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Sep 19, 2014

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RBPMail 2.03, March 1996

Real Beer Page Mail (RBPMail) began as a modest update to craft-brew events on the WWW. It evolved into a news digest and sometimes editorial forum. We present its contents here much as they were emailed to subscribers. Often, links you will see are out of date, and businesses referred to may also be long gone.

In this issue:


Stroh To Buy G. Heileman

The biggest news in the industrial and specialty beer industry was delivered in a press release dated February 29, 1996: Stroh Brewery and G. Heileman Brewing Company, Inc. have announced a signed letter of intent for Stroh to acquire all Heileman assets. The transaction, expected to be completed by July, 1996, brings together the nation's fourth and fifth largest brewers. Stroh will acquire all of Heileman's Brands -- Special Export, Old Style, Ranier, Henry Weinhard, Schmidt's, Lone Star, Champale, Colt 45 and Mickeys -- in addition to breweries in LaCrosse, WI; Baltimore, MD; Portland, OR; Seattle, WA; San Antonio, TX; and a beverage manufacturing facility in Perry, GA. Stroh, family owned and operated since 1850, has brewing facilities in St. Paul, MN; Longview, TX, Lehigh Valley, PA; Winston-Salem, NC and Tampa, FL with the Stroh's, Old Milwaukee, Schlitz, Schaefer and Schlitz Malt Liquor brands. The move bolsters the Stroh brewery facility coverage on the Eastern Seaboard, in the Midwest and adds new capabilities in the West, offering large potential savings in shipping costs. The letter of intent is subject to negotiation of definitive agreements, regulatory approvals, Heileman stockholder and bondholder approval and other conditions and will follow a pre-arranged bankruptcy filing by Heileman. Think for a moment beyond the implications of the internal brand competition that this merger may create and consider the largest contract brand relationships in place: G. Heileman in Portland currently brews about 40/60 mix of Henry Weinhard's and Samuel Adam's (we won't say which the mix favors); during the labeling controversy of last month, Pete's Wicked Ale stated that it was "proudly brewed by Stroh." Could this mean that two of the biggest specialty beer competitors will be sitting in adjacent -- or even, following cleaning, the same -- fermenters?

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U.S. Market German-Import Index:

German beers, hope to ride the popularity of craft-brews in the U.S. Market Watch, a magazine for the wine, spirits and beer industry, notes American beer drinkers are becoming more adventurous and more willing to try different products, including German. Beck's enjoys almost 60 percent of the U.S. market for German beers, followed by St. Pauli Girl (14.1 percent), SPATEN (4.8), Paulaner (4.4) and Warsteiner (4.2).

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World Beer Cup

The first World Beer Cup, featuring 3,000 breweries from more than 100 countries, will take place in Vail June 12-14. The global beer competition, hosted by the Association of Brewers, will offer awards for the best beers in 61 categories. In addition to 500 U.S. breweries, among those expected to take part are breweries from Argentina, Belgium, Canada, France, Germany, Great Britain, Japan, Ireland, South Africa, Russia and Zimbabwe.

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Bosnian Beer Aid

Businesses, churches and veterans posts from Chippewa Falls and other Wisconsin towns recently shipped 1,200 bottles of Leinenkugel's beer, 500 bottles of Chippewa Springs water and 100 pounds of cheddar cheese to U.S. troops in Bosnia. (Dick Kreck, Denver Post, February 21, Wednesday, Food, Pg. E-01)

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Beer Camp Update

Oldenberg Brewing Co. of Ft. Mitchell, Ky., is expecting to sell out its semi-annual Beer Camp, taking place March 22-24. Information on the camp, which includes seminars, discussions and beer in its many aspects, is available at (606) 341-7223 You can also visit their web page at http://realbeer.com/oldenberg/.

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Kentucky Bom Crisis

Beer-of-the-Month or wine clubs shipping orders to willing consumers in Kentucky will become criminals under a House-passed bill that cleared a Senate committee Tuesday. House Bill 302 would make it a felony to ship any alcoholic beverage directly to a Kentucky consumer from out of state or out of the country. Individual violators could receive up to five years in prison, and corporate violators could be fined up to $ 20,000. The buyer would not be punished. The committee approved the bill 8-0. Sens. Dan Seum, D-Louisville, and Dick Roeding, R-Fort Mitchell, abstained, saying they had objections. Mr. Seum accused the wholesalers and beer distributors backing the bill of "trying to kill off your competition." (Source: Robert T. Garrett, The Cincinnati Enquirer, February 14, Wednesday, Metro, Pb. B06)

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Nebraska Brew Pubs Bullied By Bigs

In Nebraska, the Legislature is considering LB 1088, a measure that would allow brewpubs to sell their products in other bars and restaurants. Proponents told members of the General Affairs Committee that state liquor laws put Nebraska microbrewers at a competitive disadvantage. They feel that brewers within the state should be able to compete fairly with out-of- state producers for the demand for craft-brewed and more flavorful beers in Nebraska. Representatives of Anheuser- Busch, the nation's largest brewer, and the Nebraska Beer Wholesalers Association testified against the bill. The committee took no action. (Source: Tony Moton, Omaha World Herald, February 20, Tuesday, Living Today, Pg. 27SF). A Brewer in Nebraska confirms with The Real Beer Page that A-B, Coors, Wholesalers and an aspiring microbrewery in the area are behind "killing competition" from brewpubs.

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Full Bodied Beer: Elvira's Witchy Brew

We see a bad brew a-rising. In one of the hottest (looking) press releases of the year, Elvira, "Mistress of the Dark" of television and campy B-Movie fame, announced her bid to take a bite out of the seasonal brew action. Every Halloween for nearly 10 years, Elvira pitched Coors beer nationwide. This year, in partnership with Beverage International --owners of the Cold Spring Brewery, Cold Spring, MN -- she's poised to expose her own line of brews. Unofficially called the "Elvira Brew line," Beverage International expects to have it on shelves nationwide by late spring. ''We know there will be a year-round product, a Halloween beer and probably a third product down the road,'' said a spokesperson. (Source: Todd Pruzan, Advertising Age, February 19, News, Pg. 12 and B.I. Press Release)

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Brew Stock Watch

Articles surfaced last month in the Cincinnati Enquirer and The Plain Dealer about the "ailing" state of craft-brew stocks. In the context of Oldenberg's quick selling shares, a Canadian Micro IPO and Coor's poor performance, The Real Beer Page suggests that analysts may be confusing the craft-brew performance with the mass-beer market's woes:

Reports Of A Demise Greatly Exaggerated

The Enquirer article points out the following: "Microbrewers, producers of specialty craft beer, offered investors a heady market for new publicly traded stock last year. But the sector appears to be going flat. The companies remain solid and their earnings look good, but the stocks are following the typical pattern for initial public offerings (IPOs): After a sharp rise on a burst of enthusiasm, prices level off and then decline." These statements are followed by an "insider" quote: "'Specialty brewers are sound, but overpriced,' said Manish Shah, publisher of IPO Maven, a review of upcoming deals. 'Most are valued at 80 to 125 times 1996 earnings - and that seems a little outrageous because growth in unit volume seems to be slowing down.'" The analyst fails to point out that several Internet stocks including Netscape's are priced well beyond these earnings ratios, but their speculative and growth value substantiate their high price. The article refutes the earlier "flat" critique of the *Specialty Brew* industry sector with the following accepted industry figures: "Overall, the stocks in the craft beer sector rose 8.4 percent in 1995. Craft beer sales grew about 50 percent in 1994, while total U.S. beer sales declined slightly to about $ 51.1 billion for the same year." (Source: Scott Reeves, Cincinnati Enquirer, February 18, Sunday, Financial, Pb. E05) The Real Beer Page advises that investment in Specialty Brew stocks should be studied with the same scrutiny, caution and awareness of risk as any investment. Considering the continual growth of the sector in balance with the growing shelf-space/distribution competition and price-point sensitivity, investments should also be approached as medium- to long-term investments rather than as speculative buys.

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How The Big IPOs Among Craft And Specialty
Brewers Have Fared:

Redhook Ale Brewing Inc., of Seattle, - Sold 1.9 million shares at $ 17 each in August, peaked at $ 35, closed Friday at $ 22-3/4

Pete's Brewing Co., of Palo Alto, Calif., - Sold 3 million shares at $ 18 each in November, peaked at $ 27.75, closed Friday at $ 19.

Boston Beer Co., (Samuel Adams) - Sold 3 million shares at $ 20 each in November. Peaked at $ 33, closed Friday at $ 21-3/8.

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Expansion/Growth Spotlight On
Baltimore's Microbrewing Scene:

Clipper City, Baltimore's newest Microbrewery, features a 50-bbl brewhouse heated by city steam housed in a 15,000 square-foot warehouse that can accommodate expanding capacity 5-times. Clipper City's founder, Hugh Sisson, knows his way around the industry -- ten years ago pioneered the first brewpub in the area called, Sisson's. You can learn about the brewery's progress on the web soon at the URL printed on their six- pack and bottles at http://www.clippercity.com. Bookmark the URL.

Frederick Brewing Co., producer of the Blue Ridge brand, hopes to raise between $ 2.5 million and $ 4.8 million. next month in a public stock offering -- the first for a Maryland microbrewery. The money will go toward a new plant and boost capacity from 12,500 barrels annually to 50,000, said CEO Kevin Brannon.

Oxford Brewing is increasing its in-house capacity from about 5,000 barrels to more than 7,500, said general manager Mike Jaeger. Oxford also hires other breweries to produce 3,000 gallons or so a year.

Wild Goose wants to double it's capacity of two years ago from 20,000 barrels to 40,000 by this Spring. "The industry's been growing at about 40 percent a year, and we're just kind of keeping up with the rest of them," said Wild Goose President Jim Lutz. (Source: Jay Hancock, The Baltimore Sun, February 13, Tuesday, Business, Pg. 1)

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Oldenberg Offering Moves Fast

Oldenberg Brewing Company, Fort Mitchell, Kentucky (about 10-minutes from Cincinnati) home to the Oldenberg Brewery, Beer Museum and Beer Camp, announced that a stock offering of 800,000 shares for nearly $2 million sold out. Oldenberg President, Dave Heidrich, said "We have sold out the offer in approximately... 50 days, which is significantly less than the 120 days we gave ourselves to do it." The money will be used to expand the production capacity, currently at 11,000 barrels per year, as well as for marketing and working capital. (Source: Lisa Biank Fasig, The Cincinnati Enquirer, February 5, Monday, Financial, Pg. D01) More brewery information is available at http://realbeer.com/oldenberg/.

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Canadian Microbrewer Plans IPO
- Look for Acquisitions

TORONTO With an eye on the fast-growing market for high-class brews, Upper Canada Brewing Co. Ltd., Canada's second-largest microbrewer, said it plans to go public to get cash for a push into the U.S. market. "The (specialty beer) market is growing by an average of 50 percent a year in the United States and 25 percent a year in Canada. That's pretty dramatic," Upper Canada Chairman Frank Heaps said in an interview. Microbrewers just 4 percent of Canada's nearly C$ 10 billion ($ 7.2 billion) in total annual beer sales. Canada's two brewing heavyweights, Molson Cos. Ltd. and Belgian-owned John Labatt Ltd., dominate the market with a combined share of over 90 percent. The proceeds from the share offering will be used to expand Upper Canada's existing Toronto plant, which can brew 1.6 million gallons (60,000 hectolitres) a year, and to pay down debt. To add more capacity, Heaps said Upper Canada would be interested in acquiring other craft brewers. (Source: Darren Schuettler, The Reuter Business Report, February 6, Tuesday)

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Coors Shares Take Another Tumble

The stock price of Adolph Coors Co. tumbled again yesterday following the company's earnings release and an investment analyst briefing last Friday. At that briefing, Coors Brewing officials said for the first time the company is losing money on the heavily promoted Zima clear drinks, said CS First Boston analyst Martin Romm. The decline in the share price yesterday followed Brown Brothers Harriman & Co.'s cut in its short-term recommendation of Coors stock to "avoid" from "hold." Merrill Lynch & Co. analyst Allan Kaplan reduced his recommendation on the stock Friday to "neutral" from "above average." (Source: Denver Post Staff and Wire Reports, The Denver Post, February 6, Tuesday, Business; Pg. C-02)

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Tiny Madison Brewery Tweaks Giant Brewers
- Fictional Mascot Touts "Real Beer"

Capital Brewery Co. makes no bones about it: Liam Mahoney doesn't exist. He's the mascot for the Madison microbrewery's newest beer Liam Mahoney's Brown Ale. Liam Mahoney is the "patron saint of real beer," an Irish immigrant who "was horrified to discover that the mightiest country in the world also has some of the wimpiest beers on the planet," said Richard Lingk, Capital president. Kirby Nelson, Capital's brewmaster, acknowledged that the brewery's marketing campaign is aimed at the so- called "stealth breweries," which are operated under fictitious names by the nation's major brewing companies. "Boston Beer is just a marketing company and Plank Road doesn't exist," Lingk said. (Source: James E. Causey, Milwaukee Journal Sentinel, February 12, Monday)

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Trolley Firm Will Offer 3-Hour Brew Pub Tours

Boston's Old Town Trolley Tours will act as "designated driver," with twice-a-month brew pub tours through Boston and Cambridge. The three- hour tour will carry bus loads of up to 42 passengers. At each stop passengers will be offered two 10-ounce samples of the pub's beers or ales and served food - main courses at John Harvard's and Commonwealth Brewing Co., and a dessert at the Brew Moon. Old Town Trolley vice president Shawn Ford says riders will have to prove they are over 21 before boarding and be prepared to do so at each pub. The first two Old Town brew pub tour, were sold out, and others scheduled for March 3, March 19, April 6 and April 27 are filling fast. All will be in the afternoon, except the March 19 tour, which will begin at 6:30 p.m. Come summer, plans call for the buses to tour once a week. (Source: Jerry Ackerman, Boston Globe, February 10, Saturday, Economy, pg. 58)

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Beer Kegs To Be Traced Tags To I.D. Buyer
In Drive On Underage Drinkers

Liquor stores n Boulder, Colorado are cooperating with the Boulder Police Department by requiring signatured-purchases for kegs of beer. If a keg ends up in the hands of underage drinkers, it can be traced back to the person who bought it. The city will supply stores with brightly colored and numbered tags that will be attached to each keg. If the keg comes back without a tag, the purchaser will forfeit their deposit ($50 to $100) and be charged with destroying city property, which will bring a fine of about $25. Kegs showing up at parties with underage kids will have a trail to the purchaser. One liquor store owner estimates that 200 kegs are sold in Boulder on an average weekend. He said microbrewery kegs, which are smaller, are beginning to sell more. "We used to sell tons of Coors Light kegs. But now we sell kegs of Avery, O'Dells or Fat Tire." (Source: Mike McPhee, The Denver Post, February 3, Saturday, Pg. B-01)

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Cheap Tricks -- Editorial

Last month we ranted about misleading beer labeling; here we take on a more subtle aspect of marketing "sleight-of-hand." A brewery based in Montana has started to spread its message in several new markets across the U.S. From the S.F. Chronicle we find this tidbit of explanation: "Franciscan Minott Wessinger, the great-great-grandson of Henry Weinhard, began brewing Black Star Premium Lager last year in Whitefish, Mont., his new home. Wessinger says Black Star fills the gap between mainstream beers such as Budweiser and microbrews like Sierra Nevada. He uses a 'double hopping' process, adding both Pacific Northwest and Czechoslovakian Saaz hops, first in the brewing kettle and then again in the lagering tank, a process that Wessinger says gives the beer richness and depth while keeping it drinkable." (Source: Gerald D. Boyd, San Francisco Chronicle, February 21, Wednesday, Food, Pg. 4/ZZ1) At first pass, you see the kind of story Food editors love to pick-up: A brewery steeped in tradition and lineage using craft-beer products and dropping names of beers that are recognizable. In radio ads Wessinger also talks about Sierra Nevada's beers, but offers a more drinkable alternative with his Black Star beer.

Before we state our objections, we need to offer our own background: The Real Beer Page went on location to Montana last summer, which will be showcased later this month in our BrewTravels area (http://realbeer.com/travels/). We started out on a Friday evening at Bayern Brewing in Missoula which is creating -- hands-down -- the best lagers in the state; Jurgen Knoller, owner/brewer took time to greet us in the middle of a 300-hours-in-3-weeks personal brewing stint. We headed up to Whitefish where we met the Real Whitefish brewer, Gary Hutchinson, brewing a charactered nut-brown beer on glorified homebrew set-up while awaiting new equipment for expansion. About 45 minutes east, John Campbell of Lang Creek Brewing was creating the hoppiest, most complex and interesting beers outside of the Northwest and west of the Mississippi. Each of these brewers were working throughout the weekend to keep up with demand. The Black Star Brewery on the other hand, a stunning, $3- million tourist attraction, was conspicuously absent of any signs of life during our three days in the area. A quick taste of their beer at the local tap- house told the rest of the story. We mean no disrespect to the line brewers who work hard to meet delivery schedules. We also realize the work it takes to create a brand in empathy with the marketers behind the project. Our concerns are about the integrity of representation and the experience we had in contrast to "Real" beer producers around the state. This brewery appeared to be a well-financed front for an ambitious marketing company.

Here-in lies our objection, supported by some of the brewers we met in the area. Black Star tries to position itself between the microbrew market and the industrial beer market, as though the difference in the beer is a flavor-profile. Craft-brew enthusiasts know better than this, but the uninitiated may be mislead. The advertising wants you to believe that the only difference between corporate fizzy beer and one of the world's finest India Pale Ales is smoothness. In their "fence-straddling" position, Black Star advertises using the names of micro and industrial brewers. In advertising-speak, this is called a "borrowed-interest" strategy, where the message is validated and reinforced by the name recognition and investment of the referenced companies. The brewery is creating a confusing message while leveraging the good name of Sierra Nevada. If you must, a taste of their beer should confirm that this is another opportunistic marketing company looking over the fence at the brewing revolution and trying to cash-in. We think great-great-grand-dad would be rolling over in his grave if he caught wind of this snake-oil scheme.

The views here are those of the Real Beer Page, not necessarily its advertisers or strategic partners. Agree, disagree or got your own rant? Write us at RealBeer@realbeer.com!

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