Month: November 2007

The economics of Widhook, and a book review

The U.S. Brewing IndustryPatrick Emerson has been kind enough to the work of Vic and Carol Tremblay in analyzing the merge of Widmer Brothers Brewing and Redhook Ale Brewery, giving me an excuse to mention that and also offer something of a review of their book, The U.S. Brewing Industry: Data and Economic Analysis .

Please start by reading his post at The Oregon Economics Blog as well as Jeff Alworth’s response (which is what got me to the Economics Blog). Emerson brings up quite valid concerns, particularly the ongoing competitive landscape.

I’m not going to repeat what he said about minimum efficient scale (MES), but expand on it a bit. From the end of Prohibition until the late 1950s the minimum production a brewery needed to reach scale efficiency and be competitive was 100,000 barrels per year. A-B was the largest brewery in the country, producing 8.4 million barrels per year, and Miller was 10th at 2.4 million. (Visit BeerHistory.com for more.) It wasn’t 1880, when we had more than 2,500 breweries, but regional breweries were a competitive force.

MES began to rise dramatically in the 1960s and was 4.5 million by 1973. Now it’s 23 millions barrels, which only Anheuser-Busch, Miller and Coors achieve. And the latter two plan to merge U.S. operations.

With that in mind, although it will still produce only a fraction of that Widhook (as those in the Northwest are already calling this “new” brewery) makes sense. Drawing on Tremblay and Tremblay, Emerson writes: “These are the cold, hard facts: economies of scale exist in beer brewing, they can be quite large and thus the economic incentive is to grow bigger and become more profitable and/or more competitive.”

So what about the fourteen-hundred-and-however-many other breweries in the country?

I’m reminded of what Eric Wallace of Left Hand Brewing said more than 10 years ago: “The large brewers are not tooled to do what we do. They’ll have to build less-than-efficient breweries to make beer like we do.”

And as beer drinkers we need to remember that. Less efficient means more expensive. I won’t climb on on that soap box today, because I promised something of a review of The U.S. Brewing Industry.

– You don’t need the book if you are looking for the best Czech lagers, are wondering what kind of glass to pour a particular beer into, or want to read entertaining essays in the manner of Pete Brown.

– You might enjoy the book if you’re deep enough into American beer history to wonder how and why the beer industry changed from 1950 to 2000. It fits quite nicely with Maureen Ogle’s Ambitious Brew: The Story of American Beer, although it’s not quite the breezy read. It’s an economics book.

– You really should own the book if you want to sell beer in America. Robert Weinberg, who made part of his company’s extensive brewing data base available to the Tremblays, explains why in the foreword:

“The Professors Temblay have hit a home run. In a single volume they provide the theorist with more than adequate basic knowledge of the fundamental operating dynamics of the brewing industry. At the same time, they provide brewing industry executives with an excellent demonstration of how the tools of economic analysis can improve even the most pragmatic managers’ understanding of the environment in which they operate.”

Sometimes you can’t use the best ingredients

Green's gluten free beerThe easiest way to understand how malt and barley proved over several millennia that they are the best grains for brewing is to drink a gluten-free beer (no barley, wheat or rye).

That sounds harsh, but it’s hard to imagine choosing to drink a beer brewed for the gluten intolerant, most often celiacs, unless you have to. Maybe our brains must register the flavors of barley or wheat before they can think “hmmm . . . beer.”

But what if you grew up in sub-Saharan Africa, where sorghum and millet are more commonly used in brewing? Then you might feel the same way about what we consider traditional beers.

That’s why I really don’t understand seeing these beers “scored” against our standards at the beer rating sites. Part of the reason, of course, is that more smaller breweries are offering them, and therefore they get classified as “craft” and that means they are supposed to be judged to a special flavor profile.

Instead consider them an acquired taste. The slightly astringent, sometimes cidery, thumbprint of sorghum becomes part of their flavor profile. And despite how unappetizing that may sound brewers are finding different ways to produce an alternative for those who are gluten intolerant, want to drink alcoholic products and don’t want to drink wine.

(Just to be clear, being gluten intolerant is not like finding yourself a little stuffed up because you are mildly allergic to yeast. Celiac disease is a genetic disorder that causes stomach cramps and digestive problems and can lead to other serious health risks.)

Now a few examples:

– The easiest to find and the easiest to drink is Anheuser-Busch Redbridge, introduced not quite a year ago. It won a gold medal at the Great American Beer Festival in the new gluten-free category and deserved it. It knocks the rough edges off the sorghum profile better than any other beer, with some toasty sweet character.

– Merchant du Vin began importing three of the various gluten-free beers that Green’s in the UK has commissioned. All three of these are brewed at DeProef in Belgium, with Quest called a tripel and Endeavor a dubbel. Both have the bright esters you’d expect from the styles, a bit of perfume and certainly candy sweetness. (In the case of Quest, which is 8.5% abv, the alcohol is also pretty apparent.) Quest is spicier, while Endeavor has more fruit and caramel. Both exhibit what a beer judge friend of my calls “extract tang” that’s more noticeable at the start than after a few sips.

– Sprecher Brewing in Milwaukee has taken another approach with Shakparo Ale and Mbege Ale. They were first brewed for Milwaukee’s African World Festival and thus styled to be African. Mbege is made with bananas as well as sorghum and millet. I haven’t had it. Sprecher brought Shakparo, made with sorghum and millet to the GABF, where it won a bronze medal. It’s fruity, with some cider characteristics that seem more integrated than in other sorghum beers.

Depending on whose numbers you look at, there are between one and three million celiacs in the United States. Breweries aren’t making these beers as a public service, but it feels more like serving a community than exploiting one. According to Information Resources Inc., A-B sold about 21,000 cases in supermarkets in the first half of 2007, less than Michelob Ultra Lime Cactus and not even 5% of Miller Chill sales.

That’s why I would call these “beers of conviction.” A few months ago I began using that term and even created a category to file posts under. Perhaps I should further define what that means, but for now I know one when I see one. And these beers brewed for those who can’t enjoy barley or wheat qualify.

Stuff to read while drinking a winter beer . . .

A few things to read this evening instead of watching “Dancing with the Stars” or “Two Dudes Catering” (even though cheese is involved) and perhaps while doing research for The Session #10:

– Andrew Jefford, multi-purpose UK drinks writer, asks a question.

One day, fortunes will be made with fine beer. Why not one day soon?

In case you overlook it, he makes a great point: “all wine is able to profit from the locomotive effect of fine or great wine: the existence of fabulous bottles enables more ordinary bottles to bask in a little of their allure. Whereas, for most beer drinkers, great beer doesn’t exist.”

– And what might be a fabulous bottle?

Many would say Lost Abbey’s Angel Share (and I won’t disagree). Look at the ruckus Saturday’s release (and almost immediate posting on eBay) caused at Rate Beer. You’ll find reviews at Rate Beer, or at Summer of Beer.

Lost Abbey’s Tomme Arthur explains where all the bottles went and the behind-the-scenes volunteer effort involved.

Savor– The Brewers Association has more information about SAVOR: An American Craft Beer & Food Experience.

It would appear somebody has been reading Andrew Jefford.

The part beer drinkers care about: “Tickets for each of the three sessions (May 16-17) are limited to the first 700 ticket purchasers. The $85 ticket includes a commemorative tasting glass, souvenir program and Craft Beer Taster’s Commemorative Journal, fabulous food and craft beer pairings, seminars, and 2- ounce samples of specially selected craft beer.”

And what beer will be there? 48 breweries from eight regions will participate. The BA will randomly select five breweries from eight regions of the country, plus eight supporting brewery sponsors, to participate in the event. It’s a lottery, with winners announced in December.

– Dr. Vino partners on a paper to calculate the carbon footprint of wine. I’m hoping somebody does this for beer (because I’m too lazy). Notice the “green line” that runs from Ohio into Texas, because east of there wine from France leaves a smaller footprint than bottles from California. Think the same is true of beer?

Chocolate: Homebrew gone awry?

Researchers are reporting (I like the National Geographic version) that chocolate was discovered by accident by Central American Indians who were making beer.

“In the course of beer brewing, you discover that if you ferment the seeds of the plant you get this chocolate taste,” said John Henderson, an anthropologist at Cornell University. “It may be that the roots of the modern chocolate industry can be traced back to this primitive fermented drink.”

Duvel shaped chocolate

In a new study scientists chemically analyzed the Honduran pottery fragments.

“It was beer with a high kick,” said study author Rosemary Joyce, an anthropologist at University of California, Berkeley. “But it would not have tasted anything like the chocolate we have today.”

The Geographic suggests this could inspire new chocolate dishes.

(It) could “fuel creativity and spark the imagination of chocolatiers and chefs,” Alice Medrich, author of Bittersweet: Recipes and Tales from a Life in Chocolate, said by email.

“As a result, we get new ideas about using chocolate in savory as well as sweet dishes and about pairing the flavors of chocolate with other flavors, too,” Medrich said.

Meanwhile, I’m thinking that if you performed an MRI on the brain of Sam Calagione of Dogfish Head Brewery — the master at turning what scientists discover in ancient pots into beers we could never imagine — you’d see the wheels spinning at record speed.

Of course this only confirms a beer and chocolate connection that’s hardly a secret. Lucy Saunders devotes a chapter to “Chocolate: Another Fermented Favorite” in the recently released The Best of American Beer & Food: Pairing & Cooking with Craft Beer.

The photo above is from a chocolate shop in Brugges, where they shape really good chocolate into all manner of things, including a Duvel bottle and glass.

Further Reading:
– Pete Slosberg talks about shifting from the beer business to the chocolate business.
– A “chocolate companion” from Stephen Beaumont.
– Saunders offers recipes at her beercook.com site.

No, Pabst did not buy part of Southampton

Apologies, because I really don’t plan to make this site all Southampton-Pabst all the time. But since the question was asked and I obviously did not make it clear before . . .

Strategic alliance means just that. Pabst did not buy Southampton Brewing or an portion of the company. Southampton owner Donald Sullivan explained via e-mail:

“Pabst has not bought any percentage of SHB. Southampton stays independent. The strategic alignment is affording SHB a well established distribution network with full sales and marketing and marketing support while allowing PBC to begin to offer it’s distributors a specialty brand that has legitimacy in terms of quality and reputation.

“SHB receives economies of scale with market penetration equal to most or all of regional/national competitors while PBC is able to access and offer the myriad of styles available through the SHB license agreement.”

Tomorrow will focus on actual beer, not business. Hope that’s not an empty promise (because I don’t have a clue what it might be about).