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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 Often, links you will see are out of date, and businesses referred to may also be long gone.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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