Friday, April 24, 2015

There Will Be Blood

Dave Infante has written the best piece on the evolution of craft beer market I have read in quite some time (and not just because he quotes me).  I get asked all the time if I think there is a craft beer bubble and my answer is always no, but that I think the market is maturing to a point where price competition is coming and it will put a lot of pressure on small-scale breweries.  I expect that we will see a fair number of breweries closing but because of this dynamic, not because of a bubble. 

Go and check it out. 

A Visit to Growlers Hawthorne and the Wonder of Digital Pour


I found myself at Growlers on Hawthorne yesterday at the invitation of Jim Hillman, the owner, and came away impressed by the business in general, but particularly impressed by the Digital Pour system they have installed.  The place is simple and elegant: you come in, choose from about 40 different beers and ciders (and a separate kamboucha station that even includes craft root beer), fill your growler and off you go. You can sample anything you want  They even have parking right in the heart of Hawthorne.  They have a cute bike like painted on the floor from door to door inviting you to roll your bike right on up to the filling station so you don't have to lock it up outside - brilliant.  A growler fill starts with at CO2 purge and then a fill using a freshly sterilized hose each time, as good as it gets. 


But what really caught my eye was the Digital Pour system for displaying the beers.  As you can see above the information includes a logo (which allows Growlers to avoid tap handles and yet still let customers identify the brewer by logo), the brewery name, the beer name, a description of the beer, the place of origin, ABV, IBU and an icon that gives the customer an idea of the SRM or color of the beer and then the price of a growler fill for that beer.  Finally, there is an icon that describes the state of the keg - how much beer is left.  This information is uploaded in real time to their - wait for it - iTunes App, so you know exactly what choices your have when you go in (or if you need to hurry before a keg blows). The display also have a twitter feed that displays any tweets that mentions the store and information about what is on deck - beers about to be put on.

Turns out Digital Pour is a Portland company, as you might expect, and I have a feeling we will be seeing a LOT more Digital Pour displays around town very soon.


In the meantime, I recommend you check out Growlers.

Friday, January 23, 2015

Why AB is Buying Up Craft Breweries...and Why You Shouldn't Be Too Concerned.

News today that Anheuser-Busch InBev NV has agreed to buy Seattle's Elysian Brewing Company has, once again, rattled the craft brewing community as it follwos closely on the heels of the acquisition of 10 Barrel and, a couple of years ago, Goose Island.

This has arisen me from my stupor and prompted me to do an actual blog post which, ironically, follows my remembrance of Jack Joyce with whom I once had an extremely interesting conversation about the big breweries and craft beer.  The crux of the conversation was this: macro brewers could, if they wanted, brew outstanding craft beer: they have ultra-modern brewhouses, amazing brewing talent, access to the very best ingredients, fantastic distribution networks and the resources to invest in craft beer.  So why don't they?

Jack's answer was that their corporate structure, all centered around mass sales was not conducive to growing a new beer or brand.  The corporate culture insists on clear sales goals and to displace Bud Light on shelves and tap handles any new beer had better taking off flying.  There is no patience for slowly establishing a beer or brand.  Not to say their efforts have not been somewhat successful - Blue Moon and Shock Top are two moderate success stories but ones that have not really broken into the craft market.

So what does acquisition do that in-house cultivation doesn't?  First and foremost it solves the impatience problem.  By buying an established and respected brand you already have a proven winner to show the bean-counters and share holders. 

Which is why I am not worried about this that much.  They have learned that they cannot replicate craft brewing within the macro brewing corporate structure.  This has been a lesson that has taken some time to learn but I think has sunk in.  I think the attitude is, therefore, not to try and bring these craft brewing companies into the corporate fold, but to let the operate independently - to continue to do what they do and help them grow with capital infusions and improved distribution.  If you can't beat them, join them (or have them join you).

I don't know how long the corporate restraint will last, but it is quite possible that it will continue to last for a long time if the Goose Island experience is any guide.

Time will tell, but for now, I personally have no qualms reaching for a 10 Barrel or Elysian beer.

P.S. My apologies for the lack of blogging - it has been a combination of: becoming chair of the econ department, writing an economics textbook and a major family health event that has caused a lot of adjustment and changes (all is well - no worries). 

Friday, May 30, 2014

Remembering Jack Joyce


When the news that Jack Joyce had passed away at 71 reached me, I was surprised and saddened.  Surprised, because the last time I saw him he was typically high-energy and appeared indestructible.  Saddened, because he was a true Oregon original and the craft beer world has lost a legend.  [See this very nice Allan Brettman piece in the O for an understanding and bio of Jack]

So, I'll take a minute here to tell a story of Jack.  When I first arrived at Oregon State, I was asked to be the faculty advisor to the economics club.  I thought it would be fun to take the club on a trip to Newport to check out Rogue.  Given my Beeronomics bent, this was a perfect example of my schtick: let's use economics to understand the business of craft beer. 

I e-mailed the business office at Rogue, hoping to get 30 minutes with someone.  Instead what I got was a personal invitation from Jack, who ended up hosting us and entertaining us for hours: he made sure we were fed and supplied beverages (both beer and non-alchoholic drinks), spent about 2 hours sitting down with the group of us (about 10 in all) answering any and all questions we had and then took us over to the distillery where we spent another hour or so.  He was typical Jack: gruff, entertaining, outspoken...and altogether likeable.  About a week later I got a hand written letter from him thanking me for the visit.  His act of extraordinary generosity sticks with me to this day.

What I came away with from that meeting was just how much Rogue Brewing Co. is a company in his own image.  A company that does things its own way for better or worse.  Unconventional in every way and yet surprisingly successful - they have been pioneers in the early craft beer scene and continue to be with their in-house hops and malting operations and the like.  Jack really was a Rogue and Rogue really is Jack.

So this weekend  I'll raise a glass of Rogue beer in honor of Jack Joyce: Rogue and Legend.
   

Wednesday, May 14, 2014

How IPA Conquered the World

...as explained by The Economist:
The beer that craft brewers like making the most is IPA. Artisan beermakers in America adopted old recipes from Britain for their IPAs but gradually began to adapt the brews to their own tastes. The heavy use of hops allows them to show off their skills in blending different flavours. Some parts of America, like Britain, have an excellent climate for growing top-quality hops. The bold flavours and high alcohol content create a beer that has a distinct style and bold taste, yet can come in many shades. The passion for hops in American craft beers has taken on the characteristics of an arms race, as brewers try to outdo each other in hoppiness.
If no brewer in America can pass up the opportunity to make an IPA, the same is true elsewhere. As the craft beer revolution has spread beyond America, so has the taste for IPA. Britain is undergoing a brewing revival alongside a foodie revolution, based on local produce and artisanal methods. Much the same is happening in other rich countries around the world, where breweries are springing up to serve up craft beers. Indeed, IPA has come full circle. Many British craft brewers are using new IPA recipes imported from America for their brews but again adapting them for local palates. IPA may not yet have displaced lager as the global tipple, but it is at least battling for bar space with mainstream beers.
None of this is particularly new or enlightening, except for the fact that to Economist readers it might just be both.  For it is a truly global magazine and while the USA is awash in IPA, they style is still just catching on in other parts of the world.  It is almost completely nonexistent in Brazil for example and in the UK, the new upstart brewers who are going all-in on hops like Dark Star, Thornbridge and the global marketing phenomenon that is Brew Dog, face resistance from the traditional craft brewers that have been doing milds and bitters for centuries.  My favorite part o fthe UK craft beer scene is the slow coming together of these two forces in craft beer as breweries like Fuller experiment withe more hops while breweries like Dark Star try and perfect the perfect bitter. 

Tuesday, March 18, 2014

State of Beer in Oregon





This is just a plug for Damon Runberg's nice report on the brewing industry in Oregon.  Go have a look to get a very nice snapshot of the facts and figures surrounding the industry.

Monday, March 17, 2014

Happy St. Pat's Day: Time to Remind You That Guinness is Not Really That Irish

This time The Economist Mag takes up the case:
Arthur Guinness, who founded the brewery in Dublin in 1759, might have been surprised that his drink would one day become such a potent national symbol. He was a committed unionist and opponent of Irish nationalism, who before the Irish Rebellion of 1798 was even accused of spying for the British authorities. His descendants continued passionately to support unionism—one giving the Ulster Volunteer Force £10,000 in 1913 (about £1m, or $1.7m, in today’s money) to fund a paramilitary campaign to resist Ireland being given legislative independence. The company was alleged to have lent men and equipment to the British army to help crush Irish rebels during the Easter Rising of 1916, afterwards firing members of staff whom it believed to have Irish-nationalist sympathies.

The beer the company has become most famous for—porter stout—was based on a London ale, a favourite of the street porters of Covent Garden and Billingsgate markets. Since 1886 the firm has floated on the London Stock Exchange, and the company moved its headquarters to London in 1932, where it has been based ever since (it merged with Grand Metropolitan and renamed itself Diageo in 1997). Even in terms of branding, the company was considering disassociating itself from its Irish reputation as recently as the 1980s. Worried about the impact on sales of the IRA’s terrorist campaign during the Troubles, Guinness came close in 1982 to re-launching the brand as an English beer brewed in west London. But as Northern Ireland’s situation improved in the 1990s, the company’s marketing strategy changed again towards marketing the beer as Irish, aiming its product at tourists in Ireland and the estimated 70m people of Irish descent living around the world. Now the Guinness Storehouse, part of the original Dublin factory which was reopened as a tourist attraction in 2000, promotes Guinness to tourists as an Irish beer once again.
But for economists, the real story of Guinness is the Student's T-Distribution, from the authoritative Wikipedia:
In the English-language literature it takes its name from William Sealy Gosset's 1908 paper in Biometrika under the pseudonym "Student". Gosset worked at the Guinness Brewery in Dublin, Ireland, and was interested in the problems of small samples, for example of the chemical properties of barley where sample sizes might be as low as 3. One version of the origin of the pseudonym is that Gosset's employer preferred staff to use pen names when publishing scientific papers instead of their real name, therefore he used the name "Student". so he had to hide his identity. Another version is that Guinness did not want their competitors to know that they were using the t-test to test the quality of raw material.

Gosset's paper refers to the distribution as the "frequency distribution of standard deviations of samples drawn from a normal population". It became well-known through the work of Ronald A. Fisher, who called the distribution "Student's distribution" and referred to the value as t.
So raise a Guinness today not for Ireland, but for Econometrics!