Beer Wars

by Dave on April 16, 2009

This article originally appeared in Coastal Sussex Weekly, April 16, 2009.

Beer.

The simple mention of America’s beverage stirs different emotions and memories in each of us, whether it’s the Sunday game, the taste of a cold one after a long day or perhaps the memory of a youthful indiscretion. But this isn’t your father’s Miller High Life. Beer today has come a long way from where it was even ten years ago.

As more variety and choice enters the market, sophistication and pretense, like tradition, are being tossed aside. Extreme is just one word that comes to mind when you come across beers with names like Santa’s Butt, Arrogant Bastard, I’ll Have What the Gentleman on the Floor Is Having, and Old Leghumper.

Stumbling upon quirky monikers like those, you quickly realize that you’ve just crossed the hazy line into a different culture: upstart craft brewers, a nation of passionate superheroes struggling to bring flavor and quality to a beer-drinking public drowning in tasteless pilsners force-fed to them by publicly traded conglomerates focused solely on profitability and shareholder value.

Joe Sixpack, a columnist for the Philadelphia Daily News, calls craft brewers “a universally unshaved, T-shirt-wearing, pierced-and-tattooed lot that you ought to keep away from your sister.” But nowadays, they are also authors, multimedia stars and celebrities in their own right.

It is their battle, a quest to survive and thrive in an enormous, cutthroat business complete with characters ranging from corporate overlords to monopolistic distributors to weekend brewers, which forms the landscape for Beer Wars, a new documentary from filmmaker Anat Baron.

“In trying to understand how this playing field could remain unbalanced for so long, I discovered an incredible connection between beer and politics,” said Baron. “Something I knew nothing about even though I had worked in the industry. This totally fascinated me, why the big players are so intent to keep things exactly as they are. And why the independent brewers are threatening this 75 year old monopoly.”

One of those brewers, arguably the star of Baron’s movie, is local Delawarean Sam Calagione, who makes “off-centered ales for off-centered people” at his Dogfish Head Craft Brewery in Milton, which has quietly grown to be a major player in the craft brewing industry.

Calagione, co-author of He Said Beer, She Said Wine and author of Brewing Up A Business, is one of the biggest celebrities in his field, often mobbed at festivals and conventions. He is the face of “extreme brewing,” the method of creating beers with more intense flavors, higher alcohol content and unique ingredients. Dogfish Head extreme beers like Raison D’Etre, Midas Touch, Immort Ale and Theobroma have made as much an impact on the beer world as have the more common 60-minute IPA and Shelter Pale Ale. And each beer seems to have a tale attached to it. For instance, Midas Touch was made from ingredients deciphered by a University of Pennsylvania professor from drinking vessels found inside King Midas’ tomb, including honey, white Muscat grapes and saffron.

When Anat Baron arrived at the Great American Beer Festival to conduct some interviews for her film, she found Sam Calagione with great ease.

“I wanted to find someone who represented these craft brewers,” said Baron. “So I did what I used to do in Hollywood, I cast for him.”

She was struck most by Calagione’s style. “It wasn’t his good looks that got me. It was his down to earth, take no prisoners attitude. He wasn’t afraid to speak the truth. I asked Sam if he wanted to “star” in the movie. I’m not sure how many beers he’d had that evening, but he said yes.”

Calagione believes his participation in the film is owed to Dogfish Head’s narrative of starting as a small brewpub on Rehoboth Avenue and growing to be the largest craft brewery in the Mid-Atlantic.

“I think our story is recognized as a good illustration of what a lot of small breweries go through in that we’re sort of passion- and beer-focused instead of money- and profitability-focused like the public, giant companies that we compete against,” says Calagione, tucked into a cramped office at the ever-growing brewery, a large brick building tucked off of Milton’s Chestnut St. that permeates the air outside with a wonderful, earthy steam as it produces over 6,000 cases of beer a day, a volume that ships to retailers in 27 states.

In addition to Calagione, Baron focuses on Rhonda Kallman, a veteran of the Boston Beer Company (producers of Sam Adams), who left to form her own startup, New Century Brewing, makers of Edison Light Beer. Kallman, a celebrated entrepreneur, has been cited as one of “25 Entrepreneurs We Love” by Inc. Magazine and as one of “10 Innovators in Beer” by Independent Thinker.

“While following Sam and Rhonda during the production of the film, I realized that their struggles mirrored those of entrepreneurs in general– raising money, taking risks, getting their product to consumers, and managing growth,” added Baron.

Baron is no beer amateur. After a career as a television movie producer, she was the General Manager for flavored malt beverage startup Mike’s Hard Lemonade. That alone was quite a personal stretch for her: she’s allergic to alcohol and doesn’t drink the beverage at all.

After leaving Mike’s Hard Lemonade and exploring her future options, she received an invitation to the annual beer industry convention in the mail.

“It sparked an idea,” said Baron. “What if I got permission to film it? After all, the big players were all going to be under one roof and I could see if there was a story to be told.”

What a story it became. Among the villains that quickly emerged was the “three-tiered” distribution system. The system works like this: Set up in the wake of Prohibition to address saloons owned by the breweries, it literally mandates a “middle man.” Producers of alcoholic beverages must sell to a distributor who then sells to a retailer.

“This system which was set up after prohibition to cure the evils of tied houses (when the brewers owned the saloons) and provide consumer choice has now, 75 years later, done the opposite,” Baron added.  “Yes, you have a larger selection of beers today when you go to the bar or store. But, and it’s a big but, you don’t necessarily know who is really behind the label of the beer you choose. And you may not care. But as I got into the story, I realized that I cared. A lot. Because, if you turn a blind eye, real choice may not be there tomorrow.”

Visit the National Beer Wholesalers Association web site and you can see a video of Boston Beer Company chief Jim Koch extolling the virtues of the three-tiered system as it helped him quickly recover some tainted bottles during a recall. But not everyone shares Mr. Koch’s apparent passion for the three-tiered distribution system.

“These distributors have created very successful businesses but they’re very 20th century,” adds Baron. “Their presence in every congressional district makes them a powerhouse. They’re adept at using the political system to lobby politicians to keep the status quo. The more power these distributors have and the more connected they are to the big brewers, the less opportunity there is for the next Sam Adams to emerge on the national stage.”

Most of the recent struggle over the three-tiered system has come not from brewers but from vintners trying to get rare wines over state lines by direct mail. But the beer industry has its own stake; especially independent brewers like Calagione who have to battle publicly traded nemeses on a daily basis.

“I’m not going to lie to you, it’s competitive out there,” Calagione admits. “But the consumer is getting much more enlightened and wants to support American companies.”

The reference to “American companies” highlights the fact that foreign conglomerates own Budweiser, Miller and Coors, who combined account for 75% of the American beer market. The entire craft beer industry accounts for between 4% and 6% of the industry, and Dogfish Head controls just .035% – .05%.

“The name of the game is getting that mind-share of that retailer – the guy who decides what goes on that shelf, getting the mind-share of that distributor – the person who trucks your beer and sells it to that retailer,” adds Calagione, whose combination of wired and wiry suggests he enjoys the David role in this mythic struggle against the foreign Goliaths. “And small breweries can’t say ‘Hey, if you give me that shelf space, I promise to run an ad during the Super Bowl,’ or ‘Hey, I’ll make sure you get 10 tickets to the Phillies game.’ And that’s what we’re up against.”

Calagione, however, sees great opportunity in the size and structure of the larger companies.

“In the days of the Enron scandals through the Madoff scandals, people want to believe in business and they want to embrace local businesses with a face like craft breweries, and there’s now over 1,400 craft breweries in the nation, giving people the opportunity to vote with their wallets and their pocketbooks.”

It is that spirit which landed him in the middle of this unique event: a one-night-only documentary release followed by a live panel featuring Baron, Calagione, Kallman and other beer industry types and hosted by Ben Stein (Win Ben Stein’s Money, Ferris Bueller’s Day Off). The panel discussion will be beamed by satellite to more than 430 theaters nationwide, including one at the Brandywine Town Center in Wilmington.

“I’m really proud and excited for Anat because she stuck to her guns and got this thing done,” adds Calagione. “The movie industry isn’t that dissimilar from the beer industry and she’s competing against these giant film companies and to get this sort of release is sort of telling because I think it’s a celebration of American entrepreneurial spirit that’s kind of been dampened in this economic environment and I’m excited that our company’s going to be a part of it.”

Baron, too, sees the movie as a metaphor that stretches across the greater entrepreneurial economy.

“My goal was to interview experts on beer, distribution, retail, lobbying– everyone involved in the broader story of the beer industry,” said Baron, “and find the truth: what do the struggles of entrepreneurs like Sam and Rhonda say about American business in general?”

Along the way Baron noticed people starting to take more interest in what they were putting into their bodies.

“An increasing number of Americans were interested in making their own choices and not kowtowing to the corporate marketing machine,” said Baron. “Whether in coffee, cheese, chocolate, locally grown produce, people were willing to experiment and explore, even if it meant paying a little more. Craft beer was a natural extension of this trend.”

That craftsmanship in the beer industry has led to a growth rate that is exceptional in such a down economy. Though the overall market share of craft brewers remains small at 4% of the total barrels sold, growth of the craft brewing industry in 2008 was 5.8% by volume and 10.5% by dollars.

In theory, Dogfish Head Craft Brewery could be located anywhere in America, but Calagione says a lot more than local water goes into his beer: “the natural beauty of coastal Delaware and also how approachable people are here.”

More than that however, is Sussex County’s key geographic location, something that often surprises Calagione’s industry peers.

“We live in rural Delaware and our brewery is there and it’s actually a perfect hub to distribute something from,” Calagione recalls telling friends in Milwaukee. “We’re two hours from DC, Baltimore and Philly, and three-and-a-half from Manhattan. In that radius you hit this amazing fraction of the American populace, but we get to live in a place where we don’t have to lock our cars, our kids are safe and we can walk to the beach.”

The company also enjoys its role in giving back to the area, promoting and partnering with local businesses like Quest Fitness for Pints & Paddles, a popular kayak excursion/brewery tour package.  In addition, Dogfish Head recently underwrote the kayak launch for Lewes’ new Canalfront Park and Mariah Calagione annually runs the “Dogfish Dash” road race to raise money for the Nature Conservancy.

“It’s really warming to me to know that we’re helping the community that helped give us our birth and our life,” Calagione shared. “We do anything we can do to karmically pay back our good fortune that we live in an area where people are so friendly. We’re not just trying to market Dogfish Head. We’re also trying to market coastal Delaware.”
That effort seems to be working. The tours at the brewery in Milton alone are responsible for drawing many people into the area. Calagione estimates that about 25% of those who take the brewery tour came to Delaware specifically to take the tour, and then go out into the community to go shopping, dine, and enjoy the area.

But not before they sample the product in, and the story behind Lawnmower Ale, Shelter Pale Ale, Red & White, Fort, Sahtea or any of the other uniquely-named liquids that flow from the taps in one very special corner of coastal Delaware.

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