “I think in general sales were flat last year due to the economy and its decline caused most of that,? he says.
“I’m starting to see a trend downward in excise taxes which tells me that the flow of alcohol through the system has declined somewhat. I can’t rule out that the economy is not good and consumer confidence is not good. There are a lot of contributing factors here. What will continue to happen is really a crap shoot.?

At Liquor World in Cambridge, beer buyer Joe Grotto has seen some ups and downs in recent years. “We’re up but have definitely slowed from the year before,? he says. “While we were up quite a bit two years ago, we’re up a little less last year. We’re not seeing as much growth as 2007 and 2008 though.?

Overall, Grotto cannot point to the economy as the sole factor in the slowing of sales
“I am not sure how much the economy has to do with it because we usually do better when things get kind of crappy,? he says. “But people might shift from buying a thirteen dollar six pack to buying a fifteen dollar twelve pack. So maybe the more elaborate and expensive stuff does not sell as well. For example, I don’t remember the last time I sold a Belgian four pack because they are close to twenty bucks a pack.?

While Grotto sees a slight shift in consumer buying habits, they have not abandoned higher quality products and remain focused on quality. “I think people are perhaps drinking a little more pedestrian in terms of price but not quality,? he says. “Our mixed twelve packs have been doing really well since last fall and that is an indication of the bad economy. The Victory, Troegs, Smuttynose twelve packs are way up. Smuttynose especially, people know it is a quality beer at a reasonable price and they are just trying to find that craft bargain.?

With respect to beer in particular, Anzalotti believes that the category has taken a stronger hit than others due to a combination of the sales tax increase and the economy. “Beer has taken one of the more significant hits perhaps because we have a deposit on it,? he says. “Pretty much, across the board, the consumer has probably traded down a bit. A lot of customers are telling me that the same dollars are going into their cash registers but six and a quarter percent of it is not there any more, it’s going to the state. Where the consumer may have bought a fifteen dollar bottle of Brand X, now he is buying a thirteen dollar bottle of another brand so that he is not spending any more than fifteen dollars.?

The Lingering Effects of the Sales Tax

In addition to the problems caused by the economy, Anzalotti also pointed to the extension of the sales tax to beverage alcohol products as a contributing factor in the decline of sales. “When the sales tax hit in August there was a considerable drop off in business, attributable to a number of things, including the economy,? he says. “The other being this knee-jerk reaction to an additional six and a half percent being applied to the sale of alcoholic beverages. The effect of the sales tax had wider effects across the state. “Most of the stores at that point in time suffered some level of dropped sales,? Anzalotti says. “It varied depending upon the geographic location and the demographic but for the most part, sales dropped over all. When we hit November and December and holiday times, the reports I received were that sales were down even more significantly.?

As for 2010, Anzalotti believes the sales tax increase will continue to hurt retailers. “While the knee-jerk reaction in 2010 may not be so significant, the customers are coming back for the small sales, almost to a person, my retailers are telling me they are losing the big sales, the weddings, the events, the holiday purchases. That kind of sale is shifting northward or south to Rhode Island.?

The Outlook for 2010

Overall, Anzalotti has not seen any return to normalcy yet. “When it comes to the beer industry in particular, a lot of it is going to be driven by the weather and the weekends and just the general mental state of the consumer and how free he is going to want to be with his money. I think that question is yet to be answered,? he says.

On the package store level, Grotto also sees a leveling out in the consumers after getting used to higher quality products. “In the last few years, we have focused on getting higher quality wines, better cocktail ingredients, and higher end craft beers in the store,? he says. “At some point in the future, we expect that to cap off with our consumers. Unless you can continue to get a new audience involved, that is expected to happen. Those people continue to come in but it is harder to draw in new people.?

Grotto also plans to continue the store’s focus on brewers from around New England. “People have been very willing to support their local market lately,? he says. “I think there is a lot of local loyalty. We have done really well with Mayflower this past summer and fall and with Pretty Things.? For their part, local brewers have continued to perform well even in a down economy. Fresh back from attending the Craft Brewers Conference in Chicago, Jon Curtis, head brewer at The Tap Brewpub in Haverhill is looking forward to 2010. The brewery has continued to expand its operations beyond the walls of the brewpub and into off-premise and on-premise accounts from Boston to Amherst. “We have been pushing this year to get more on-premise accounts but we’re also starting to sell more in Worcester and western Massachusetts,? he says. Brewing more than 53 styles nearly six days a week, The Tap is considering opening a production facility in the future to keep up with the demand. “We keep having better years every year in the pub but it is incremental,? he says. “We are presently working on getting a better bottling line so that we have more flexibility with our bottle sizes.?

Despite the local loyalty, consumers also remain interested in products from further away, Grotto says. “I have sold almost fifty or sixty cases of the Troegs Nugget Nectar in a month and have only one six pack left. I have sold more of that than Harpoon IPA even.?

Grotto also believes that breweries may have to shift their thinking when it comes to releasing certain beer styles and packaging types. “There has been this trend in recent years towards the big twenty dollar bottles of beer,? he says. “I think it will get more popular with the breweries and less popular with the consumer. Once people have bought their sixth four pack of Kentucky Breakfast Stout, they may not be so keen to take two hours off of work to come pick up their seventh for twenty five bucks a six pack. That is especially when there are many other breweries doing these high priced, limited release beers.?

Along these lines, Curtis also plans to continue its production of reasonably priced specialty releases. “We’ve had good success with our twenty-two ounce packaging,? he says. “Our six-packs having taken off a lot in the last year but beers such as our imperial stout have taken off. It’s a little bit of a shot in the arm to sales every other month. I like having the six packs out there but also have the brewpub brewer mentality of letting people try new beers every few months. We’re trying to share more of our unusual beers with the public including beers that can age a while.

Liquor World is also trying to assist consumers transition into different styles of beer. “I have been starting to notice that people who have grown up with these big, crazy, blown out beers have really started to mellow out in the last few years,? Grotto says. “I am hoping that starts trickling down to newer craft beer drinkers so that they think that just because something is a session beer that it is not interesting or good. I think Mayflower is a good example of that. I have customers who have been walking out with a twelve percent alcohol crazy beer in one hand and a Mayflower Golden Ale in the other hand.?

–Article appeared in the June 2010 issue of Beverage Business Magazine.

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Fighting Taste Blindness…

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I have always believed that beer’s greatest asset is its accessibility. When it comes to other beverages, which will go unnamed, the drinker is often left with the sneaking suspicion that someone is playing a joke on them. Try as they may, other beverages prefer to stay at arm’s length from their clientele.

In contrast, beer is like that person you’ve met a couple of times who seems cool but it takes the discovery of a mutual love of the movie Slap Shot or the sound of vinyl records to realize how companionable you really are. After you’ve hit it off, beer opens itself up and invites you to join it for a round or two. At its best, beer employs the oft-forsaken arts of subtlety and nuance, all while presenting itself in a straightforward and easily understood fashion. It’s comfortable in its own skin and is happy to let you view it honestly, not via some externally applied pretension.

The great American essayist and food writer MFK Fisher once condemned our collective unawareness of flavor as being a “nation taste-blind.? The author of such quixotic books as How to Cook a Wolf, Fisher knew a thing or two about breaking through perceived barriers. Writing in the late 1930s, she thought Americans maintained an interest in food insofar as it allowed them to grow full and that they lacked appreciation for the true nuanced pleasure of consumption. I think the same view readily applies to the interest most consumers have for beer; it is but a means for becoming lightly intoxicated or even drunk.

As Fisher observed, most people remain taste-blind because they have never been taught to look for different flavors. Along these lines, I am often approached by passionate beer enthusiasts who lament that their friends simply “don’t get beer? or can’t connect with their particular level of interest in the drink. After listening to their grievances about failed attempts to “convert? their friends through mini-lectures on the history of beer styles and mind-numbing soliloquies on the brewing process, I always counsel a simpler approach. Most people drink simple macro-style lagers, not because they love the flavor only a sixty-four calorie beer can give, but because they haven’t yet experienced that moment where beer no longer tastes like “beer.? In a corollary to Fisher’s aphorism, our taste-blindness when it comes to beer relates to the coordinated campaign of sameness we have all been bombarded with since birth. Beer, on the macro level, is sold not by flavor but by jest; it is differentiated not by character but by degree of levity and penchant for often witless humor.

When I try and welcome new friends to the wider world of craft beer, I start by talking about coffee, bananas, chocolate, oranges, and cotton candy. The words extreme, decoction mashing, and bitterness unit never enter my vocabulary. I’m not trying to teach, I’m trying to take a silent machete to the underbrush obstructing someone’s flavor association faculties. Because when it comes down to it, people understand the flavors that they enjoy; they just don’t realize these can be found in beer. While most people don’t understand beer styles, they clearly appreciate whether they enjoy roasted coffee or orange citrus. With these basic points established, advocates of better beer are on familiar ground when they offer curious friends a sample of porter or India Pale Ale. Considering how well-founded these and many other flavor preferences are, it’s madness to waste the few true moments we have to help people transition from lives of taste-blindness to ones enriched by the full flavor of beer.

-Article appeared in Issue 40 of BeerAdvocate Magazine.

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Let’s Hear It For The Beer Show…

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When I go to a bar, I want to see a show. I’m not talking some lame comedy act or an experimental theatre troupe. See, as much as I write about beer, I often drink cocktails when I’m out. And with cocktails, at least in a decent bar, it’s all about the show. Again, I don’t mean bartenders tossing bottles behind their backs Tom Cruise style or Coyote Ugly girls dancing on bar tops. No, I’m talking about preparation, the deliberate and stylish combination of ingredients, the concentrated efforts on crafting a quality final product. This performance of craft, whether conscious or not, repeats itself time after time with most cocktail preparation. And it adds a little magic to the drinking experience, a form of delayed gratification that builds anticipation for what’s to arrive in the glass.

When compared to the culture of cocktail service, the unceremonious pouring and delivery of beer can often be downright depressing. You order your pint, the bartender reaches for the stack of scraped and beat up Shaker pints, reflexively tilts the glass at a forty-five degree angle under the uniform taps, tilts upright again, and then slides it into your hand. Case closed, another prosaic widget served in the assembly line of beer.

Now, anyone who has been served a crusty old bottle of aged lambic from a wicker basket in a Belgian café or hoisted a half-liter glass of hefe-weizen in a German beer hall knows that beer service, when done right, can certainly put on a good show and captivate its audience. Such delivery, with proper glassware, thoughtful pours, and a touch of caring and flare, causes heads to turn and customers to ask what that lucky guy or gal is drinking. Shortly after the first glass is presented, others just like it start to pop up on tables throughout the pub. And the cycle continues.

Apart from these classic purveyors of beer traditions, the rest of the world often seems content on a uniformity of experience in the service of beer. And while a true beer show, one in which proper glassware is employed, thoughtful pours undertaken, and some presentation provided is entirely unlikely throughout much most of pilsener knock-off drinking world, the American beer marketplace is sufficiently developed that we shouldn’t have to suffer such homogeneity any longer.

We, my fellow beer drinkers, deserve much better from our pubs, bars, and pints. The diversity of our available selections has thankfully developed to an impressive point, where craft beer is now widely available across the country. It’s time that we in the beer and bar industry took things to the next level. The first step, as I have talked about before in these pages, is that the Shaker pint must die. But before that font of glass utility is relegated to the juice, soda, and margarita graveyard, I would be pacified with the addition of a handful of glassware types, such as tulips and snifters, in the average pub quiver.

Bar owners should also spend time teaching their bartenders and servers the importance of proper heads, serving temperatures, and methods. Allowing glasses to be submerged in the tap nozzle is disgusting from both a hygiene and flavor stand point. Waste and poor, sticky pints only follow taps that are allowed to overflow continually into a full glass of beer is achieved. And if there is a delay between pouring and service, causing any head to retreat, perhaps a top off or repour can improve the sight. The responsibility for changing the depressing physical appearance of beer remains with bar owners properly teaching their front line staff, thoughtful bartenders and servers monitoring their products, and customers demanding what they want. I think it’s time for the show to begin.

-Article appeared in Issue 39 of BeerAdvocate Magazine.

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The BeerScribe Video Beer Minute(s): Hanoi, Vietnam…

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Our final stop finds us dodging motor bikes and trying evade the incessant honking, all while taking in the charms and better beers in Hanoi. A world apart from the rest of Vietnam, and not always in a positive way, Hanoi does offer beer enthusiasts some of the best offerings to be found in the country. With nearly a dozen brewpubs and beer bars, as well as the ubiquitous and highly questionable Bia Hoi corner joints, you always have a place to drink if you don’t feel like squatting on a tiny plastic step-stool on the street.

Our first spot was one of my favorites as the atmosphere and environment were very different from anywhere else we went. We continue with our disembodied drinking videos at the unpronounceable Coi Xay Gio brewpub.

Next up is the Lac Vien brewhouse, where my brother attempts to ruin my video by belching. The locals appreciate his “charms.” We also manage a Ho Chi Minh beer drinking reference.

And then we head to the far west side of Hanoi to visit Van Tue, another massive and empty beer hall. Myk is noticeably edgy because when we walked in, at 4:30 pm mind you, the place was dead empty of customers and all the lights were off. We almost turned on our heels but a dozing hostess flagged us to a table way in the back of the restaurant, where she promptly turned on the lights and woke up a sleeping co-worker passed out at a nearby table on some chairs. A bit creepy was the experience…

Another trip to the Hoa Vien chain finds us in a quaint little courtyard, somewhat reminiscent of European beer gardens. They were roasting some delicious headless animal of unknown provenance behind us so you might see some ash raining around us. Myk leaves us after this video.

My final stop in Vietnam before heading off to Germany for a week, Legends Beer is located square in the middle of Hanoi’s Old Quarter, as you will see from the crazy moto driving video we drop in here.

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The BeerScribe Video Beer Minute: Hoi An, Vietnam…

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A short plane ride from our beloved Saigon finds us racing along a little road from the Da Nang airport towards the tiny town of Hoi An. Mainly a shopper’s paradise, Hoi An is a much quieter experience, especially from the major cities. We spent a lot of time just relaxing in Hoi An, and that meant we basically drank the local beer, Biere Larue, like it was our jobs. And in the evening heat and humidity, we basically decamped to the amiable Sleepy Gecko pub on nearby Can Nam Island. Run by an Australian expat, the place has a very low key vibe with an incredibly extensive and eclectic music selection.

Off to Hanoi and our final stop…

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