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What ‘Selling Out’ Is Actually About

On Sep 6, 2016 - 82 Comments -

Anheuser-Busch InBev is in the midst of a PR push, the goal of which is to soften resistance to their craft brewery acquisition strategy. Sadly, credulous beer writers aren't asking any of the right questions, so I feel a need to respond.

The sacrificial lamb in this takedown is Aaron Goldfarb's recent piece for Serious Eats entitled, "What 'Selling Out' Allows a Craft Brewery to Do.” I'm picking this one because it covers most of the bases on this issue, which makes it convenient.

I apologize to Aaron in advance because he’s sorta conscious of the fact that he's being manipulated, but he simply doesn't know enough about the beer business to understand exactly how. I don’t mean to pick on him; there are plenty of other similarly problematic articles I could have chosen. Hell, when I was a freelancer, I would've gladly cooked up a story about how to construct a helicopter from discarded sex toys if someone had offered me twenty five cents a word to write it. But I’ve heard the misinformation in this piece repeated too many times to ignore, so here goes.

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I'll take the arguments one at a time:

1) Claim: Moving production of core brands from acquired breweries to ABI's plants improves their quality. Goldfarb says ABI's plants are being "retrofitted specifically to handle craft beer in ways that the craft breweries themselves simply couldn't afford back when they were independent operations. InBev's added a Super Sack system...hop backs...conical tanks, and more cellaring space.” Other items cited are a mash filter, centrifuge, and tasting room.

Problem: None of the items listed are unaffordable to independent craft brewers and none of them are related to quality. Many craft brewers have Super Sack systems: they cost about $25,000 and do nothing to improve quality, although buying specialty malts in Super Sacks does reduce their cost slightly. Likewise, many craft breweries have hopbacks; I paid about $3,000 for mine. Most breweries don't bother with them, however, because it's generally understood they don't do a better job of imparting hop flavor and aroma than whirlpool additions. And "conical tanks"? What brewery doesn't have conical tanks? Literally every single brewery can afford conical tanks. What about "more cellaring space"? You mean, like, renting a building? Likewise, mash filters, centrifuges, and tasting rooms are all relatively common at mid-sized independent breweries. This is just a list of random words meant to give the appearance that the argument has substance. ABI is spinning minor logistical adjustments as proof of their commitment to quality. Anyone who has worked in a brewery can see that this is bullshit.

Side note: Calling ABI "the best lager makers around" is like calling Kraft the best cheese makers around; allowing that statement from Blue Point’s president to go unquestioned is bizarre.

2) Claim: ABI is investing in the breweries themselves with the goal of improving quality, which they couldn't have done on their own. Goldfarb writes, "It gave 10 Barrel $10 million to buy six new 400-barrel tanks, for instance, and it's helping Blue Point open a new 40,000-square-foot facility housing brewing and packaging operations, a tasting room, and office space. Collectively, these improvements have led to the production of more consistent flagship beers for many of ABI's craft breweries."

Problem: Anyone who has ever worked on the business side of brewing would immediately see the problem with the first part of this claim: 400bbl tanks cost around $100,000 each, so six of them won't add up to $10 million. Failing to notice the huge discrepancy between the dollar amount listed and the cost of the alleged purchase is indicative of the overall lack of industry knowledge throughout this piece and many others like it. It may seem like a semantic issue, but it means the author isn't equipped to dig into ABI's claims with any authority. The second problem is a larger point and it's one that gets repeated both throughout this article and many others: the idea that the breweries who sold couldn't have expanded without macro-beer financing it. This is bullshit, too. Goldfarb cites Bluepoint's 40,000 sq ft expansion, but I can think of literally dozens of independent craft breweries that have expanded far more aggressively than Bluepoint (Modern Times included) without ABI's money. But the breweries who have sold and the beer writers who accept their excuses without question would have you ignore this obvious reality because it undercuts an excuse that tends to go over well with the public.

3) Claim: Macro-brewers have made hops available to the breweries they've purchased which would otherwise be unavailable to them.

Problem: Virtually all hops, and certainly all of those cited in this article, are available to any craft brewer willing to plan ahead and contract accordingly. Modern Times is a mid-sized, rapidly growing brewery that almost exclusively uses highly sought-after hops in very large quantities, and yet somehow, without the help of ABI's private farm, we have more than enough hops contracted to see us through the next 7 years of extremely aggressive expansion. We are hardly the only ones who can say that. Hop contracting takes some work, but no one needs the help of macro brewers to get what they need or want.

4) Claim: Macro-beer's money gives acquired breweries access to capital they could not have gotten otherwise, and this money is spent on experimentation. Goldfarb writes, "Before Golden Road was acquired, in September of 2015, Gill and her two partners were relying heavily on small-business loans from Bank of America Merrill Lynch. That meant money was always tight and had to be used strictly to help the brand grow; there were no resources for experimentation."

Problem: There are several, but the first is simply a failure of journalism. If Goldfarb has simply asked Gill who those partners are, the fact that one of them is a billionaire would have made clear that she is completely full of shit. Golden Road was the most lavishly funded start-up in craft beer history, something that is widely known throughout the industry. Then there's the claim that "there were no resources for experimentation” at Golden Road, with the implication being that the same is true for many breweries. This is also nonsense. How money is spent within a brewery, especially one with access to virtually unlimited funds like Golden Road, is a question of priorities, not capabilities. If a brewery does not invest in experimentation or barrel-aging or a sour program, it is because the people who chose how money is spent at that brewery are not interested in those things. Again, there are literally thousands of breweries with far fewer resources than Golden Road or Goose Island who do all of those things and more.

The vast majority of independent craft breweries successfully rely on bank financing for their expansions. Interest rates are at nearly historic lows, and banks are more eager than ever to work with bricks-and-mortar companies with solid cash-flows. If you want bank financing and your business is even moderately healthy, it is there for the taking. My experience with several rounds of major expansion is that the equipment financing expanding breweries need is usually the easiest type of financing to access, and that banks are generally understanding of how and why breweries spend money.

5) This one isn't a claim, it's a key piece of information that goes maddeningly uncommented upon. Goldfarb writes, "Gill says. 'The margins we needed to hit on our beers are now gone'—ABI doesn't necessarily care if each and every beer released makes a solid profit—and 'it's changed how we think about our portfolio in a major way...'"

Problem: This is the most predatory and ill-intentioned thing the macro brewers have done with their acquisitions, and Goldfarb allows Gill to cite it as evidence of their benevolence, which drives me nuts. The reality is that selling a product at or below cost is an anti-competitive business strategy that is intended to put smaller competitors out of business. If there's one thing independent craft brewers can't do that macro-brewers can do it is lose money. And this strategy is, by far, the most effective way for macro-brewers to reduce consumer choice and extinguish the craft beer movement they’re now trying to co-opt. Goldfarb remarks upon this later in reference to $56(!) Goose Island kegs, but fails to grasp that this strategy is THE reason for these acquisitions. Not quality, not making dreams come true, not sharing information. The goal is to destroy craft beer from within by operating acquired breweries as zombie brands that wreak havoc in the marketplace long after the life has been squeezed out of them.

6) Claim: Being acquired by a macro-brewery gives access “to the minds of fellow brewers,” allowing breweries to improve their practices.

Problem: Craft beer is the most open, collaborative industry I know. There is absolutely no shortage of access to information from “fellow brewers.” I have not once been told something was “proprietary information” by another craft brewer. If there is anyone in the beer industry who jealously protects their “trade secrets”, it is the macro-brewers, who are notorious for their harsh treatment of employees who fail to obsessively protect information from competitors. "The minds of fellow brewers" are there for anyone to access, no buy-out necessary.

7) Claim: Breweries can’t expand their geographic distribution without the “muscle” of macro brewers. Goldfarb claims Founders "would never have been able to obtain shelf space” in “foreign cities” had it not been partly acquired by a macro-brewer.

Problem: Independent craft breweries expand their geographic distribution literally every day. There has never been a time when distributors were more eager to take on new brands. This has, in fact, been one of the seismic shifts in craft beer over the last decade. In the late ‘90s and early ‘00s, craft breweries often had to beg and plead distributors to take them on. Now, distributors are so eager for new brands, the Brewers Association has had to enact a rule preventing distributors from openly pitching to craft brewery owners at the annual trade show because it became overwhelming. Meanwhile, loads of craft brewers of all sizes are jumping at export opportunities, which are abundant. Hell, Modern Times, which is about one tenth the size of Founders, exports to 12 overseas markets, zero “muscle” required.

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Here’s the truth: selling to a macro-brewer is the fastest, simplest way to turn equity in a craft brewery into cash. That’s the only reason to sell to them. Anyone who claims otherwise is full of shit.

Cheers & thanks,
Jacob McKean
Modern Times Beer

Some Thoughts on the New Year-Rounds

On Mar 9, 2016 - 73 Comments -

Releasing 3 new year round beers was a thing. A major thing. A thing that consumed much of the time, energy, and brainpower of many of the people in this building. These beers also embody our collective approach to decision-making better than anything else we've made. Let me explain.

About a year ago, a bunch of us sat around a table and decided what the major pieces of our beer program would be in 2016. There were oodles of ideas, many of them conflicting. But we patiently fleshed each of them out, compared them, synthesized the best ones, discarded whatever didn't fit, and ultimately ended up in a place that all of us could embrace. That process of consensus-building is fundamental to who we are, and a major reason why we make good beer.

The first step was deciding on what we wanted to feature and what we felt like we were missing. We agreed that: a) We had taken major steps forward with several key brewing processes, and b) We were underrepresented on the bomber shelf.

After debating the merits of countless beer options to put into year round bombers, we settled on the three we felt best represented what we've learned, and added something meaningful to the local craft beer market.

City of the Dead most obviously meets the criteria because it's a beer that literally only Modern Times could make. Our ability to barrel-age, roast, and dose coffee into beer is totally unique, and we were frickin' stoked with the results we were getting. City of the Dead is exactly the kind of beer that puts the jam on our toast, and so it was a shoe-in for the program. The only real challenge was figuring out how to massively scale-up our barrel-aged coffee program, but that's something we had planned to do anyway.

Fruitlands was a somewhat harder decision, but only because of the logistical challenges inherent in brewing it year round. We didn't doubt our ability to brew an absolutely badassical fruited gose, but kettle souring is a time intensive process. We worried that success might lead to endless headaches in the brewhouse, but our brilliant production team put on their thinking caps and figured out how to make it work. The idea to rotate the fruit three times a year also got us all hot and bothered, so we basically forced ourselves to solve the riddle. We're still tweaking the way we add fruit, but that type of adjustment is par for the course with anything new.

Orderville was definitely the toughest of the three to decide on. How do you commit to brewing a beer year round you've never made before? At the same time, we learned a tremendous amount about brewing hoppy beers over the course of many special releases and draft-only batches, so we felt good about putting an IPA in that slot.

But Orderville had to be brewed with hops we could actually get, and it had to be absolutely bomb. In today's hop market, that's like trying to build a helicopter in a high school shop class. So we auditioned a variety of different hops and yeasts over five agonizing test batches, before finally settling on the final approach. We've continued to fuss with it, but with our third full-scale production batch about to be packaged, we feel stellar about our totally sweet helicopter.

Anyway, that's just a peek into how we make these kinds of decisions and why. I don't believe in the misguided idea that singular genius trumps collective decision-making, and our extremely collaborative process reflects that. These beers and the process of making them are probably the clearest embodiment yet of that value, and I'm exceptionally proud of the results.

New Year-Round Bombers: City of the Dead

On Feb 29, 2016 - 4 Comments -

City of the Dead represents the divine union of our barrel-aged coffee program and our relentlessly inventive brewhouse. "WTF is barrel-aged coffee?" Good question, here's how we make it.

When we started realizing the incredible depth of delicious complexity we were able to get out of barrel-aged coffee beans, it was a pretty short step to: "We should totally put this in beer." A couple of casks of Black House w/ barrel-aged beans later, and we were convinced that this definitely had to be a thing.

So we formulated a 7.5% ABV export stout specifically to play well with barrel-aged coffee. The base beer is luxuriously rich and chewy, and loaded with notes of roasty, chocolaty radness. The perfect canvas for these incredibly flavorful beans.

Once the beer has finished fermenting, we dose it with 2.5 lbs/barrel of bourbon barrel-aged coffee and let the beans work their magic. The coffee origin will change throughout the year, but the first batch contains our single origin Guatemala Jacaltenango, a bean that brings a considerable amount of chocolate and dark-fruity goodness to the mix.

What you get in the end is a stout sporting an impossibly decadent mélange of freshly-emptied bourbon barrels, coffee, and malty awesomeness unlike any other. It's tastes something like a coffee-drenched, burnt mashmallow, but drier and more like beer.

This mind-altering ambrosia hits shelves starting TODAY, and is on tap and in bottles now at both tasting rooms. Once your taste buds begin singing together in joyous harmony, we think you'll concur that it was worth the rather long trip to create.

New Year-Round Bombers: Orderville IPA

On Feb 21, 2016 - 6 Comments -

If we had a nickel for every time someone said "You should make (insert preferred Modern Times seasonal IPA here) year round!", we'd have, like, so many goddamn nickels. Of course we'd love to make City of the Sun or Booming Rollers year round, but unless you've got a few truckloads of Citra & Motueka to sell us, it ain't happening.

It did, however, get us thinking. Was it even possible to make a year-round IPA that rivaled the standard of bomb-diggityness set by our seasonals without putting ourselves into a impossible hop-sourcing bind? At this point, the idea of beating the IPA boss on "Hard" mode became too intriguing to ignore.

What followed was an excruciating number of brewing iterations, subjected to the kind of obsessive, anxiety-ridden scrutiny that only a room full of OCD beer nerds can fully understand. When we finally emerged from the final QA panel, we held in our hands something magical–an IPA that met our unreasonably high expectations, made with only a somewhat annoying list of ingredients. Behold, Orderville.

While you might mistake this for a bottle of pure, unfiluted sex, it is actually a Mosaic-stuffed IPA propelled to peach-tastic glory through the inspired use of a top-cropping English yeast strain not often seen on this side of the U.S..

A word on the yeast. If you’ve been by our tasting rooms recently, you may have tried some of the test batches for this beer under the name Nova Swing. Nova Swing was a killer IPA, but was is unimpeachably top-of-the-heap, year-round material? Not quite.

It needed an extra push, which came in the form of a yeast strain with just the right fruity, estery roundness to compliment the hop bill, turning "great" into "Holy shit, this is amazing." Managing another yeast is a pain in the ass, but at least we don't have to fight over a limited supply of it with every other brewery on the planet.

We realize "old -school English yeast strain" is not a catchy selling-point in the contemporary beer market, and to be fair, it's not always a good idea. Chico, our standard yeast for hoppy beers, just gets the hell out of the way of the hops, allowing them to completely drive the sensory experience of the beer.

Oftentimes, that's all you'd want out of a yeast in a hoppy beer. However, a yeast that produces a ton of fruity esters can sometimes be incredibly complimentary to a new wave, tropical hop bill, blurring the line between the sensory features contributed by the yeast and the hops and yielding an incomparably intense fruit quality that is unachievable with hops alone. Try it, you'll like it.

Even after the insanely demanding process of formulating a beer, we never really stop dialing it in. This process of constant tinkering and improvement is an integral part of what makes us who we are, and we'll be bringing that perfectionist approach to bear on Orderville as well. So expect to see this beer only get radder with time.

Has this been a ridiculous amount of work? Sure. Was it totally worth it? Definitely, and we think you’ll agree once you put some of this year-round radness in your pie hole.

Next week: a rundown on City of the Dead, our award-winning stout with house-roasted, barrel-aged coffee.

New Year-Round Bombers: Fruitlands

On Feb 6, 2016 - 2 Comments -

Our beer lineup for 2016 is looking absolutely bonkers, and one of the things we're out-of-our-minds stoked about is the chance to add three incredibly unique year-round beers to our brewing (and drinking) schedule. We'll be featuring one of them here each week to get you better acquainted, so it's not all awkward when you meet in real life. First up: the epic crushability of Fruitlands.

This beer is a glorious mansion of fruity refreshment built on the rock-solid foundation of a sour, salty gose. The funky, delicious base beer proved to be an absolutely magical companion to any fruit we threw at it, so we ended up dividing this release into three parts, giving you a taste of each of our favorites. Here's how it breaks down for 2016:

Apricot: March–May
Passion Fruit and Guava: June–September
Cherry: October–January

Prepare your tastebuds for wonderment; there was a reason we couldn't pick just one. Next week: the fruity dankaliciousness of Orderville IPA.

Wizard Fest at Kindred in South Park, SD

On Jan 18, 2016 - 1 Comment -

To celebrate the Grand Opening of Kindred in San Diego, we're tapping an absolutely face-melting pod of mega-whales, with special tappings throughout the day to pair with their menu, plus hot and cold brewed Black House and Heavy Weather coffee. Wizard Fest, indeed. Here's what's on the agenda:

10am tapping:
Cask: Devils' Teeth With Coconut & Heavy Weather Winter Blend coffee
City of the Sun IPA
Aztec Mummy (tequila barrel-aged gose)
Fortunate Islands

4pm tapping:
School of Certain Victory (white wine barrel-aged sour w/ apricots)
Monsters' Park Aged in Rye Barrels (NITRO)
Neverwhere Brett IPA

8pm tapping:
Symmetric Orchestra (oak-aged funky sour)
Nova Swing IPA
Monsters' Playground (sour stout w/ citrus zest)

1503 30th St., San Diego, CA