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Upscale beer segment bucking the trend.

Upscale Beer Segment Bucking the Trend

Unlike overall domestic and imported beer categories, specialty beers accomplish sales and popularity gains.

Those in the know in the beer industry know this: things will get worse before they get better.

Yes, maybe dry beer will be the light beer of the 90s; yes, maybe the recent slump in import numbers is just a natural levelling off after an explosive growth period; and yes, maybe Surgeon General C. Everett Koop's recent attack on the alcohol beverage industry will not have the same effect as a similar 1964 surgeon general report had on the tobacco industry.

Those persons operative in 99.9 percent of the beer industry are the present-day incarnation of the little Dutch boy trying to plug a wall of mistrust and misleading statistics.

Apart from this stands that microscopic one-tenth of one percent; appearing immune to the malaise striking the rest of the alcohol beverage industry. The microbrewery and brewpub outburst contradicts all the tell-tale signs now present for the alcohol industry.

Although they account for a modicum of volume, the number of small brewers is growing, and along with it, the specialty products they produce.

All this is not lost on the major players who have slumbered in this market for some years now, but have hesitated in making a commitment. Now the giants appear to have awakened to the wondrous profits that await them beyond the Michelob and Extra Gold line. For now, the majority of the specialty-beer market is dominated by the small brewer struggling for a niche.

The question is why?

As with any success story, the biggest question which arises is why? Why the popularity of specialty beers in a period of stagnant growth for the rest of industry?

"Because we are still relatively small, our fortunes are going to rise and fall with our efforts and how well we do our jobs," says Thomas Potter, chief executive officer, Brooklyn Brewery, makers of Brooklyn Lager. "Whether the beer market goes up or down really will not affect us to any great extent."

Potter, along with fellow entrepreneur and business partner Steve Hindy, is a principal in a now-typical success story of an expanding specialty beer.

According to a company release, the Brooklyn Brewery venture was launched March 30, 1987 by Hindy and Potter. Both left cushy jobs--Hindy's journalism job had taken him around the world and Potter was a lending officer at a Chemical bank--to pursue this effort.

One year to the day, Brooklyn Brewery sold its first bottles of Brooklyn Lager to five accounts in the borough bearing its name. Directing its efforts exclusively to Brooklyn, the new brewing operation boasted 150 accounts by June and a guarantee of ink from the local tabloids.

Potter says the company is continuing to do well; it posted record monthly sales this March and a weekly sales zenith was set this May. Brooklyn Lager can now be found in approximately 500 Brooklyn accounts and to a lesser extent around the metropolitan New York region. This spring the brew traveled south to the Washington D.C.-Maryland area and to the Far East, arriving in Japan earlier in the year without much fanfare.

The recognition and expansion is nice, Potter says, "but Brooklyn is, and always will be, our home."

The 33-year-old Potter exhibits boyish ebullience when he enthuses, "We have the most successful new beer in the New York market and also the fastest growing beer, maybe with the exception of Michelob Dry," he reluctantly concedes.

The Yale graduate, while remaining supportive of other microbrewed and specialty beers, believes Brooklyn Lager will surpass the top New York specialty beer--Old New York Brewing Co.'s New Amsterdam Amber beer--within the next two years.

"Our philosophy is to be supportive of other microbrewed products and encourage it," he says. "People who drink better beers, I think, do not stick with one all the time, the way you might stay with a Budweiser.

"We would like to be someone's favorite ale but our main competition is not other microbrewed beers," he continues. "Success helps all of us and there is so much room for us to grow. We like to say that our greatest challenge is not our competition, but rather apathy and ignorance."

Moerlein advantage

Overcoming apathy and ignorance with the limited or nonexistent ad budget that most of the micros are strapped with is an herculean task, to be sure. The Hudepohl-Schoenling Brewing Co., a regional brewery that prides itself on being Cincinnati's brewery, and makers of Christian Moerlain are at a slight advantage.

Some advertising monies from the brewery do find their way to Christian Moerlein--monies that are spent educating the consumer.

"Did you know Christian Moerlein was the first American beer to pass the Reinheitsgebot law," Francie Patton, director of public relations for Hudepohl-Schoenling, asks the erstwhile ignorant interviewer.

Reinheitsgebot is the 1493 Bavarian purity law which signifies that a brew is derived from nothing more than water, yeast, hops and malt. The brewers who brew other quality beers containing no adjuncts and preservatives also make notee of this feat. Moerlein passed the Reinheitsgebot in 1983.

One look at Moerlein's point-of-sale, though, tells the story. Moerlein's purity achievement is widely heralded and Patton is noticably proud of this accomplishment.

"This is the beer people will have when they want something special," Patton explains. "There will always be a place for it, but it's not the type of beer where you would grab three six-packs and go play softball. It's more of an on-premise kind of beer."

Patton, like Potter, connects Morelein's sales with knowledge of its presence.

"People are becoming more aware of the beer," she says of Moerlein's 30-state distribution area. Moerlein is reportedly doing quite well in Chicago, where it can be found in finer dining spots. Hudepohl's public relations director also proudly recounts that Moerlein recently became available on Delta flights out of Cincy.

Christian Morelein, named after a German immigrant who brewed beer during the 19th Century, was first produced in 1981. Its current label, which features a woman from the Victorian age drinking a glass of her beer, is taken from an original Moerlein advertisement.

Patton is confident Moerlein's appeal and barrelage will grow--although no volume numbers were disclosed--along with the specialty beer segment.

The top three

If G. Heileman and Stroh aspire to fill Anheuser-Busch's shoes in the overall domestic beer market, then the participants in the specialty fraction wish to match the success of one of three men and three beers: Fritz Maytag's Anchor Steam Beer, Matthew Reich's New Amsterdam Amber beer or Jim Koch's Samuel Adams Boston Lager.

Maytag, a scion to the home-appliance fortune that bears his family's name, is generally credited with creating the market for upscale quality-brewed American beers.

Maytag's ascent in the brewing business is a tale of George Bailey-ian proportions. A foundering Anchor Brewing Co. was in need of wherewithal in the mid-1960s in order to pay its bills. Maytag, a fan of Anchor Steam, who was floating in and out of jobs and diversions, offered to bail out the brewing operation in exchange for a controlling interest.

Enraptured by its machinations, Maytag bought complete ownership of the San Francisco landmark and worked diligently over the next 10 years to create a fine-tuned super-premium beer. His tenacity has paid off. Anchor, which produces a number of beers including Anchor Porter and Anchor Wheat, brewed approximately 45,000 barrels of beer last year which places it in the top two of specialty operations.

Like Maytag, Jim Koch consigns a romantic flavor to beer making. A family trade for over 100 years, Koch first made big bucks as a consultant before brewing his first batch of Sam Adams in 1985. Since then, success has followed.

"We're doing fine," Koch says. Although he refuses to release exact numbers, he does admit the Boston Beer Co. is brewing over 40,000 barrels annually. "We are experiencing nice and steady growth."

Koch, a fifth-generation brewer has rattled some bones in the past. In 1986, the firm believer in the Reinheistsgebot law challenged German imports to pass the purity test. His quest continues to this day, and is now directed toward the domestically-produced ultra segment.

"Many beers that call themselves specialty beers are still lightened up with adjuncts," the brewer says, adding that it is his policy to brew Sam Adams no more than 24 hours before it reaches the consumer. "Let's face it, there is a huge difference in the taste of a Sam Adams than a Killians."

A Boston brewery was opened late last year to help accommodate the production of Sam Adams and its sister brand, Boston Lightship, but a majority of the suds are contract brewed at the Pittsburgh Brewing Co.

Koch espouses that the specialty beer market will get bigger and better, "as long as people who enter the trade learn their craft." Future ventures for the Harvard law grad include distributing Sam Adams out West and opening a brewpub in Philadelphia.

New York's entry

Not as big as Sam Adams, New Amsterdam Amber is as well-known in brewing circles.

Matthew Reich founded the Old New York Brewing Co. in 1982. New Amsterdam is the company's flagship brand, although Old New York recently introduced two new brands--El Paso Light and Whyte's Pale Ale--which are "doing great," according to Reich.

By Reich's estimation, New Amsterdam outsells its nearest specialty beer competitor by a 4-1 mark in the New York metropolitan area, the brand's biggest market by far, on about 15,000 barrels annually.

Old New York's president realized a short-lived goal a few years back when he opened a brewery in Manhattan. Spiraling costs forced Reich to close it down after a few years. New Amsterdam is currently brewed in Utica, NY at F.X. Matt's brewery.

"There is a definite trend toward small, specialty beers," the youngish Reich asserts. "I find accounts 100 times more receptive of my products now than when I first started.

"The increase has been slow, but now, in certain areas where specialty beers are big, you can walk into a bar and find three amber beers on draft."

Old New York's director sees this recent trend continuing despite a slowdown in the overall beer market.

Reich's biggest competitor for the super-premium beer drinker in the New York metropolitan area is The Manhattan Brewing Co., Inc. and its Manhattan Gold Lager. The SoHo-based brewery is in the process of overhauling Manhattan Gold's packaging and anticipating the opening of Manhattan's restaurant.

"We have a new packaging design for the bottled Manhattan Gold," Mark Witty, Manhattan's masterbrewer, remarked. "Distribution and marketing of the brand will be rejuvenated to coincide with the package change."

The lager's recipe is currently under review, according to Witty, but no major changes are planned. The restaurant's reopening has been victimized by some bad luck, but Manhattan's principals are optimistically gearing for a summer premier.

The imports--primarily exotic imports--are Manhattan Gold's biggest competitor, according to Witty.

Battle with imports

"Manhattan Gold is up against Beck's, Heineken and Pilsner Uruquell as much as New Amsterdam," Witty explained.

And what of the competition with New Amsterdam for the New York drinker?

"We generally feel the competition helps," the former Sam Smith brewer announced. "The benefits outweigh any faults. If someone has a Sam Adams up in Boston and then sees us, they'll be more likely to try the product if it's looked upon as a Sam Adams from New York. Other products create interest which is what we need."

The 33-year-old Witty sees a two-pronged trend developing in the industry: one in which American drinkers are beginning to shy away from the mass-produced product and toward the micros and imports, and another which features a reduction in alcohol consumption.

The latter notion will occur, he says, if Americans allow alcohol to be amassed with drugs. This is an image Witty, a European with strong beer roots, believes to be inaccurate.

"The biggest problem is alcohol and drugs are being lumped together," he maintains, "and it's bred from a certain amount of hysteria in this nation.

"Beer is part of the fabric of my culture, part of my history and a staple of my diet. I think this prohibition outcry is ridiculous for a product that, when used moderately, can actually be good for you."

New Amsterdam is not the only ultra-premium beer produced at the F.X. Matt Brewing Co. Saranac 1888 is Matt's own entry into this category.

Saranac 1888 was launched in 1985 and has been expanded ever since. Last year was the beer's first in New Jersey, but the brew is distributed through much of the Northeast, as well as areas of California and Florida. It is an all-malt product that brewery chairman F.X. Matt has said, "is the beer I've waited a long time to brew."

He continued, "We believe a growing number of beer consumers want a heartier, more robust beer with an abundance of rich flavors. To make such a beer you have to use the more expensive malt of the two-row variety for body and character, with a subtle softness and plenty of rich aromatic hops."

Some miles east of Utica lies White River Junction. Even in its home state of Vermont, this sleepy town is far from becoming a tourist hotbed; unless you are a fan of Catamount Brewing Co.'s products.

The vision of founders Alan Davis and Stephen Mason, Catamount became a reality in 1984. Since then, sales have progressed "slightly faster than we thought" according to Davis, to the present-day total of 4,500 barrels a year.

Catamount limits itself to three distinct beers, produced year-round: Catamount Amber, Catamount Gold and Catamount Porter.

Category demographics

The "light lager world" that Davis describes is slowly disappearing due to a growing awareness by beer drinkers of the wide variety of beers that are available. "The knowledgeable consumer is availing himself to this market," Davis states.

The ominous cloud of neo-prohibitionism looming in the vicinity of the brewing giants does not appear as threatening to Davis and his business.

"I don't think Koop's movement affects our side of the business as much for two reasons," he expounds. "Our consumers are health conscious and have a moderate consumption pattern. People who drink our beers drink less, but are highly conscious of what they drink."

Appearances aside, the popularity of specialty beers is not confined to the East Coast. The micro movement in California--initiated by Anchor and substantiated by Sierra Nevada--and Washington (Redhook being the giant out there) has been well documented, but Colorado is also a key contributor.

Boulder Brewing Co. does not brew as much beer as in-state neighbor Coors, but it turns out a wide variety of libations: Boulder Extra Pale Ale, Boulder Light Ale, Boulder Porter, Boulder Stout and Boulder Sport.

The Boulder Brewery, a 10,000-barrel facility constructed in 1984 is home to these brews; two of which have won awards at The Great American Beer Festival.

Joining Boulder out west is the Stanislaus Brewing Co., Inc. in Modesto, CA, the home of St. Stan's Alt Bier. Company literature describes St. Stan's as "a beer brewed according to the lager process, but using a top-fermenting yeast. Its color is a deep, reflective copper, brewed with dark malts and well hopped," while possessing a "slightly fruity, bitter-sweet taste."

Three of these non-pasteurized, all-natural products are brewed: Amber, Dark and the seasonal Fest beers.

Garith Helm, owner of the brewery, began brewing beer in his garage in 1984, but the hobby quickly grew into a business, and by July, 1985 the marketing of St. Stan's had begun.

The beer has grown steadily, recently reaching the brewery's maximum capacity. A $3-million pub and restaurant expansion to handle St. Stan's growing popularity is now in the works, Helm reported.

The California microbrew received a big lift earlier in the year when it was chosen by Orlando-based Disneyworld to be featured in restaurants, hotels and retail outlets at the amusement park.

Big guns take aim

The undeniable success of the specialty beer has also prompted involvement in this category by the industry's big guns. Stroh Brewery recently purchased the Augsburger brand from the defunct Jos. Huber Brewing Co. (now Huber-Berghoff). Anheuser-Busch has expanded markets of its Anheuser Marzen "ultra-premium beer." But Coors Brewing seems to have the greatest hold for the majors with George Killian's Irish Red.

The story is now familiar: George Killian Lett held out against modernization and mass-production in his Irish homeland, until Coors came along. The Colorado giant began brewing Killian's Red in 1981 with initial distribution limited to a handful of states. Killian's now is available, on draft, in 49 states with the exception of Indiana. Bottled Killian's can be found in 43 states.

According to the Golden, CO brewer, Killian's is experiencing double-digit growth. Long-neck bottles were recently introduced to help capitalize and continue this growth, the company said.

Coors brews a separate, seasonal super-premium suds, Winterfest. At presstime, the company was optimistic for a 1989 edition, but not certain.

A-B has approached the specialty category a bit more cautiously than the dry beer market, but feelers are out in the form of Anheuser Marzen.

A non-pasteurized product, Marzen is currently available in New Hampshire, Virginia and Missouri. The brew is handled by 10 wholesalers, according to brand manager Dave English.

Currently the super-premium brew, which uncharacteristically receives no support, is in what English calls a "controlled expansion," stage.

"We are taking it slowly and carefully," English says about the brew's limited availability, "and learning in the process of adding more markets."

Some additional market expansion is planned these next couple of years. English reported that sales in the areas where found are good, and the home market of St. Louis leads the way.

A release informs of the quality of products that go into Marzen: European hope, pure water, lager yeast and malt derived from two-and six-row barley.

Current numbers indicate a demand for Marzen, A-B says, and the company is looking to satisfy that want and keep an eye open for future developments within this segment.

"Our policy is to be a player in segments that warrant our attention," English states. "Right now we are interested in pursuing this super-premium market."

PHOTO : Anheuser-Busch's Marzen brand, presently in a "controlled expansion," is available in

PHOTO : Missouri, New Hampshire, and Virginia.

PHOTO : Boulder Brewing Co.'s Extra Pale Ale is just one of several specialty beers produced by

PHOTO : the Colorado microbrewer.
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No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1989 Gale, Cengage Learning. All rights reserved.

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Author:Pepper, John E.
Publication:Modern Brewery Age
Date:Jul 10, 1989
Words:3094
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