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How Sam Adams Saved Beer: A Love Story

“So you know how Sam Adams basically saved  beer, right?”

I did not. My friend David the bartender was dumbfounded.

“Well dude…you know about the worldwide hops shortage, right?”

“The what?

“The hops shortage! A few years ago! You don’t know about it? It almost wiped the craft beer industry out – well, or at least seriously maimed it. Yeah man, it was a big deal. It was worldwide but hit America really hard because we obviously have a ton of microbreweries.”

We do?

I felt pretty stupid for a guy who’d just started an online magazine called The Pub Scout. But then again, I was talking to my friend David the bartender – and his knowledge of beer was doctorate worthy – if only there was a school that gave diplomas in beerology.

“What do you mean by a ton?” I leaned in.

This was all the launchpad he needed.

“I mean there are a TON! In the thousands, for sure!”

He was excited now, and I could sense an information dump coming on.

“People don’t realize it but I’m telling you – and I tell everybody this – America is the country for beer. Really for craft brew. People always talk about Europe and foreign beers and all that. NO. WAY. America beats everybody, hands down.”

He was really excited now – and so was I.

“I mean not even close dude…not even close. The craft beer scene here is exploding, nobody else in the world can touch it. Breweries, home brewers, pubs, everything – from New York to California. Best place in the world for beer, hands down.”

But I wanted to get him back to where he started.

“Wait a minute, wait a minute,” I said. “I know we’ve got a ton of microbreweries – but what were you saying about Sam Adams…saving everybody, or something like that?”

He stopped again, now almost defensive.

“Yeah, man. Saved beer. I mean Sam Adams literally saved craft beer! They basically – wait…” He trailed off, and then decided to start over. He could see I needed a proper education, and a proper education begins at the beginning.

The bar was closed now. We turned on the fans. David lit up a cigarette.

“Okay, so it all started back in 2008…”

***

It actually started long before then.

Boston, 1984.

Jim Koch (pronounced “cook”) is in his kitchen, hunkered over something on the floor. It looks like a kid working on a messed up science experiment. But Koch is focused.

He is brewing beer.

He’s also just quit his job.

And not just any job. The Boston Consulting Group kind of job. The kind of job they give guys with JD MBA’s from Harvard. Which is exactly what Jim has. A few days ago he was drawing a sizeable salary and telling CEOs how to run their businesses. Now, he’s kneeling on his kitchen floor.

And if that sounds crazy now, in 1984 Boston, it was doubly so.

Jim Koch grew up in Cincinnati in the ‘50s. His dad was a brewmaster. His dad’s dad was a brewmaster. His dad’s dad’s dad…well, you get the point. The Koch family recipe for beer dates back to 1860 – to Jim’s great-great-grandfather and his beerhouse: The Lewis Koch Brewery, in St. Louis. For Koch, beer runs in the family, and the brewer’s craft is equal parts art, tradition, and living.

It’s 1984, and Jim Koch is getting back to his roots.

“I grew up outside Cincinnati, on a farm where I spent a lot of my summers,” he says. “My dad was a brewmaster, and my mother was a teacher. When my dad’s company went out of business in the late ’50s, he started a company for brewing supplies. I come from a long line of brewmasters, so I grew up with beer and entrepreneurial instincts. When I told my dad I wanted to start a brewery, his reaction was, ‘Jim, you’ve done some stupid things before. This is about the dumbest.’ In his lifetime, breweries went out of business, and in his world, the little guy was bankrupted by the big guys. But my dad gave me his course materials from brewmaster school, and my education was state-of-the-art 1948. We’ve learned to make beer cheaper and faster since then, but not really better, so I don’t think I missed much.” [1]

But Boston in the 1980’s was no haven for microbreweries. In fact back then, the word “microbrewery” was about as much of an anomaly as hybrid cars, vegan diets, and hipsters. But to understand the beer culture in America in the ‘80s, we have to take a step back even further – to the days of moonshiners, stills, gangsters and guns – to prohibition.

Prohibition ended in America in 1933. Pre-illegal-booze America saw hundreds of breweries around the country flourishing. The Puritans themselves were brewers. In fact, legend has it that the first building erected by the Europeans in the new world was…a brewery. [2]  Sam Adams (the revolutionary founding father, not the beer) was himself a part-time professional brewer. (I’m guessing the founding fathers had a few pints before–and after–signing the declaration). The presidential Adams, John, practically defined morning cocktails.

But somehow it all faded. And in came the outlawing of alcohol.

Yes we do.  (Courtesy, NorthJersey.com)

Prohibition brought in underground booze, moonshine, speakeasies – just about any kind of potato juice you could squeeze out and make alcoholic. It shaped an era, and perhaps more importantly, what would follow.

Post-prohibition saw history turn the page yet again. Men were no longer the sole patrons of the bar. Suffrage happened. Women were realizing great equality. The ladies also started drinking – publicly. Elise Miller, in 1938, was the first (and still only) female head of a beer company – Miller. Prohibition had forced cheap, watered down, barley-pop beer on the masses. Anything you could brew in your bathtub or the basement that didn’t make you want to vomit and contained some trace of ethanol had to do. Our collective taste was diluted. Once prohibition ended, women, not at all to their discredit, inundated the market. And what did the ladies want? Light beer. Porters, dark lagers, heavy malts – out the door. The light beer was born.

Such was the monotonous beer culture in which the newest Koch found himself. The breweries of bygone days were just that. Everyone was drinking, listening to the Beatles, falling in love with football, going to Woodstock. The farmer’s art of early America was giving way. Getting drunk was a new national right – and everybody deserved it, and deserved it tasty, easy, and cheap. European imports like Heineken were introduced as cool alternatives. Budweiser was god.

So when Koch took his kitchen brew to the Great American Beer Festival in 1985, the concept of “craft beer” was a dusty old fact. But Jim was about to change all that.

Out of 93 national competitors that year, Koch’s Boston Lager was named “Best Beer in America.”  It was 1985, and a re-birth of beer was afoot. The name for Koch’s new flagship beer? Samuel Adams.

Boston-Lager_On-Bar-300x200

“I wanted an assertively American name, and Samuel Adams was a brewer, a patriot, and a revolutionary, so we named the beer after him. I wanted to create a beer revolution in the United States in the same way Samuel Adams created a political revolution. Our Boston Lager was the first time America had tasted rich, flavorful, fresh beer. Domestic beers were fresh but not flavorful, so it was a revelation to people. It didn’t taste like Heineken, Corona, or Bud Light. Six weeks after it came out, we got picked at the Great American Beer Festival as the best beer in America.” [3]  

THE REBELS

“I brewed this beer knowing that light, mass domestic beers ruled the market and I was introducing a rich, full flavored beer that drinkers had never tasted before.” [4]

And so it was that Koch launched The Boston Beer Company with the help of partners Harry Rubin and Lorenzo Lamadrid. “My first hire was the best I ever made: a woman named Rhonda Kallman who had worked at BCG (Boston Consulting Group… remember Koch’s old job?) as a secretary. She was 23, organized, very outgoing, and had worked as a bartender at night. For the first six months we had no office, desk, computer, or telephone.”  But with the cult status of “best beer in America” the Boston Beer Company had liftoff. Jim and Rhonda drove a rented van around, bar to bar in Boston – going in, giving tastings, selling cases on the spot. By 1989, sales clocked in at an annual volume of 7,393,000 liters.

Koch, in the beginning. Courtesy, boston.com

The time was ripe. By 1995, American craft breweries had risen to number 600 nationally. Craft beers at this time either stayed small and local, or became mid-sized, and then got bought out by the likes of Budweiser, Miller, or Coors. But Sam Adams stood on it’s own – and that same year, The Boston Beer Company decided to affirm its status as the leader of the new revolution by going public, selling Class A shares of common stock on the New York Stock exchange. The company’s stock ticker? SAM.

THE EVIL EMPIRE

I used to enjoy Budweiser. It felt good tipping back the “all American” barley pop. Budweiser is good. It’s light and refreshing. It’s not a beer’s beer, but it doesn’t pretend to be. And I used to be okay with that. But then I learned this.

Now, this is not a piece about slamming “the man” or to twist your arm into telling you that you shouldn’t drink Budweiser. (You shouldn’t). But to understand what makes Sam Adams truly great, we have to take a look at the rest of the American beer industry. We have to understand the contrast – and the contrast is stark.

On July 13, 2008, the Belgium based distributing giant InBev agreed to buy Anheuser-Busch for a total value of $52 billion. Still think ol’ Budweiser is “America’s beer”? Not anymore. All you flag waving red-staters might want to think again about your next Sunday afternoon football pre-game purchase. Have fun supporting the Belgians and their waffle irons.

And Miller? Miller’s long gone. Long gone as in South Africa gone. Miller beer is now SABMiller. SAB? Yeah – South African Breweries. [5]  

Both giants sold out – they sold out hard and they sold out big. And hey, if money’s what they’re after, then good for them. The cliché “it’s just good business” is hard to argue with when your only moral meter is measured in mounds of cash.

I’m not faulting the beer giants for being beer giants. And I don’t care that they sold out to Europe and South Africa respectively. It’s the hypocrisy that cuts me deep. Motley Fool blogger D. Joshua Rubin summed it up best in a post, and I’m going to quote him at length because his words are hilarious, and spot on:

“And how did they return our loyalty? They sold out to the highest bidders. Miller sold out to “SAB” — make that South African Breweries — for roughly $5 billion and became SABMiller. Anheuser Busch sold out to the multinational Belgium-based corporate behemoth, InBev. For $52 billion Anheuser-Busch hocked a loogie in our national eye. And to pour malt on the wound, they sold out during one of the worst economic downturns in our nation’s history, when we needed them most.

From billboards, print ads, radio and television commercials including huge buys during the Super Bowl, American men are routinely portrayed as clueless hyper-manly or totally unmanly idiots while American women are degraded as dingbat hotties or beyotches who never let their men just have fun watching sports and drinking beer. Is this just harmless fun? No. As the world becomes hyper-competitive, it is in the interest of foreigners to take America down. What better way than to assume control of our beers and serve up billion-dollar streams of belittling messages?”

Last year, the up-and-coming brewery Dogfish Head was airing a “Brew Masters” documentary on the Discovery Channel. Beerheads across the country loved it. The owners of Dogfish are dynamic. The brewery makes fantastic stuff – like “Midas Touch,” a beer that’s supposed to taste like what beer tasted like when old King Midas tipped one back a few thousand years ago. The series chronicled the storyline of ups and downs and of a small business growing the hard way. It was the stuff of American dreams.

Unfortunately, it got shut down about three-quarters of the way through. Most of the speculation is hearsay, but craft beer heads concur that the bottom line went as simply as this: Budweiser (make that InBev) called the Discovery Channel and threatened to pull all advertising if the network didn’t take “the competitor’s” show off the air. Discovery had little choice.

THE SHORTAGE & THE SAVIOR

But in 2008, while Budweiser was busy leaving the shores and the global economy was waffling like a toppling Jenga tower – another kind of famine paralleled the misery.

Hops are one of the essential ingredients in beer, and in April of 2008, a massive worldwide shortage was afoot. Simply enough, rain didn’t come, crops dried up, and the price for a barrel of hops rose almost five-fold. This didn’t cause a problem for behemoths like Anheuser-Busch or SABMiller whose size mandated massive amounts of reserves. But the little guys were in serious trouble.

Most people don’t know that there was a worldwide hops shortage in 2008 – almost exactly 5 years ago to this month. I certainly didn’t. [6]  But like many of history’s footnotes, it happened quietly, affecting only those whose livelihoods depended on it; in this case, the hundreds of family-run craft breweries across the United States.

Making Mash. Courtesy, samueladams.com

According to the Brewer’s Association, there are currently over 2,403 breweries operating in the United States. Count out a few of the bigger craft breweries like the Boston Beer Company, Bell’s Brewery in Kalamazoo, and Dogfish Head – and one can reasonably estimate that this left well near 2,000 breweries – small businesses – in a bad way.

Enter Samuel Adams. The beer, that is.

With thousands of breweries on the brink of the fiscal cliffs of insanity [7], The Boston Beer company decided to honor a long-standing tradition amongst craft brewers, and subtly no doubt, pay homage to their namesake.

Simply, Koch and company decided to sell 20,000 pounds of hops to 108 randomly selected microbreweries across the U.S. – at cost.

“We looked at our hops inventories and we said we can take some risk,” Koch said. “If the 2008 harvest is okay we’ll still be covered.” [8]

But wait a minute. Where in Harvard business school did Koch learn that it was a good idea to sell your competitors (in every textbook definition of the word) something that you both need to stay in business. And oh yeah – for zero profit. Wait. What?

Koch’s answer? Simple. “We view each other as colleagues not as competitors.” [9]

“The craft beer industry has nurtured a uniquely collaborative and creative culture. Craft brewers interact and work together all the time; we visit each other’s breweries, we sample each other’s beers.  Most importantly, we share certain values and the most important one is brewing quality, flavorful beer for drinkers. In general, the 2400 craft brewers in the US are supportive of each other, because we’re still 6% of the beer market and together we’re a lot stronger than we are divided.” [10]

Stronger together than we are divided. Now, where have I heard that before?

This seems a funny sentiment in today’s America – and if it doesn’t, it should – because Koch’s actions are far from the norm. It’s also strange to hear a businessman talk this way – and make no mistake, Koch is a businessman. As of the writing of this article, Boston Beer’s stock (SAM) is worth $155.26 a share. That’s over $50 per share more than the next closest competitor – the lecherous Anheuser-Busch.

When I first saw the recent batch of Sam Adams commercials, complete with the homey, family brewery feel, and smiles all around, and the Tim McMorris love song playing as the soundtrack romanticizing it all, I thought it was cute. Cute…and a little gimmicky. Jim Koch diving into a giant trough of Boston Lager? Okay, it’s a good publicity stunt, but come on. As the slogan “For the Love of Beer” comes up at the end, you’ve about been convinced to go out and buy a six pack. So the marketing firm did a good job. Big deal. I’ve seen Mad Men– I know how this works.

That’s what I used to think.

And then I talked to David the bartender. Then I talked to folks at Sam Adams. And then I heard from Jim himself. Then I studied the company. And I learned all of this. Now, I won’t shut up about the commercials. I think some of my friends pray they won’t come on during the game, because they know I’ll jump up on the couch and start preaching about Sam Adams and craft beer like a revival tent preacher with turrets.

Sam Adam's signature beer glass, for maximizing flavor.

“We’re passionate about what we do,” Jim tells me. “And we’re always experimenting with new ingredients and brewing and fermentation techniques, like with our Samuel Adams Utopias, a limited edition specialty beer that we’ve been releasing every other year.  It’s unlike any other beer out there; it pours like a port or cognac. The 10th Anniversary batch released in 2012 netted out at a bit above 29% ABV – an unprecedented level. When I started brewing Samuel Adams, I made it my life’s goal to push the boundaries of traditional brewing and we continue to do so.”

And so it is that Budweiser, the self-proclaimed American treasure – the pride of the states as red as the label itself – is now owned by the Belgians, who seem hell bent on increasing nothing but market share and continuing to shape our national consciousness as a group of dub-stepping hipsters and rednecks, all as idiotic as the beer we buy. Miller is doing…something in South Africa I guess; and still chest-thumping the worn out platitude that their beer is “triple hops brewed” – which, in fact, meansabsolutely nothing.

Jim Koch is still in Boston, honoring the family name, holding up tradition, building a culture of better beer, smiling, and diving into tanks of his fifth generation family brew. Employees at the Boston Beer Company say they still see the Chairman around the office quite often – doing things like emptying the break room dishwasher.

For the love of beer indeed.

Title Photo Credit: flickr

1) http://money.cnn.com/2013/03/21/smallbusiness/samual-adams-koch.pr.fortune/index.html
2) See Stephen Mansfield, The Search for God and Guinness.
3) http://money.cnn.com/2013/03/21/smallbusiness/samual-adams-koch.pr.fortune/index.html
4) Jim Koch, quoting directly to The Pub Scout.
5) Though now, the company, the 2nd largest beverage distributor in the world, is based in London.
6) Then again, I didn’t know the swine flu was crashing through Asia in ‘09 until I was in the Tokyo airport and saw EVERYONE wearing surgical masks and staring at the ground. When a lady vomited into a trash can in the boarding line, I decided it was time to get a mask.
7) See “The Princess Bride.” It probably means what you think it means.
8) http://www.pantagraph.com/business/article_3f06ff0a-44a8-53c2-bd18-52b5e6e25977.html
9) Ibid.
10) Jim Koch, quoting directly to The Pub Scout.

 

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