A visit to the Elk Mountain Hop Farm, courtesy of Anheuser-Busch.

The A-B Specialty Brewing Group recently allowed a large group of journalists to observe the hop harvest at the A-B hop farm in Bonner's Ferry, ID.

Hops in Idaho. Plump, ripe cones ready for picking. And in the background, the Selkirk, Purcell and Cabinet mountain ranges. This was the setting last August for the third editors' roundtable sponsored by Anheuser-Busch's Specialty Brewing Group. Over forty beer editors and writers from across the United States gathered in Coeur d'Alene and Bonners Ferry, Idaho, for three days of presentations, Q&A sessions and a visit to and tour of A-B's Elk Mountain Hop Farm.

Formed in 1994, the Specialty Brewing Group is responsible for A-B's efforts in the fast-growing specialty beer segment. Senior Brand Manager Bob Franceschelli led the presentations on the first full day of the roundtable. He began by stating what he sees as three positive points for the growth of his group's specialty beers - increased demographics in the country, increased excitement about specialty beers by beer drinkers and dietary guidelines stating that moderate alcohol consumption is good for you.

Continuing, Franceschelli explained four reasons contributing to growth in the specialty segment. First, there is the large number of microbreweries, brewpubs and contract specialty brewers in the country. Second, for distributors specialty beers create good margins. Third, what's true for distributors is also good for retailers - good margins on specialties. And fourth, consumers enjoy the variety of flavors from the many specialties on the market, and they now have the discretionary income to buy these products.

The A-B product portfolio, as outlined by Franceschelli, follows this hierarchy: First come the A-B core, mainstream brands: Bud, Busch, Natural Light, etc. and all their variations. After this, the Specialty Brewing Group's products enter. These start off with Michelob Specialty Ales & Lagers (Amber Bock, Golden Pilsner, Hefeweizen, Honey Lager, Pale Ale, Porter, Maple Brown Ale and WinterBrew Spiced Ale). American Originals (Black & Tan, Faust, American Hop Ale) and regional specialties (Pacific Ridge Pale Ale in northern California and ZiegenBock in Texas) are next in the portfolio, along with Red Wolf. Finally, for the hard-core specialty drinker, there are the Redhook beers brewed by A-B's "alliance" partner in Washington and New Hampshire.

Franceschelli said that with Michelob Specialty Ales & Lagers, "The eggs are in this basket for growth. They perform well, in some markets better than others. These beers are true to the style they're patterned after, but milder and easier for the drinker not accustomed to these styles and increased flavors." Asked about pitting these beers against A-B's core brands in the marketplace, he replied, "We think the two can co-exist. If there's a viable segment, we want to participate in it - to sell enough to keep it fresh on the shelf and keep it viable to us." He went on to say that the American Originals product line is now sold in kegs nationwide, and that the beers are doing well in select markets. He also pointed out that the marketing of these beers goes well with A-B's new TV ad campaign featuring August Busch III and his family's hundred-year-plus roots in the company. As for the regional specialties, "Pacific Ridge may expand East a bit. It has long term potential. Zeigenbock does well in its limited market, and we fend off requests to expand it out of Texas."

The Specialty Brewing Group's marketing strategy is much the same as Franceschelli outlined at previous roundtables. Four groups of beer drinkers have been identified and described:

* Group 1 consists of 86% of total beer drinkers, They drink regular brands, and don't drink micros. A-B's core products (Bud, Busch, etc.) are targeted for this group.

* Group 2 consists of 7% of total beer drinkers. They drink regular brands most often, but may have tried a micro in the last week. Red Wolf and Michelob Specialty beers are targeted for this group.

* Group 3 consists of 5% of total beer drinkers. This group drinks micro brands most often, but also has regular brands in their set, and have likely had one in the past week. Red Wolf, Michelob Specialty beers and American Originals are targeted for this group.

* Group 4 consists of 3% of total beer drinkers, and while they drink 1% of overall volume, they consume 23% of micro volume. They have more brands in their set than Groups 13. A-B's alliance brewing partners (Redhook and any brands rumored coming into the fold, such as Widmer) are targeted for this group.

Franceschelli said that drinkers in Groups 3 and 4 tend to be the most highly educated of the four groups and to live in major cities. Naturally this is where he will focus his marketing efforts for the beers targeted for these groups. Minority interest in specialty beers has not been strong, so there are no plans at present to market A-B's specialty beers to minorities.

Brad Studer, manager of the Elk Mountain Hop Farm spoke next. Opened in 1987 in Bonner's Ferry, Idaho, less than ten miles from the Canadian border, the hop farm sits in the Kootenai River valley. The farm, owned and operated by Busch Agricultural Resources, Inc., covers 1,800 acres and is the largest aroma hop farm in the world, producing only Hallertau, Saaz and Tettnang hop varieties. Plans call for adding an additional 400 acres in the future.

Studer, who said he wanted to be a hop farmer from the age of six when his father took him to visit a hop farm, said the location of the farm was chosen because it's the same latitude as Europe's best hop growing regions - approximately 49 degrees north of the equator with sixteen hours a day of sun during the peak growing season - and has good clay loam soil.

The first year of operation, 1987, 600 acres of hops were planted, beginning with Hallertau. Eighty percent of the hops made it to harvest.

When the fields were being set up, workers installed 1,250 twenty-foot poles each day.

The estimate for the 1997 harvest, Studer said, was two million pounds. It would take 371 employees to complete the harvest, working around the clock for three weeks before the first frost in mid-September.

Elk Mountain grows just shy of 8% of A-B's hop needs. The reason for operating the farm is not to compete with other Northwest hop growers, he continued, but to grow hop varieties that other hop farmers are not willing to grow - specifically the European noble hops. Franceschelli added, "It makes financial sense for A-B to own a hop farm and to educate ourselves about the hop market and to make sure our suppliers are honest with us.

After Studer's talk the group boarded a bus and headed north to Bonner's Ferry and Elk Mountain. A surprise awaited the editors and writers as they descended the steps of the bus at the hop farm. There to greet them was August Busch III, Chairman and CEO of A-B, Inc. Busch joined the group for an outdoor BBQ lunch and fielded questions from the journalists.

Busch stated his belief that the specialty segment has expanded the taste spectrum of beers overall. He predicted a stable industry, with a 1% increase this year, and said that specialties have raised the pricing cap.

He also emphasized his disdain for price cutting. "That's not the way to increase market share," said Busch. He stated firmly that A-B "will not lose our share of the market."

After lunch the group toured the facilities of the Elk Mountain Hop Farm, where the harvest was in full swing. (see sidebar)

The next morning Steve Michalak, an A-B brewer and the new head of A-B's Pilot Brewery Operations, spoke about the ways in which the Specialty Brewing Group plans new beers. Ongoing research includes beer style taste panels, lab analysis, wort panels, malt comparison beer trials, the brewing of single hop beers and yeast strain selections. How does the group decide on which new beer to brew? "Executive decree is number one," said Michalak with a smile, "followed closely by marketing research and suggestions from A-B brewmasters. There are also wholesaler driven brands, such as Pacific Ridge and ZeigenBock."

Initial research into new beers comes from A-B's 10,000-volume corporate library, the company database and archives and staff brewmasters' experience. From these sources are established the flavor profile of any new beer to be brewed at A-B's Research Pilot Brewery (RPB).

The formulation of recipes includes establishing the finished beer's specifications, calculating the grain bill, selecting a mashing schedule, determining the hops to be used, setting fermentation times and lengths and determining any other needed analytical requirements. Since hops were the focus of the roundtable, Michalak told the attendees that A-B uses twelve imported and six domestic varieties for its many beers. The decision of which varieties to use is determined by the style of beer and the taste desired. At the time of the roundtable Michalak said that nine new products were in the works, and that at any given time up to forty new beers could be going through the RPB. Another important job of the RPB is to research and test new grains, malts and hops to protect the integrity of A-B's flagship product, Budweiser.

"Cost is not a factor," Michalak emphasized, "in formulating and producing new beers. August Busch III won't allow cost to be a problem. He tells us that the dollars will always be there. He wants only top quality, regardless of the cost."

During the following Q&A session, Michalak and Franceschelli both stressed that the RPB brewers and the marketing department work together. "We are a team with the RPB," said Franceschelli. "We ask them what they want and would like us to do." Franceschelli also pointed out that the Specialty Brewing Group is consumer driven, not marketing driven. "We are marketplace driven by the consumer," stated Franceschelli. "We do what he wants. Focus groups help us determine which product we'll go with."

Commenting more on the four groups of beer drinkers identified by his department, Franceschelli admitted that drinkers in Group 4 don't accept A-B's specialties. "That's why we have our alliances," said Franceschelli "We have a bad rep with consumers in Group 4 that isn't justified. To turn around these drinkers' perceptions will take time. However, we will work and strive on drinkers in Groups 2 and 3. These we consider the low hanging fruit. They don't always want to go for stronger flavors, but we hope to catch them with our specialties and move them around."

Advertising for the Specialty Brewing Group will be commensurate with sales, said Franceschelli. "We don't have plans for TV or radio at this time. I do, however, like mainstream media and as much of it as I can get."

As for distribution of their specialty products, Franceschelli said that A-B could possibly go to a second set of distributors. "It's a big question under consideration," he explained, emphatically adding, "We very stringently support the current distribution system and don't want to jeopardize that." A-B currently has 850 U.S. distributors.

Asked about the withdrawal of the Elk Mountain brand, Franceschelli commented, "The package design wasn't right, the tall bottle wasn't right, the price was a bit too high and our wholesalers were not with it. Not enough was moving."

Franceschelli was asked about A-B's "100% Share of Mind" policy with distributors and if more money would be put into marketing, sales and advertising as A-B wholesalers remove non-A-B alliance beers from their portfolios. "What the wholesalers carry is up to them," responded Franceschelli. "That's an option decision they have to make independently.

"We think we can satisfy all their demands between our portfolio and our alliances, if not now, then in the future," Franceschelli said. "Since November 1996 we've come out with three additional nationwide Michelob Specials, we've come out with two new regionals and expanded one, and we've come out with a new American Original and expanded the distribution of the other two American Originals.

"So we've introduced nine beers," he continued. "They're all available nationwide, with exception of the regionals, with every wholesaler except in the states of Oklahoma, Utah and Mississippi. And we've now done lower alcohol versions of a couple of those brands because wholesalers asked for it."

Wholesaler education was also stressed by Franceschelli. "They don't get enough," was the simple statement. "We do educate them better than any supplier, but we think there's still opportunity to educate them further."

To this end, A-B has set up a new program called the Busch Satellite Network. "This is an electronic feed to all our wholesalers and it's kind of an optional/mandatory thing," said Franceschelli. "We think if they participate in it, it works tremendously to their benefit."

RELATED ARTICLE: GROWING HOPS AT THE ELK MOUNTAIN HOP FARM

Hop vines grow tall. Very tall. Fifteen- to twenty-foot heights are common. They need a trellis system and on the 1,800 acres planted with hops at Elk Mountain there are 108,000 poles (each 20[feet]6[inches] in height) and 2,880,000 pounds of wire in use. Approximately 13,000 knots are tied each day by the average twiner, and 12,600 miles of twine are used in stringing. There are 889 hop plants per acre, and during the peak growing season a hop plant can grow one foot a day. During the harvest at Elk Mountain, hop vines are gathered in the fields by hand, mechanical hop pickers and by combines. The vines are trucked to a cleaning shed where they are snagged by hooks and pulled upside down on conveyors into a machine that separates the hop cones from the vines, stems and leaves, Kiln drying follows, where over a five-hour period the hop cones are brought from a starting moisture of 80% down to 10%. The cones dry in containers that are 32 inches deep by 32 feet square. After drying, the hop cones are whisked by conveyors over to a bailing room where they are compressed into 200-pound bales, loaded into refrigerated trucks and finally stored at 26 degrees Fahrenheit until needed.

The harvest ends in September, before the first frost, and the growing cycle begins again. Workers maintain and repair the poles and trellis during the autumn months, unimaginable amounts of snow falls during the winter and in the spring the entire cycle begins again.

Greg Glaser, who lives with his family in Wilton, CT, is a freelance writer and certified beer judge who writes frequently for Modern Brewery Age.