British Beer Bummer

From Bloomberg:

U.K. drinkers bought 60.2 million fewer pints of beer in the first three months of 2011 as they cut back spending in shops and supermarkets, according to an industry group.

Beer purchases fell 3.8 percent to 5.32 million barrels from 5.52 million a year earlier, the British Beer and Pub Association said in an e-mailed statement. A barrel holds 164 liters of beer, or 288 pints, according to the London-based BBPA.

Sales in the “on-trade,” or in pubs and bars, slid 3.8 percent, the same rate of decline as at supermarkets and shops, or the “off-trade,” the BBPA said. On-trade sales declined at a slower pace than last year’s 8.8 percent decline, whereas shop sales fell from a 0.9 percent increase last year.

Beer sales “are still fragile,” Brigid Simmonds, the BBPA’s chief executive officer, said in the statement. Second- quarter sales may be helped by public holidays, including for the wedding of Prince William and Kate Middleton, and sunny weather, the BBPA said, even as beer prices rise due to a tax increase levied in this year’s U.K. budget.

Beer Consumption and Economic Growth - or - Why I am Opening My Brewery in China

From Felix Salmon I learn of a paper by Liesbeth Colen and Johan Swinnen which looks at the correlation between income and beer consumption. Interestingly the authors find that the relationship is non-linear and in fact has an inverted U-shape suggesting that beer consumption rises with wealth, but then declines as richer consumers switch to things like wine and spirits.

The good news for brewers is this:

Beer consumption has been increasing steadily while the consumption of wine and spirits has been flat.  This, they argue is largely due to emerging economies like China increasing their consumption dramatically:

The USA 'aint doing badly either, by the way.  This is, of course good news for those that are in the business of making and selling beer (especially those in China) but it also suggests that the other shoe might fall as the emerging economies become high-income economies and switch their drinking habits to wine and spirits. 

By the way, as a counterpoint to the volume graph above, note the value of alcohol consumption:

So while the volume of beer has gone up, the prices of wine have increased while volumes have remained flat and this is even more true of other alcoholic beverages. 

NB: Inverted U's are a favorite of development economists - the Kuznets inverted U is a posited relationship between wealth and inequality and the environmental Kuznets inverted U is a posited relationship between wealth and environmental degradation. 

Unsuitable

No Big Willy style after all. According to the Mirror in London:

Prince William and Kate Middleton have banned guests from drinking beer at their wedding reception.

In a move that is sure to disappoint party-loving Best Man Prince Harry, ale will not be served at Buckingham Palace after they tie the knot next Friday.

The prospect of guests downing pints has been deemed unsuitable for such a prestigious occasion.

Instead, the couple will treat their 650 guests to flutes of champagne and wine to accompany their canapés as they mingle in the palace’s 19 state rooms.

A source confirmed yesterday: “There won’t be any beer.

“Let’s face it, it isn’t really an appropriate drink to be serving in the Queen’s presence at such an occasion.

“And while the younger royals enjoy a pint from time to time, neither Kate nor William is a big beer drinker so they decided to leave it off the menu.

Proud of British Beer indeed...

At least Prince Harry knows where it's at:

Well, perhaps not.  He is drinking a John Smith's 'Extra Smooth.'  Interesting historical footnote: John was brother to William who founded a new brewery next door in Tadcaster.  The 'Old Brewery' built  by John was subsequently passed down to his nephew, Samuel.  Too bad Harry didn't go for the Samuel Smith's Old Brewery Pale Ale which is wonderful and still brewed in the old Yorkshire Squares.

At least John Smith's has a sense of humor:

Proud of British Beer

Apropos of my recent kick regarding all things British Beer I bring you (via Stan Hieronymus and Pete Brown) this nice video which has been made in reaction to the UK government's recent and planned increases in beer taxes in Britain. 


Proud of British Beer from Society of Independent Brewers on Vimeo.

Widmer's Rotator IPA Series: X-114 in a Bottle!

Widmer is kicking off a new series of rotating IPAs and as I understand it, the idea is to do about four a year.  I encountered the first of the series, the X-114, at my local store last night (and on sale no less).  I had sampled the X-114 a long time ago at the Gasthaus and loved it.  It is brewed with generous amounts of Citra hops and the result is quite probably my all time favorite of Widmer beers. 

My first thought when I had it at the Gasthaus was 'why in the hell don't they bottle this?'  Happily they are and the product from the bottle last night was as exceptional as I remember - a stellar, balanced, northwest IPA that holds its own against the best around (Ninkasi, Bridgeport, Bear Republic, Fort George, etc.).  Not overly bitter but wonderfully aromatic and beautifully balanced with a nice even malt character.

Sadly it will give over to another IPA in a few months, but the rotator idea is great if they can keep up the quality.  IPA is the signature style of NW breweries and it'll be fun to see variants on the theme from Widmers master brewers. 

But for now, go and get you some, you will not be disappointed. 

[As a side note both this and Ninkasi sixers were on sale at Safeway for $7.99 and both were in short supply. In fact I grabbed the very last Ninkasi - an anecdote, yes, but I suspect the new Ninkasi sixers are selling like hotcakes] 

Beer and Viagra

Leave it to Scotland's Brew Dog to introduce "Royal Virility Performance" IPA to commemorate the royal nuptials between William and Kate.  This beer contains Viagra so you get the joke.  They call it "Big Willy Style."  

Arise Prince Willy indeed.

Firkin Fest Recap

Brewtopia photo, not mine, not the fest

The 2011 edition of the Firkin Fest was, I'll have to admit, a bit of a disappointment.  Let me be clear, it is still one of my favorite beer events, but this year instead of the great leap forward I expected, I think it went a step in the wrong direction. I think it is now established enough that we can start to nit pick a little in the hopes that it will improve in the future.


Firstly, the beer lineup was a disappointment and of the 21 beers listed about five were Rogue and its many affiliates (Eugene City, Issaquah, Green Dragon) and one (Bridgeport) didn't even show up.

Second, the paltry food options are a real problem, especially for an event that includes food in the purchase price.  Vegetarian friends went off to the Lucky Lab for food and came back afterwards as there was no veggie option save for a small plate of cheese without bread or crackers.

Third, the beers that were there were again, for the most part, not brewed with cask ale in mind.  It is time to get brewers to step up and brew some special beers for the event.  At the very least they should share some basic info about the beer they are offering up - some neglected to mention the ABV or IBUs let along other brewing/tasting notes.

That said there were some real stand outs in this year's line up:

The Brewer's Union's Mild, Au Naturel, was fantastic.  Amazingly flavorful for a mild and a little extra hopped, I had two.

Just like last year Deschutes had a regular beer that was transformed in the cask.  Last year it was Twilight, this year it was Red Chair.  Red Chair had notes of lemon that I had not tasted before and was, in my mind, the best of the lot.

Block 15s Ridgeback Red with dry hops in the firkin was wonderful.  I am not a big fan of the red style - it is generally a little too sweet for my taste- but the hops provided the perfect balance.

Double Mountain's Little G ESB was just want you want: a special beer, done well, that is perfect for cask.

Hopworks also nailed it this year with their Bonfire, a perfect cask beer, subtle and quaffable and they avoided the isinglass fiasco of last year - no fish!

Track Town's Brown was a big hit as well with my crowd.

Unfortunately, there were also some disasters:

Rogues Farmstead pilot brewery sent some unfinished ESB that was all wort.

Fire Mountain's Oregon Pale Ale was infected and was inexcusably served anyway. I dumped it.

Migration sent a clean and pretty nice beer but apparently either decided not to or forgot to prime the firkin.  It was completely flat.

I can't imagine why either of the first two beers were served, better no beer at all than bad beer.

Still it was a great time and I love the low-key, relaxed atmosphere.  There was one other gripe from my crowd that I did not share.  The idea that you had to buy 8 beer tickets and 2 meal tickets.  Complaints about wee lassies drinking too much and large laddies not drinking enough were spoken, my I, the ever helpful economist, congratulated them on discovering a missing market and encouraged them to seize the opportunity by buying surplus tickets and selling them to thirsty linebackers.  No one thought this was a good idea or that my contribution was in any way helpful.  Save for Jeff, who after a tick, exclaimed 'arbitrage!' and was quite pleased that he nailed the lingo. 

Burton Salts

After my beer tour through Britain it was time to bring it all home by trying to replicate a traditional English best bitter in my own wee brewery. I have brewed a best bitter before but with a NW twist - NW hops and a bit hoppy for style - I called it a NW Best Bitter.

Jeff adds the salts

This best bitter is intended to be a truly authentic English best bitter, ringing in at 4.3% ABV. So off I went with the Beerax to Steinbarts and loaded up on Maris Otter malt, East Kent Goldings hops and Wyeast's Thames Valley II yeast. All fine as it goes, but this time I really wanted to try and replicate that wonderful minerally quality of British bitters and so we came home with some Burton salts.The salts are supposed to both accentuate the sweetness the malt and make the hop bitterness more crisp.  We will see.

Ready to vorlauf

We were ready to buy all the salts - calcium chloride, calcium sulfate, etc - but BeerCraft has a nice mixed salts which is perfect if you are starting from totally neutral water. Luckily Portland has beautifully clean water - there is absolutely nothing in it. So for the first time ever I amended the wonderful water of Portland with Burton salts. We were conservative, only getting about half way to Burton-on-Trent.

The scene on the only sunny day we saw in March in Portland.

The final results will not be known for a few weeks, but I am very optimistic and I look forward to tasting it along side the beer from my new favorite brewery: St. Peter's. It is a 100% East Kent Golding bitter and I am excited to taste the EKG in a single hop beer (something I relish in general - single hop beers are a great way to really get to know a hop).

Jeff and I thought that we should honor the debut of the the MLS Timbers in naming the beer.  Stay tuned...

Ninkasi Makes the Top 50

The Brewers Association has released their list of the top 50 craft breweries (which ridiculously does not include Widmer and the other CBA breweries) and a number of other Oregon breweries are on the list.  But creeping in at #50 is Ninkasi, so now we can watch as they make a steady climb up the list (as I have no doubt they will do).

Deschutes, Full Sail, Rogue and Bridgeport (being a Gambrinus brewery is okay in the BA world) are the others on the list.   

Worship the Goddess indeed.

Growing Your Own: Rogue Style

Rogue's Floor Malting House

I have been trying to grow hops for over a year now, and fortunately, after last years failed rhizome and then disappointing vine, it appears to be coming back with a vengeance.  Already there is a robust beginning.  Hopefully, I'll be able to brew a beer this year with my very own hops.

But if you want to find the commercial leader in the 'grow your own' movement look no farther than Rogue.  And it makes sense, right?  Rogue, marches to the beat of a different drummer and is fiercely proud of it.  They have been involved in a wholehearted effort to produce their own ingredients and now have a hops farm and a barley farm from which they are now producing their own beers under the "Chatoe Rogue" label.

But once you have grown your own barley you need to turn it into malted barley and this is no easy feat.  The delicate process of converting the starches into sugars requires a delicate touch.  The traditional way of doing it is through a floor malting process by which you create a hot floor and rake the germinated barley until it is sufficiently dry.  At least I think so - my knowledge of the process is sketchy at best.  What I do know is that floor-malting is the old school way of malting - a lot of hand raking and thus labor intensive - and is rarely seen in the modern industrial beer world.

Which brings us back to Rogue which has just completed the construction of their very own floor malting facility on their barley farm in Oregon's Tygh Valley.

From and earlier press release on the facility:

The Malt Floor will be a Heritage-malting operation in which Rogue Farm barley will be soaked, floor-germinated, hand-raked on the malt floor, roasted in a brick hearth, and bagged in small batches. Rogue Brewmaster John Maier plans on developing 4-6 varieties of floor malt that will be used in the brewing and distilling of Rogue Ales, Porters, Stouts, Lagers, and Whiskies.

Floor malting began in the 19th century but was gradually replaced by automated equipment that helped reduce labor costs. With the establishment of the malt floor, Rogue joins a select handful of floor maltsters in Germany, England, and the Czech Republic that continue to carry on the heritage malting method.

And speaking of the beer, I have blogged in the past about how much I liked their single malt ale for the beer itself not just because they used their own home-grown ingredients.  I liked the clean simplicity of the beer: one malt and one hop variety.  I look forward to the wonderful things John and his crew at Rogue will do with the new fully home produced malts and kudos to Rogue for investing so heavily in their own hops and barley operations.  
There are a lot of ways in which Rogue is just that - the could have easily become a Deschutes/Full Sail clone, settling on a standard line up of beer and selling far and wide.  That would have been just fine and I am grateful to have Deschutes and Full Sail, but Rogue has always had a different path, one that is not just about growing revenues as quickly as possible.  To my mind they should be celebrated for all of their fun and commendable efforts to create a truly home-grown Oregon beer.

Widmer Does Lompoc One Better

Pays to be a paid sponsor:



But Drifter?!? It is a fine beer, but not particularly evocative. What the Timbers beer should be is a big giant IPA, hopped-up and ready to go. I think the Widmers should make their X114 IPA, which is sensational, the official Timbers beer.

Here Come the Firkins!

Easily my favorite event of the year, the Green Dragon Firkin Fest, is approaching quickly - Saturday, April 16.  [Sorry for the small image, I could not find a bigger one] Why is it my favorite?  Three reasons. First, it is all about cask beer, my special interest.  Second, it is a small laid back affair.  And third, it is at the Greet Dragon, which is a pretty cool place.

This year, I am hoping for more milds, bitters and other traditional English ales that are native to cask.  But sometimes the hop bombs are a revelation on cask as well.  Last year, Double Mountain's IRA was phenomenal.  Ted Sobel from Brewer's Union will be there and I have it on good authority that he is bringing a mild, as he did last year.  Other breweries are still trying to figure out the cask thing, but they seem to get better each year (let's hope for no fishy smelling Hopworks!).

Last year the weather was outstanding, warm and sunny, and the patio was the place to be. This year, who knows with this ridiculous weather, but the inside is inviting as well.

It costs $30, but for that you get 8 6oz tasters and two food vouchers which last year could be redeemed for sausage, chocolate or cheese. I did two sausages and loaded them up with kraut and voila: lunch.

Speaking of the Timbers

Lompoc has a new beer out in bottles:

NICE.

Oh No!

The new beer sign at the Portland Timbers Jeld-Wen Field.  C'mon, in Beervana?  Really? 

The Widmers will have a beer garden so perhaps this is the AB - Craft Brewers Alliance deal showing itself in the stadium.  This sign is in a key location in that that will appear on lots of national TV, so it doesn't necessarily make sense for a local brand.  And, even in Beevana, I suspect that 75% of beer sales in the stadium will still be Bud Light. 

More on Goose Island

Over the weekend there was an Op-Ed in the Chicago Tribune by John Hall, the CEO of Goose Island explaining the sale.

Apropos of what I said on Friday, here is Hall explaining AB's rationale:

But Anheuser-Busch didn't buy us to change us. It bought us because we can do things its people can't. They're megabig, so it's harder to get people who sell huge brands to really push new products. As in a lot of industries, it's the small guys who are really creative, because they have to be creative. That's what's made us what we are.

***

My executive team, including Greg, who's my son and our brewmaster, all agreed that Anheuser-Busch would be far and away the best alternative for us if it would agree to certain conditions. We didn't work 23 years to build what we have just to throw it away.

Goose Island had to remain an independent company, with me in charge, with brewing centered here in Chicago and with sales and marketing reporting up through me. And I would report to just one person in St. Louis.

In other words, we wanted to continue to do what we've done. And they agreed to that right away.

Also in the Trib is an article on the many other craft beer options local to Chicago reinforcing the notion that craft beer is not in peril. The article focuses on Two Brothers and Three Floyds, too bad they chose to ignore the Four Horsemen...

Budweiser buys Goose Island

A few folks have e-mailed me wondering why I haven't posted some comment on the AB-InBev purchase of craft brewery Goose Island.  There are a few answers.  The most important is that this blog is an offshoot of my main blog, the Oregon Economics Blog, but even that blog is an offshoot of my real job which is as a full-time economics professor at Oregon State University.  OSU is on trimesters and my schedule is particularly heavy in the winter and spring quarters, meaning January through June.  So it is hard to find time to sit down and write for both blogs as well as keep up with all my other responsibilities.  Which is all a mea culpa for posting so infrequently these days.  Sorry.

The second is that what interests me is economics not business, so pure business rationale is not necessarily something I am motivated to post on, what I like as an economist is to think about why certain business decisions make sense - what are the economic forces at work behind the scenes as it were.

The third is that, given my interest in the economics, I am still trying to think through all of the angles of this.  As a academic I am trained not to shoot from the hip and so my bloggy persona and my professional persona are often in conflict.

So with that needlessly long-winded intro, here are some thoughts on the deal:

1. My first thought was something that Rogue owner Jack Joyce said to me and a group of students a few years ago.  He was saying that the big brewers could easily best the craft brewers but that the corporate structure lacked patience.  Once you are corporate and divisionalized, the marketers want to know how to sell the beer, the bean counters want to know that there will be big sales at the outset to justify the marketing budget and the corporation is worried about the bottom line so why should they go for lower profit-margin beer?  Since, getting the public to accept and adapt to a good craft beer takes a lot of patience - you have to be willing to grow a craft beer line slowly and wait for the delayed rewards - this is something the modern brewing behemoths are not used to doing.
2. Part of craft brewing's ethos is the idea that it is an artisanal product and the brewers themselves are part of the 'personality' of the beer.  It is hard for a generation of craft beer drinkers that have been brought up on this to accept a big brewers brewing quality craft beer.  Converting mainstream drinkers to things like Bud's American Ale has not been very successful.  So either you create a faux craft brewery ala Blue Moon and grow it slowly (see point #1) or you look to acquire an established brand.
3. Economies of scale are the name of the game in brewing, but in craft brewing I think the demand is such that a brewery should accept the economies of scale hit you take from sticking to a smaller brewery, and instead leverage the economies of scale you have in distribution and ingredients.  This is not too distant from the Craft Brewer's Alliance deal with AB. 
4. This is a typical big corp. play in a world of innovative entrepreneurs - think of Microsoft and Google gobbling up the Hotmails and YouTubes.  I think it demonstrates three things.  One, that the craft beer market is only going to get bigger and bigger.  Two, that there is a lot of great new breweries and brewers out there.  Three, that the big timers are getting in the market for real this time and they are not going away.
5. I don't think this is anything to fear, I think it means that craft brewing is going to grow that much faster.  Either AB-InBev leaves Goose Island alone in terms of creative license or it will fail.  In this modern era of new and innovative beers, no one company will every be able to create meaningful market power.

So in the end I think this is good for craft brewing and I don't see any reason to stop supporting Goose Island and their beer. In the future it'll either be good or it won't. If it is good, buy it.

An e-mailer asked me about this comment:

It is the lack of AB’s actions to do anything serious in this sector that speaks the greatest volumes. AB has more of everything that anyone has ever needed to move into the craft beer market. They have had the capital, the physical plant, the brewing expertise and the distribution chain to do this on their own for their entire existence, IF they truly wanted a card of genuinely high-quality beer in their product line. There is no company in the world with more opportunity to deliver on whatever intention they have to make great beer. There are but two things that have stopped them: bean counters and shareholders. They demand growth and increased profits. Growth they will get by buying decent breweries. Profit they will get by cheapening their product. That has been the A-B modus operandi for 50 years. The burden of proof to show that they are changing is on you, and not on the justifiably skeptical beer geeks.

To which I would respond with a reference to Jack Joyce's comment from a few years ago. Big corporate brewing doesn't understand how to market and grow a quality craft beer, but they do know how to buy a successful company. It remains to be seen if they will keep hands off, and in that will lie the true judgement. But the market is sophisticated now and I think it'll punish quickly any attempt to use the Goose Island brand to sell American Ale.  Hopefully Bud will see this and understand.  I don't think it is a forgone conclusion that they will dilute the Goose Island brand.