The Other Side of the Brewpub Coin

When I first started thinking about the brewpub vs. production brewery question, I had no intention of turning it into a series of posts. You can find the earlier ones here and here. I'm addressing the question again because I stumbled onto something that generated some additional thoughts..

What happened is I visited one of the Blitz Sports Pubs...in this case Blitz Ladd down on Southeast 11th Avenue. I did not venture there to further research the brewpub question. Nope. I stopped in because I wanted to check out the space, the beer list and the food. Just another adventure.

Hard to miss the Blitz logo

In case you aren't aware, there are currently four of these joints in or near Portland. Besides the one I visited, there are two in Northwest (Blitz Pearl and Blitz 21)and another one in Tigard (Blitz 99W). Blitz Ladd is the second location. Blitz Pearl is the original. 

I initially thought the Blitz chain was headquartered outside Oregon. These are large spaces, (Blitz 21 is evidently smaller than the others) and they've made a substantial investment in the brand identity. But the Blitz chain is locally owned. And they are expanding. Someone I know in the biz tells me Blitz has plans to open in Beaverton and in the Hollywood District. I'll get back to that shortly.

On the big board: 23 standard beers, 13 rotating taps

These places offer plenty of distractions. They've got gaming galore (ping-pong, shuffleboard, Foosball, video games and more). Large, wall-mounted TVs dominate the visual decor. The menu is standard pub fare and, more importantly, the beer list is damn good. Blitz Ladd has 36 taps pouring mostly great beers.

The Counter Argument

These Blitz pubs may offer the perfect platform on which to mount the argument that production breweries may, indeed, be the wave of the future in craft beer. Over the course of the last few years, we have seen an increasing number of places large and small that feature great beers. Now we have the Blitz chain and Buffalo Wild Wings, both enormous operations, hawking great beer. 

The proliferation of places that serve craft beer not brewed in-house has implications for the industry. It will potentially help production breweries and hurt brewpubs. How so, you may rightfully ask.

The $6 Blitz burger with fries.

First, places like Blitz add to the plethora of opportunities for production breweries to sell their stuff. They are jumping into space already occupied by bottleshops, dive bars, bowling alleys and taprooms. This is to say nothing of the grocery and convenience store channel, which is growing exponentially in Oregon and elsewhere. Today's production breweries have nearly unlimited markets. Of course, brewpubs have the same access...but many don't have the brewing capacity to fully tap it.

Second, and more importantly, large pubs like Blitz may sap business away from brewpubs. They offer a greater variety of beers in the company of a comparable menu. There's also the fact that Blitz, (Buffalo Wild Wings, too) offers gaming and entertainment amenities you aren't going to find in your average brewpub. These folks are offering a seriously viable alternative to the brewpub.

Off-street parking at Blitz' rumored future location

Blitzkrieg

Consider this. The rumor mill says Blitz is working a plan to take over the former Poor Richards in Hollywood. This area is bursting with positive energy. The nearby Hollywood theater will soon get a new marquee and there's construction happening next door. It's a hot strip. Sweetening the pot for Blitz is that the Poor Richards location has plentiful off-street parking.

There are brewpubs in the area. Columbia River Brewing is to the east across the street on 40th Avenue. The Laurelwood flagship is up the street on Sandy. Alameda Brewing and Fire on the Mountain are a short distance away on Fremont. Does anyone think a Blitz Sports Pub in the area isn't going to have an impact on those businesses? 

Hard to miss the Blitz logo

Evolution

It occurs to me that the Blitz Sports Pubs are merely part of the evolution of the craft beer movement. Ten years ago, people who wanted good beer found it almost exclusively in brewpubs. Today, the ground has shifted. People now know what good beer is...thank the brewpub model for that. They know they don't want Bud or Coors. Instead, they demand good beer wherever they go. Blitz, along with other large and small venues, is simply tapping into the fact that craft beer has an established following.

We'll have to wait and see how this pans out. If you go out to Yelp or any of  the other places where people comment on pubs and restaurants, you'll find Blitz pubs aren't getting the greatest marks for food or service. Some brewpubs are in the same boat, but I suspect Blitz needs to clean up its act if it's going to compete with the better brewpubs for the better customers.

Blitz the dog is interested in the Blitz burger

I'm working up some thoughts on strategies the brewpubs and smaller breweries are using or are likely to use to ensure that customers continue to come through their doors. The brewpub is certainly not dead. Next week.

Outdoor Festival Season Revs Up with NAOBF

Even though there have already been several festivals, the upcoming North American Organic Brewers Festival is nominally the first of the summer. That's a sketchy argument if you go strictly by the weather, which has been, shall we say, uneven. But I can easily make the argument using the calendar, since we just officially entered summer.

Early Friday afternoon features line-free tasting

One of the biggest challenges routinely faced by the NAOBF is the weather. As most Oregonians know, summer often doesn't arrive here until July 5th. June can be dicey. Last year's NAOBF did not enjoy perfect weather. When I was there drinking on Friday, it was fairly cool. I think it warmed up during the weekend, but you never know what you'll get this time of year.


The Beers

The beer list for NAOBF 2012 is fairly impressive. They expect to have around 50 organic beers in a wide range of styles from around the country. Lots of good beer means choices can be tough. Well, unless you can come to the festival for multiple drinking sessions. Then you're set...but your liver may be in trouble.

My own recommendations are based on single visit drinking...most likely Friday afternoon. How do I decide what to taste? I look for beers that I can't find in local stores or pubs, or maybe a variation of something I can find there. I also take ABV into account because I can only taste so many beers. Lower values are going to attract my interest more than higher ones. I know, I know...that runs contrary to the thinking of some festival goers. Oh well. My list:

The bike corral packed in last year

Alameda Brewing - Thai Yellow Wolf Imperial IPA - ABV 8.2% IBU 100

Standard Yellow Wolf is a good IIPA, available in many stores and on draft around town. This is a variation, made with 100 percent organic malts. They also add dried mangoes, flaked coconut, Thai basil and ginger. This could be pretty interesting. Or not. But worth a try. At 100 IBU, it's a pallet buster for sure, so save this for late in your tasting excursion.

The Commons - Havier Bier/Oat Saison - ABV 5.6% IBU 15
Any beer by The Commons is worth a try. Saison is a refreshing style and perfect for a warm weather. Even if the weather fails to cooperate, I suspect this beer will.

Fort George Brewing - Spruce Budd Ale - ABV 5.2% IBU 0
This is one of two beers Fort George is bringing to the festival and the other one (South, a barrel-aged fruit beer) is worth a taste, as well. But Spruce Budd Ale looks interesting. The "O" IBU isn't a typo, so hopheads may wish to move on. Fort George brewers use spruce tips in place of hops for aroma and some flavor in this beer. I suspect it will be great or terrible. Either way, I like the creativity.

Late afternoon lines will be long

Laht Neppur Brewing Co.- Peach Hefeweizen Fruit Beer - ABV 5.2% IBU 15
Laht Neppur is located in Waitsburg, Washington...the heart of wine country. They make wine and beer...the brewing part of the operation was established in 2006. Seriously, Laht Neppur is on my road-trip hit list the next time I go to the homeland (Spokane or Pullman). This beer is their standard Hefeweizen with peaches and puree added. Sounds like a perfect summer pick-me-upper.

Laurelwood Brewing - Organic Green Elephant IPA - ABV 6.9% IBU 80
Laurelwood is bringing two excellent and highly sought-after beers to this festival. I'm listing Organic Green Elephant because it has a lower ABV than Organic Deranger Imperial Red Ale. Both of these are limited edition beers and worth trying. Hopheads will be lined up for both...and rightfully so.

Logsdon Farmhouse Ales - Kili Wit Beer = ABV 5.5% IBU 20
Logsdon is located up the road in Hood River and makes its beers from locally grown ingredients. They have built a strong reputation on their Farmhouse Ales. Kili Wit is brewed with organic barley, wheat and oats. Whole cone Fuggle hops (as opposed to pellets) and Egyptian coriander evidently contribute to a light, refreshing beer.

Recycling is a big part of the program here

McMenamin's Crystal Brewery - Organic Liquid Friend Session Ale - ABV 4.7% IBU 26
I'm not normally going to seek out McMenamin's beers at any event. However, this one looks interesting. They use 2-row barley and wheat malt for the backbone and Centennial and Tettnanger hops for a citrus, floral finish. Beware of the low IBU rating here. Hops may come to the forefront due to the relative lightness of the beer.

Natian Brewery - Alphabetically Above Average Organic Amber Ale ABV 5.3% IBU Not listed
The other Natian beer at the festival (La Luz Summer Ale) has a higher ABV than this one. It's a little odd for an amber ale to be lighter than a summer ale...though not unheard of. They evidently use a bit of organic cocoa in this beer for color and flavor.

Pike Brewing - Naughty Nellie/Golden Artisan Ale ABV 4.7% IBU 24
Sometimes a name is all you need. Naughty Nellie sounds pretty good to me. Seriously, Seattle's Pike Brewing has been producing great beers for a long time. Nellie is positioned as a balanced, crisp golden ale. We shall see.

The beer will flow, rain or shine

Santa Cruz Mountain Brewing - Love Potion Fruit Beer ABV 4.5% IBU 36
Love Potion is a seasonal offering at Santa Cruz Mountain Brewing. This is a place I hope to visit someday. Anyway, Love Potion is a pale ale brewed with cherries, oranges, rose hips and hibiscus. How can this beer not be interesting?

So there you have it...my tasting list for the NAOBF. Opinions will certainly differ. There are a lot of high octane beers at this festival and I'm quite sure some of my partners in crime will have tasting lists that are significantly different than mine. And that's cool. It's all about personal preference.

The Festival 
I suppose the most important thing to remember about this event is that it runs THREE DAYS. That's right. This isn't the OBF, which runs four days (and could possibly run a week). The NAOBF is basically a weekend event. If you're keeping in theme, walk, ride your bike or take public transit to the event. Parking is extremely limited. There's a whole lot more info here.

Cheers to summer!

Leaving the Brewpub Model Behind: The Sequel

My original post on craft beer and brewpubs (it's here) drew a number of comments from a variety of places. You know you've struck a nerve of sorts when people are sending you emails about a blog post. There were also comments on the blog and on the blog's Facebook page. I'm not saying the post went viral and I got messages from Russia, but there was definitely some interest in the topic.

Just to summarize that post, I was simply pointing out that we are seeing an increasing number of craft beer production facilities that are not attached to a brewpub. This runs contrary to the business strategy upon which much of the country's craft beer industry is based. My question: Are we really prepared to leave that model behind?

The established, antiquated model

Counter-punch

The most common leverage point in favor of the evolving model is that beer is more profitable than food. The argument goes something like this: If your brewpub revenue is 60/40 in favor of food, more of your net profit is coming from beer because beer is more profitable than food. Using that logic, the new age breweries that have no food and limited tasting room hours will be just fine as long as they have good beer and they sell a lot of it. Hmmmm.

Survey says

I don't own or work in a brewpub, so I have no firsthand knowledge of profit ratios and net profit. So I went to the horse's mouth...someone who has run a successful brewpub for many years. I'm not going to identify this person because that's the way he/she prefers it. I'm simply going to say industry source. Here's what my source says:

You can't take cost/profit percentage to the bank. Beer is probably more profitable than food. But that slight difference in profit won't pay your bills in the long run. When a tasting room sells four customers 2 beers each at $4.00, they put $32 in the till. If those same four people come to my pub, we'll get the same $32, but maybe they each buy a burger for $10 each, and an additional beer each. Now we've put $88 in the till. Sure, there's more overhead, labor, equipment, food cost, etc. But the extra $56 we put in the till more than covers that cost. We also get the added benefit of all the additional business that comes in just to eat, whether breakfast, lunch or dinner. The tasting rooms don't see that business.

The new model...

The importance of daily cash flow has been covered before, notably by Sam Calagione (Dogfish Brewing) in his book Brewing up a Business: Adventures in Beer. In it, he talks about the easy (and daily) cash flow that a pub brings in. My source continues:

Most production breweries rely on wholesales sales to distributors. Distributors pay on a 14 day cycle. In our case, we have several distributors, only one of which pays on time. We typically get paid three weeks after they get the beer, potentially 5-6 weeks after we received the grain and other ingredients to make the beer. Most suppliers give us 30 days to pay bills because we're well-established...newer breweries may have less favorable terms. Anyway, without that extra money in the bank from restaurant sales we'd never have the cash flow to pay our beer ingredient suppliers on time.  

Elephant on the couch
Look, it's hardly a secret that craft beer has been on a growth tear in recent years. Growth seems to be open-ended. These new age, production breweries appear to be based on the premise that they can make a lot of quality beer and sell it for a good profit. Nonetheless, the overwhelming success of the brewpub model and questions about the viability of the brewery-only model ought to make you wonder why this route is being chosen.

Well, one of the reasons is financial. If you want to open a business of any kind today, chances are you're going to need financing. Even if you plan to borrow against your house or other assets, you will probably need help from a bank.

If you go to a bank with the idea of opening a restaurant, you aren't going to get a warm reception. Why? Because restaurants are regarded as one of the riskiest investments out there...they have a high failure rate even in a good economy.

However, if you go in with the idea of opening a brewery, the reception will be much warmer. Why? Because the Federal government regards breweries as manufacturing facilities, which are eligible for SBA (Small Business Administration) guaranteed loans. Here's how my industry source sums it up: 

In the current banking climate, banks don't like restaurants or pubs. But they love breweries. I'm working on two projects at the moment...a new pub and a production brewery. Even though I would create 25-30 jobs with the pub and only 7-8 with a new brewery, the bank would prefer to help me with the brewery due to the SBA guarantee. The pub would create more jobs, but everyone knows restaurants have the highest failure rate of any business, right?

So if you want to understand why so many production breweries are opening, it may be helpful to understand the realities of the financial climate. It's a good deal easier to get funding for the brewery-only arrangement, despite the historical success of the brewpub model. Manufacturing is king. Who knew?

Organic Festival Highlights Sustainable Values

The onslaught of the summer festival season is upon is. Get ready for crazy. For the next three months, beer fans get to enjoy the best of the best mostly in outdoor settings around town. The highlight, in my mind, is always the Oregon Brewers Festival, which happens in late July...a sort of exclamation point on Oregon Craft Beer Month.

What event kicks off high season in Portland? It's hard to say. Maybe it was last weekend's Fruit Beer Festival, which attracted good crowds in an expanded venue in and around Burnside Brewing. That festival is going to continue to grow and will likely need an even larger space next year.

From the 2011 event...early Friday afternoon

The next big event is the North American Organic Beer Festival, now in its eighth year and set for June 29-July 1 in Overlook Park. They are expecting 18,000 beer fans for what is thought to be the nation's most environmentally friendly festival. More on that shortly.

They will be serving up 60 or so organic beers and ciders from 39 breweries this year. The tap list is out there to review if you're so inclined...I'll wait to make any suggestions until the week of the festival.

Craig Nicholls, who is arguably Portland's first organic brewer, launched the NAOBF and continues to run the show today. Craig was the brewmaster at Alameda Brewing for many years and subsequently opened Roots Brewing. He folded up Roots a couple of years ago and has been doing consulting work since, helping folks like Fire on the Mountain organize their brewing systems and operations.

There will be plenty of great beers at this event. But its values transcend beer. The NAOBF is all about promoting sustainability and does so in a variety of ways:

• Beer is sampled from reusable, compostable corn starch cups.
• Strategically placed onsite stations collect compostable and recyclable items
• Food vendors must use organic ingredients, as well as compostable plates and utensils
• Solar and biodiesel generators provide festival electricity
• A gigantic bike corral packs in hundreds of bikes

As a direct result of the efforts made here, 90 percent of the 2,300 pounds of waste generated by the NAOBF last year avoided landfills via recycling and composting. Craig had hoped the festival would be trash neutral this year...meaning nothing would wind up in in landfills. Even if that goal is not quite attainable for now, he is focused on getting there and eventually will.

As I said in an article I wrote for an actual publication last year, the NAOBF essentially uses good beer to showcase what you can do with sustainable principles if you put your mind to it. Most of the festivals around town generate mountains of waste that goes to landfills. This one does not. You have to respect that.

There's plenty of information on event times and costs here. It should be another good year for the event. Mark it, dudes.

Cheers to Portland Beers, Round Two

Part of the reason I started writing this blog about a year ago is I thought it would be a nice companion for a book I was working on at the time. The book, Beervana Rising: A Guide to Portland's Craft Beer Scene, was published as an eBook last fall. It is essentially an overview of the Portland beer scene, with coverage of the brewpubs, pubs, bottleshops and significant events, along with historical references, stories, etc.

Beervana Rising has been available on Amazon, Apple, Barnes & Noble and several other sites where you can buy such things. I thought an eBook might be a nice way to present this information. I realized there are plenty of places you can go on the web (blogs, Yelp, etc) to find the same kind of information. But I thought the book might be useful because it provides a lot all in one place.

In the with new...

I didn't do much to promote Beervana Rising, beyond mentioning it to friends and family. Why? I was never quite satisfied with it. I wasn't completely sure it covered everything it should and I thought maybe it needed to be published as a print book to gain a following....an idea I didn't pursue.

Fast forward to April 2012. I was working on getting a formal book contract for a different project. During those talks, it occurred to me that Beervana Rising is exactly what it should be: an eBook. Things change so fast on the local beer scene that print makes no sense at all. A book like this needs to be updated on a regular basis to stay relevant. I had always intended to update and republish the book, so I put it in motion.

The newly published book is called Portland Beer 2012: A Guide to the Best of Beervana. It's an improvement over the first book. The content has been expanded and updated to include some of the newer spots around town...places like Gigantic, The Commons and Pints. Some of the content is re-purposed from blog posts, but a lot of what's here is specific to the book.

Why the new title? I hope it will make the book easier for search engines to find and for potential buyers to identify with. The cover is also new. I designed the cover of Beervana Rising myself. It wasn't bad and I'll continue to use that artwork in various places. But cover art is pretty important with an eBook because it's the first thing buyers see when they're scanning book titles. I decided I needed a beer photo on the cover.

...and out with the old.

When you want a great beer photo in this town there's an obvious go-to person: Matt Wiater (aka Portlandbeer.org). I've known Matt for many years via work not related to beer. I talked to him about what I was looking for and he was kind enough to help me find a photo I think works well. If you're wondering, the photo was taken several years ago at the old Laurelwood Brewery on 40th Avenue...Columbia River Brewing occupies that space (and brewing equipment) today.

My vision (if that's what it is) of the book has also changed...I now see it as a series. There will be a a new version with updated content each year, probably in the spring to coincide with the busy summer season. The cover may change from year to year...or not. I'll cross that bridge when I get to it. As for 2012 book, I'll be updating it every few months through the fall and loading the revised versions to the various sites.

In case it isn't quite clear, the book is intended for people who want to know more about Portland's beer scene, including the roots of the craft beer movement here. People who travel here to sample the beer, as well as locals who want to know more, will certainly be interested. The beer geek community isn't the main target, although there's probably something here for them, too.

As of today, the book is on Amazon only...it will take a week or two for it to show up on the other sites. There's a link to the Amazon store at the top of the right column. By the way, if you're reading on an iPad, the reading experience is much richer if you buy the book through the iBooks app. Honest.

I don't expect anyone to run out and buy this book. But spread the word.

MillerCoors Hopes to Pull a Rabbit Out of a Hat

I continue to be amused by the tactics of the big boy brands in the face of market share loss to craft beer. It isn't like MillerCoors or Anheuser-Busch are going out of business. But the sustained growth of craft brands has them scratching their heads (and other things) as they struggle to come up with some kind of response.

Inasmuch as I was just beating up on Coors the other day, I hate to do it again. But what am I supposed to do when I find out they are currently launching a trio of beverages designed to compete for the attention of drinkers who normally chase craft brands and liquor? Coors is just a huge target.

The three-pronged offensive is all part of the "innovations' program at MillerCoors. They have an official marketing director and everything, so it must be the real deal. Hard to fathom. What they're hoping to do with this program is win over what Coors calls "millennial consumers"...otherwise identified as folks "who constantly change their drinking habits."

First off, let me say I think the idea of going after a target market which apparently has zero brand loyalty and might drink your product once and never again is ingenious. The execs at MillerCoors must have really put some elbow grease into thinking this up. The bonuses are going to be huge.

Let me take you through the actual products, in case you don't have your Google alerts set to pick up on crap like this. Seriously, you need to spend some time adjusting your news feeds so you don't miss out on great stuff like this.

New Shit has Come to Light
The first of the new products is Coco Breve, a coconut water-infused malt beverage. This thing has about the same alcohol as light beer (4.2%) and intends to capitalize on the mainstream popularity of non-alcoholic coconut water. You don't even need to ask who they are targeting with this drink, right? Women. Specifically, women who want to bring something on girls night out...but won't bring light beer.

Next up is Redd's Apple Ale, which MillerCoors expects to compete with flavored malt drinks like Mike's Hard. Apple Ale comes in at 5% ABV and is supposedly a little on the sweet side. Go figure. They are targeting men and women with this stuff, in case you were wondering. You probably qualify if you constantly change what you drink and have no brand loyalty.

From a craft beer perspective, Coco Breve and Apple Ale have zero appeal. Craft beer fans shouldn't be in the conversation when you're talking about drinks like this. I suspect if one of these is going to be successful it will be Coco Breve. Not with beer fans, though. Coco Breve is far more likely to draw women away from white wine. This runs against standard big boy marketing tactics, by the way. They typically spend their time scheming ways to take market share away from other beer brands, not from wine, flavored water or whatever. I'll be interested to see how it works out. Honest.

The Sandlot Strategy
The third of the new products is Third Shift Amber Lager. This is the first in a series of smaller batch beers invented by Coors brewers (supposedly) during their off time. This beer evidently won a gold medal at the 2012 World Beer Cup....under the code name Flor Hosen by the Sandlot Brewery in Denver. Sandlot is connected to Coors Field, if you were wondering. The beer was developed and is brewed at Coors headquarters in Golden.

Amber Lager, which will be a draft only offering for now, is surely a decent beer...probably at the lower end of the craft spectrum in terms of body and flavor. But MillerCoors won't call it a craft beer. Instead, they say it's an "invitation" beer. They have it their head that this beer will appeal to craft fans who like variety and want something a little less expensive. Indeed, they are going to be selling this beer at a slightly lower price point than typical craft beer. Hmmm.

There's something everyone needs to know: MillerCoors could make great good beer if they wanted to. So could Anheuser-Busch. All they would need to do is buy better ingredients and develop better recipes. They already have the facilities to do it. Instead, they make watered-down sludge, advertise the crap out of it and make money selling it to a mass audience in volume. That's their business model.

I actually like the fact that Coors is producing a series of small batch beers. However, I think they are making a grave error with Amber Lager. They should be marketing this stuff as an award winning beer at a standard craft price. Why? Because price is a huge factor in beer brand identity. If you sell your beer at premium price, people will assume it to be a better product and your brand will be enhanced. Selling Amber Lager for less will instantly undermine the integrity of the brand, even if the beer is damn good. This is beer marketing 101.

It's a pretty good bet that the new MillerCoors products will fail to gain significant market acceptance. They have a pretty good track record in this area and each of these products seems ill-advised in its own way. As craft beer continues to gain market share, it may well turn out that the best place for big beer to look for continued profits is China ...which has enormous untapped potential. Take a look at Jeff Alworth's analysis here. Good stuff.

Let Me Tell You How it Will Be...Taxman!

Throughout history, there are countless examples of events that were driven less by ideology than by economic forces. Sometimes you have to look a little deeper to see how a particular outcome was motivated by money. In fact, tax policy is often involved. How is beer wrapped up in this statement? Read on.

Lets' start with Prohibition...13 of the darkest years (1920-1933) in American history. The standard story line is that Prohibition came about because the Anti-Saloon League, part of a movement that dated back to the mid-19th century, convinced a majority of Americans that it was a reasonable idea. That helped them get people elected who supported the notion.

However, Prohibition could never have happened had the federal government not changed the way it collected revenue. Awake yet? You see, prior to the implementation of the federal income tax in 1914, the federal government relied mainly on customs duties and the liquor tax. From 1870 to 1912, the government got two-thirds of its revenue (more than 75 percent in many years) via these two taxes. Congress could not seriously consider approving an ideal that would strangle the national treasury. 

That changed once the income tax was implemented in 1914. It supplied increasing amounts of revenue each year, receiving a further boost with the War Revenue Act of 1917 (the United States had entered WWI and needed more cash). By 1918, the income tax was generating the same amount of revenue as the customs duties and liquor taxes. By 1919, liquor tax revenues were trivial next to the income tax. 

Once it became economically feasible, Congress approved Prohibition legislation...and the 18th Amendment was ratified by the states. The law was largely ignored by many Americans and it boosted the fortunes of organized crime in many areas. But those aren't the main reasons it was repealed in 1933. A good part of the reason it was repealed is the Great Depression had seriously reduced federal tax revenues. The government needed more money. The 21st Amendment (repeal of the 18th) helped with that, although it took the brewing industry years to recover from Prohibition.

Fast forward 60 years for another tax-induced fish story. When I first learned Widmer was contract brewing Kona beer in the late 1990s, I assumed Kona simply wanted better access to the mainland market. I suspect there was some element of that. You brew and package your beer here and it's more efficient in a lot of ways if you're targeting mainland sales.

But there was more involved. What really happened is the state of Hawaii changed the tax code in the 1990s. The revised code penalized brewers for bottling beer in the state. Hawaii, which had (and still has) one of the highest excise taxes on beer (nearly $29 per barrel vs. about $8 in other states) established a tax (50 cents/case) on empty beer bottles shipped to the islands. Since there was no bottle manufacturing in Hawaii, brewers who bottle there were stuck with the excise tax and the bottle tax. 

The new tax hurt brewers throughout the Hawaiian islands. Many went under. Kona is the only one that prospered and they did it by off-shoring (if you will) their bottling to Oregon. They continued to brew keg beer in Hawaii, but bottling in Oregon, even with transportation costs back to Hawaii, saved them money. Kona has been part of the Craft Brew Alliance for several years, a relationship launched at least nominally by tax policy.

Cue George Harrison...

Let me tell you how it will be,

There’s one for you, nineteen for me,
‘Cause I’m the Taxman,
Yeah, I’m the Taxman.
Should five per cent appear too small,
Be thankful I don’t take it all.
‘Cause I’m the Taxman,
Yeah, I’m the Taxman.