The Changing Face of the Beer Industry
Starting in earnest during the early years of the 198Os, few could have guessed just how much the complexion of the American beer industry would change. It’s moved from an era when a small handful of corporate brewers reigned supreme from coast to coast to a time when the plains are dotted with the brands of nearly fifteen hundred small craft brewers. Throw in hundreds of immigrating brands from brewers from all corners of the globe and consumers and business owners alike who are experiencing a new age of beer.
The changes are not only taking place on the small scale, in the breweries and warehouses of microbrewers. Instead, some of the industry’s largest players are quickly recognizing the importance and far-ranging consequences of the systemic changes at play. Long before its marriage with Brazilian-Belgo behemoth InBev, Anheuser Busch tried to find a way to break in to the higher margin echelons of craft beer. Despite its efforts, which ranged from its Amber Bock to attempted Guinness knock-off Bare Knuckle Stout and its Michelob specialty series, Anheuser Busch achieved very little traction. These unsuccessful campaigns were all the more painful to accept in light of the continued and determined success of the Blue Moon Belgian White from Coors Brewing.
After more than a decade of getting beat up by the juggernaut from Colorado (or Canada now), there is finally some reason for joy in the boardrooms of Saint Louis and Leuven. Anheuser Busch first released its Bud Light Golden Wheat at tour centers at four of its plants. With a soft launch in September followed quickly by a national rollout in October, its newest Bud Light brand extension, the Golden Wheat, is lifting spirits with brisk early sales. According to a report from a recent issue of crains chicago business, Anheuser Busch instituted a full court press for the brand, which resulted in sales of nearly 263,OOO cases of Bud Light Golden Wheat in November, a number that nearly equaled the totals for Blue Moon.
Anheuser Busch is positioning the brand, which constitutes another extension of the Bud Light name, not as a craft beer but as a “more flavorful light beer”, according to a company release. The beer is an unfiltered American wheat beer brewed with coriander and possessing hints of citrus. “Bud Light Golden Wheat is not a craft beer, but captures the refreshment of the wheat beer style while remaining consistent with Bud Light’s product attributes that beer drinkers enjoy,” said Mike Sundet, Senior Director of Bud Light Brands in the release. “Our Innovations and Brewing teams have worked for almost two years developing Bud Light Golden Wheat from consumer insight and perfecting it to Bud Light standards.”
According to industry numbers, sales of the popular wheat beer from Coors grew fourteen percent last year, with sales of more than $125 million last year, accounting for an impressive two percent of total sales for the MillerCoors franchise.
While the release has been initially successful, in large part due to Anheuser-Busch InBev’s unmatched ability to get new products through the distribution channel and into the market place, the brand’s future prospects remain in question. Backed by another $3O million advertising budget, the company hopes that it can create additional consumers for the brand without cannibalizing the main brand, a proposition that is being hotly debated within the industry.
GOOSE ISLAND in BOSTON
The Goose Island Beer Company is the latest major craft brewer to enter the Massachusetts marketplace. The Chicago based brewery first began its beer operations in 1988, with the opening of a brewpub. Started by John Hall, Goose Island went on to become the city’s biggest brewery and one of the largest craft brewers in the Midwest, adding another brewpub and a production brewery to its catalogue. Hall’s son, Greg, went on to become the company’s brewmaster. In June of 2OO6, Goose Island announced an equity agreement with Widmer Brothers Brewing of Portland, Oregon, that allowed the Chicago craft brewer access to the distribution network of corporate partner Anheuser Busch. Under the terms of the agreement, Goose Island sold forty percent of its business to Widmer, A-B’s alliance partner.
Goose Island’s first shipment of beers to the state, available both in draft and bottles, include its Matilda, a Belgian style pale ale; Pere Jacques, a Belgian style dubbel; Bourbon County Stout, a big, wood aged imperial stout; Sofie, a saison; Night Stalker, another imperial stout; along with the brewery’s flagship lineup of 312, a wheat beer; Honkers Ale, a delightful English style bitter, and its IPA.
THE BIG BEER BAN in MASSACHUSETTS: BOSTON BEER and UTOPIAS
Select beer distributors around the state received word in December from the Alcoholic Beverages Control Commission (ABCC) to remind them that they are prohibited from selling beers whose alcohol levels exceed twelve percent by weight (or fifteen percent by volume) to retailers that only possess a wine and beer license. The ABCC’s advisory statement stems from a state law that defines malt beverages, in relevant part, as those products that are produced with malt or cereal grains and fermentable sugars, which result in alcohol levels less than twelve percent alcohol by weight. A beer whose alcohol levels exceed this threshold can no longer be classified as a malt beverage in the Commonwealth. The practical effect of this regulation prohibits many licensees who lack a full alcohol license from selling these products. The advisory statement specifically referenced the Utopias, a near thirty percent alcohol beer produced by the Boston Beer Company.
The state law in question was clearly drafted at a time when no one contemplated the wide availability of a number of beers whose alcohol levels dwarfed even those of hot, boozy wines. These high alcohol beers remain in an odd legal limbo as they are no longer considered malt beverages under the law and therefore cannot be sold by certain licensees. On the other hand, the law does not appear to preclude their sale within the Commonwealth to establishments that possess full alcoholic beverage licenses.
CONTINUED CONSOLIDATION WITHIN the CRAFT SEGMENT
On the heels of deals such as Goose Island and Widmer Brothers and Magic Hat Brewing buying Pyramid Breweries, comes recent news that the Long Trail Brewing Company of Bridgewater Corners, Vermont, is in the final stages of purchasing the Otter Creek Brewing Company, of Middlebury, Vermont. Opened in November of 1989 by former businessman and owner Andy Pherson, Long Trail produces a simple array of mainly German styled beers. In comparison, Otter Creek opened for business in March of 1991. The Middlebury-based brewery struck an important business deal in 1998 to start producing the Wolaver’s line of certified organic ales. In May of 2OO2, the Wolaver family purchased the Otter Creek Brewing Company and kept its name and products. The new deal between the two breweries is the product of Otter Creek’s president, Morgan Wolaver’s desire to exit the beer business. Wolaver plans to stay on as a consultant and spokesperson for his organic brands.
“We are excited about the potential of two great Vermont companies joining forces,” according to Long Trail Brewing’s CEO, Brian Walsh in a release. “We hold the same, proud Vermont traditions as creators of award winning craft beer. Our roots are in Vermont, and we are looking forward to growing our business together.”
Long Trail’s leaders expect great synergies between the two brewery’s brands with little cross-over and excess to cut. The consolidation will allow both breweries to expand their distribution operations to several new states. As Mike Gerhart, Otter Creek and Wolaver’s brewmaster put it in the release, “We’re all extremely excited about the partnership with Long Trail. There’s a lot of creativity and talent in this building. Now, we’ll have the resources and tools to up the ante and make each other stronger, pushing the craft beer envelope. At the end of the day, it’s about making great beer.”
As I have written previously, the coming decade will likely see greater consolidation in the craft beer segment as owners and pioneers start to retire and exit the industry. In many cases, this may involve a transition from father or mother to son or daughter, but in others, outside suitors will be the best or only possibilities.
In mid-October, the New England brewing community lost one of its leaders, Greg Noonan of Vermont.
In 1985, Greg and his wife Nancy observed a growing craft brewing movement and decided to open a place of their own. After learning that Vermont prohibited pub brewing in the state, the pair petitioned the legislature to change the law. After three years of hard work, the legislation passed in May of 1988 and the brewpub opened that November.
Noonan was the author of several well regarded books on brewing, including Brewing Lager Beer, later revised and updated as New Brewing Lager Beer, and the Seven Barrel Brewery. Noonan helped establish several brewpubs around the state, including the flagship Vermont Pub and Brewery, the Bobcat Café, and Amherst Brewing Company.
Located in a nondescript bank building in downtown Burlington, the Vermont Pub and Brewery remains one of America’s oldest brewpubs. As they converted the space, Greg created a mish mash brewery, including a maple sap boiler, a stockyard feeder and a former commercial ice cream manufacturing vessel. With his Yankee ingenuity, the pub was served well and won awards for more than fifteen years.
Located a few hundred feet from the beautiful shores of Lake Champlain, the Vermont Pub continues to produce a variety of high quality ales and lagers. Among its offerings, Noonan’s Smoked Porter stands out in terms of both quality and reputation. In the early days of brewing, brewers used the sun’s warmth and the air to dry brewer’s malt. With the development of kiln technology, malts eventually were dried over open fires, which led to the development of acrid, foul smoke flavors. With the dawn of the Industrial Revolution came the flavor clarifying benefits of better, indirect kilning procedures and less offensive fuel sources.
While many brewers avoided smoke flavors, a small cadre of enterprising modern craft brewers counseled a return to the old days and essences of fire and heat. One of the earliest leaders of this quiet, smoky movement was Greg Noonan. To produce the pub’s famous Smoked Porter, Noonan and his brewers smoked their own malt every few months in a grueling eight to ten hour operation. Noonan developed a process where the brewers use a mixture of maple, hickory and apple wood chips during the smoking process. To this day, the smoked malt makes up fifteen percent of the malt bill in the Smoked Porter, which gives the beer a consistent, smoky flavor.
Noonan’s ingenuity also led to one of the greatest beers I have ever had the pleasure of enjoying. I stopped by the Vermont Pub a decade or so ago on a return to Boston from a beer festival in Montreal. After sitting down, I noted wafts of beautiful, sweet malt filling the room as a sampler passed by. Upon receiving the Wee Heavy Scotch Ale, the powerful malt aromas remain vibrant to my mind to this day. Aged for two years before release, the beer remains an excellent testament to Noonan’s brewing legacy and the contributions he made to the beer scene in New England and across America. The thoughts and thanks of a grateful beer community remain with the Noonan family.
