This Years Craft Brewers Conference

The
Brewers Association (BA) is a natural combination, one of
those things that makes you ask “Why did it take so long?”
It brings together the craft brewers and the regional
brewers in one group, and there was a lot of optimistic talk
about combined efforts, particularly in the legislative
arena. The BA has plans for a legislative office in
Washington, DC, to lobby the federal government.

That’s the kind
of getting serious, getting down to business things that set
the tenor of this conference. The industry is firmly on its
feet after some years of drifting and consolidating, and it
showed in the success of the conference. A record attendance
of over 13OO brewers and industry representatives made the
Philadelphia conference a great opportunity to find out
what’s going on in this industry, and what’s coming up in
the future.

DEFINITELY
NOT DEAD Gary Fish,
president of Deschutes Brewery (Bend, Oregon), delivered the
keynote address, hitting a theme that resonated with many
attendees: “Didn’t You Know You Were Dead?” It was a
triumphant cry of a resurgent segment of the brewing
industry that had gone from being written off as a fad to
being the leading segment of the entire alcohol beverage
market in 2OO4, “the lone shining light in the beer market,”
as Fish put it.

Craft brewers
feel that the press closed the books on them back in the
late 199Os, starting with a string of “Microbrewing Fad Is
Over” stories in 1996 (something that never happened in
these pages, of course). “I remember thinking, ‘Gee, we just
had a great year. I don’t even feel sick,'” Fish
said.

He pointed out
that the media had gone to the breweries that were having
problems, chasing the story of bad businesses when the good
businesses were chugging along, unnoticed. “A couple of bad
businesses closed,” he said, “and all of a sudden they are
what we are being judged by, terrific!” Now, he added, “the
media is talking about us as though we are some kind of big
surprise, that we have somehow come back from the
dead.”

Fish held up the
conference attendees themselves as proof of the industry’s
maturity. “These conferences have been a great study in the
evolution of the industry,” he said. “There were days of
high attendance at the Craft Brewers Conference, filled not
so much with industry people as with ‘tire kickers,’ people
looking to get into the business under the assumption there
was a fast buck to be made. Most of these people were not
really serious about beer or the business, but, frequently,
the media looked to them as the barometer by which to
measure our success.”

Now, Fish
continued, the conference is populated by “people who have
largely survived their own, as well as the industry’s,
learning curve, and realize that there is true value to be
derived at these conferences. And the conferences are better
too, full of relevant content for all aspects of your
business and your industry. The enthusiasm is back, but now
with knowledge that only experience provides. We are
beginning to look like we’re not just lucky.”

He also touched
on the job the BA had ahead of it, setting the political
goals and the public perception of the industry. “What we
now need,” Fish said, “is our own healthy self-respect
blended with a rationing of humility. What I’m not talking
about is the irresponsible, entitlement attitude that the
national brands suck, and my beer is the best, therefore I
am owed something from the market. That attitude was the
attitude of the past and is what created some of the
problems we still suffer with today.”

What else should
brewers be doing? Legislative and community outreach, Fish
said, and it’s not going to happen unless individual brewers
joined together to make a substantial impact. “No matter our
size,” he said, “we run important businesses, employing many
people, with high overhead and capitalization costs, in a
heavily regulated industry. But it is only together that we
begin to look big. There is an old Chinese proverb that
says, ‘Enough shovels of earth – a mountain, enough pails of
water – a river.’ We are that mountain and that
river.”

Fish also spoke
about the relationships between small brewers and the big
players in the business: large brewers and wholesalers.
“I’ll try and dispel one myth that has plagued our industry
for a while,” he said. “Wholesalers and the large brewers
are not our enemies. They have businesses and priorities,
payroll, rent, etc., just like we do. Their priorities are
sometimes different from ours, and their business models are
definitely different, but they do not wake up in the morning
thinking of how they are going to screw small brewers. We
need to have the business maturity to understand that. If we
can construct win-win situations, they’ll not just listen,
they will act in concert with us.”

Winding up, Fish
moved into a more comfortable gear, and talked about the
benefits of beer. “We all too frequently hear of the cost
alcoholic beverages extract from society,” he said. “We
never hear of the benefit they provide. I am speaking
specifically about our health as a society. I am talking
specifically about the value of the neighborhood tavern or
public house. I feel proud to be part of an industry that
has, in our own way, a profound impact on such a fundamental
thing as the public discourse. I believe this is a real
benefit, as real as the reduction in heart disease, or other
ailments and, perhaps even more valuable because the quality
of our lives and our society is at stake. You should all be
very, very proud of that. We, as an industry, should be
proud of that and not afraid to speak about it.”

He wrapped up
with a reminder of the challenge set by New Belgium
Brewing’s Kim Jordan a few years earlier, that craft brewing
strive for 1O% of the beer market. “I remember people saying
a variety of things like, ‘it couldn’t happen’ to ‘that’s
too large a goal’ to ‘it can’t happen in my state,’ among
others,” Fish said, and broke a big grin. “Well, this year
Oregon topped 14%. Until you believe it can happen, no one
else will either, particularly our friends in the media who
wield so much influence. So, on behalf of the Oregon
brewers, so Oregon doesn’t have to drag the rest of you
along, I suggest we all begin to believe and then, truly,
1O% will be modest indeed.”

Kim Jordan spoke
briefly this year as well, as chair of the Brewers
Association. She set a goal of 5% of the market by 2O1O,
something that looks attainable in light of the industry’s
growth and the flatness of the overall market. She also
announced the BA 2OO5 awards: the annual Brewers Recognition
Award to Carol Stoudt of Stoudt’s Brewing (Adamstown, PA),
the F.X. Matt Award for Industry Defense to the BA’s
counsel, Marc Sorini, and the Russell Scherer Award for
Innovation to Greg Noonan of Vermont Pub and Brewery
(Burlington, VT).

TRY
TO LEARN SOMETHING
Seminars available to the brewers showed the wide range of
interests and directions for the industry. There was a
series of Export Development seminars, focused on different
markets and regulatory requirements. Craft brewers are
successfully exporting to markets in Europe and Asia,
markets that are eager to buy these boldly brewed beers.
Brooklyn Brewery’s Eric Ottaway explained how the brewery
had capitalized on recognition garnered in England by their
brewmaster, Garrett Oliver, to grow their exports to the
point where 5% of Brooklyn’s sales are now outside of the
US. “It takes some thought,” Ottaway said. “Some countries
have a well-developed beer culture that can support import
sales, others do not.”

A number of
Massachusetts brewers were spotted at a seminar on Adding
Packaging to Your Brewpub, given by Dale Katechis, owner of
the Oskar Blues Brewing Co. in Lyons, CO. Katechis is
celebrated in craft brewing circles for putting aggressive
beers in cans: Dale’s Pale Ale, a hoppy American-style pale
ale, and Old Chub, a big, malty Scottish ale. “It seemed
funny to put a 65 IBU pale ale in cans,” said Katechis, who
opened the presentation with a tongue-in-cheek home video
documentary. “Then it wasn’t funny any more.” He said that
simply being in a different package “has helped a lot; I
can’t say that enough.”

John Fahimian,
owner of The Tap brewpub in Haverhill (whose brewer, Dann
Paquette, was the subject of a profile in the February, 2OO5
issue), was at the seminar and sees packaging as a great
thing. “We have a lot of brewing capacity, and we’re only 3O
miles from Boston,” he said, “but no one comes up. Bottling
or canning would be a great marketing tool to get our place
better known, but I want to sell more beer, too.”

One of the
standard sessions at the CBC is Robert S. Weinberg’s
statistical presentation of trends and numbers in the beer
market (though this year he delivered his talk by
speakerphone from his office in St. Louis). Weinberg has
been following the beer industry for decades, and uses
strict statistical methods. They have always provided him
with good models for predictions, he said. “For 39 years, I
knew what was going to happen in the next year in this
business,” he said. “Now, I don’t.”

Things are
changing rapidly, and Weinberg sees that as a climate of
great opportunity for craft brewers and Anheuser-Busch. “It
is possible that the Big Three brewers will have no growth
over the next few years,” he cautioned. “That is the first
time I’ve felt this way. But Anheuser-Busch’s performance
will be like sex: even when it’s bad, it’s good.” Meanwhile,
this represents a window of opportunity for the craft
brewers. “The smaller brewer has a greater opportunity,
because they are faster on their feet,” Weinberg said in
conclusion.

There were also
a number of technical seminars: Optional Cell Growth and
Fermentation Management, Micro-Filtration and CO2
Purification, Fluid Dynamics and Beer Transfers, and a panel
discussion on draft systems. Most journalists skipped these
in favor of things like Sustainability: 1O% Market Share and
its Impact on Brewer, Distributor and Retailer
Profitability. This sobering panel discussion started off
with a cold assessment of what the industry would need to
get to 1O% of the market, and the first thing was 8 million
barrels of brewing capacity.in addition to what already
exists. This capacity comes at a cost of approximately $942
million in 2OO5 dollars.

But Rogue
president Jack Joyce quickly asked the question, do we think
about market share in terms of barrels of volume sold, or
dollar sales? “‘Market share’ is commodity thinking,” he
said. “We’re not a commodity. If we’re talking dollars,
we’re at 5% already! And there is room in the market for a
price increase. If we can add value to the market.we’ll take
all of it. Let the big guys take the barrels, we’ll take the
money.”

Bump Williams,
the popular executive VP at IRI, the supermarket information
consulting group, pointed out some important numbers that
craft brewers often miss. “First,” he said, “craft brewed
beer is very responsive to promotion. Second, retailers are
not giving these beers enough shelf space. Why? Craft beer
will turn over 15 times – at 15% margin – in the time it
takes wine or spirits to turn over 6 times at 1O% margin.
Those are numbers you can take to retailers.”

There was
disagreement on the panel about discounting: everyone but
Williams said it was a bad idea. “You don’t let your dumbest
competitor set your price for you,” said Joyce. Williams
countered by saying he wasn’t advocating deep discounts.
“But promotions are good: with only 2-3% lower cost to the
consumer, you can get up to five times your regular sales,
and it builds brand loyalty. You have to be smart about it,
a buck a six-pack is too much. It’s important to remember
that it’s not the volume you move, it’s the quality of the
sale.”

And after
Saturday’s banquet, and the announcement of Seattle as next
year’s site, everything was over but the drinking. Attendees
were pleased with the conference. Contacts were made, the
seminars were well-received, and Philadelphia was a big hit
with the brewers. The local bars and brewpubs went all out
to have their best foot forward. It was a great showcase and
opportunity for a segment of the beer industry that is
finally taking its place as a respectable player.