How ABInBev is Destroying Macro Beer (and Helping fuel the Craft Beer Renaissance)

There has never been a beer company like AB InBev. It was created in 2008 when InBev, the Leuven (Belgium)-based owner of Beck’s and Stella Artois, swallowed Anheuser-Busch, the maker of Budweiser, in a $52 billion hostile takeover. Today, AB InBev is the dominant beer company in the U.S., with 48 percent of the market. It controls 69 percent in Brazil; it’s the second-largest brewer in Russia and the third-largest in China. The company owns more than 200 different beers around the world. It would like to buy more.

So starts this interesting piece on ABInBev and its Brazilian Chairman Carlos Brito from BloombergBusinessWeek.

There’s one hitch. AB InBev’s CEO is a skilled financial engineer, but he has had trouble selling beer. The company’s shipments in the U.S. have declined 8 percent to 98 million barrels from 2008 to 2011, according to Beer Marketer’s Insights. Last year, Coors Light surpassed Budweiser to become America’s No. 2 beer. (Bud Light remains No. 1.) Meanwhile, Brito is alienating lovers of AB InBev’s imports by not importing them. And he’s risking the devotion of American beer lovers by fiddling with the Budweiser recipe in the name of cost-cutting.

The article goes on to give a pretty interesting short history of how the Brazilian beer industry consolidated and how they essentially have conqured the global beer market - all from humble orgins, Brahma Beer (taste it and you'll know how humble).

But it is largely a hit-piece about how ABInBev has cut costs, cheapened ingredients and raised prices.  Which is meant to enrage the Bud drinkers of the world, but doesn't bother me one bit.  In treating beer like soda, ABInBev is just opening the door wider for craft beer.  It is no wonder craft beer sales are skyrocketing while macro beer sales are tanking. 

It makes me wonder if the Brazilian experience is affecting Brito's decisions in the US.  In Brazil (where, unfortunately for the beer enthusiast in me) I travel in a few days, AmBev (Brahma, Antartica, etc.) and other macro brewers have effectively shut out competition through tied relationships with bars and restaurants.  There is a nascent craft beer scene, but it is tiny and struggle to get their product in front of customers.  Not so in the US where the free market in beer is alive and well. 

Only in Beervana: Welcome Hillsboro Hops!

It turns out I might like this team after all.  Pretty cool nod to the local craft beer industry and hops growers.

A Final Fresh Hop Tour

I have been negligent of fresh hops. So busy, in fact, that I let my own fresh hops wither on the vine.  So it was that I took an opportunity last Wednesday night to do a little impromptu fresh hop tour with the Beerax himself.

We stated at the mecca of fresh hops: Descutes Portland Pub.  Deschutes has arguably the most consistent success with fresh hops and they go all in, with no less than six fresh hop beers on tap that rotate continuously through the season.  Jeff's favorite Fresh Hop Mirror Pond was no longer available, much to my dismay, and his other big rave, Chasin' Freshies, was (a week later) a bit too long in the tooth which says a lot about how ephemeral fresh hop beers are.  They just don't last.  Chasin' Freshies had lost that aromatic fresh hop flavor and, to me who is very sesnitive, just tasted like fusel alchohol.  There was a fresh hop porter, which was actually quite nice, but not what punters are generally looking for in fresh hop season.  Hop Trip was very good but my favorite by a long shot was Flagline which at 4% ABV is a wonderfully tasty sessionable fresh hop ale (note the name had just changed to something else which escapes me: something road perhaps...whatever, look for the 4%).  Tremendous. 

We then meandered to Gigantic where "The Most Interesting Beer in the World" was loosing it freshness as well. Still good, but no longer great.  The risks of waiting too long to go and get fresh hop beers.  We ended up at the Laurelwood Westmoreland pub where the Fresh Hop Red was no longer available.   Trying to decide on a replacement was a challenge with a server who knew nothing about beer and seemed very bemused that we would want to know what hops were used in the beer we chose.  She didn't have any idea and went to find out - with no luck.  Apparently the pub knows nothing about the beer they serve.  Methinks a staff training session is in order.

So the moral of my story is not to wait too long to go and seek out fresh hop beers.  There are still some good ones out there but they are quickly fading.  And if you do find one, ask for a taster first to see how well it is holding up.

Another Note on Gigantic: Fresh Hop

My lovely wife stopped by Gigantic Brewing yesterday to pick up a growler of beer for me for my birthday.  She was impressed by the place and the folks behind the bar.  And she decided to get me the fresh hop beer that had just gone on tap the day before.  Good call, it is excellent.  Admittedly, I haven't had any others this year and I hear great things about Deschutes' Fresh Hop Mirror Pond and Laurelwood's Fresh Hop Red (as well as expecting the ever excellent Killer series from Double Mountain to once again rock), but Gigantic's is a wonderful example of the art.  It exudes fresh hops without the grassiness that can make the beer less pleasant and sits on a body that complements without overwhelming the fresh hop flavor.  Once again, the hop flavor I get is citrus dominated so I am inclined to like it.   Anyway, though I can't give it a relative judgement, I can say that I think it is an exceptional fresh hop beer.  Definitely worth a trip.

By the way, my wife could not remember what they called it but, amusingly (if you understand Gigantic's sense of humor) she said very seriously: "apparently it the the best beer in the world." To which I replied: "I am sure that it is." 

UPDATE: Bill Night informs me the name of the beer is "The Most Interesting Beer in the World" which must be what my wife was thinking of but misremembered.   Bill is also the go-to authority on fresh hop beers as he zealously tracks down almost every one each year. 

Review: Gigantic IPA

UPDATE: It is amazing what you can find out if you simply read the bottle (in my defense a zealous recycler in my family disposed of the bottle before I wrote the review below).  Anyway the hops used are Cascade, Centennial Crystal and Simcoe.  So I was not that far off, I was pretty sure about Simcoe (which is a wonderful hop variety) and I got the Cascade and Centennial right as well.  I love crystal hops but they are clean and often can be subsumed - the old Rogue Brutal Bitter was a showcase for Crystal and turned me on to it.  Also notable is the fact that it comes in at 7.3% ABV.  Normally, I'd be complaining about this - it is much bigger than I usually like, give me a 6.3% and I am much happier.  And it IS big and full of flavor, so much so that a friend found it too intense.  But it is such a well made beer that I didn't notice the bigness as much as I normally would and the flavor is exactly in my sweet spot (I love the citrus hop if you haven't noticed).  Anyway, it won't be everyone's favorite IPA but it sure is mine. 

To say that Gigantic is getting a lot of love would be a bit of an understatement. From John Foyston's blow-by-blow account of the construction of the new brewery to the many rhapsodic reviews that followed its opening (not to mention the crowds of hipsters at the taproom), Gigantic has be beset with high praise. Like such supergroups as Audioslave and Velvet Revolver - Gigantic was born from the star power of well-known brewers Van Havig (of Rock Bottom fame) and Ben Love (Pelican, HUB). Fortunately this supergroup is turning out to be more Cream than Chickenfoot.

I have run across a number of Gigantic's early beers, the most recent being their excellent, and aptly named DYN-O-MITE, that they offered at the OBF.  So my opinion of their beer was already high when I finally encountered a bottle of their IPA at the store and greedily grabbed it.  The IPA is, apparently, going to be their one and only regular offering and to say that in the Pacific Northwest you have to hit the ground running with your IPA is a massive understatement.  Like it or not this will be the beer by which Gigantic is known, their touchstone, their calling card.  Fortunately, they know what they are doing and have managed to hit this one out of the park.

The beer, as you can see in my crude photo, pours a medium amber with orange hues, has an ample and creamy head and very nice lacing that lasts long after the beer is down the gullet. But the relationship with one's IPA should start with the nose in my opinion, and Gigantic's IPA introduces itself with a bang: massively hop saturated aroma that is a lovely pine-citrus.  I do not know what hops are used (though I do know they use a heck of a lot of them) but I detect the more citrus notes of Simcoe, say, and less of the stanky CTZ varieties.  I suspect you'll find the traditional Cascades and Centennials and maybe even Amarillos or Citra in the beer.  But whatever the hops used, Gigantic pulls off that rare feat of achieving total hop saturation full of flavor but without the face-melting bitterness that sometimes accompanies such beers.  This is, as I have written before, what I thinks characterize the NW hop bomb from the palate destroying Southern California varieties (e.g. Stone). Gigantic IPAs aroma carries over onto the tongue, each sip a massive flavor experience that engages a the senses.  Because it lacks the palate destroying bitterness, the flavor of the last sip is just as intense as the first.  This is a truly remarkable beer. 

As an amateur I won't try and characterize the beer beyond that, but if you are a hop head like me that loves the aromatic NW hops, this beer is a delight.  You often hear hop bombs slagged off as easy to make - just throw a lot of hops in and you are good - but as a home brewer that has tried to perfect his own hop bomb, I can say with some authority it is not nearly as easy a trick to pull off as it may seem. To get the flavor and aroma out of the hops in a way that sings and dances on the nose and palate is very, very hard. With their IPA, Van and Ben prove themselves to be masters of the hop.

Of course it may also have to do with their pioneering resurrection of the long lost 15th century brewing technique known as rauchspringdammerung which is a combination of triple decoction and party-gyle brewing with metallurgy and the use of virgin softwoods sourced solely from the region of the southwest Czech Republic known as Plzerdns.  Though incredible expensive and time consuming (not to mention bizarre - the insistence on bare feet is especially strange) it seems to yield amazing beers.  But I digress.

I am a true hophead and lover of Pacific Northwest IPAs and I have a running internal debate about which is the best.  For a time it was Ninkasi's Total Dom until (IMHO) QC issues have compromised the product.  I think there is a special place in brewer heaven for Alan Sprints for his Blue Dot which still delights me after all these years.  Pelican, Oakshire, Ft. George and especially Bear Republic's Racer 5 are all in my top 10.  But I now have a new #1: Gigantic IPA is my new favorite beer.

I have tasted the awesome.  

The Beer Distributor as Agent Model of Craft Beer

The Oregonian is now in to the second of a set of three articles that extensively explores Oregon's byzantine regulations regarding alcohol sales in the state.  Jeff, over at Beervana, waxes philosophic about the whole thing and today both the Oregonian's article and Jeff's post talk about distributors.

I have always struggled to know exactly how to think of distributors from an economist's perspective.  In other words, I don't know the right model to hold in my mind with which to analyze this set up.  One of the reasons is that normally I would think of models of double marginalization (essentially where both producer and distributor takes a cut and the consumer ends up with less and at a higher price) but when you talk to small brewers these day, as Jeff mentions, you almost always hear them defend distributors.  Why is this?

Well, the key to selling beer is getting it in front of consumers.  Shelf space is hard to come by and subject to capture by the big brewers.  A distributor can use their influence to get smaller brands on the shelves.  They do this because they want as big a stable of clients as possible and they need to get sales for their clients to attract others.  Brewers don't have the manpower to get their beer in stores by themselves and so getting a distributor behind them is a key step to increasing sales.

[Doesn't have to be this way, by the way, at the beginning of the Ithaca Beer Company, founder Dan Mitchell, got his beer sold the old fashioned way, driving all over central New York getting tap handles and shelf space through sheer force of will and charisma.  Oregon is now much more crowded marketplace than was central NY in the late 90s and I doubt an individual would have much success these days around here.]

Anyway, the point is that the model I now think of when I think about distributors is more of an artist/agent relationship.  If you stop thinking about distributors as trucking and storage companies and start thinking them about serving as agents for their clients, the whole thing starts to make a lot more sense and you start to see why brewers defend them so vigorously.  Agents want to make money and they do so by getting their clients money.  To accomplish this they must fist attract clients and then push them on the market - sell them to bars and retail stores, get them prime tap handles and shelf space.  Brewers for their part are happy to cede part of their revenues to pay for this advocacy and service.

The question then is where does this leave consumers, better or worse off?  I think there is a good case to be made that consumers are better off in choice and variety, but worse off in terms of price.  I don't think there is any doubt about the latter - the effects of double marginalization are well known and empirically valid - but how much is consumer choice worth?  Apparently a lot judging by the prices local consumers will pay for a 22oz bottle of beer.  When you pay the same price for one 22oz bottle of beer as you would for a six pack of macro beer it is a pretty strong indication that consumers place a very high premium on choice and variety.

Which is the main thing that the distributor-as-agent model provides - more choice, better variety.  So in this sense, I think that the balance tips in the consumers favor...for now.  In the future, as the craft beer scene matures, there may be more and more natural variety on the market, by which I mean that retailers will internalize the premium for variety they get and look for it themselves.  I think it is beginning to happen already.  But just like a 43 year old economist on Spotify, just because you now have access to variety does not mean you know what to do with it.  So distributors still have a role as agents of beer, selling retailers on brands they may not know of or beers they have never tried.  

Beer Tasting in São Paulo

Our host instructing us on the method

I was invited to a beer tasting event while I am visiting and conducting research in São Paulo.  At first I was excited because I thought it would be a chance to try out new craft breweries in Brazil (which are devilishly difficult to find due to the stranglehold the big brewers have on the Brazilian market), but it turn out it was all macro brews.  No matter it was a fun time and the host was interested in finding out if his guests could distinguish correctly among the beers, find consensus on what beers were good and the ranking of the beers.  Unsurprisingly, there was a distinct lack of ability to tell them apart and no consensus on what were the better beers.

By the way, I don't think it is translated into Portuguese but what my host needs is his own copy of the Beer Tasting Tool Kit.  Next time I come I'll take him one signed by the author...

My sheet

Brazilian macro lagers have a distinct taste due to their use of corn they are derisively called Brazilian Corn Beers (BCB) by the small but growing community of beer geeks in Brazil.  I dislike them and find them desperately in need of a little more hops.  The beer I turn to when I have a choice is Heineken which is brewed in Brazil but tastes pretty close to the real thing - Heineken in Brazil also produces Kaiser and Bavaria (which was one of the beers at the party).  AB InBev is the global conglomerate that is a Brazilian - Belgian company and was formed in part out of the Brazilian firm AmBev that was formed by the merger of Brahma and Antartica - two of the beers we tried - and they also own Bohemia and Skol.  Thus the companies that are represented in the list below are exactly three: Heineken, AB InBev and Itaipava (Groupo Petropolis).

The beers were:

The metric

Itaipava

Brahma Extra

Antartica

Bohemia

Bavaria

Skol

Frankly they were all pretty bad I am sorry to say, but no worse than if I was in the US judging Coors, Miller and Bud.  They do have a distinct taste due to the corn, just as US macros have a distinct taste due to the rice they often use. I found the beers lacking in taste and substance and my winner won because it was the only beer in which I could detect even the faintest hint of hops.

My winner

Still it was a fun time with lots of denigrating the beer and a friendly contest to see who could name the most beers correctly (the winner was able to name 4 beers correctly and did so twice - impressive - the rest of us peaked at 1).  My winner, by the smallest of margins (mainly because I had to choose a winner) was Brahma Extra.  I like to think that this confirms my discriminating taste as I chose the only beer that was 'Extra." 

So what of the Brazilian craft beer industry?  Well it did make one appearance in the from of Baden Baden Stout, which at 7.5% ABV was for me far to heavy and sweet.  Take 25% off the grain bill and you might be on to something as the flavors were nice.  I had a Baden Baden Golden the last time I was here and I remember finding it a bit heavy as well so I suppose it is their house style and it makes some sense in response to the thin watery beers.

My next time here perhaps I'll arrange a craft beer tasting party, but for now at least I am well learned in the ways of BCB.