Category: Economics

Has Discontent Struck Good Beer In A Time of Plenty?

A little bird, or rather an email correspondent, who was present advised me that at the recent Craft Brewer Conference there was a closed session at which at least one well placed big-mid-sized Midwest brewer “sure made for good entertainment at the voting members session of the CBC- you know, the one the toss the media out for”. Apparently, unlike what is seen on the public sessions, issues like the asymmetrical effect of tax breaks and grants are creating divisions amongst those who would like you to believe that they sing all from the same hymnal… and, then, would like to sell you the hymnal so you can keep in tune, too. Interesting, then, to read about one implication arising from this sort of thing as illustrated by one particular expanding good beer market, Ashville NC, as reported today by Bill Night at The New School:

If the $9 Mil for New Belgium that Magee mentioned sounds like a lot to you, maybe you’ll be interested to find that New Belgium actually snarfed up $13 million in total from “the public trough”, as explained in this post on the blog Ashvegas. As far as I can tell, Sierra Nevada wasn’t quite as gluttonous, and only needed a little under $5 million to set up beer camp in North Carolina:

– State of North Carolina: $1M grant to New Belgium
– Buncombe County: $8.5M tax incentives to New Belgium
– City of Asheville: $3.5M tax incentives and infrastructure to New Belgium
– State of North Carolina: $1M grant to Sierra Nevada
– Henderson County: $3.75M tax incentives and infrastructure to Sierra Nevada

You know who should be really pissed about all that money? The small brewers who built Asheville up into Beer City USA.

Redistribution of wealth is tricky stuff and it does not help that those receiving are national craft millionaires even though sometimes it seems they would like us to think that they are hunting for sofa change to try to make payroll. But it does not stop there today as Harry Schuhmacher in the Beer Business Daily touches on more of the questions left unanswered after the recent conference. He discusses questions of tax policy as I discussed here the other day as well as badly made and overpriced craft – and even how succession planning leading to big money buyouts are all discussed. All important big issues that can leave a bad taste… sometimes by actually leaving a bad taste.

But, most interesting to me is the “S” word – smugness. Harry puts it succinctly: “I’ve met a few new craft brewers over the last year, and I get the sense lately that many think they invented beer.” A great direct line. I can’t, however, speak to the truth of it as, being trained in the law, I assume this is a phenomena that is woven throughout all business sectors so I don’t know whether this is new to beer or that the guard has been left down a bit recently. Yet the other sources mentioned above might be indicating that might well be the case. Where does all of this lead? Good beer did well in the recession, expanding market share as the economy took a hit. But that does not mean the industry is immune to all risk.

For me, big business is big business and will act as such. Lobbying and entitlement will benefit the largest most. But the time needs to come when US craft will stop trying to pretend all brewers are small start ups even if only to argue for financing opportunities which can benefit businesses of different scales. Beyond that, the risk of fatigue needs to be addressed – and not fatigue of flagship beers as Harry suggests though that is happening too. Craft beer is starting to act like pre-teen soccer league where everything and everyone is special. Every brewer gets the medal. Every one gets the treat at the end of the game. In the case of craft beer, the treat is unending increased prices and increased sales forever and ever, amen. Nothing works that way.

Change will come and will likely be unexpected. Change may also be brought upon oneself. How would a brewer best situate itself to withstand a shift away from these present times of plenty? Admitting opening how things actually are might be a start.

Book Review: The Economics Of Beer – Swinnen, ed.

oxeb1I bought this because Simon told me to. Simon said.

This book is a series of essays related to the 2009 conference of The Beeronomics Society. It says on its back cover that it “is the first economic analysis of the beer market and brewing industry” but that is just silly puffery. There have been loads of economic analysis of the beer market and brewing industry. Frankly we have been weighed down by them. Don’t make me review Tremblay and Trembaly again. Do you remember those graphs and tables?

This book is a lot like one of my favorite sets of essays, the papers from the “Cooperstown Symposium on Baseball and American Culture.” It is also a lot like Beer and Philosophy, a set of essays which included one from me on the underlying philosophy of beer regulation in Canada. What they all have in common is that they are a collection of papers tackling aspects of a general topic from various points of view. In the TEOB you will find 18 papers from the 2009 conference organized under the four topics of history, consumption, industrial organization and the new beer markets. With any luck, as with the annual baseball conference but unlike Beer and Philosophy, the followup second conference of The Beeronomics Society will issue another volume of essays reflective of the topics covered in September 2011.

So is it worth getting? For a book nerd like me, sure. I was a little uneasy with the superficiality of the first essay “A Brief Economic History of Beer” given it covered so much of time and culture so quickly. However, when I saw that there was an essay by Richard Unger, everyone’s favorite beery medievalist and Renaissance man, I was won over. And the essay “Recent Economic Developments in the Import and Craft Segments of the US Brewing Industry” by the manical graph-huggers¹ T+T may serve as something of an update of their 2005 book. Best of all, each submission comes with its own bibliography alerting folk like me to other papers and texts that might be out there just waiting to be added to the book shelf.

Published, too, by Oxford University Press, this book is another sign that we fans of beer and brewing live in lucky times. If I have more intelligent comment after reading a bit more, I will add it in the comments. But at this point this, too, looks like a good buy for the serious beer nerd.

¹ There are seven graphs and four table in just 18 pages!!!

“I Am Less Free Today Than I Was 30 Years Ago…”

That is a shocking sentence to read. Gets the brain going. Here is the nub of an excellent post over at the always excellent The Last Exile:

Globalization was suppose to make us all free and rich. Although, it has not worked out that way for most of us. I am not any richer and my wages face a constant erosion from the rising rates of taxes and the general cost of just about everything while the corporate tax rate continues to slide ever downward. I know for a fact; I am less free today than I was 30 years ago. Canadians generally do not have any babies anymore; mostly because they cannot afford to when it takes a 2 person income just to raise a small family with ordinary expectations. We never really discuss that in this country, and if the topic does manage to come up in public dialogue, somehow the dominate ethos manages to give the impression that a woman who works outside the home rather than rising her children at home does so for selfish avaricious reasons rather than the fact that taxation, housing and transportation costs now claim a much larger percentage of family income than they did 30 years ago.

Add to that list communications device fees. I pay over $250 a month for home phone, internet, cell phone and cable TV. I could cut it but with the range of ages in the house it’s not a practical solution. I am a bit shocked at electricity hikes added to natural gas bill, too. Again over $250 a month combined. If I ever created that stand alone blog dedicated to complaining about society’s broken promises called Where the Hell is my Jet Pack??, I might write about these things or think about them more.

Why don’t I? We are fortunate and a bit unconventional as fosterers and for other reasons, I suppose, but if I thought about it, I might have expected the sort of financial status we have now to have been the lifestyle in my late 30s rather than my late 40s. But maybe I don’t care. Maybe the money or other resources go to intangibles and non-investments. Like better cheese. Like tanks of gas for wandering weekend road trips. I think I am better off. But who knows. I don’t think I think about it all that much.

Two Cautionary Tales Of Good Beer Bad Behaviour

monkey4We like to ascribe so many positive things to good beer and those who love it we often forget that we make most of it up. We pretend brewers are rock stars. We pretend thinking about beer began (and sorta stopped) in the 1970s. But most of all we pretend people who make and enjoy craft beer are the sort of people we would like to hang out with. Really? Two morality plays for your consideration. First, Zak points out the tedium that one craft beer boor has put him through recently:

This post isn’t really about Chad, it’s about the idea that you have to reach a level of ‘beerdom’ in order to be allowed to drink certain types of beers. Sure, there are some beers that benefit from a little explanation, most sour beers and rauchbiers being the primary examples. But surely beer is a democratic, egalitarian drink that can be shared by everyone? Or do you disagree?

A great point that has attracted some comments but my point is not to highjack his discussion but to compare and contrast that situation to a second one that has been reported on by Jeff:

Don McIntosh of the NW Labor Press–a worker’s rights publication that’s not exactly neutral–has a devastating article about how Rogue Brewery treats its workers. The main issue is an effort to unionize Rogue that the management has aggressively fought. They have deployed tactics familiar to anyone who has followed labor relations in the US over the last 20 years–all legal by today’s laws. But worse than that, McIntosh paints the picture of a hostile work environment where management acts capriciously to ensure full compliance.

As Jeff points out, the tactics of Rogues he points out are likely within the law and the accuser is a labour publication – but the story is still pretty distasteful. So much so that I took the opportunity to not buy Rogue beer after work today, part of the LCBO’s summer brewery feature. I would ask you to consider making the same consideration – however you decide to act afterwards.

But, really, I would ask you to consider how craft beer may sometimes brings out the bully and why. For me, it boils down to one word: passion. Jeff points out the motto “Rogue is not for everyone” but we can take that a few ways. Either it can mean many can not handle their beer or, my preferred reading, the brewery is not egalitarian, is not for all people and, apparently, not for that part of its workers who don’t fall into lock step. “Passion” has that problem of being ultimately fairly meaningless and too often code word for my way or the highway. We’ve seen this sort of “passion” at work before with the bland “hooray for everything” attitude of trade associations, defensive niche hugging consumer group executives or senior brewery buffoons who believe good marketing include condescension. Spare me the passion.

And isn’t that really what Zak has had to deal with as well? Somehow, yet another self appointed craft beer person of importance awards himself the right to denigrate others, to be not for them. We’ve seen the self-appointed boor in action before. How many of them are there? How many bad boss craft brewers? Lord, how many? Certainly not anywhere near a majority. But is there any part of the beer culture that makes us celebrate the illusionary community without point out the individual arseholes amongst us in the crowd?

Wouldn’t it be nice if beer rating sites included a way to factor in how happy the workers are as part of the over all scoring? Wouldn’t it be nice in beer rating sites punished boors with pomposity points reminding us all to take their opinions with a very large grain of salt?

Where There Is Beer There Is Peace Revisited

2832When I was growing up, Ethiopia was one of those nations with the hallmark of being incessantly near collapse. Civil war unending. The famine. Now there is beer:

The Beemnet bar is one of those places in Addis Ababa which attracts Ethiopians of all ages. Increasingly locals are going here for breakfast, lunch, dinner and drinks – a sign of the country’s increasing purchasing power. On Friday and Saturday nights, the terrace and bar is packed with people drinking beer and trying out their new dance moves before heading to a club after midnight. Beer is becoming increasingly popular among the growing Ethiopian middle class. In fact beer consumption in Ethiopia – Africa’s second-most populous country, is expected to grow by about 15 percent every year for the next five years. According to a report carried out last year by Access Capital, an Addis Ababa-based research group, this growth in consumption is very much in line with Ethiopian population levels and economic growth rates.

As in the Mid-east, in Sri Lanka and in the southern Sudan, this rise in beer production and consumption in Ethiopia is a hallmark of peace. Even as – or is it because – they seem to prefer the “jumbo” size glass.

A little oddly, the US Embassy did a study of the Ethiopian beer market in 1998 at the time the breweries were denationalized. It notes that it was the Czechs and Slovak Velvet Revolutionaries back in 1993 who created the Bedele brewery Heineken recently bought, outbidding Carlsberg. You can allegedly find the beer in Canada, a nation not known for its fondness of monkey gibbon… or lemur… well, it’s very likely a Coquerel Sifaka branded beer. [Update: unless the connection is about Zaboomafoo!]

Has An Unacceptable Level Of Drinking Been Described?

Pete Brown has run a series of posts this week and last that delve into stats being issued by various government agencies and health lobby groups in the UK. It is important work that Pete is doing as there is no stat worse than the unexamined stat. Today’s post was called “More Hilarity with Statistics” which examined claims about the level of drinking in Scotland. I made a comment over there but did some more rooting around to make sure I agreed with what I was seeing and, to avoid looking like a totally rude idiot being all finger pointy in the comments, thought I would set it out here instead. I also got thinking because even if a stat can be discredited it does not mean that the underlying facts necessarily do not exists, only that they are not well described. But, as I said in the comments, I am really bad at math so I am happy to be corrected.

The BBC story Pete began with was titled “Scots ‘Drink 46 Bottles of Vodka‘” by which they mean per person per year on average. Pete suggested that this was not particularly well researched as tourism trade taking the booze away was not figured in – but then when I ran the numbers I saw this pattern:

  • Scotland has about 8% of the UK population
  • total UK booze sales in 2007 were worth over 41 billion pounds
  • and therefore, Scotland’s booze sales can be approximated at around 4 billion pounds.

I took the numbers from this soul suckingly slow .pdf source. I read them to meaning that if every penny of the 25 million pounds spent at distillery shops was non-Scots resident alcohol sales, removing it entirely from Scottish consumption, it only represents well under 1% of total Scottish sales? If that is the case, the variation is under a bottle of vodka a year. I said that even if I was off by a whole decimal point and the distillery sales represent 10% of sales isn’t it still a little bit alarming that every Scots adult averages 41 or 42 bottles of vodka a year? By which I mean I had a gut feeling it was in fact pretty high. But is it?

A little more looking around further, found information stating that 30% of Scots adults say they do not drink – which means the drinking Scot averages 58 or so bottle a year working off the conservative 41 bottles a week stat. It is more like 65 a year if you go by the BBC’s number of 46. I got the “did not drink” percentage from this pdf. So you have 30% of Scots not drinking, 35% drinking up to the average and 35% drinking over the average.

What does that mean? 58 bottles a year on average means 1.12 x 700 ml bottles a week at 40% that means 313 ml of pure alcohol a week. By comparison, a standard Canadian 12 oz 5% beer has 341 ml. Which means that average Scots drinker’s booze consumption is the equivalent of 19 standard 5% Canadian beers a week. Sounds like a bit more than you might think is a good idea, week after week day after day. But not fatal. It’s maybe what we expect the average healthy working Joe would drink in a week. Similarly, a US 22 oz bomber has 650 ml. At 8% that is 65 ml of pure alcohol. Which means that the Scot’s drinker’s booze consumption is the equivalent of 4.8 bombers of 8% US craft beer a week. Is that going to scare off a craft beer fan? Hardly.

But it is an average and that is what I think is the real concern. It means 35% of Scots drinkers adults drink more… because 65% drinkers there drink less including the 30% who abstain. I think those numbers are troubling. They may well be wrong so please do your own a arithmetic. But if they are not wrong – is there not a valid public health concern where 35% of your population is doing that level of drinking. I don’t really care if you think there is no such thing as a public health concern from a libertarian point of view as that is not the point here. Nor does someone called “Alan Campbell McLeod” care if you think this is only a Scottish problem. I think we can all agree that there is a point beyond which alcohol is unhealthy. Is that point been identified by the BBC report?

Warning: Your Freebie Beer Blogging Ways Are Over!

A few weeks ago, a wiggling waggy hand rose above the crowd pointing out that there was uncertainty as to who was dabbling in beer blogging in relation to matters in which the blogger had a financial interest. Melissa Cole admitted that there were doubts even about her own writing and that it was all not quite on. It has all devolved into a well deserved bout of slappy heed [Ed.: in the comments] over calling out but not calling out yet the point is still a reasonable one… as is Jeff’s counterpoint… but not Pete’s… Pete’s contribution is not helping things at all.

Well, as the New York Times tells us things are now more serious than whether one or another or all of us are cool with… or is it cool towards… such practices. Bigger than even Pete Brown (as sophomorically illustrated¹) himself, the UK’s – if not the language’s – real top beer writer. See, the law is now involved as the United States Federal Trade Commission has issued a revision to its “Guides Concerning the Use of Endorsements and Testimonials in Advertising” (warning: big honking burly .pdf) which states in a number of ways that blogging has now gone big time and we know so because the line between comment and endorsement, opinion and advertising has gotten blurred. For instance, the FTC states at page 14 and 15:

The Commission recognizes that because the advertiser does not disseminate the endorsements made using these new consumer-generated media, it does not have complete control over the contents of those statements. Nonetheless, if the advertiser initiated the process that led to these endorsements being made – e.g., by providing products to well-known bloggers or to endorsers enrolled in word of mouth marketing programs – it potentially is liable for misleading statements made by those consumers.

… and further at 47 to 48:

The Commission acknowledges that bloggers may be subject to different disclosure requirements than reviewers in traditional media. In general, under usual circumstances, the Commission does not consider reviews published in traditional media (i.e., where a newspaper, magazine, or television or radio station with independent editorial responsibility assigns an employee to review various products or services as part of his or her official duties, and then publishes those reviews) to be sponsored advertising messages. Accordingly, such reviews are not “endorsements” within the meaning of the Guides. Under these circumstances, the Commission believes, knowing whether the media entity that published the review paid for the item in question would not affect the weight consumers give to the reviewer’s statements. Of course, this view could be different if the reviewer were receiving a benefit directly from the manufacturer (or its agent). In contrast, if a blogger’s statement on his personal blog or elsewhere (e.g., the site of an online retailer of electronic products) qualifies as an “endorsement” – i.e., as a sponsored
message – due to the blogger’s relationship with the advertiser or the value of the merchandise he has received and has been asked to review by that advertiser, knowing these facts might affect the weight consumers give to his review.

So, while the FTC indicates that it will not go after the bloggers directly, it will go after the advertisers who use new media to get their message out. What will this mean? It may put a chill on ads, samples and…frankly… the goodies. And what the hell point is there blogging if one never gets the goodies??? Well, for those quasi-bloggers who are really professional writers (you know, the book writers) slumming with the cool kids, it will mean absolutely nothing because their revenue is through indirect advertising not the entirely more wholesome and less problematic direct moo-lah stream. Me, I actually get very few samples through the maple wall that is the US-Canadian border and the cash ads mostly come (however oddly) from other nations. But for the poor US based semi-pro beer blogger just looking for a little reason to go on, well, this may be the kick in the pants they don’t really need. So share a silent moment, if you would, for the blogger looking for that one little break, that something in return. It may just have become that bit less likely to arrive in the mail.

One last thing. I do think it’s great that the law is actually addressing new media (even if blogging was cool seven years ago and starting going lame about three years ago) but is this at all a likely outcome in an advertising model where a scurrying pack of small operators get paid peanuts to send out a viral message?

In order to limit its potential liability, the advertiser should ensure that the advertising service provides guidance and training to its bloggers concerning the need to ensure that statements they make are truthful and substantiated. The advertiser should also monitor bloggers who are being paid to promote its products and take steps necessary to halt the continued publication of deceptive representations when they are discovered.

No, me neither. Ain’t going to happen.

¹[Ed.: lesson – don’t blog with an eleven year old goading you on to make the cartoon look sillier. Sorry Pete. Really. Sorry. Just think how boring this post would be without your input… err… participation… umm… objectification.]

But Isn’t Taxing Beer The Third Oldest Profession?

It is interesting to follow beer fans in different jurisdictions in the US and the UK react to various plans to use beer as one way to cope with the global economic crisis. The British Beer and Pub Association backed by CAMRA and many brewers is running the Axe the Beer Tax campaign. States like Illinois are thinking about making changes while others like Wisconsin may leave them where they have been for forty years. Jay points out that the US Federal tax might be tripled from 18 to 45 bucks a barrel but is that really stupid or just reality in an economic collapse? Just as it makes no sense when a certain sort of politician advocates for lower tax on business income to get small businesses started – no sense because they have no profits to call income at that stage – similarly, in a downturn, you can’t raise taxes on the limp sectors of the economy economic activity. So, if there are going to be taxes – and, yes, there are going to be taxes – why should beer be exempt?

Amy Mittleman in Brewing Battles points out that modern taxation policy was largely created in the mid-1860s to react to the nation’s financial need to pay for the Civil War. Beer and brewing was the chosen conduit for the taxation as was follow existing European models with the aim of creating the greatest level of consumption and therefore the greatest revenue stream. She also points out that the Federal beer excise tax on beer was set at 9 dollars a barrel almost six decades ago under the Truman administration. The tax level now in after inflation dollars has simply not kept up given $100 in 1952 is now worth $798.87. Fully adjusted taxes would make for about $72 per barrel of Federal excise today at Truman’s rates. Obama’s Senate pals are considering $45. Jay quotes Jeff Becker of the Beer Institute as part of his argument:

In 2008, members of the beer industry paid more than $41 billion in taxes at all levels of government and provided jobs to 1.9 million Americans. Any proposed tax increase would severely offset this important economic contribution.’”

Really? Any tax will threaten it? Will “wipe out an industry”? Seems like the socialists do pretty well on the beer consumption scale. Look at it this way. In these tough economic times there are two western economies which are sort of standing out. Norway is booming and the Obama administration is looking to dull old Canada for banking regulatory lessons. Despite cursing it as we do, both Norway and Canada beer fans live in cultures with a pay-as-you-go mentality with high beer taxation. When I was a kid in Nova Scotia the beer cases even had “includes health tax” written on them right next to “union made” right on top. We paid the tax and were quite happy when the ER visit didn’t turn into a question about could we afford it. We also had no choice. Unlike today in the UK, there was no cheap booze alternative undermining the marketplace in the Maritimes. Well, except in PEI… but that is another matter.

Look, I am not going to say “oh, goodie goodie goodie, a new tax” but at the end of the day isn’t there an effort going on to somehow roll back the clock to about 1857 when shock and dismay is expressed over taxes on beer even in a time of economic recession?

New York: Latvians Are Coming! Latvians Are Coming!

Sorry, not Latvians. Not at all. The story was co-authored by a Mr. Lattman. Misread that entirely. My fault. I blame the head cold. Nevertheless, this is an interesting tidbit in the Wall Street Journal today:

Private-equity firm KPS Capital Partners LP is angling to become a player in the U.S. beer industry. The company is in the final stages of closing a deal to acquire High Falls Brewing Co., the closely held maker of the Genesee and Dundee beer brands, according to people familiar with the matter. It also is among the final bidders for Labatt USA, an arm of the world’s largest brewer, Anheuser-Busch InBev. KPS hopes to combine High Falls and Labatt USA, both based in upstate New York, and explore other transactions in the industry, which is undergoing rapid consolidation.

A player! Does that come with a smoking jacket and a gold cigarette case? It pretty much comes with all corner store and gas station sales from Syracuse to Buffalo and half of the rest of upstate NY. Interesting that the Labatt wing of the deal would make sense as part of the badly named Anheuser-Busch InBev efforts to pay down debt. Reuters reports that Labatt USA should gain ABIB (which I pronounce “ah-BEEEEEEEEEB” in a high piercing voice) about a tidy $100 million. Sadly, the same report indicates that the Rochester-based High Falls Brewery is only worth the assumption of its debt. But it is interesting that these tough times appear to be apt for a merger and consolidation focused on continued expanding brewing in what is otherwise a region which has known tougher times for a while now.

Apparently Beer Is, In Fact, The Affordable Luxury

Last December, I suggested that we may see a bump of sorts in beer sales in response to the recession in the US. In another in a series of events that prove that, yes, if enough monkeys used typewriters one could write sonnets, it appears I may well have been right as The Washington Post notes, via a twittery h/t to Cizauskas:

…this time around is different. Smoking has fallen into such ill repute that many municipalities ban it. Fuel costs have made driving or flying to a casino a pricey proposition, and gambling has become almost an afterthought at many of the lavish new ones. Now it seems the only acceptable — and affordable — sin left is alcohol, namely beer. “It’s really considered a consumer staple kind of industry,” said Dan Ahrens, author of the book “Investing in Vice.” He put it on par with toothpaste, or, say, soap. “People gotta drink no matter what’s going on with the economy.” More than 16 million barrels of domestic beer were sold in the United States in July, and annual sales through that month are up 1.4 percent, the largest increase since 1990, when the economy was headed toward a recession…

So not only is beer affordable but, in this time of downturn or at least stagnation, there are fewer and fewer acceptable sins available to the average American, who on average, has a bit less to spend. I still think this means craft brewers need to focus on the low-price end of the their brands.

The high end of beer pricing is moving in the wrong direction, however. When I was beer shopping down south this year, I saw beer in the $20 and even over $30 range for the first time. I declined even though I have some advertising support for my sin spending. I did buy a $20 De Ranke Kriek but that was only because I am obsessed. But I was not snookered at all by those offerings as a quick review of my sales slip shows a great number of great beers for a great price – Harviestoun Ola Dubh 12 for $8, a small bottle from Meantime for $3.50, large Bernardus 12 for $10 plus a large number of great new New England craft beers for even less than half of those prices.

My point? Beer is the affordable sin not just as a budget recourse to easy mindless comfort but because it still can provides great value for extraordinary products in tight times.