Comment - Beer - A Letter from America

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Larry Nelson has been back in his native US this month. Whilst it's been nice to be home, he saw some trending that suggests the country that was once open to all is now looking inward when it comes to beer. The land of opportunity does not see this as a problem, though.


Hey! Haven’t seen you for a while. Good to bump into you. Been on the road again?
Props back at you, big guy. Yes, I’ve been working on padding my pension, also known as my frequent flyer plan. I’ve been away long enough that my children were wearing name tags when I came home.

As long as they don’t call the police when you barge through the door. Where've you been?
The heartland of middle America, my friend, starting in Chicago, then drove to Milwaukee, doubling back through the Windy City south to Cincinnati and eventually returning to O’Hare - over four days by car.

That’s, what, 1,200 miles? It’s often been said that to understand America you need to get behind the wheel, experience the vastness of the land and the kindness of its people. You know, Simon & Garfunkel, Hunter S Thompson, the whole searching for the ‘real’ America thing.
Americans remain unfailingly wonderful to meet, more so now than ever. It helps that I now have an English accent, and that the car I was driving was the vehicular equivalent to being pregnant: a bright blue late model Ford Mustang.

Hey! Now, there’s a car I remember from my boyhood. This was the coolest of American metal, alongside the Chevy Camaro and the Corvette. What was it like?
First car I’ve driven in a while that people felt compelled to compliment me on my choice – toll booth attendants, parking garage cashiers, locals at truck stops in Indiana. Yet, I suspect that this is not the car that upper-class Americans aspire to, that it’s more of a working class ambition.

What makes you say that?
As a dutiful father, I took a shopping trip to a mall in posh suburban Chicago on behalf of my increasingly brand-aware daughter. I’ve been away from North America for close to two decades now, yet am well aware of the drift towards foreign models. Yet the metal in the mall’s parking lot was ... shocking. There’s no other word for it. I actually drove around a bit looking at cars – lots of Japanese models, BMWs, Mercs, a handful of British-built Jaguars. But there were very, very few Fords, Chryslers, or General Motors products. The ‘Big Three’ accounted for, at best, 15% of the mall’s parking lot inhabitants.

That’s astonishing. It sounds like Americans have stopped thinking of domestic brands as being aspirational. When did that happen?
Well, my guess is the late ‘80’s, when there were build quality issues. Detroit is playing catch-up: GM’s launch of their first electric car was generating coverage last week, but the Japanese got there first. And, when it comes to build quality, well, the German marques remain the gold standard.

So, what does this mean for the American brewing industry?
This is a bit of a stretch, but there is a similarity between the desire for foreign cars and craft beers. America’s micro brewers have been looking to Europe and elsewhere for their inspiration, not to Anheuser-Busch or what were once Millers, Coors, Pabst and Stroh, etc. Craft brewers aren’t looking to create a better light lager – although some commercially-minded ones have understood the margins available and given it a shot.

As long ago as 1999, at the Craft Brewers Conference in Milwaukee, UC Davis professor Michael Lewis made what then seemed a controversial comment – that micros had taken the best of European styles and ‘Americanised’ them - experimented and pushed them in new directions. Think of the emphasis on hops, for example. In retrospect, more than a decade later, Lewis was bang on in his assessment.

Which suggests what, in terms of market trends?
Come the end of this year, there’s a good chance that we’ll have seen a huge surge in the number of America’s craft brewers. The market trends are favourable, as I’ve noted previously. But there’s more: as in the early days of the movement, there are a lot of recently unemployed, first-career-KO’ed-by-the-recession types looking for new career directions. Starting a brewery isn’t hugely capital intensive. As a growth segment, there are opportunities for new entrants that don’t require fighting for existing market share. And, well, it’s more fun than endless hours at a brokerage.

It’s worth noting that imported beers are under pressure, with some market share erosion. Is this where craft beer is taking market share?
There’s probably market data that shows exactly that – consumers switching from Heineken and Corona to domestic craft premium brands, such as Brooklyn Lager, Fat Tire and Sierra Nevada’s portfolio. The difference between cars and beer is simply economies of scale – it doesn’t cost much to start a brewery relative to opening a car plant and developing a brand. It’s hard to see a rosy future for Detroit, save for Ford; it’s easy to see a place for A-B InBev and MillerCoors.

It’s the imports that will be under pressure – America, that great melting pot that pulled immigrants to its bosom and made them something different, is reshaping beer styles and making them uniquely American. You’re saying that they are the world leaders in beer innovation.
That’s it, in a nutshell. Speaking of which, one of my more disturbing realisations was the level of obesity amongst Americans. A very large percentage of the population seemed overweight. This is a land of plenty, and food remains both inexpensive and readily available – every Interstate exit boasts at least one fast food outlet.

It’s beyond silly – witness ‘all you can eat’ offers at the majority of Major League Baseball stadiums. In Cincinnati, the offer included hot dogs, popcorn, peanuts and soft drinks. The business case is that patrons gain both cost certainty and a value for money appreciation. There may be some stadiums with healthier buffets – but this kind of offer at a sporting event? The polite word is 'antithetical'.

I’ve been reading a lot about obesity as the next great challenge for Americans. The costs seem to be spiralling out of control, especially when you consider heart disease, type two diabetes, and just general wear and tear on the body.

There’s a substantial body of research about beer offering health benefits, based on large-scale, long-term studies. The subject has certainly received something of a PR boost back home in the UK recently. Beer, consumed in moderation, can be considered beneficial, especially for middle-aged adults in relation to heart conditions.

Beer is good for you. A happy thought right, in your demographic strike zone, staying with baseball parlance. What’s the connect, the key learning here?
Just this: this is an age where taxation is increasingly used as a way of shaping behaviour, rather than looking to longer-term solutions as health education. It’s my opinion that swingeing ‘health taxes’ on high-salt, high-sugar content foodstuffs will become reality. Leaving aside the huge political implications and civil liberty questions – does government really want to draw a line in the sand as to what is and isn’t healthy – at some point the cost of healthcare will force the issue. The question is whether alcohol generally, and beer specifically, will be included in this basket.

But in the meantime, eat less, exercise more, and get a good night’s sleep?

Especially the last. Chances are I’ll win a look-alike contest for raccoons some day. In the meantime, be well and stay thirsty, my friend.

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