What A Difference A Year Makes – 2017 Edition

Over the holidays, I was thinking about what to do with this blog in 2017. It’s been a heavy slog over the last few months ensuring the important and favorite and representative bits of bits of 10,000 posts get across the River Jordan to the next bloggy life but that’s largely behind me now. What I need to do now is look ahead and take on the new opportunities that the coming year offers in style. It a bit of panache. Even. Maybe.

A lot can happen in a year. Last year this time we were still in the grip of learning that US craft brewery owners were (horrors!) not all evangelists willing to starve for the cause. No, the sweet taste of gravy was too much for many – or the actual goal all along. Click on the score card and have a look. You’d have a hard time filling that chart out properly now. You might need different colour pens. Funny thing –  no one really cares now. As is often the case with the leadership clique within even a small circle, they are barely missed as others are ready and willing to fill the gap. Beer is nimble like that. Beer itself is a survivor. The survivor. The rest of it all comes and goes.

Not sure blogging is surviving along with it. I could try out a new structural twist like the B+B “Breakfast Debate”… except I am only one person and I wrote my homage in two-fisted dialogue to The Compleat Angler with Max a few years back. But I like the idea. Keeping it fresh. These winter months are great for working on an historic era, for working through a data base. I have a notion to work away at the erroneous ideas that (1) temperance was some sort of trick played on the many by the few and (2) that, contrarily perhaps, it was all that effective. And greater early 1900s social history. I sit above a small outdated law library. It’s great stuff and holds masses of facts proven by evidence, tinged with authority. Rare.

I would also like to figure out a way to crack the nut of getting into the ledgers of contemporary craft brewing. What are they actually up to as businesses? It’s the only way to break the cycle of brewery owner cheery pozzy obvsy bios we’ve been stuck with for the last few years.* You would have thought that the craft sellouts would have taught a lesson but gate-keeping editors will have their way. The narrative must go on. And it will be even more popular in the new Trumptastic era. Boo to the questioners! Down with those losers asking “why?”!  Hmm. I would need to present it at a statistical abstraction. And I would need some helpful assistants in the business offices of craft breweries. Any takers? You can voice flabbergasted serious objections in the comments below and send me your non-disclosure agreement template to beerblog@gmail.com. Let’s talk.

What else can I do? We do? I am interested in another unpopular idea. What is it that makes us lose interest in novelty, makes us find a home in certain pop culture things like beer? Most folk I know have packed in chasing the beery tail. Novelty is for novices. Some lasting things are actually better. Think of it this way. I am a lucky man. I was 14 to 24 from 1977 to 1987 which means I was in the front row to a very strong point in pop and alt** music history. I have not been persuaded since that another period is superior but I also realize its not only the music I heard but that I was that age in my life when it was popular. I would hope those years were golden for each of us – though being 14 in 1977 was pretty sweet. Does the same idea work for good beer? Will we all just end up accepting Rochefort is fabulous or will today’s twenty somethings actually get a bit verklempt over memories of weird fruit flavoured gose thirty years from now? Could you imagine? It’s be like getting nostalgic over Mumford and Sons.

So. Any suggestions? Any idea I might explore? Conversely, any lakes you might, perhaps, direct me to jump into? I am for too entrenched to care if you take offense. Last year saw a peak in the “how dare you!” emails suggesting a personal slight directed to folk I really never thought that much about. Could you imagine thinking that much of yourself that you took the minute and 27 seconds of deep consideration it took from outrage to pressing send? Well, we won’t be having any of that in 2017, will we. Nope! And that is because this is the year where people get a grip, learn we are not each the centre of the beery world and get about doing what needs to be done!

Remember: it is only beer and, by way of corollary, you are only you. Well… fine. Can we at least start with this is the year we give it a try?

*aka “it’s amazing work – but, trust me, everyone is broke.”

**Is it too soon to use “alt” again?

The Fluidity Of Good Beer’s Paradigm Shift

Two bits of related US big craft beer industry news this week. First, Japan’s Kirin has acquired about 24.9999% of Brooklyn Brewery for an undisclosed sum on largely undisclosed terms. Second, Stone Brewery is laying off 5-6% of their workforce. How about we look at the latter first. Part of the news release states in part:

…the onset of greater pressures from Big Beer as a result of their acquisition strategies, and the further proliferation of small, hyper-local breweries has slowed growth. With business and the market now less predictable, we must restructure to preserve a healthy future for our company…

This is interesting. For some time I have been going on about the schism in craft beer. So long I bored myself with the obviousness of it. This statement confirms it. There are three sorts of craft: macro craft, big craft and micro craft. The one in the middle has the shortest shelf life. Boosters will deny it, but the sales slump for big craft has been a thing for a while. So steps have had to be taken and this is what it looks like after things change at the heart of a business. They are not alone. Remember, just last April, Stone tried to suggest that the outside investment funds they took on were “craft” investments. Silly PR committee. No one believed it. The immediate response today from Jason Alstrom reflected what might be going on: “Typical corporate response … Does not sound like Stone at all. They are having a tough time wearing those bigboy pants.” The CEO is blamed but the Board and ownership set out the tasks for the CEO to complete. Likely for very good reasons given the tired brand and founders.

In the other notable story, Brooklyn has taken Kirin’s cash. The transaction’s obvious and awkward effort to avoid hitting the 25% share level led me to review the Brewers Association’s definition of craft. An American craft brewer must be independent and to be independent…

Less than 25 percent of the craft brewery is owned or controlled (or equivalent economic interest) by an alcohol industry member that is not itself a craft brewer.

Notice that careful placement of “or” in that definition. Clearly, it is possible to control more of a craft brewery than owning the same relative measure in shares. How does that occur? By the transaction for the sale of shares including a shareholders’ agreement that effectively bars the corporation from doing many things without consent of the otherwise minority shareholder. As a result, the BA’s 25% ownership rule is meaningless in the world of creative financing and investment. Strings shall be both pulled and used to tie things down. Jason Notte commented on Twitter on the distinction between ownership and control as a factor in establishing the independence of a brewery:

I often wonder how deeply @BrewersAssoc dives into the details. They have a lot on the plate without auditing every deal.

The Devil is in the details, they say. If the Brewers Association is not able to keep up with the implications of the realities of business like investment terms why bother having the definition at all. Maybe that is the plan for 2017. These are, after all, the days and months of change. The big names of big craft are mostly moving out as the money moves in. It seems that only the man of yogurt is sticking around to bask in the twilight of these dusky days for big craft even after cashing out in his own way. He must be holding out for something more – but what?

This Is Reasonable Proof That Big Craft Is Losing It

This first hint something stunned was up came in a tweet from Andy Crouch:

Ha ha ha true craft beer. I give up.

Now, before you jump to “haters gonna hate” have a look at this response to that tweet: “Stopped saying “craft”, feels good.” That from the first guy I heard “haters gonna hate” from. You know big graft has already lost its grip when a man of faith such as an Alstrom mocks it. What’s the news they are discussing? This:

…Stone will be participating in True Craft as a founding member. The new venture has received an initial $100,000,000 brought forth from an investor group committed to the long term model. True Craft will welcome a handful of the best craft brewers in the business alongside Stone Brewing. Each brewery may participate in True Craft and in turn the company will provide minority investments to its members with minimal stipulations. All breweries will be aligned in the philosophical mindset of banding together to preserve craft while retaining full soul and control of their businesses for years to come. “This is about setting up a consortium so we can not just survive, but continue to thrive in a world in which craft is being co-opted by Big Beer,” said Steve Wagner, Stone President and co-founder. “This allows companies like Stone to follow an ethos that involves independence and passion for the artisanal. By investing in True Craft now, we can be confident that our vision is locked in beyond our professional lifetimes and we feel privileged to help others in our industry do the same.”

One of the more disappointing things about writing about beer for over a decade is how many folk writing about beer have little interest in studying history or understanding business – let alone tackling the reality that beer and brewing sits in an very wide intersection of human activity that has been regulated in our tradition for at least the best part of a thousand years. It’s a story like this that has the wheels, however, to interest an amateur brewing historian who practices in public construction and commercial law. Let me explain.

See that figure up there? $100 million. Sounds like a lot. Sounds like someone thinks that will make some sort of change. Don’t count on it. Long time readers will recall an early post of mine sweetly titled “Beer is Bigger Than…” in which I pointed out that all beer in Canada in 2003 was worth $7,864,437,000.00. It was bigger than wheat, charity and the Government of Nova Scotia. Thirteen years later, not much has changed. Beer is big and $100 million USD probably now represent maybe 1.5% of the Canadian brewing market. Expect the US market to be ten times that and in the NATO region market maybe double that again. In the global marketplace the fund is piddly. About the cost of building two 18 story apartment buildings or one water treatment plant for a small city. And that’s in Canadian funds – which is about 80% of US right now.

Not only is the fund small, notice also that it is an investment fund. It’s not a grants fund. The capital is to be recovered. A month ago, Jim Koch of Boston Beer was telling a tale of woe about the effect rapacious private equity will have on craft beer. We are toldFunds have finite lives…When those fund lines get to the end, [fund managers] have got to sell those assets.” It’s reported as doomsday. They sky is falling. Well, if it’s true of a professional fund then that reality is going to be true of this one, too. Interest will have to be paid and at some point the fund will cash out. These monies, too, will need to be repaid – passion or no passion.

And it’s also up against clever competition. Recently, the Boston Globe profiled private equity firm Fireman Capital Partners, the investment folk behind the expansion of Oskar Blues and the cash injection into Florida’s Cigar City Brewing. You think those guys are shaking in their boots over the prospect of a rival fund based on Stone’s ethos? Hardly. The experienced private equity players will out bid and out run their deals. It’s their business, not a hobby or a faith-based act of grace. While True Craft may “welcome a handful of the best craft brewers in the business alongside Stone Brewing” we are all too well aware that many of the best craft brewers have already made their minds up and moved elsewhere – whether under the wing of big beer or in partnership with existing private equity.

Finally, look again at one last loony line in the press release: “This allows companies like Stone to follow an ethos that involves independence and passion for the artisanal. By investing in True Craft now, we can be confident that our vision is locked in beyond our professional lifetimes…” Question #1: is Stone the central recipient of funding or an investor in the dreams of others? What is really going on? Question #2: can you see the oxymoron? How can one be independent and also go along with a “vision… locked in beyond our professional lifetimes” when that vision is someone else’s vision? The guy looking forward to retirement’s vision. Who needs that? The greatest thing at the moment in good beer are the thousands of actual small brewers coming forth independently in a complex wave of entrepreneurial vitality. They don’t need Stone or its money. It is a rather modest proposition to set up a small brewery and, in the right market, one that usually is greeted with enthusiasm by the buying public. Unless you suck.

It’s the same as it ever was. Same as it ever was. At the macro level, brewing is a business that undergoes continuous change that is usually misinterpreted as failure. Folk say temperance caused the collapse of breweries leading up to prohibition. It was actually the explosion of the railroad network in the latter 1800s which unleashed basic commercial efficiencies. Hooray for cheaper good beer for all! Folk suggest the old guard of big craft represent some sort of guru class who carved a niche of good beer forgetting that the entire world of consumer goods has raced towards diversity and excellence over the last four or five decades. The big craft era of 2005-15 is relatively late to the game. And, let’s be honest, if these guys didn’t become the millionaires and billionaires someone else would have. It’s not like they invented beer. Folk will say that good beer is in crisis and point to this odd news as some sort of life raft in an ocean of evil big beer and big money. Have none of it. This is just the new boss meeting the old boss all in the great cause of money. Which is good. Because that is success.

Rejoice. Big craft is dead. Brewing continues to move on and on, becoming more affordable and more excellent and more diverse and more interesting because this era of craft is dead.

Is This One Way Big Craft Might Be Dying?

hansunger1

There is nothing more certain about the brewing trade more than the history is defined an extraordinary limited set of patterns. Those who think that the owners of big craft breweries are special, well, know nothing about the rise of lager in the late 1800s as a premium even healthy drink – and know nothing about the rise of Albany Ale from central New York in early the middle third of the 1800s or the rise of Taunton Ale from southwest England as probably a premium even healthy drink in the last quarter of the 1700s. I suspect Northdown Ale was the premium even healthy drink in the lower Thames valley in the third quarter of the 1600s, too. There are, in fact, only a limited number of things you can say about beer to make people buy it other than that it’s tasty, cheap and gets you a tremendous buzz. They are: (i) it’s premium and (ii) it’s healthy. Check out social media today. The spin doctors are still at it. That quote up there? That is from the fabulously fabulous Dr. Richard W. Unger of UBC. More particularly, it is from his essay “Beer: A New Bulk Good of International Trade” in the book Cogs, Cargoes and Commerce: Maritime Bulk Trade in Northern Europe, 1150-1400. It’s actually the ending. Sorry. Spoilers. It reminds me of craft. Or rather big craft.

Just at the moment, big craft is going through a time of change that is not unlike what happened to the beers of Hamburg in the latter 1400s and early 1500s. Hanseatic Hamburg’s hopped beer as a technology went through an era when it was considered premium, rare and difficult to make. Roughly from 1250 to 1350. Neighbouring markets raised import duties to keep it out or just enough to equalize the cost with local producers. Because Hamburg during that time was the greatest brewing center in the history of beer. 42% of the workforce was involved in brewing. 15% of all Swedish exports were hops sent to the breweries of Hamburg and its allies. Read ye some Unger if you have any doubts. These trading communities had their own warships and a trust based commerce that overcame North Sea and Baltic piracy and storm. A commercial empire. And it all went away. At least the brewing did. They switched to trading in the ultimate beer concentrate – grain.

Here in Canada we are undergoing much more accelerated change at the moment. The collapse of the oil market and the sad performance of the Canadian dollar against the American version means no one in their right mind is even thinking of buying US craft beer either by a quick flip over the border or as an import. Yet there are around 550 craft brewing kettles in the land. As a result, while I can buy 2 litres of Pilsner Urquell for 10 bucks and decent Ontario craft for maybe 12 bucks the equivalent volume of beer in a six pack of fairly pedestrian Sierra Nevada Pale Ale is selling for a silly $15.50 and will likely soon cost more given our new 68 cent dollar. Who needs it? Few if the stock that sits on the shelves is any indication.

This is an accentuated version of what is happening in the US itself. Being well north of 4,000 breweries in the US means fans of good beer in the US are no longer dependent on those Hanseatic Hamburgers of big craft who ship coast to coast. People are making their own better local beer now just as the Netherlands did around 1450 and England did starting in 1520. Big craft is losing sales just as its handmaid bulk cider is. Who needs it? If you are looking for something rare and interesting – premium and maybe even healthy – who needs to go to a grocery store or gas station shelf to buy the beer trucked in from out of state? Fewer and fewer.

The economies of scale in good beer are having their way with the market. Not large scale. Small scale. The era of the great white male multi-millionaire brewery owner is over. The nameless nimble newbie hoards have learned the tricks of Hamburg, leaving the old fests cancelled and the old men the option to sell out, shut down or sit around wondering what happened. Same as it ever was.

Your 2015-16 US Craft Brewery Dance Card

These are troubled times. One does not know what and who to hate or cheer on. Craft is either dying or transforming into something new and glorious. So you need some help. Click on the image for a bigger version. This is your cheat sheet. A notepad to carry with you at all times to make sure you know what you are supposed to think. You need to know what you need to reject.

* – no one really believes they are actually craft.
** – Actually Canadian, Belgian or something else but not ultimately US owned.
$ – sold out to big evil hateful brewing or money interests.
$$ – absolutely took big evil hateful brewing interests to the cleaner but still sold out.
+ – branch plant owner therefore just a small version of big multi-national brewing.
++ – just so big that it makes no sense to think of them as craft in any real way.
? – only allowed in craft so others could be retained in craft.
?$?$ – looking and hoping.

That’s just a start on my list. I probably missed a bunch. Let me know. If you click here you can get your own dance card to review, consider and annotate. Just make sure you use the dry-wipe ink feature on your browser so you can update this on a regular basis.

A Few More Thoughts On Craft Brewery Buyouts

I quickly wrote this over at the beer blog’s Facebook page* and thought it was clever enough to repeat:

With respect, the main point is being missed. The disassembling of the US craft beer market is itself the bursting of the bubble. The “big macro v. tiny craft” paradigm failed a long time as the BA’s failed “crafty” campaign illustrated. Continuing to suggest that the path of craft is being validated ignores the greater underlying realities. Big craft bought into scale a long time ago. Craft as brand regardless of what’s in the bottle is market reality. The brewery isn’t being bought. A battle with craft is not being waged. Macro is buying brands and markets to use for other purposes. The rump BA will appear to be quaint soon. Then pointless.

Some interesting comments ensued. I suppose it is related to the posts about how craft will kill itself from a few years back but this is really another thing. Craft being killed off by macro simply eating it after paying billions for the opportunity. We are likely not at mid-meal yet but that’s what’s going on. What we haven’t heard about yet, when you think of it, is how those brewers wanting to be bought but not getting offers are doing. You know, just because they are not worth buying doesn’t make them any less the traitors to the cause… if you are into that whole “cause” thing. What I expect we do know, however, is the guys at Goose Island must be really pissed off unless they took a deferred part of their $39 million chump change payment in the form of percentage share of future brand growth as part of their deal. That stuff is brewed everywhere and sold everywhere now and someone is making buckets of cash.

*…which reminds me of a pet cat having a pet hampster.

Your Saturday Morning News Not From Boak And Bailey

Six thirty Ay Hem. That’s what you get when you go to bed early on a Friday. After having a nap around supper time. That’s how I think of myself on this sort of Saturday. Okocimiski.

Three elections in a row this week plus, you know, the life of a desk jockey did me in. The first election last Monday in my former tiny jurisdiction of PEI saw my old law school prof get in as Premier. The next on Tuesday in the western Canadian home of the conservative puritans saw a landslide by the socialist hoard. And in the Old Country Thursday the nationalist lefties beat out the unionist pinkos to send the aysmetrical quasi-federation into a dither. The combined effect of many split votes in the last one caused the astounding “great victory of no more votes” – quite an accomplishment. What’s this got to do with beer? Not that much. But I work in governance so am aware that some things do actually matter. What else has been going on?

=> Jim Koch is cashing in some of his shares. Note that his balance of equity seems to be worth around 63.4 million. Sure, it’s a small brewery. Sure it is.

=> In one post, Ron has explained the point of Asheville NC far more clearly than the output of 1,000 subsidized junkets. That he got there via a milk run back country bus was a deft bit of contextualization even if he had to sit on his luggage… no, his actual luggage.

=> It’s been three weeks since beer retailing in Ontario was reformed and absolutely not one thing has actually changed. Classic boondoggling. And no one is complaining. Classic Ontario. Perhaps by 2028 we’ll be allowed to hold our beer bottles with our left hands in public. After all, what really matters is the posing. Like calling something “a game changer”, Toronto has a wee problem calling itself “world class” like the needy kid back in kindergarten who told you his uncle went to space. The phenomenon is described by the term world classy.

=> Go read BB. And then do it again. Where don’t their tentacles reach? It’s like they are becoming a vast industrial complex. [Thankfully, we can trust they did not write “here’s how to unearth the ‘ultimate’ session beer” in that header.] Note: their post on May Day celebrations at Padstow in North Cornwall is one of their best ever.

=> This is funny. In far western British Columbia:

The final report of the B.C. Liquor Policy Review recommends the government consider establishing a quality assurance program for craft beer and artisan-distilled spirits, similar to the VQA, or Vintners Quality Alliance, program — which currently guarantees wines are made in B.C., with 100 per cent B.C. ingredients.

Trouble is no one checked that “local” and “craft” in beer bear scant relationship to wine so… they are left with the same sort of fibs and platitudes we always see – which led to the refreshingly honest admission: “that’s kind of thrown a wrench into the ability to focus on what the next level would be.

=> Just realized that if I started my own periodical I could name it “Al About Beer.” I would have to work on my ra-ra superlatives so maybe not.

=> Might I suggest unless one is extreeeeemely certain that a surprise beer and brunch pairing for Mother’s Day is only one thing: a quick route to the dog house. Don’t be stupid. Just because the love of your life puts up with your dependency / “hobby” it does not mean she likes it. Not at all.

Saturday. And maybe a stinking hot one as well. It was +25C¹ after deep into dusk last night. That means gardening. Letting more lettuce seed buried. Or drinks in the yard. Might get a bit Okocimiski. Jest Sobota Okocimiska? Może. Or I could just go get a growler. You have to remember that they sell lettuce at the grocery store in July, too, you know. Enjoy your Saturday. 7:45 am. People are starting to get up. Better make coffee.

¹ Disclosure: in Canada in spring there are a few days when you have to still make clear you are talking about +25C and not -25C.

Quebec: Retirements And Consolidation At McAuslan

If I have a favorite beer at a favorite pub, it’s a pint of McAuslan Oatmeal Stout at the Kingston Brewing Company. It does not hurt that the place is a block from my work. But news has thrown a pebble at my world just now, placing that pleasure at perhaps some risk:

After a quarter century in the business, the husband-and-wife team behind the McAuslan Brewing company has sold their company to another Montreal-based microbrewer, RJ Brewers. Peter McAuslan, who founded the company with his wife Ellen Bounsall in 1988, told CJAD News it was just the right time for the two of them to get out. “When one starts a business, you always have a sort of an end point in mind,” McAuslan said. “Both of us over the last ten years said, ‘well, there’s going to come a point where we’re going to want to sell out and take advantage of the work that we’ve done.”

Risk you say? Don’t get me wrong. I have had RJ’s Belle Gueule and it has its worthy place. But successors rarely maintain the particularity of a beer even if quality generally is maintained. Different equipment, hands on the knobs, water tables or yeast strain races? You’re never sure about these things. With luck, I’ll stand corrected this time and that wee note of licorice will be there along the twiggy hops for years to come. Good news for the team of McAuslen and Bounsall certainly and perhaps part of an era we’ll be entering where many such just rewards are gotten by many more retiring first wave microbrewers.

But, really, it’s not like I drank the beer because of them. I drink it because of it. And I hope it has many more years ahead of it.