Boston Beer Sues Anchor

And it used to be such a friendly business...

Boston Beer Co. is suing San Francisco-based craft brewing competitor Anchor Brewing Co. and a former Boston Beer marketing executive, alleging the executive violated a noncompete agreement by taking a job with the West Coast firm.

The suit, filed Tuesday in U.S. District Court in Boston, alleges that Judd Hausner knew his move might be construed as a violation of the noncompete, but told his Boston Beer supervisor upon giving notice that an Anchor employee had told him the agreement could not be enforced.

Hausner gave his notice at Boston Beer to take "a key sales and marketing position with Anchor, a direct competitor of Boston Beer," the suit states. Boston Beer brews Samuel Adams beers; Anchor's Anchor Steam beer is another widely distributed craft brew.

I predict that nothing good will come from this. And really, why is Boston Beer so scared of Anchor? Listen big craft brewers, you market share has come largely at the expense of the macros, not each other. Can't we all just get along? I mean, come on, how much special knowledge can a marketing executive have?

OPB on the Potential for a Bend Beer Bubble

David Nogueras has a story on the many, many new breweries opening in Bend.

Residents of Bend are used to seeing bicycles on their streets, but this is something new.

The Cycle Pub, as it’s called, carries 12 peddling riders, six on each side of what’s essentially a long bar. The contraption carries the riders from brewery to brewery.

And with 10 breweries in a town of under 80,000, Bend has plenty of breweries to visit. But how many is too many?

"Today is brew day it’s a grand day here in the brewery. We always enjoy brew day because we get to smell all the beautiful aromas of the hops and grain," Barnett said.

Indeed, the air is sweet with the smell of wort. That’s the sugary extract or pre-beer yet to be fermented. This batch will eventually become an IPA -- the standard bearer of Northwest Beers. Most breweries in Bend have one. And according to Barnett most of them are really good.

"It’s awesome. You can walk down the street and have a pint of BBC, then two blocks away go to Deschutes and then four blocks away go to 10 Barrel or Boneyard. It’s great beer and we just want to add to the notoriety by brewing beer that is up to that level," Barnett said.

The question the story raises is how many is too many? True Bend is only 80,000 (or actually more like 75,000 these days), but the story points out that there are 2 million tourists that visit Bend annually.  I think there is plenty of room at the moment for these breweries - especially the ones going the brewpub route - but that for the smaller production breweries, it might get tough.

On my last visit to Bend last month I spied the Cycle Pub and went to the Northwest Crossing farmers' market where Below Grade had a booth. [No tasting notes - tasters were expensive and I am a cheapskate! Actually it was hot, smoky and 11am so I was not ready for beer] Below Grade is a basement nano-brewery and one of many that are low capital costs, but also low volume. As the name of the game is economies-of-scale I think for a lot of these smaller breweries it is grow or die. It is when all these breweries try to grow at the same time that I expect a shake-out. But heck this is the process of creative destruction that will guarantee Bend as a top spot for beer for years and years to come.

On War and the Strength of British Beer

 
Across the pond, The Pub Curmudgeon gives us some stats from the BBPA statistical handbook:

Average strength of beer produced in the UK:

1900: 1054.9 OG
1910: 1053.0 OG
1918: 1030.6 OG (low point during WW1)
1920: 1042.6 OG
1930: 1042.5 OG
1940: 1038.5 OG
1946: 1032.6 OG (1940s low point, actually after the end of the war)
1950: 1037.0 OG
1960: 1037.4 OG
1970: 1036.9 OG
1980: 1037.3 OG
1990: 1037.7 OG
2000: 4.17% ABV
2010: 4.22% ABV

In fact, from 1950 to the end of the original gravity system in 1992, the average OG was always within the range 1036.9-1038.2, although this masked the long-term decline of mild and an offsetting reduction in the strength of bitter.

As Jeff has pointed out, wartime rationing led to the invention and popularization of the relatively low alcohol bitter and mild styles that have this aura of being ancient styles (proabably because they are British and everything British has that slightly musty aura of history turning slightly off...).  What is fascinating here is the sharp downturn around the Great War which quickly bounced back, while the low alcohol beers of the WWII era stayed.  Still nothing like the beginning of the 20th century.  For some perspective, it is hard to find a NW ale brewed below 1050 original gravity. [Alcohol content depends on the difference between OG and the finishing gravity - the sugars converted by the yeast to alcohol - but 1050 generally yields about a 5% ABV beer]

Poll: Widmer's Rotator IPAs

Sorry for the Oregon-centric nature of this, but as much of craft beer is local these things happen regularly.  Actually Widmer is spread pretty far and wide, so it should not be too limiting.  Anyway, the Widmer Rotator IPA series is now on its second iteration and I thought I'd get a sense of the relative reaction to the first two offerings: X-114 and Falconer's IPA.  So, after a long hiatus, it's poll time!

As a refresher, X-114 is the Citra-infused IPA that has been out all summer.  If you have caught the Timbers at Jeld-Wen this year and bought a Widmer IPA, this is what you had.  The Falconer's IPA, named after NW brewing legend Glen Falconer and using the eponymous hop, has been out for about a month now.

So the poll is simple: of you had to choose one, which do you prefer?

Is the Weak Dollar Helping US Craft Beer Exports?

Here is an interesting story from the Sydney Morning Herald about US craft beer sales in Australia (yes, I consider Boston Beer to be craft beer) being helped by the strong Aussie Dollar.  But the strong Aussie Dollar is due in large part to the very weak US Dollar which might mean that craft brewers have a unique opportunity right now to expand sales overseas.

From the SMH story: 

The strong Australian dollar is proving a boon to beer importers, particularly with top-of-the-range brands from Belgium and the US becoming more competitively priced.

''The state of the Aussie dollar allows everyone to receive the margins they are looking for,'' says the owner of Beer Importers & Distributors, Franck Berges. ''Where a six-pack of Sam Adams Boston Lager used to sell for around $24 to $27 in the likes of Dan Murphy's, it's now under $20.''

Berges has negotiated to import more brands from the Boston Beer Company. ''We've imported Sam Adams Boston Lager for years but we're selling a lot more these days,'' he says. ''But they've got an incredibly wide range and there's a growing interest in the whole US craft beer scene.

''We have to fit in with their production schedule but we'll start bringing in their Noble Pils, IPA and Pale Ale - which will arrive in Sydney before Christmas.''

Last year the Brewer's Association reported that US craft beer exports were up 28% by volume. I suspect that this sharp increase is continuing.

Update: Pressed for time I didn't bother to look up currency markets but did make a passing comment about the weak US dollar in general.  This is true but a reader e-mailed me to emphasize just how strong the Aussie Dollar really is these days, and he is right (and provided images to prove it - thanks for these).  Here is the US Dollar/Euro market where you can see that the USD is pretty much flat over the last three years:

Now compare this to the Australian Dollar/Euro market where the AUD is up dramatically, over 50% since the bottom of the recession in 2008/2009:

Apparently this has a lot to do with strong commodities prices, mineral wealth and close proximity to Asian markets.  But the government also pays relatively high rates to borrow money, so purchases of AUD to buy treasuries is also a factor.

I guess what this means is that the time is right to sell down under.

Beer Sales Down in Europe

More about beer sales and the shift to home consumption and how it affects the recession from a nice post on the New York Times Economix blog:

Europeans are saving money by drinking at home rather than in pubs, which is costing jobs in the hospitality industry and depressing tax revenue, according to the study by Ernst & Young, which was paid for by the Brewers of Europe, an industry group.

The shift to home consumption has a disproportionate effect on unemployment, because 73 percent of jobs associated with the European beer industry are outside breweries. They are found instead in bars, hotels and restaurants.

‘‘Obviously, the crisis has had an effect,’’ said Pierre-Olivier Bergeron, secretary general of the Brewers of Europe.

Beer consumption in Europe fell 8 percent from 2008 to 2010, the period covered by the study. But employment in the beer industry fell by 12 percent, or 260,000 jobs, the study said. That compares with a 2 percent decline in employment for Europe as a whole.

But, never fear, craft beer will save us all:

But not all the news is bad for the brewers. Mr. Bergeron said he saw signs that a long-term decline in beer consumption in Europe, driven in part by health concerns and tougher drunken driving laws, could be coming to an end. A proliferation of microbreweries means that beer drinkers are being offered some of the variety and local character that makes wine appealing, making beer more attractive to younger, more affluent consumers.

When Mr. Bergeron joined the brewers organization a decade ago, he said, there were just 14 members from his home country of France. Today there are 80, with most of the new entrants small breweries.

Not Just in the Colonies...Microbrew Reannaiance is Going Strong Across the Pond

Fergus McMullen … 'People want quality, and they want to have a taste'. Photograph: Graham Turner for the Guardian

From the Guardian a nice piece on the microbrewing revolution sweeping Britain [HT: John Foyston].  There is so much talk about the explosive growth of micro breweries in the US it is interesting to see that the same trend is happening in Britain.  There, however, it is a renaissance of traditional English ales, rather than the new-world hop-forward ales we are seeing as the backbone of the industry in the US.  Here is an excerpt:

Hunter's is part of a remarkable early 21st-century flowering of traditional British ale. Helped by an increasingly enthusiastic public and a handy excise duty relief that effectively halves your tax bill as long as you make no more than about 3,000 barrels a year (thank you, Gordon Brown), some 50 new small breweries are expected to open around the country this year.

There are now, in fact, more breweries in Britain than at any time since the end of the second world war: well over 800, against half that number, of all sizes, less than a decade ago, and a mere 140 in 1970. And we clearly like what they're brewing: sales of "live", cask-conditioned ales, which ferment a second time in the barrel, have surged by 25% over the past five years.

What makes this more striking is that overall, our national drink is in seemingly irreversible decline. The UK beer market, still dominated by the big keg lagers such as Carling and Foster's – which, for the sake of shelf life, get filtered or pasteurised after brewing to kill off the yeast, then are injected with CO2 in an effort to give them back some semblance of life – shrank by 7% last year. And we're losing 25 pubs a week.

Apropos of my earlier post about british supermarket beer sales eclipsing pub sales:

The big retailers have certainly got it: Sainsbury's is organising a Great British Beer Hunt that will see 16 new British ales, selected in regional heats, battle it out from early September for a permanent place on the shelves in some 300 stores. "We're seeing 7% year-on-year growth in premium bottled beers," says Oliver Chadwick-Healey, its beer buyer. "This is a real phenomenon, driven by choice and quality."

US Beer Sales Down, But Craft Way Up..Again

From the Sacramento Bee, another story on the beer business:

For the fourth year in a row, the beer industry has continued its declines and lost 1.9% to total 2.8 billion cases. According to the Beverage Information Group's recently released 2011 Beer Handbook, continued declines in the Light segment continue to contribute to the overall losses in the industry. This segment has seen declines amongst its core brands and is only seeing pockets of growth from newly introduced line extensions.

Despite the struggling economy, growth was seen among the Craft segment as well as Imports. The higher-priced Craft segment continued to post solid gains due to consumers' attraction to the interesting flavors craft brewers offer. Imports, which previously have been experiencing declines, gained 0.9% to 362-8 million cases last year, but that is still 11.1% lower than its pre-recessionary levels.

From Monday's post on falling macro sales, the theme was that the big brewers are seeing sales of their regular beers drop, while light beers held steady - however, this appears to be isolated to the beers highlighted as the overall trend is down.  Overall beer consumption in the US is falling which suggests that beer is not recession proof, as the anemic economy appears to be having an impact. 

But craft beer does appear to be recession proof, but that clearly comes from the cannibalization of the macro market and not from overall market growth.

UK Beer Sales Switching From Pubs to Supermarkets

Photo: REUTERS

This is fascinating: the Telegraph is reporting in the UK, supermarket beer sales are poised to overtake pub beer sales for the first time.  The thing that always struck me about the beer scene in the UK was precisely the fact that almost all drinking happened in pubs and there was very little beer for sale in the markets and little found in household refrigerators. Seeing the 'off license' sign, signifying their ability to sell take-away beer, outside the little markets was a rarity. From the article:

Back in the 1970s more than 90pc of all beer drunk in Britain was bought from the "on trade" – pubs and clubs, with less than 10pc brought from the "off trade" of supermarkets and off-licences.

According to the British Beer &Pub Association this ratio had fallen to 50.9pc from pubs and 49.1pc from supermarkets at the end of last year. "It will cross over in the near future," said a spokesman, possibly as soon as this Christmas.

Why? Well, the pub scene in Britain is in crisis suggesting that the changing lifestyles are leading more and more people to find their entertainment in the home instead of outside it.

Pub closures hit a record rate of 53 a week at the height of the recession. Last year, 26 a week closed their doors, leaving just 52,500 pubs in Britain, nearly half of the level at its peak before the World War II.

The Beer & Pub Association blamed competition from the supermarkets, which often sell beer as a "loss leader" to drive customers into their stores, and above-inflation increases to beer duty. The GMB blamed large pub companies putting up their prices because they were struggling with too many debts.

The GMB has calculated that the average price of a pint of lager cost 93p at a pub in 1987. If it had risen in line with the Retail Prices Index measure of inflation it would now be £2.18, but in fact it has climbed to £3.09, making it unaffordable as a daily staple for many consumers, already hit by rising utility bills, petrol prices and salaries which have been frozen.

Leaving aside the humorous notion of beer being a daily staple of British life, I think the blame is misplaced if it is aimed at pricing strategies of supermarkets. There is always a premium to be paid in a pub, after all, but the sea change we are seeing now has come during a time (until recently) of great prosperity in Britain, so I think the changing lifestyle explanation carries more water.

US Beer Sales: Falling Macros

Here is an interesting compilation of eight beers whose sales have declined precipitously from the blog "24/7 Wall St."

Number 1?  Michelob which saw a sales decline from 2006 to 2010 of 72%.  This makes sense as it was ABs 'premium' beer which, it stands to reason, was most subject to competition from micros.

From the blog post:

Most of the beers whose sales declined that much have one thing in common — they are “full-calorie” beers, or about 145 calories a can. Instead, beer drinkers have turned to “light beers,” which have 100 calories a can, and “ultra-lights,” which are closer to 90 calories.

Surprisingly, Budweiser, the best-selling beer in America for years has lost 30% of its sales over the five-year period. Given that Budweiser sold 18 million barrels last year, this is a massive loss – more than 7 million barrels less. Sales of Bud Light, on the other hand, held steady at just over 39 million barrels during the five year period. Six products on our list have lost half their sales since 2005.

Other than lighter-calorie beers, drinkers have also turned to imports, such as Corona, and to craft beers, which are produced, and usually also consumed, in relatively small regions, according to Eric Shepard of beer marketer’s INSIGHTS. Overall, sales of beer from 2005 to 2010 rose 1.9 million barrels to 208.4 million barrels. But sales of the top 20 brands dropped 10 million barrels to 149 million, a sign that Americans have turned to craft beers and imports.

Bud is the number 8 beer on the list.  Go and see the rest here.

Growing Your Own: Fresh Hop Brewing

The hops, after a disappointing (but expected) first year with no blossoms, flourished this year and produced a bumper crop.  So I finally got a chance yesterday to brew my very own fresh hop ale with my very own (organic!) hops.  The problem is, of course, that I have no experience using fresh hops and the whole endeavor is pretty new, so there is not a lot of collective wisdom out there about the use of fresh hops.

Nevertheless, I forged ahead.  I am a huge fan of fresh hop ales, but I also know how hard they are to make well.  Most fresh hop festivals have as many failures as triumphs.  One thing I have settled on is that dry hops should be used for the bitter charge.  There are some who would argue that this then makes the beer not a true fresh hop ale, but I disagree.  The point of the fresh hops is not the bitterness but the green earthy note they impart to the beer.  And bad beer is bad beer, so using the very hard to anticipate fresh hops as the bitter charge increases the risk of a bad beer significantly.  In fact, I am confident that my beer will be quite enjoyable no matter what I have been able to extract from the fresh hops.

 I decided on a very simple recipe - a light colored pale ale (no, not a redundancy) hopped exclusively with Cascades, both dry and wet.  My brewing compatriot came over at 10 and we began the harvest of the hops at 10:30 while the strike water was heating up and by 10:45 we mashed in and continued to pick the hops.  Just for kicks I threw a couple of handfuls of wet hops in the mash at vorlauf for some wet hop first wort hopping.  Then the dried Cascades at the beginning of the the boil with a big bunch of wet hops at the end.  Having no idea how much to add I just grabbed handfuls and dumped until satisfied.  Something about that lack of precision - in a process defined by precision -  seemed fitting to the whole fresh hop beer ideal.  All went well and the beer is now fermenting happily. 

It'll be interesting to see how long the beer will last.  We will have five gallons of the stuff and I expect the fresh hop note to be ephemeral - I wonder how long it will take for the beer to either lose its character or become stale and unpleasant.  Those with experience are encouraged to chime in to prevent me from wasting beer.   

The whole endeavor feels very Portland to me - backyard hops cultivating, home-brewing, and making a northwest pale ale.  It was also a very cool experience regardless of the outcome.   

Beer Arbitrage

I am going to hop on (get it?) an ongoing debate started by Jeff at Beervana (in fact he egged me on to do so) by talking about beer arbitrage.  It all started with a link to this article in the Washington Post. [You should go and read Jeff's post and the very interesting and informed discussion that followed in the comments]

While it focuses mostly on the eBay marketplace for beer (which is both prohibited by eBay and, if sold across state lines, most likely the law), I want to focus on the bigger picture: the secondary beer market itself.

The fact that these market have arisen suggests that there was a missing market problem: buyers and sellers who would like to transact but for whom there is no forum for such transactions.  The most common reason for such transactions is some sort of regulatory constraint.  Black markets in command and control economies like the former Soviet Union are a perfect example: shoes are on sale in Moscow, but there is little demand, so buyers buy them and sell them illegally in Siberia and so forth. 

In this case I suspect the main culprit is interstate restrictions on the sale of alcohol and the fact that a lot of the special beer can only be obtained close to the brewery. So this secondary market is really about circumventing the law - making money by breaking it.  But it is also about beer lovers who are willing to pay a lot to get some special beers that they crave and I agree entirely with Jeff, I fail to see how the resale market in any way exploits brewers.  The very existence of such markets means that additional value from the production and consumption of the beer is being created.  Which is good.

For the sake of argument let's forget about the regulatory constraint and suppose I decide to sell the bottle of Roots Epic that I have in my basement to a local buyer.  I am pretty sure I could get more for it now than when I bought it.  I have a willingness-to-sell price above which the cash is worth more to me than the beer.  I suspect there is someone out there with a willingness-to-pay price above my sell price and below which the beer is worth more than the cash.  If we can agree on a price somewhere in between my price and his/her price we are BOTH better off going through with the transaction.  This is precisely the entire point of markets: they create value by facilitating mutually beneficial exchanges.  Why this should be frowned upon is completely beyond me.

Here is a snippet from the article:

“In another life, I would be a consumer advocate,” Stone’s Koch says, adding that high prices also are problematic because they often accompany second-tier products. Some beers, such as hoppy India pale ales, quickly lose their vibrancy or go rancid when exposed to light and heat. “Frankly, somebody’s naive if they pay big dollars for this stuff on eBay,” Koch says. “They think they get a rare, special beer, but the reality is that they get a rare beer but it’s no longer special.”

Ultimately, though, what seems to upset brewers most is their sense that they are being exploited. “You want to hear about the framboise story?” said Russian River’s Cilurzo. “I am furious about this.”

Last September, Russian River released Framboise for a Cure, a raspberry-flavored beer that it sold for $12 per bottle to raise money for a local breast cancer treatment center. The beer sold out in a day, and soon somebody sold a bottle on eBay for $400. Then someone else put one up for sale. “We contacted that person,” Cilurzo says, “and we said, ‘This is absolutely ridiculous, because we donated 100 percent of this for charity.’”

But this is ridiculous, there is nothing pro-consumer about special releases and events that restrict the beer to a lucky/well-connected/eager set of consumers. What this secondary market is telling you is that you are excluding lots of your consumers and doing so in an inefficient way. And if Russian River wanted to raise money for the Cure, they should have raised the price of the beer, because they probably could have sold it for more. But they got the $12 they wanted for charity, I fail to see how the resale of the bottle has anything to do w.th it, it is not going to affect the amount raised.

Furthermore, the implication that buyers of high priced Vertical Epic bottles are getting a degraded product is totally beside the point. Any buyer paying that much surely knows enough about beer to know the risk he/she is taking. And who are we to judge their preferences. I would not spend the money, but that is me, everyone else can follow their bliss.

So in the end, I do not think secondary markets are evil, just the opposite.  In general I love to find little instances where markets arise spontaneously due to some missing market problem and this is but another case.

Fresh Hop Fest in My Backyard

I am happy to report a bumper crop of Cascade hops in my backyard.  Now it is time to harvest and brew.  This will be my first ever attempt at a fresh hop beer.  I am of the opinion that fresh hop beers are best when dry hops are used as the bittering hops and the fresh hops are saved for the aroma.  I do not think this in any way creates somehow an ersatz fresh hop beer. I am, in general, a big giant fan of fresh hop beers and appreciate them even with their green and grassy warts.  Beer's connection to the earth is never more apparent, and the beer itself never more fresh tasting, than with fresh hop beer. 

All that said, it seems to be a real challenge to brew good ones.  Most fresh hop beer fests contain a few great ones, many so-so beers, and quite a few total failures.  I don't expect much from my first try.

Any and all advice is appreciated.