Economics

Jim Koch Sounds the Alarm

Boston Beer Company jump-started America’s craft beer movement and made its founder, Jim Koch, a billionaire. But in a recent op-ed in the New York Times, Koch warns craft’s run might be coming to an end.

Koch calls industry consolidation the number-one culprit. In 2008, federal antitrust regulators not only approved the MillerCoors joint venture, but they also gave the green light to InBev’s acquisition of Anheuser-Busch. That left two brewing giants in control of 90 percent of America’s domestic beer protection. Making matters worse, the federal government allowed the big brewers to buy craft breweries—and then fail to disclose that they were the new owners.

Those mega-mergers resulted in higher beer prices and pink slips for American workers, as well as consolidation among distributors. Today, in most markets, more than 90 percent of all beer is controlled by distributors who depend on either A-B InBev or MillerCoors for most of their volume. Those distributors have considerable power regarding promotion, shelf space, and marketing support for the brands they handle—and they have an incentive to give preferential treatment to craft brands the big brewers now own.

According to Koch, the key to saving American craft beer is stricter antitrust enforcement. He names China and South Africa as countries whose regulators imposed strict conditions on big brewery mergers to protect their domestic economies.

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Are Grocery Stores Abandoning Craft?

Portland, Oregon-based writer Jeff Alworth reports on a disturbing trend in beer retailing. Fred Meyer, his state’s dominant grocery store chain, is scaling back the craft beer selection and giving more shelf space to macro brews and “crafty” beers, the latter being craft labels acquired by big breweries.

On the surface, Fred Meyer’s decision doesn’t make sense. The chain stands to lose business to competing stores that offer a wide selection of local craft products. However, there are fewer alternatives outside Oregon’s larger cities. Alworth adds that Fred Meyer’s parent, Kroger Company, can improve its profit margin by using its buying power to negotiate low prices and cutting costs by paring its beer inventory.

Alworth warns that in localities where the big grocery chains dominate and the public isn’t as attuned to craft beer, “crafty” beers such as Goose Island—or even the big national brands—will become customers’ default choice. That’s bad news for small breweries, especially the newer ones.

The Friday Mash (”Happy Birthday, Internet” Edition)

On this day in 1969, the Internet Engineering Task Force and the Internet Society issued their first Request for Comments. The publication of RFC-1 is considered the Internet’s unofficial birthday.

And now…The Mash!

We begin in Newport, Oregon, the home of Rogue Ales and its famous 40-foot-tall red silo. Opinions differ as how the silo got there, but everyone agrees that the town fathers thought it was an eyesore.

In Kentucky, you can enjoy local craft beer or bourbon at most of the state’s resort parks. The state plans to offer adult beverages in all state parks which have restaurants and where alcohol is legal.

Michelob Ultra sales have risen by 27 percent over three years. Jeff Alworth puts the brand’s success in context: light beer still dominates the market, and Michelob Ultra is considered trendy.

Yes, it’s possible to grow hops in Brazil. Grower Rodrigo Veraldi has been experimenting with the plants, and one of his varieties thrives in the hot, rainy climate near Sao Paolo.

Bad news for Baltimoreans: National Bohemian is no longer available at Oriole Park at Camden Yards. “Natty Boh” enjoyed a brief reprieve last season, but fell off the menu after the first homestand.

IBU is an important quality-control number for brewers, but it’s not very helpful for beer drinkers. Malt content has a big effect on perceived bitterness, and the average drinker can’t perceive IBUs beyond the 100-120 range.

Finally, the University of North Dakota’s “Beer Grandma” has passed away. Beth Delano, who has attended UND men’s hockey games since 1947, became famous when the scoreboard video caught her quaffing a beer during a break in the action.

The Friday Mash (“Long Live the King” Edition)

On this day in 1603, James VI of Scotland becomes James I of England and Ireland upon the death of Queen Elizabeth I. The kingdoms of Scotland and England remained sovereign states, with their own parliaments, but both were ruled by James in personal union.

And now….The Mash!

We begin in Vancouver where last week, the Railtown Pub advertised its St. Patrick’s Day celebration with a Guinness glass filled to the brim and literally losing its head. That caught the attention of the Irish Independent newspaper, which called the pour “sacrilegious”.

Now that the Chicago White Sox’s partnership with MillerCoors has expired, the ballclub has formed a new partnership with Constellation Brands, which will open “Casa Modelo” at the ballpark.

While on spring break in The Bahamas, a frat boy used the teeth of a beached shark to puncture a beer can so he could “shotgun” it. His video of the stunt prompted a swift—and angry—backlash on social media.

Portland, Oregon, is about to get a beer bar devoted to session beers. Its name, naturally enough, is Sessionable. The bar will pour 30 beers, all with ABVs ranging from 2.5 to 5 percent.

Neil Patrick Harris, who the spokesperson for Heineken beer, says that he has a Heineken Light tap in his bar at home. He adds that unlimited beer at home “is as awesome as it sounds”.

According to a recent survey, one out of four beer drinkers said they would switch to marijuana if it became legal in their state. If they do switch, brewers will suffer $2 billion per year in lost sales.

Finally, MLive.com asked eight brewery owners in the Grand Rapids, Michigan, area whether the craft beer industry is in a bubble. They don’t think so, but some admit that the market is getting tougher for new entries.

The Friday Mash (“Sell High” Edition)

On this day in 2000, the Nasdaq Composite stock market index peaked at 5132.52, thanks to investors who bid up dot.com shares to astronomically high prices. Those who didn’t take profits got a nasty surprise: the Nasdaq fell by more than 50 percent by year’s end.

And now….The Mash!

Fittingly, we begin on Wall Street, where big breweries’ stocks haven’t been doing well. According to SeekingAlpha.com, the only company whose shares are trading near their 52-week high is Kirin Holdings Company.

Congress is considering a bill that would cut taxes for small brewers. The bill’s supporters contend that lower taxes would enable breweries to expand production, add jobs, and attract more visitors.

Session IPA is popular, but opinions vary as to its definition. Draft magazine has published a scale which shows how much these IPAs vary in alcoholic strength and, especially, perceived bitterness.

A few years ago, Emily Hengstebeck and her friends partied together at beer festivals. Now employed by a brewery, she found herself on the other side of the table. She describes what it’s like.

More than 7,000 CraftBeer.com readers filled out a survey asking them what was their state’s favorite beer bar, and why they liked it. Without further ado, here are the winners in each state.

It’s still “Miller Time” in Chicago. According to BevSpot, Miller has a more than 8-percent market share in the Windy City, more than twice the brand’s market share nationwide.

Finally, a Virginia brewery will release a beer honoring Secretariat, the 1973 Triple Crown winner, at a birthday celebration this month. The horse was nicknamed “Big Red”; the beer is an imperial red India pale ale.

The Friday Mash (Red Cross Edition)

On this day in 1863, a group of citizens of Geneva, Switzerland, founded an organization called the International Committee for Relief to the Wounded–now known as the International Committee of the Red Cross.

And now….The Mash!

We begin in England, where festival organizers in two of the country’s most famous beer cities, Norwich and Sheffield, are joining forces to promote their local products and attract beer tourists.

The Norwegian supermarket chain Rema 1000 is feeling the backlash after it took several local breweries’ products off the shelves. Some Rema customers switched to competitors’ stores.

Are you a DIYer who loves craft beer? You might like the Kinkajou Bottle Cutting and Candle Making Kit. You can give the candles to friends—and show off your collection to them.

“Pepper”, a robot from Japan’s SoftBank, has his first job: greeter at the Pyramid Taproom in Oakland International Airport. When not posing for selfies, he’s working on his speech-recognition skills.

A faith ministry in Nebraska has started a fund-raising campaign to buy out four stores that sell millions of cans of beer in a tiny village next to the alcoholism-plagued Pine Ridge Indian Reservation.

Heroica, a brewery in Brazil, is flavoring its Kuromatsu Kamikaze IPA with branches of bonsai trees, brought over by a Japanese family more than a century ago. Some bonsai trees are worth $20,000.

Finally, Bart Watson, the Brewers Association’s chief economist, told a gathering of brewing professionals that it’s still possible for a microbrewery to grow to regional status, but very few will succeed in doing so.

Forecast for 2017: Craft Beer Turf Wars

The number of craft breweries continues to grow rapidly, while the growth of the craft sector is slowing. Which means something has to give.

Jason Notte of Marketwatch.com predicts that 2017 will be the year of the turf war; there will be less mergers-and-acquisitions activity and more competition among breweries to claim shelf space.

This could be the year that craft breweries lay off workers and make other cuts in an effort to trim costs. Industry leader Boston Beer Company has been hit hard by shrinking sales of Samuel Adams Boston Lager; the company’s shares have tumbled 50 percent from their 2015 high.

We’re also likely to see more breweries bring in private-equity firms. Already this year, Victory Brewing Company and Southern Tier Brewing Company have formed such partnerships with such firms.

And we’re likely to see smaller brewers focus on taproom traffic and food sales and avoid the battle to get their products on store shelves and on bar and restaurant menus.

Notte believes that Oskar Blues is the brewery to watch because it has been the craft sector’s trend-setter for years. The brewery was the first to can its beers and the first to build a second facility in the eastern United States. Two years ago, it kicked off the private-equity trend when it sold a majority interest to Fireman Capital. It then used some of that money to acquire craft breweries in Michigan, Florida, and Texas; the latter two states are considered underserved beer markets. Oskar Blues also borrowed from the big national brewers’ playbook. It rolled out more mainstream beers, sponsored sporting events, and put an emphasis on brand recognition.

Notte concludes, “Whether drinkers benefit from [this] turf war or become victims of it remains to be seen.”

The Friday Mash (National Geographic Edition)

On this day in 1888, the National Geographic Society was formed. The Society’s logo, a bright yellow box, appears on National Geographic magazine, which is published in 40 languages around the world.

And now…The Mash!

We begin in Pennsylvania, where the beer police caught up with Travis John Miller, who was selling the contents of his beer cellar on Craigslist. Miller faces a misdemeanor charge of selling alcohol without a license.

Swedish brewer Fredrik Tunedal, who often came home from work covered in malt dust, has released a Shower Beer. Its flavor profile includes a soapy taste, which Tunedal calls “on-point” for his product.

Keurig Green Mountain has partnered with Anheuser-Busch InBev to develop a line of instant beers—and other instant adult beverages—that Keurig owners can make at home.

The CEO of Constellation Brands, which imports Corona and Modelo beer, said that he doesn’t expect President-elect Donald Trump’s trade policy to raise the price of Mexican brands.

Despite a dismal 5-7 record, the University of Texas finished #1 in the country—in beer sales, that is. By season’s end, Longhorns fans spent $5.26 on alcohol for every fan in attendance.

Bart Watson, the Brewers Association’s chief economist, disputes studies showing that beer sales have fallen in states where recreational marijuana is legal. Watson argues that pot is just one of many variables affecting sales.

Finally, in Adelaide, Australia, the woman-owned Sparkke Change Beverage Company is putting feminist messages on cans of its beer. It’s an effort to start conversations in the country’s male-dominated beer culture.

The Friday Mash (Heisman Trophy Edition)

On this day in 1935, the Downtown Athletic Club Trophy, later renamed the Heisman Trophy, was awarded for the first time. The winner was halfback Jay Berwanger of the University of Chicago who, despite being a number-one draft pick, never played pro football.

And now….The Mash!

We begin in Wisconsin, where you’ll get a beer chaser with your Bloody Mary. The state’s taverns have a long-standing tradition of serving chasers with cocktails.

The Jewish Museum of Montreal has joined forces with a nearby craft brewery to re-create a beer brewed by brothers Ezekiel, Moses, and Benjamin Hart in 1796.

Is there a beer aficionado on your Christmas list? Forbes magazine writer Tara Nurin can help you. She’s written mini-reviews of 18 worthy beer books.

The latest gizmo for beer snobs is That Ultrabeer Thing, a vibrator that emits ultrasonic waves that break up carbon dioxide bubbles, creating a creamy foamy head.

San Francisco’s ReGrained is collecting spent grain from three local breweries and turning them into susatinable granola bars. The company’s slogan is “Eat Beer”.

A market analysis firm has found that beer sales are “underperforming” in Colorado, Oregon, and Washington. Recreational marijuana is legal in all of those states.

Finally, the stereotypical craft beer drinker is a bearded white male. However, craft customers are becoming more diverse, and the industry is making efforts to get customers of color to drink their product.

The Friday Mash (Mickey Mouse Edition)

On this day in 1928, The Walt Disney Corporation released the animated short “Steamboat Willie”, the first fully synchronized sound cartoon. It was directed by Walt Disney and Ub Iwerks. Disney considers this release to be Mickey’s birthday.

And now…The Mash!

We begin in England, where pub companies warn that the price of a pint is about to jump. Factors include inflation, higher costs of doing business, and the introduction of the living wage.

Game of Thrones actor Jason Momoa showed off his axe-throwing skills in an Instagram video. What makes his performance even more impressive is that he drank a beer immediately before he hit the bulls-eye.

FIFA, the world-wide governing body of soccer, is negotiating with officials of host country Qatar over whether beer will be served there during matches at the 2022 World Cup.

Effective January 1, 2019, Labatt will discontinue the 50-year-old tradition of issuing free beer for life to company retirees. The Canadian brewery is now owned by Anheuser-Busch InBev.

Travel blogger Emmanuel Marshall used Innis & Gunn IPA as currency to pay for transportation and lodging on his 5,000-mile trip from Scotland, the home of Innis & Gunn, to India.

Scientists at Rockefeller University have found that beer pong players expose themselves to numerous icky bacteria. The good news is that college-aged players have strong enough immune systems to cope with them.

Finally, the San Diego Union-Tribune named the five beers that put the city on the craft beer map: AleSmith Speedway Stout, Ballast Point Sculpin IPA, Green Flash Le Freak, Karl Strauss Red Trolley, and Stone Arrogant Bastard Ale.

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