Tomme | June 24, 2007

Welcome to the Crossroads.

It’s 2007. We are in the midst of what many are calling the most amazing time in the history of beer in our country. So my friends, welcome to the Crossroads of American Brewing. In 30 short years, we have bolted from the basement of brewing and have catapulted ourselves into a pool of the most diverse and progressive thinking brewers in the world. We’ve left our storied but diluted American Brewing History behind us. Now we are fully united as a nation of loose cannons firing shots across every sacred brewing bow in the world. And you know what? It feels good.

Actually, it feels better than good. Why? Because some of the most creative and interesting beers are being made right here in my proverbial backyard.

Sure there is a measure of egotistical Americana involved in a statement such as that. But it’s true. In the last 30 years, we have gone through a revolution of brewing from 65 breweries to over 1400- the likes of which we may never see again. During this transition from pallid watered down lagers to more uniquely American full flavored ales and lagers, we have witnessed the rise of an American Brewing Scene which is inspiring brewers from here to Timbuk 2.

We’ve resurrected styles of beer that were headed the way of the Woolly Mammoth. Extinction is not in our nature as brewers. We believe that our beers live and breathe and that somewhere, even if in a remote corner of South Dakota, there is a consumer who needs our beers. And these days, it seems like there really is a need for these beers.

The internet has fueled a global trading empire for the smallest batch beers. It’s impressive to see beers from Norway and Denmark routinely show up on our bar during samplings. It’s not like that guy walked into his local 7 Eleven and asked them to replace Natty Light. Or did he? I’m starting to see our Wipeout IPA in 22 oz bottles on the shelves of 7 Elevens. I think Global Warming might be causing Hell to slip into some sort of Beer induced perma-freeze? It’s crazy. And at the same time, It’s down right exciting.

So, today I feel like I am truly standing at the Crossroads of American Brewing. We may finally have reached the proverbial Tipping Point- that one place and moment in time where things shift for the better and only later can we look back and view the momentous accomplishments with better clarity. Sir Isaac Newton once proclaimed, “If I have seen further. It is because I have stood on the shoulders of giants.”

A solidified beer foundation has been laid by the pioneers and those who blazed the malted trails before us. These breweries are fully invested and dot the new American Beer landscape. In 30 short years our roads have been carved, paved and continually stretched by the great brewers at Sierra Nevada, Anchor, Widmer, Goose Island, Alaskan Brewing Co and numerous others. And they continue to innovate, experiment and refine their beers ensuring they are delivering a World Class beer at every turn. These are the beers of My American Breweries. These are the beers I think of when I hear the words American Beer.

And for that, I am thankful to have reached the Crossroads when I did. But the coolest thing about Crossroads is that they have several paths leading in and out of the same intersection. In this way, each brewer wandering down the path that is known as American Brewing has an opportunity to set out in differing directions. This is my favorite part of reaching this intersection. Every time you get there, you always get to make a decision about which direction to set off in.

It was inevitable that we would all meet here. When you’re working to grow the whole category of better beer, a party is bound to break out when you start to reap what you have sowed. Today, I see American Craft Beers standing squarely shoulder to shoulder, like giants, at the Crossroads. Our growth numbers are staggering and Americans are clearly embracing flavor and all the excitement our beers offer

During the last 30 years, we have honed our craft and without fail, we have educated the consumer all the while keeping our feet squarely on the accelerator of flavor. In this way, we are consistently delivering new experiences seemingly on a minute by minute basis. Yet, there are always new crusaders joining our cause. The result is that now that we have reached the Crossroads, we get to greet our new fellow brewers who have journeyed to this place as well.

Five years ago, there was no Surly Brewing Co. Captain Lawrence Brewery was only an idea in Scott Vacaro’s mind. And, 60 months ago, there were only a few pieces of scribbles on paper regarding this Lost Abbey. Yet, some of these brewers and their beers now dot the landscape of American Brewing. Don’t for a moment think that people haven’t noticed.

So now that many of us have reached this great place known in my world as The Crossroads, it is our duty to offer assistance to those who have come with good intentions. Those seeking The Crossroads like a miracle diet pill will find only a placebo in their quest. For the Crossroads are not found on a marketing map. You can’t ask a focus group for directions and if you happen to find it mistakenly by the Grace of God, don’t be surprised if an Italian Brewer from Delaware asks you to point your car back in the direction you came from. It was a long tiring road to get here.

We’ve earned the right to be a little arrogant about our beers. Seriously, no where else in the world can you find this level of diversity being exercised at this highest of qualities. In 30 years, we have scaled a massive mountain and we did it by blazing our own trail. Many of us will be seen as the Giants Newton alluded to. But you’ll need to excuse me for a moment as I am not ready to retire just yet. You see the thing about explorers is that they are always looking for the next adventure.

This means that when the time comes to part our ways, we’ll set off going back in a direction possibly from whence we came or potentially, one that we hadn’t realized even existed. Now that I have found this place, I have come to the conclusion that while I like the paths currently leading into and out of it, I typically much prefer the road less traveled.

So, if you see a semi bald brewer wearing board shorts, flip flops wielding and a Chainsaw. Fear not. You have found the fearless author of this tome. Every explorer needs the right tools to navigate his or her way. A chainsaw may be the one piece of equipment that allows me to see the forests from the trees. If you want to meet me at this proverbial intersection, I am always in need of companions. Just make sure you bring enough gasoline to keep the Chainsaw running. As a wise Carpenter once opined, ”We’ve only just begun.”

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Tomme | June 5, 2007

So this past week was a very busy one with the Real Ale Festival in Carlsbad going on among other things. On Sunday, I decided like the last 10 years not to run the Rock and Roll Marathon. But for those of you who care, there is a Marathon in Dublin in October that interests me. Can you imagine how good that Guiness would taste?

I titled this two things tonight as there have been two online things that have piqued my interest in the last week. But before I digress, I thought I would share that after a weekend full of Real Ale(lord knows I don’t drink Fake Ales) and Vince’s food, I opted for a Spring Mix(read May Showers bring Weed Salad) with Blue Cheese and Sauvignon Blanc for dinner tonight.

This is important as I will shortly come to the defense of my beloved barley while consuming wine(just to prove I am an equal opportunity spirited writer)! So, this evening I am coming at you live on the heels of glass number two of Joseph Phelps Napa Valley 2005 Sauvignon Blanc. Because I know that my readership is terribly concerned with appellation issues.

So, tonight is about two things. Well, maybe three things. First, I haven’t yet used this blog to discuss the politics of anything so we’re going down that road tonight. Below, you will find some questions. These were recently published in an article in which the CEO of SAB Miller was interviewed. In an effort to dismiss rumors of our impending merger with a larger conglomerate, I thought I would take the effort to answer the same questions on our terms. Please follow along at home(with apologies for the lack of brevity. His not mine)! This is a two part posting that will get into the wine side of things later.

For the sake of this blog, let’s pretend that I was being interviewed about our year using their questions. It’s fun. I swear it is. From his interview then.

How would you characterize the company’s fiscal year just ended?
The SAB Miller Answer- The year gone by has been very successful. Latin America was amongst the strongest regions of growth, but Europe was as impressive. And we also had very strong volume growth in Asia, so our performance all around is strong.

Tomme Responds: Well, we’re still in business after our first year. I think that’s pretty kick ass. We made a bunch of new beers and we didn’t kill anybody. As for Latin America, it was our weakest region but Europe was awesome. They opened their arms to me and I can’t wait to go back and brew another batch of beer there. I’m thinking of hooking up with the guys at Struise. They make great beer. In terms of Strong Regions, we experienced great growth everywhere we went. Personal Growth is most important to me. I had a lot of it this year. We especially made in roads in the North East. The weather may suck but the beers are great and the people the best.

We haven’t been able to tap into that hot Asian market yet. Too many young drinkers. We feel there is most certainly a happy ending or two waiting for us in the future should we allow our brands to go there. But we’re holding out waiting for maturation of our stuff.

Is the integration of Bavaria, which you bought in 2005 for $7.8 billion, now complete?
It’s pretty much over with. We are now in the middle of changing the trajectory of the business. Bavaria is about a third of our profits, and this year will be one of great investment in the business.

Tomme Responds: Everyone knows by now how I view Germanic Brewing traditions…It would be a silly investment for me. However, I’ll take a fleet of their Mercedes delivery trucks. Our beer deserves the best. They make soft suspensions. At least that is what I have been told.

He says,“For example, we are building a new brewery on the outskirts of Cali in western Columbia. We’re essentially taking a disorganized portfolio of regional brands and making that portfolio more national, with a bit of character to it.”

Tomme says- I’m 100% independent but we will always have a disorganized portfolio. Just ask my accountant. Adding character is something that writers do when there’s a need. Unless of course the plot line doesn’t require attention. Methinks, I should start investigating that need in Western Columbia during revisions too? Nah, we’re solid in act II. Perhaps when we get to act IV?

Do you often take beers across borders?
We do, if they show signs of suitability for that. We have designated three of our brands for marketing around the world – Peroni Nastro Azzurro, Pilsner Urquell and Miller Genuine Draft.

Tomme responds: I take beer across every border possible. Beer is the ultimate conversation starter no matter what language you speak. It’s a quintesential beverage. It is perhaps the one thing that qualifies as a universal language.

Which of those three has had the most success overseas?
MGD. We make MGD in Russia, Italy, Poland, Hungary and South Africa, as well as in the U.S. It is almost a billion liter brand in Russia and is very popular on the club scene.

Tomme Says: We don’t have a billion liter brand of anything so I will put my money on anything that Sam Makes. Dogfishead is a universally, globalized, serialized thing. I even know which state that beer is made in… Thank God my fifth grade state report was on the great state of Delaware or I wouldn’t be able to find it on the map!

After that, I would say Brooklyn and New Belgium. I love Peter but he speaks funny English. This is better than ok as I speak funnier than you know what Flemish. As for Garrett, we’re still trying to figure out what language he speaks.

Your growth last year came partly from renovation of mainstream brands. Can you give an example?
We have those three international brands, but we also discovered that other brands have [cross-border] appeal. For example, we have a brand called Kozel, which in the Czech Republic is a lower mainstream brand. The brand’s symbol is a goat. In Slavic countries, the goat symbol plays very well and so Kozel has become a roaring success there. I don’t really understand why.

Tomme Replies: Well, we knew Sharkbite Red Ale would be our go to guy for the first year. Like a cagey veteran, we signed on for a two year deal. We’re in the process of reloading our talent and think we’ve got the key players inked to long term deals. They may be short on experience but their entusiasm more than makes up for it. As for symbols, we think the Celtic Cross plays well in countries where drinking is legal. You know, the Christian ones.

What about China and India?
Those markets are polar opposites of each other. The Chinese market is very open commercially – there are very little licensing requirements. It is a very high volume, low price market. We sell roughly as much beer in China as is sold in the entire UK market.

India is the opposite: it is tiny, and has by far the lowest beer consumption per capita, at less than one liter of beer per annum. Their relationship with alcohol is quite troubled. Recall that Gandhi was a teetotaler. The problem is just trying to peel back the state. It is very difficult to get permits to do anything. Ironically, India’s economic development is held in check by its democracy.

Tomme Thinks: I should visit there one day? Either one of them. I too have a Buddha Belly. I am troubled by teetotalers. Aren’t we all?

How are you growing the Chinese market?
What we have been doing in China is taking brands national, getting better distribution, and improving quality dramatically. Our brand Snow is the most national brand but no Chinese beer brands are truly national.

Tomme Says: We are growing like Snow White’s date on prom night in China. It’s a very liberating experience. We hope to continue the unveiling there. We will let China come to us, that’s my motto.

Save for imports and craft beers, the U.S. beer market continues to stagnate, and your profits there declined for the second straight year. What’s the problem?
Two years ago we did not declare victory when things were going swimmingly for us in the U.S. so we are not declaring defeat now. The issue right now is cost pressures, in aluminum specifically. We spent about $100 million dollars more on aluminum this past fiscal year than the year prior.

Tomme Says: I blame Crackhead Dave… He’s a big fan of alumininum. Me, I have no worries. Our beer sells itself- with or without boobies. I like that part about our beer. “It taste’s great without all the filling…” Aluminum is something I don’t have to be concerned with. Crackhead Dave on the otherhand….At least he doesn’t run $100 million in damages.

What do you make of the craft beer resurgence in America?
I think it’s going to fade. It’s inevitable.

Tomme Says: I for once agree with him. It’s inevitable that our beers taste better and it(macro brewed beers) will fade. But that’s just my .02 worth. My money is on Avant Garde in the 5th race. I know it’s an underdog(small stable with low resources but there’s just something about the little guy that makes me feel good).

Tell us about Miller Chill, which you just launched.
We launched Chill in a few test markets and it was so well received that we are taking it nationwide by the Fourth of July. It’s an American take on a Mexican classic – a light beer with lime and salt. That doesn’t sound very prepossessing but it drinks extremely well. It is flying off the shelves now.

Tomme Says: I enjoy a michlada when I am in Mexico or close by. I have yet to enjoy a Miller Chill and I will always go for the original. I have a feeling it’s flying off the shelves due to Seismic Activity? I blame Global Warming for plate shifting and the ensuing earthquakes knocking the product from it’s place.

How is Anheuser-Busch looking?
I would say it’s too soon to tell. [New CEO] August Busch IV brings a fresh approach.

Tomme Says: Like a redheaded step child on Christmas or an analyst on Wall Street. Either way, there is a lot of spinning going on. Reminds me of Dizzy Sticks at the AB Company Sloshball Game. Tough to find first base. I hear Louie the Lizard is coaching First these days. They put him out to pasture. He loves the well manicured lawns of the baseball diamond.

“Fresh” how?

I don’t want to comment there. They are grappling with their problem, which is essentially the difficulty of providing growth when you have such a huge position in the mainstream U.S. market.

Tomme Says: I’m pleading the 5th. My boy Sam was deposed enough for 16 of us.

Is it worth it to get into a price war with A-B in the United States?
We try to build brands rather than cutting prices. It sounds pious but it’s true. A-B’s advantages are in the mainstream, where they have huge operating scale and can provide superior levels of service. So I think we’ll take them on in things they are not as good at, which is premium brand development. A head-to-head slugfest with A-B in their heartland is not very smart.

Tomme Says: Well, We hate to agree here but a head to head anything at this point would be foolish. We make beers that amaze people. They make beers that beg questions… So, let’s just both agree like Presidential candates, that we’re good at Premium Brand Development whatever that means…

Will we see more acquisitions from you this year?
We are always doing strings of deals. Activity is driven by what comes up.

Tomme Says: I bought an IPOD last year. That was a major acquisition some would say a life altering experience. I don’t think we’ll work on acquiring too much this year although there is talk of more capacity vis a vis more fermenters. Shiny tanks are nice!

Haven’t most of the likely targets been bought already?
The short answer is yes. In China, we are still acquisitive, but even there things have tightened up. There are still some businesses that might become available in Russia and in [the former Soviet republics], but prices have tightened up. There will be consolidation yet to come but the pace is much slower.

Tomme Says: Life is about things that are bought and sold. I think we have more to go in this department. Thank GOD! WE have a great CPA on our team.

What is your favorite beer?
Pilsner Urquell.

Tomme Says: Whatever Vinnie is most proud of this week. Goodnight. Vinnie says hi by the way- Sammy too.

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