The Audacity of Hops: The History of America's Craft Beer Revolution (50 page)

None of the publicly traded craft beer companies appeared to have a tougher go of it than the Frederick Brewing Company, the central Maryland operation founded in the spring of 1992 by husband and wife Kevin Brannon and Marjorie McGinnis and the biggest craft brewery in the Mid-Atlantic. Their March 1995 IPO afforded them millions for a spending spree on top-shelf brewing and packaging equipment as well as a new $7 million brewery that upped their capacity tenfold. It produced more than fourteen thousand barrels in 1998, an 81 percent increase over the year before. Then, within two years, it was all gone. As with Catamount Brewing in Vermont, Frederick Brewing could not foment enough demand to absorb its new supply. Its sleek, new brewery was running at less than 40 percent capacity; its share price slid below twenty-five cents; its brewmaster quit; and its board went looking for someone to take over. A small conglomerate out of Cleveland, started by technology consultant David Snyder, did just that in the summer of 1999. By then, Frederick Brewing owed hundreds of thousands in back taxes and fees, and it had been delisted from NASDAQ for trading so low. It never did turn a profit after the IPO.

Pete's, even with its troubles, was never in such dire straits. The industry had changed, though, and if cofounders Pete Slosberg and Mark Bronder were going to cash out, now would be the time. With hindsight, we are able to see an arc of recovery in the craft beer movement, with the shakeout of the late 1990s as a trough and the growth of the twenty-first century's first decade as another peak. But for those living it in 1997 and 1998, things looked dire. Competitors and compatriots who were with you one month, whom you perhaps shared a beer with at an Association of Brewers conference the springtime before, were gone, oftentimes with creditors hounding them as they departed, the quality of their beer immaterial to the bottom line. And for all the hullabaloo of the last twenty years, for all the hope and heartbreak, the long hours and the financial risks, domestically produced craft beer still accounted for not even 5 percent of the American beer market. Some craft brewers might have been rock stars, but they were not superheroes.

A few had exited already while the getting was good. BridgePort Brewing in Portland, Oregon, had sold itself to Gambrinus in the fall of 1995. Cofounder Dick Ponzi explained that it was either not expand and maybe even prune distribution, or expand with fresh investments that might mean giving up control of the company, or sell—pretty much the summation of choices all smaller craft breweries faced. The first choice would have likely spelled disaster for anyone as the industry heated up; the last two, on the other hand, proved much safer bets. Gordon Biersch, the brewpub chain started in Palo Alto, California, sold a controlling stake for $17 million to Fertitta Enterprises,
a gambling and hotels company out of Las Vegas; the November 1995 sale allowed Gordon Biersch to expand at a time when founders Dan Gordon and Dean Biersch, who kept 30 percent of the company in the deal, had grown the chain to five locations.

The same year, in a deal fraught with inescapable symbolism, the largest winemaker in Washington State bought America's oldest brewpub. The irrepressible Bert Grant—he of the vial of hop oil, the kilt, the Rolls-Royce with “Real Ale” on the vanity plate, the contention to critic Michael Jackson that the hoppy Scotch ale he brewed was a Scotch ale because Grant had been born in Scotland—realized that with craft beer really taking off, he needed to more effectively market his thirteen-year-old, twelve-thousand-barrel Yakima Brewing and Malting Company. According to him, marketing “was never my big suit anyway.” At age sixty-seven, Grant would stay in what he described as “anti-retirement,” remaining as brewmaster as new owner International Wine and Spirits anticipated quadrupling production while still limiting its distribution to the Northwest.

To drum up cash, Pete's actually spent much of early 1998 looking to make similar acquisitions of smaller competitors when its investment bank, Morgan Stanley, came back with another option: sell. And the bank had a buyer: San Antonio, Texas-based Gambrinus, one of the nation's ten biggest importers, had already saved the regional Spoetzl Brewery and had acquired BridgePort for its first foray into craft beer. It might have seemed to some a bit incongruous for the importer of Corona—the big Mexican brand that was a particular bugbear of Michael Jackson—to snap up the second-largest craft brewing company, whose beers had been the gateway drink for millions of craft beer geeks and had spawned not a few imitators. But Gambrinus made it worth a struggling Pete's while: an affiliate of the importer offered $69 million in cash, or $6.375 a share, when Pete's shares were trading at around $5.80. Gambrinus would keep Pete's recipes—it would even keep Pete; part of the deal, closed in June 1998, was that Slosberg remain for two years as pitchman.

Slosberg was one of the shakeout's graceful exits. So was Rhonda Kallman. The bar-savvy, twenty-something secretary turned beer mogul, leader of the industry's most productive sales force who shared an office with Jim Koch until her final day in late 1999, was done. The last few contentious years had taken a lot of the fun out of the day-to-day work, and besides, Kallman had other opportunities she wanted to pursue.
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As for Slosberg, he would remain
a presence in craft beer, not only in those two remaining years at Pete's and not only in America, but also by lecturing throughout the world, including in South America, which began taking its zymurgical cues from the States rather than from the Old World stalwarts like Belgium, Germany, the Czech Republic, and Ireland. Over the last thirty years, the student had become the teacher. American beer was now more diverse in style, bolder in flavor, and influential in experimentation than just about anything the European countries had produced or were producing. It was as if American craft brewers had compressed centuries of evolution into mere decades.

Michael Jackson noticed this shift earlier than anyone. Writing for an updated 1988 edition of his groundbreaking book,
The World Guide to Beer,
Jackson pegged it all—rightly—to that unique feature of American history, mass immigration: “Far from lacking in a beer culture, the world's most cosmopolitan country is enriched by the traditions of all its founding nations. It made almost every type of beer before Prohibition—and is now beginning to do so again. The rediscovery of beer in the developed world is proceeding faster in America than anywhere else.”

American craft brewers, as we've seen, still largely defined themselves stylistically against their European counterparts. And though it would be easy to drift into a kind of obnoxious triumphalism—USA, USA!—it is important to remember that European countries faced their own brewing challenges in the 1990s. Aside from being part of nations sorting out their economies post-Cold War, German and Czech brewers were wedded to the Reinheitsgebot, the sixteenth-century German purity dictate that said beer could be comprised of only hops, water, and barley (yeast came later); it was no longer law but remained a very strong tradition. It was the same in Belgium, that tiny, big arbiter of style: save for the giant Interbrew, maker of Bass and Stella Artois, among others, tradition trumped the pursuit of explosive growth: why fix what had never broken?

As for Great Britain, it was undergoing its own consolidation wave: “The once gentlemanly trade of beer making has fallen prey to big business,” as the
Birmingham Evening Mail
delicately put it in December 1998. Nowhere was this more evident than when it came to that staple of British lore and life: the pub. A flurry of deals had by the end of the 1990s left the Japanese bank Nomura as the biggest owner of British pubs: more than fifty-five hundred, including 988 from the Bass estate acquired in a nine-figure deal in February 2001. By the start of the new century, fewer than 10 percent of the kingdom's pubs were owned by breweries like Newcastle, the majority of the rest snapped up like so many securities by investment houses like Nomura. Such
consolidation meant a homogeneity in draft beer perhaps unprecedented in the long history of Albion, thousands of supposed locals all with the same taps.

Something similar was happening in Ireland, though with a nasty twist of irony. The faux-Irish pubs that popped up throughout the United States in the 1980s and 1990s now dominated the real Irish drinking landscape; the nation's National Heritage Trust estimated that by the new century there were only twelve to fourteen examples of authentic Irish pubs left in the capital and largest city, Dublin. Add to the fates of the pubs the fact that the number of breweries was rapidly decreasing—thirty closed in the United Kingdom in the 1990s—and you had the story of American craft beer in reverse.

More than anything, though, the old countries lacked the moxie of the new. Americans came at beer from all sorts of walks of life and with all sorts of ideas in hand. They brought panache and swagger, a jones for experimentation and a Manifest Destiny-like hunger to expand (sometimes too much so, as we've seen from the shakeout). Nowhere but in America could or would individuals from so many different backgrounds, with so many certainties as to the way to do things, have gathered as they did at the first homebrewers conventions or Great American Beer Festivals in the early 1980s or at the first beer dinner in that hotel basement in Washington a few years later or at myriad smaller events like the one Charlie Papazian and Jim Koch hosted in Denver in October 1999.

The Denver gathering was a blind taste test for seventy-five people at John Hickenlooper's Wynkoop Brewing Company: five American craft beers versus five European imports. Four of the American beers trumped their European challengers. Koch, who had quickly recovered his own swagger after Big Beer's assault, declared the results proof that “when you take away the fancy bottles and the hype of the import, then the best American craft beers are making better beer.” While most Europeans still saw American beer as Budweiser, Miller Lite, and others of that ilk, things had changed stylistically as much as they had changed financially. It was this zest for experimentation and evangelization that would power the American craft beer movement through the postshake-out years and into a fresh period of explosive growth. This time, though, as Koch noted at the Denver taste test, “We're all in this together.”

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Kallman did reemerge in the beer world in 2001 with a short-lived Hingham, Massachusetts-based brewing company called New Century. Its signature brand, however, was a doomed caffeinated beer called Moonshot, which met with consumer indifference and government opposition.

I
f ever there was an appropriate keynote speaker
for the Association of Brewers's annual Craft Brewers Conference, it was Fritz Maytag, godfather to the entire movement. And if there was ever an appropriate time for Maytag to be that keynote speaker, it was during the shakeout.

When the conference opened on April 5, 1998, in Atlanta, the industry's growth had skidded from double-digit percentages to barely single digits—it was just under 5 percent in 1997, according to the association. Dozens of breweries and brewpubs were closing up shop forever. Once the darling of Wall Street and many Main Streets, craft beer was now incongruous to the still economically booming America. Indeed, it was a particularly cruel twist of the knife that the larger national economy continued to do so well as so many craft brewers washed out. It was an era of cheap loans, swelling stock portfolios, and, as president Bill Clinton had been fond of reminding voters during the 1996 elections, the longest peacetime economic expansion in the nation's history. Unemployment was below 6 percent, and the Dow was headed toward a previously unfathomable ten thousand (when it finally broke that ceiling in March 1999, traders literally popped Champagne and tossed specially made rally caps). The bull market that had lured so many of Generation X's best and brightest to Wall Street seemed to have no end, no red flag, no matador with a knife to quiet things. For a while, craft beer was a part of that. Now everyone clamored for Pets.com; much fewer wanted an IPA.

Up to the podium in Atlanta stepped the man who started it all. Maytag was not a boisterous public speaker; he was plainspoken, even matter-of-fact, with wry humor not uncommon. He came armed this time with a ladder chart to punctuate a warning for his compatriots who were left:

At Anchor, we're trying not to grow. Each vertical line is capital investment, and each of these leaps signifies a change in the nature of your company. Don't assume that you should make every leap. Your company may not easily make the next jump, and you don't necessarily have to try. Being small is a matter of choice. There is a chasm between levels, and when you make a vertical leap, you may fail before you get to profitable volume. Once you get to be a medium-sized brewery, your business will change. The wives won't be able to come in and visit as much anymore.