Interview with a scholar: Professor Ken Elzinga (part 1)
This is the first (and potentially only) installment in a new series interviewing “scholars” about the beer brewing industry (no Jeff, just because you went to Harvard that doesn’t make you a scholar). Professor Ken Elzinga is a renowned economist at UVA, was my adviser in college, and I realized recently that he’s an expert on the economics of the brewing industry. He kindly granted me a phone interview and some excerpts are below.
From the perspective of an economics professor, what do you find most fascinating about the beer brewing industry in the United States?
I don’t think there is any other American industry that’s had the trend to consolidation that brewing has had and then at the same time have a thousand new entrants come in almost in your lifetime?certainly in mine.
So if you were a boy growing up in Michigan, you not only knew of Miller High Life and the Budweiser brand, but you knew of Goebel and Pfieffer, Stroh’s and Drewry’s.
At the same time, as that steam roller of consolidation moves across the industry, coming up from below, starting with Fritz Maytag out in San Francisco? you could actually pinpoint it historically. One guy, one town, one event when he takes over Anchor Steam Brewery and turns it into a craft brewer and starts to develop a clientele for craft beer and then these two kind of different marketing models of a brewery selling through a small distribution network either on premise or off premise or a brew pub offering food and beer made on premise, this little thing gets started in San Francisco and spreads across the country to now, where there’s over a thousand brewers, and some day they’re going to have a 10 percent share of market.
The cost efficiencies were such that only if you had a plant of 4 million barrels or above, could you be cost efficient, and then these guys come in and offer a craft product at a different price point with product differentiation and they changed it dramatically. So that’s the yin and the yang of the beer industry. That is what makes me? as an economist, why I’m interested in it.
Do you believe there is an opportunity for consolidation of microbrewery brands? While it has certainly occurred on a more minor scale (Independent Brewers United/Magic Hat example), do you anticipate it happening more extensively, or does consolidation undermine the competitive advantage that micros have (local focus, diverse and unique product offerings, etc)?
Yes, that’s starting to happen. Magic Hat would be the best example where you actually have a consolidation of brands that are not geographically contiguous to one another. Now how much money those guys are making, I do not know.
But I find that interesting and I suspect there will be more of that. So far the ties between craft brewers have been just through their trade association. And that’s been terribly important because it’s been a real trade association of networking, of camaraderie.
What is your opinion on the following beers: Amstel (owned by InBev – who you consulted for), Bud Light (AB product, who InBev bought), Coors Light, and Miller High Life, (also a company you consulted for)
Amstel is one that I’m very bullish about. I think it’s a really solid brand. Amstel has the advantage of being a pricey beer, an import price point, but InBev is a really relentless cost cutter and they run a lean operation. Anheuser-Busch will be a much leaner operation under InBev and I suspect it won’t affect the quality of the products. How it’ll do the marketing, I don’t know, but they’ve already gutted the 9th floor of the Anheuser-Busch offices, which [was] this beautiful palatial place where the Busch family could hang out. That’s all gonna be gone.
Bud Light is a remarkable product. Bud Light is a good example of [the second mover advantage] because it comes along after Miller Lite, and Miller stumbled in producing a low-calorie beer. [Bud Light didn't] make the same mistakes and Bud Light is the largest selling brand of beer in the United States now. The light beer phenomenon is something that nobody could have predicted.
Coors is essentially a Coors Light company that makes a lot of money off of Blue Moon as a sideline. Miller has essentially become Miller Light. They’ve just had a terrible time with Miller Genuine Draft and other interesting products that they’d come out with. It seemed to be a hit for a while, but they haven’t been able to sustain it.
Miller High Life, to me that’s sad. That was a great beer when I was a kid. The champagne of bottled beers, a great slogan, but Miller has tried to reposition it. They tried to move it up into the premium level. They tried to bring a low price point. Miller [has] had a hard time finding a marketing focus. My hunch is that Leo Kiely who’s a really good beer marketer will be good for Miller. He’s a Coors guy. He now heads the JV.
In the next installment Professor Elzinga will share his take on the future of craft beer, how the recession will affect the industry, and what beer and lipstick have in common.
Monday Update: The Election, Our Lactic Stout, and Jeff’s Recipes
Yesterday was a big day with lots going on for MNB. Highlights are as follows…
Election Update (just when you thought you’d gotten enough)
We at MNB care deeply about the community we (literally) serve (beer to) here in Westside Atlanta. While you’ll notice we stayed far away from federal politics on this blog our local politics are a different issue. I’m proud to inform our readers that I officially launched my political career last night. That’s right, I was elected as an “at-large” board member of the Berkeley Park Neighborhood Association. Yeah, it’s kind of a big deal and if my meteoric rise tracks anywhere close to that of Obama or Palin they just might need to watch out for me in 2012.
Lactic Stout
We brewed a milk stout last night and despite the frigid weather had nearly forty people come out. Although Jonathan shared his thoughts on this beer in a previous post I think the real reason we were doing it is because Jeff is about to have a baby (well, not him literally but his wife). I think he read somewhere that a milk stout can be substituted for baby formula so he wants to perfect this beer long before the baby arrives. For those of you who think babies don’t enjoy a good beer I refer you to a previous post.
Jeff’s Recipes
Jeff has been hitting the books lately. Although we give him a fair amount of crap about it he has managed to come up with a few decent recipes and some that were not quite as hot. While I won’t go into the details here I uncovered some major deviations from MNB SOPs (Standard Operating Procedures) last night and on top of that he was complaining about having to wash out a few kegs (he doesn’t do well with “manual labor”). What Jonathan and I have finally realized is that we need to embrace Jeff in his full Harvard-book-loving-excel-crunching glory. We love you Jeff.
120 Minute IPA
This is how we finished the evening.
Yummy.
MNB is Moving
Don’t worry, we’re not moving to somewhere lame like Delaware. We’re just moving our site over to a new bigger, better, faster server this evening. What this means to you:
- Quicker, more reliable load times when you click on all the amazing pictures of me
- No downtime (we were getting death threats from our fans last time the site went down)
- Better beer (site loads faster, we waste less time on it, we spend more time brewing beer…I think the logic works)
Also, don’t post any comments between now and tomorrow or else they’ll be lost in never never land as the database will be in transition from one server to the other. BTW, we’re thinking about creating a never never land feature as a permanent one we could use selectively for certain commentors on the site (and Chris, maybe you can patent that for us).
Wedding Beer
As Jonathan has already ranted on my “unsanctioned” beer I figured I might as well share the full story. My younger sister Martha was getting married this past weekend and since her husband-to-be was the creator of the official MNB tap I figured it only appropriate we do a custom beer to celebrate the occasion.
The beer we settled on was a modified version of our yet-named Belgian Wit. I actually added back the coriander and fresh orange zest from the original Weiss Guy recipe. For an added twist I added some fresh ginger at the end of the boil (inspired by the Allagash Fluxus I had in Portland last month). The result was a spectacular beer that won the hearts and taste buds of all who attended (that were legally of age and tasted it). Even my grandmother who hates beer partook in quite a few herself.
We dubbed it the Equally Yoked Heifer-Weizen. The quote is especially dynamite on this one too. If you can’t make it out it reads:
Who was the first guy that looked at a cow and said “I think I’ll drink whatever comes out of those things when I squeeze them?”
Yes. Something we’ve all wondered at one time or another I’m sure.
Jonathan and Joel successfully make beer (without Jeff)
As we’ve already mentioned Jeff is on vacation so Jonathan and I had to take over the role of brewmaster for the evening. Basically it involved playing on an excel spreadsheet, taking a few gravity readings, and doing some cheesy tours for the newcomers where you pretend to know a lot about beer…it was NOT very difficult.
BTW, if you are wondering where Jeff is on vacation, I will take this moment to share that he was SUPPOSED to go to Switzerland but on the eve of his departure realized that his passport was expired (as you can see below). Silly Jeff had to scramble last minute and is instead taking his wife to Montana (Dollywood was the other option but I think they opted out of that as Rednecks.org was going to be holding their annual convention there this weekend).
On another note it was a really fun crowd last night. Brewing went well and Jonathan might post later about using the salt water in the cooling process (it will be a rivetting post I’m sure). We thank Alexandra for bringing (homemade?) brownies and look forward to “more goodies” which have been promised for next time.
Allagash, Baby
This past weekend I was up in Portland, Maine and had the opportunity to visit the incredible Allagash Brewing Company. For those of you who have not had their beers they do exclusively Belgian style beers and they do them exceptionally well. The evening before I had the pleasure of tasting their Fluxus ’08 at a very cool (and new) Belgian Bar Novare Res Bier Cafe. Inspired by the Fluxus I dragged my wife and some co-workers and we did their brewery tour on Friday afternoon. Some thoughts…
- I was slightly disappointed with the tour (albeit was much better than what most breweries offer) but in fairness to the guide she claimed to be the sales manager and wasn’t the normal person who led the tours (she almost forgot the 4th key ingredient in beer after water, hops, yeast, and _______). It’s okay, sales people don’t need to know what they’re selling anyway. That being said I did get to talk to one of the brewers for a little bit and had the opportunity to meet Rob (the founder) and chat with him for a minute as well.
- These guys are slammed. They just moved into a new space over a year ago but they are packed to the max. It’s great to see their success and cool that they have a strong commitment to great beer and quality (like the room full of beer aging in various barrels).
- Their beers are awesome. I was able to taste a few new ones like the Victory (brewed with grapes) and I have yet to find a beer of theirs I don’t like. Many kudos to them for pleasing my palate.
Some pics are below. If you’re ever in Portland (Maine, that is) you should check them out.
Bryan Adams rocks our world
Sunday night was monumental for team MNB. As you all know we have a long running affinity toward both Bryan as a person and to his fantastic music (as you’ll notice on the side nav have have 15 posts dedicated to him). On Sunday we had the privilege of seeing him live at the new Verizon amphitheatre.
Several months ago I purchased 6 tickets (for the whopping price of $9.85 each) and the plan was for Jeff, and I to go with our respective wives and to use it as a chance to find a date for Jonathan. I even planned to get submissions on the blog from eligible bachelorettes (and what quality girl wouldn’t want a free date to Bryan Adams). Unfortunately Jonathan’s health problems foiled that plan but through our text messages, phone calls, and e-mails we tried to make him feel right at home.
Our goal for the evening (in addition to making out to “Let’s make a night to remember”) was to get a chance to talk to Bryan Adams, invite him to MNB, and give him an MNB t-shirt. Unfortunately we failed on all fronts. I did manage to make it to the mosh pit up front (and by “mosh pit” I mean swooning 40 year olds and their obedient husbands who stood by with their drinks in hand). I actually almost touched his foot (as evidenced by the crotch pic below.
The concert ended (or the good part at least…Foreigner was the 2nd band…totally nowhere near as cool as BA) and despite the security guards saying their was no way to see Bryan, Jeff and I would not give up. We proceeded around to the back entrance where the tour buses are located and the video below best recounts the interaction between the security guard and ourselves.
Note from Jonathan: Amazing. As you’ll notice, Joel chickens out towards the end. I think if I was there I would have been able to sneak past that guard while Jeff was keeping her occupied.
