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.

More Vital Information On Third-Category Beer

I suppose that if I ever tried it or if it had a name that did not sound like something out of Blade Runner I would have less of a fascination with that fluid in Japan that is called “third category beer.” This article in the The The Daily Yomiuri, however, is full of tidbits that make me wonder what this stuff is really like:

“Faced with gasoline and food price hikes, consumers are looking for better deals on some products. Third-category beer, which is often made from soybeans, corn and peas, is priced cheaper than regular beer and happoshu low-malt beer. Beverage makers are fiercely competing to keep prices low, while trying to produce tastes close to that of regular beer. The key to third-category beer’s success is the low price, and shipments surpassed those of happoshu beer in May. A 350-milliliter can of third-category beer sells for about 140 yen at convenience stores, about 20 yen less than happoshu and 75 yen less than regular beer.”

How excellent: “…close to that of regular beer.” Yum. Wouldn’t it be nice if we had similar clarity in our macro-brewing? How many beers would have to call themselves happoshu that now hold themselves out to be beer from barley?

Nothing Says “Yum!” Like Third-Category Beer

While little translates as badly as regulatory text in another language from another country, there is a special place in my heart for Japan and its “third-category” beer which are described as nonmalt beerlike alcoholic beverages. Not third-rate. Third-category. Mmmmm. But apparently the average Joe in the land of the rising sun is switching to the stuff with a new-found zest:

The recent rise in prices of food products and services is hitting consumers, who are in turn cutting unnecessary spending from their family budgets. One example of the cutbacks can be seen in April beer shipment numbers released last week by the five major breweries. The numbers show sales of popular low-priced “third-category” beer, or nonmalt beerlike alcoholic beverages, rapidly growing, while sales of regular beer plunged significantly.

In the case of beer drinkers shifting to third-category beer, a decisive factor seems to be the price of the product. A 350-milliliter can of third-category beer costs about 140 yen, approximately 75 yen less than a can of regular beer. The April shipment of third-category beer increased by 9.3 percent, while shipments of regular beer dropped by 11.3 percent in the same month.

You can consider one yen a cent. We are, then, talking the difference between $2.15 and $1.40 a can so we are not likely talking about the craft beer fan…except that this could cause a domino effect across the board leaving out the top end of the market or those planning to supply it. And this seems to mirror what Stan noted might be happening in the USA. Beer in Japan has some odd aspects but we’ve been watching this third-category stuff for some time now and have found the description a “beer-tasting alcoholic beverage” the most informative so far though “a product two steps removed from actual beer” is up there. For the unknowing, this is a brief glimpse into the steps that are those two steps away:

A vital technological issue in producing a “third beer” product is achieving the right taste and color. Kirin’s solution, for which patents are pending, is browning, a process in which sugar is added to the fermented soy protein and then the mixture is heated, caramelizing the sugar and giving the beverage the color as well as the taste of beer.

One wonders whether the same machinery and ingredients might also make beer broth or automotive lubricants. Could it be that the there is nothing to gain from comparing craft brew to this sort of product and the budgetary issues which give rise to its production? Or are we all destined one day to be hoping for a bit of the old category three when we leave our underground factory jobs at the end of another thirty day cycle, marching merrily home in unison under the glow of another blazing green sunset? Is it the future?

Wired’s Good Summary Of Price Inputs Got Me Thinking

It’s just a short article in Wired but it provides a good summary of where we are with the hop and barley price jumps and gets me thinking about that other elephant in the room – value:

“My jaw hit the floor when I saw the price,” Ansari says. And next year, he’ll have to reformulate his brown ale Bender beer, a blend he described as a “flagship” flavor requiring the “Willamette” hop from the Pacific Northwest. “We were informed by our supplier that next year we can’t get that hop. It’s just gone,” Ansari said. “We’re going to have to make changes. Everybody,” he says, “is crossing their fingers there is going to be good hop crop.”

I haven’t got my copy of the May Beer Advocate magazine yet but I understand this issue has an article on prices (as Andy discussed in March) that takes some bars to task for the degree of price increase they are asking customers to bear. The Alstrom lads have been addressing the question of price and value fairly consistency with their recent articles on the monks of Westvleteren wanting the inflated reselling of their beers to stop as well as their raising of the issue of paying for beer fest beers.

As you know, I’ve been thinking about it, too, but even more so this weekend as I realize how much of the bitterness in those low-priced, thirst-quenching Sam Adams Summer Ales over the BBQ is from those wee grains of paradise – and how I don’t mind at all. The Wired article mentions how 21st Amendment brews a Watermelon Wheat with virtually no hops. It will be interesting to watch how this crisis becomes for some a reason to unreasonably soak and how for others it will be an opportunity to innovate. Do you plan to reward the innovators with your support?


Beer And Philosophy: The Book Is Out!

bapIt is either out or I have just received my copy but either way it is all quite exciting to have a book in my hand with a chapter written by me. So, of course, I read my chapter first and found myself thinking that I could have written most sentences better and that I hoped I didn’t lose all the legal footnotes…though I suspect the sensible editing was afoot on that one. Then it strikes me – I don’t know – can I do a proper book review when I wrote about one-fifteenth of the thing? I don’t have any percentages deals or anything. But I can be pure of heart with the best of them can’t I? So let’s see.

Price? Reasonable. This is a trade paperback meaning it’s going to cost you a decidedly reasonable $13.57 on an Amazon pre-order. The book covers a lot of ground, partitioned as it is into segments entitled “The Art of Beer”, “The Ethics of Beer”, “The Metaphysics and Epistemology of Beer” and “Beer in the History of Philosophy”. Fascinating stuff. And with chapters by Garrett Oliver and Sam Calagione (not to mention me) as well as a forward by the late Michael Jackson (no mention of me) there is plenty of familiar names for the average beer geek.

But it is when the book goes beyond the expected that it gets really interesting. Except for the crew named above, the rest is written by Phds (pronounced “fudds“, professors and a dean. Egads! I See Eggheads! Yet, they bring the egg down off the head and…and…OK, I can’t finish that analogy but rest assured this is interesting stuff. An example: in the chapter by Rex Welshon, Chair of a Philosophy Department in Colorado, explores Nietzsche’s relationship with the drink opening with the philosopher’s observation that a “single glass of…beer in one day is quite sufficient to turn my life into a vale of misery.” I recall my philosophy professor recounting his wife’s observation that she was not so much disappointed that Nietzsche thought all those things so much as that he wrote them down. Perhaps the same might be said about him having that beer. Another example? Neil Manson, a professor from Mississippi has his bio right next to mine (which falsely claims he can drink more than me and you. Lie – I simply choose not to), has provided a dialogue of the Socratic sort (I think) on “The Unreasonable Effectiveness of Beer” which seems to talk about God a lot as three characters drink. Neato. It’s like what you think your dinner parties were like the foggy-headed next morning. And there are about ten more of these sorts of chapters.

So…bottom line…get this book. I earn nothing more from saying so yet you will gain incalculably from the procurement.

Book Review: The US Brewing Industry by Tremblay and Tremblay

tntLike any member of the bar, I think a lot of myself. I think there are not too many documents I cannot wade through and conquer. I think I have met my match, not because it is too complex or on a topic that I cannot grasp but that it is in a language I have never come across before – economic analysis. The book’s full title in fact is The U.S. Brewing Industry: Data and Economic Analysis so I should have know. It’s that last word that gets me. You are trucking along in a chapter and, whammo!, mathematical formulae. It’s never the gaant charts or the flow charts or the pie charts or the multi-coloured graphs that get me – it’s the algebra. I think that makes what is called beeronomics econometrics. Click in the picture below and you will see what I mean.

tnt1But of course it is more than math that escapes me. Conversely, both authors are professors of economics at Oregon State University [Ed.: Go State!] and they explain their book in this way:

Victor and Carol Tremblay have authored a book The U.S. Brewing Industry: Data and Economic Analysis, MIT Press, 2005. This represents the culmination of almost 25 years of research in which they analyze the important economic issues facing the brewing industry, 1950-2002. These include changes in demand and cost conditions, the causes and consequences of rising concentration, price, advertising, and other firm strategies, and the impact of advertising, excise taxes, and antitrust regulations on the economic performance of the industry. They focus on the macro or mass-producing brewers but also discuss the microbrewery and import sectors of the market. A unique feature of the book is that it provides a comprehensive dataset, including annual industry data on demand and cost variables (1950-2002), annual financial data from the 25 leading brewers (1950-2002), and annual production data from the leading 100 brewers (1947-2003).

For careful readers, you will appreciate this means the statistics pre-date the current craft brewing boom. Craft brewing is described but, as is concisely pointed out in the Introduction, we have to admit craft beer in 2001 accounted for 3% of total consumption – half a percent behind “ice beer”. No, this is not a book by boosters by boosters but the cold hearted results of 25 years of economic study brought together in one handy to describe the causes of industry concentration, basic cost issues, pricing and advertising strategies as well as public policy issues. That means it is a great over-view of the whole of the industry and could provide insight to craft brewers whose work now, by my reasonable guesstimate (not a concept in econometrics), now sits at about 4% to 5% of total beer consumption, eclipsing ice beer to stand maybe at half the importance of imports. I say guesstimate because I have not been able to find relative statistics in all the recent press about 31.5% growth in US craft beer sales over the three years ’04 to ’06. Nice to have access to a discussion of the economics of the industry that is made up of more than press releases.

So, am I glad I have this book? Definitely? Can I read it in one sitting? Not a chance. I think this is a book to get through gradually, to immerse myself in over a while – and also one to return to as a reference over and over. I expect it could serve anyone well, to give guidance both in relation to key elements of the industry as a base line for data…unless you happen to be an econometrician in which case you can zip through it during your next flight or maybe a lunch break.

Beer is Bigger Than…

In Canada at least, with sales of $7,864,437,000.00 in 2003 is bigger than:

– Total attendance at movie theatres and drive-ins with sales of $1.2 billion in 2002/03: 15.3% of beer.
– All wheat at $2.47 billion: 31.5% of beer.
– The estimated budget of the Government of Nova Scotia for 2003 of $5.327 billion: 68% of beer.
– All charitable giving of $6,500,000,000: 71% of beer.
– Beer is smaller than the military, however, which has a $13.5 billion budget for 2006: 171% of beer in 2003.

The beer sales figures do not even include retail bar and restaurant costs, just the wholesale. They also do not include the cost of that bag of chips you had to go with the bee