Beeronomics - Johan Swinnen
Beeronomics - Johan Swinnen
Beeronomics - Johan Swinnen
“Beeronomics: How Beer Explains the World is a significant book. It covers diverse
aspects of the economics of beer in world history, providing fascinating reading
for beer enthusiasts and others alike. Each chapter is a revelation. Drawing it all
together leaves us with a much changed view of this wonderful, historically
important beverage.”
Julian M. Alston, Distinguished Professor and Director of the Robert Mondavi
Institute Center for Wine Economics, UC Davis, and author of
The Effects of Farm and Food Policies on Obesity in the United States
“This impressive, all-encompassing, and accessible book is a tour de force and must-
read for anybody interested in history, economics, and obviously beer. Cheers!”
Bart Minten, Senior research fellow,
International Food Policy Research Institute
“For several years now, Jo Swinnen has been devoting serious scholarly attention to
a neglected topic, and uncovering intriguing stories along the way. Finally, these
insights are made available to a broader public in this refreshing read.”
Koen Deconinck, Former Management Consultant at
Bain & Company; Economist at Organisation for
Economic Co-operation and Development
“This is a fascinating book on beer, history, and economics by the leading beer
economists from the world’s beer capital. In fifteen chapters, Swinnen and Briski tell
the story of how the world has shaped beer and how beer has shaped the world.”
Karl Storchmann, New York University, Managing Editor of the
Journal of Wine Economics
“For much of human history beer was central – a safe source of fluids, calories that
fed the work force, and tax revenues that reshaped the political world. Monks,
generals, scientists, kings, and robber barons are all part of the book’s journey that
ends with craft beer. A must on all business schools list of case studies and your
holiday gift list!”
Professor Harry de Gorter, Cornell University
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3
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# Johan Swinnen 2017
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OUP CORRECTED PROOF – FINAL, 5/6/2017, SPi
This book is dedicated to friends and colleagues from all over the
world with whom, over the past decades, I have had the pleasure
of discussing the economics of everything—“how the world
works”—while enjoying wonderful beers.
Jo Swinnen
This book is dedicated to my mom who always believed in
my storytelling and taught me to love beer, and my dad who
introduced me to the unexpected bounty and emotional
rewards of sobriety. I’d also like to thank Casey’s Pub in
Detroit, Michigan and Pizzeria Castello in Leuven, Belgium
for nourishing me during this process.
Devin Briski
Contents
List of Figures ix
List of Tables xi
About the Authors xiii
viii
List of Figures
Johan Swinnen is Professor of Economics and Director of the LICOS Center for
Institutions and Economic Performance at the University of Leuven in Belgium.
He is also Senior Research Fellow at the Centre for European Policy Studies (CEPS)
in Brussels and a Visiting Scholar at Stanford University. Earlier he was Lead
Economist at the World Bank, Economic Advisor at the European Commission,
and President of the International Association of Agricultural Economists. He is a
regular consultant for international organizations and governments and has
written extensively on food policy, institutional reforms, economic development,
and the economics of beer (and wine, chocolate, and sports). He is the President of
the Beeronomics Society (http://www.beeronomics.org) and holds a PhD from
Cornell University.
Devin Briski is a print and audio journalist focusing on food, ideas, and
technology. She serves as content marketing manager for the events team at
Vox Media, which produces Code Conference and Vox Conversations. She is
also host of the podcast One Man’s Trash about the collectibles market. Devin
began her career in Silicon Valley, where she worked on the publishing and
marketing team of Stanford Social Innovation Review and co-founded online
magazine The Ventured Life. She holds a bachelor’s degree in sociology and a
master’s degree in journalism, both from Columbia University.
The mention of the history of beer always brings a laugh. The
history of beer for most people is not a serious topic of study. Beer,
after all, is a drink for leisure.
That perception of beer is a case of historical myopia, of an inability
of many people at the beginning of the 21st century to conceive of a
world where beer was a necessity, a part of everyday life, from
breakfast to dinner—and where beer taxes made up a major share
of revenues for towns and governments.
R. Unger, 2004
True beer connoisseurs get stars in their eyes at the mere mention of
Westvleteren Abt 12. It’s served as the “Best Beer in the World” five years
out of the past decade at RateBeer.com. But it’s as notoriously difficult to
obtain as it is prestigious. The Trappist monks who brew the beer in the
small village of Westvleteren in rural Belgium prefer to sell as little as
needed to operate their decidedly no-frills monastery. The beer is only
sold at the gate of the monastery, one case at a time, upon appointment
and with the promise by the buyer to drink it, not to sell it. The bottles
come in old wooden cases, without any label.
Needless to say, the promise not to sell is not always kept beyond
monastery gates where eBay-enabled lucrative global markets await.
The popularity of Westvleteren has not been lost on other brewers
and monasteries more willing to respond to growing consumer demand
for high-end Trappist ales. Just down the road from Westvleteren,
St. Bernardus of Watou is one of the many small, traditional Belgian
breweries to capitalize on the growing interest in pre-industrial brewing
recipes. On every bottle of St. Bernardus’ Belgian abbey ale, a cartoon
abbot shoots a knowing glance out of the corner of his eye, presumably
at the drinker about to indulge. The medieval iconography and telltale
monastic robes don’t just serve as a quality guarantee; they also stake a
claim to the historic authenticity of the production methods.
The market share of abbey ales like St. Bernardus has exploded in
recent years, both in Belgium’s domestic market and as exported goods
to nations as disparate as Japan and Costa Rica. Beers like St. Bernardus
are served for eighteen dollars per bottle at high-end restaurants like
Monk’s Kettle in San Francisco, paired with dishes to bring out the flavor
as part of the emerging practice of beer gastronomy. The restaurant’s
Beeronomics
This book explains how beer markets have shaped history, and vice
versa. Throughout history—from ancient Mesopotamia to today’s craft
2
From Monasteries to Multinationals and Back
3
Beeronomics
The fall of the Berlin Wall in 1989 catalyzed major changes in global
beer markets. The demise of communism brought in foreign direct invest-
ment (FDI) dollars to previously nationalized breweries. Chapter 7
explores how investments by Western breweries in Eastern Europe eased
the transition from socialism to a capitalist state for barley farmers.
Chapters 8 through 10 explore the transition from land to brand as
the primary regulating and marketing device in beer markets. Chapter 8
looks at the history of white beer, native to the tiny Flemish village of
Hoegaarden. The unique style developed there gained popularity during
the Middle Ages due to a tax exemption bestowed upon the village.
Centuries later, there was popular outrage when multinational AB InBev
purchased the only remaining brewery brewing white beer, registered
Hoegaarden as a trademark, and proceeded to move production of the
beer outside of the city to save costs.
Chapter 9 explores the history and modern-day consequences of the
world’s oldest food law, the Bavarian Reinheitsgebot, which limits the
brewing of beer to water, barley, hops, and yeast for all beer served in
Germany. The Reinheitsgebot came under fire when the European Court
of Justice claimed that the law no longer served to protect consumers
but rather was functionally a tariff that protected German beer brewers
from foreign competition.
Chapter 10 examines the oldest international trademark dispute in
recent memory: the battle between American beer behemoth Budweiser
and Czech brewery Budweiser Budvar, from the city of Ceské Budejovice
(German: Budweis). This trademark dispute gets to the intersection of
language, ethnicity, and the limits of geographical indication over the
course of the twentieth century.
It’s not just the brewing industry and regulations that are changing—
so are consumption patterns. As Figure 0.1 illustrates, over the past fifty
years consumption expenditures on beer have increased significantly
and have been the highest of all alcoholic beverages—they are typically
double those on wine. However, the nature of the beer which consumers
buy has changed dramatically—and so have the beer consumers them-
selves. There have been major changes in the geography of beer con-
sumption in the world. When one thinks about beer-drinking nations,
one imagines countries like Germany, Britain, and Belgium. However, a
look at global trends actually shows that beer consumption is decreasing
in these countries. The fastest-growing markets are in Spain, Russia,
China, and Brazil. Since 2003, China has overtaken the US as the world’s
largest beer market. Chapter 11 explores the “global convergence of
tastes” and the effect economic growth and globalization is having on
traditional alcohol consumption habits.
4
From Monasteries to Multinationals and Back
300
250
200
150
100
50
0
1960 1970 1980 1990 2000 2010
Beer Wine
Figure 0.1 Global consumption of beer and wine in value (US$ billion),
1960–2013
FAOstat
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Beeronomics
6
1
8
The World’s Oldest Profession
and his guests drank it in golden cups. At the height of the Egyptian
Empire, beer was the drink of choice for both festive and ordinary dining
occasions. It was only (much) later, i.e. after Egypt had been conquered
by the Roman Empire, that wine became widespread and the Egyptian
elite began to prefer wine over beer. However, even then, beer remained
the drink of choice for the Egyptian masses.
Beer was brewed every morning and consumed throughout the day.
Like Sumerians, Egyptians drank unfiltered beer—beer that had not
gone through any sieving or settlement phase—directly from large jars
through straws in order to avoid the sediment. The straw was used to get
through the layer of yeast and hulls floating on the surface of the beer.
Both cultures had a variety of beers and breads, affording preferences
and a significant trade sector with other peoples.
But let us not forget Shamhat: the prostitute with whom Enkidu sleeps
before transitioning from bestial humanoid to civilized man. The inter-
esting thing about Shamhat is that some translations refer to her as a
priestess but most as a harlot or prostitute. In reality, she’s both. She is a
priestess of Ishtar, the goddess associated with sex and fertility. Her job
as a priestess is to do Ishtar’s bidding, which usually involves seducing
men. It’s no accident that she’s the one to introduce Enkidu to beer.
The production and consumption of beer has always been a gendered
division, though a surprising amount of diversity exists regarding the
actual gender roles. Many taverns doubled as brothels in the ancient
Near East, where women worked as brewmaster by day, madam by
night. From the beginning, beer has been associated with sex. The
earliest Sumerian art shows women drinking from cylindrical jars in
seductive positions and during the act of intercourse. The same is true
of Egypt, where drinking to excess for both genders was portrayed as
both positive and festive. Hieroglyphs displayed women vomiting from
overconsumption as a celebration of wealth.
In ancient Mesopotamia, brewing was considered a domestic—and
thus female—chore. Sumerians and Egyptians both also assigned specif-
ically female deities to alcohol production. The Egyptian goddess
Hathor was a giant cow that forgot her mission to destroy human
society when she became intoxicated. She was known as “Lady of
drunkenness, music and dance.” In the case of Sumerians, the goddess
Ninkasi, or “Lady of the inebriating fruit,” specifically protected those
who brewed the beer. Brewing was the only profession to be assigned to
9
Beeronomics
a female deity. Ninkasi was mother of nine sons, all named after symp-
toms of drunkenness: “the boaster,” “the brawler,” “he of frightening
speech,” etc. She lived on legendary Mount Sabu, or “The mount of the
taverner.”
But the liberality afforded by Sumerians with respect to alcohol and
female sexuality eventually gave way to a more conservative approach
among the Babylonians. Though taverns were still operated by women,
documentary evidence begins to emerge of the marginalization of
women from ritualistic drinking. Babylon is also the source of the
earliest known legal document, The Code of Hammurabi, famous for
its brutal “eye for an eye” logic. Interestingly enough, the four laws that
address beer consumption are all addressed to female pronouns. None of
them condemn drunken unruliness; rather, they place blame on the
management of taverns. Brew-mistresses were responsible for making
sure that taverns did not become meeting places for thieves. Restrictions
meant to maintain quality standards in brewing and honest business
practices also applied specifically to women. One interpretation of the
female pronoun is that male tavern owners were exempt from punish-
ment under such laws; another is that the laws specifically targeted
female-operated tavern–brothels. However, the law pointed to a clear
distinction between religious women and tavern owners. One disturb-
ing law declared, “If a priestess enters a tavern, she will be burned alive.”
Where does the perception of wine as a more civilized drink than beer
come from? Like many tropes of Western civilization, we can blame the
ancient Greeks. At the beginning of the Greek empire (around 500 BC),
the Greeks indeed brewed beer. However, this was soon surpassed by
wine production. The popularity of wine coincided with the increasing
notion that wine was a drink that was more “suitable for the gods.”
Greeks thought so little of beer that ancient Athenians are likely the first
civilization to produce cereal grains but not ferment them, opting
instead to drink their alcohol exclusively in the form of wine. Primitive
beers of other cultures from this period were associated with excess and
barbaric behavior, as portrayed in the ancient literature. In Plato’s Laws,
the Athenian describes the Scythians, Persians, Carthaginians, Celts,
Iberians, and Thracians as the six “bellicose races,” indiscriminate with
their intoxicants, and lacking in civilized customs: “Both women and
men take all of it [their drink] unmixed and pour it down over their
clothes, and they consider the custom to be beautiful and pleasant,”
10
The World’s Oldest Profession
11
Beeronomics
12
The World’s Oldest Profession
they spent much money, time, and energy brewing beer. And they
drank a lot of it—sometimes three or four liters per day per monk.
There were several reasons for this. First, like everybody else, monks
preferred beer over water, as the available water in the Middle Ages was
often polluted. Second, apart from nutritional reasons, beer was often
used in monasteries for spiritual and medicinal purposes. Third, an
average meal in the monasteries of the early Middle Ages was rather
frugal, and beer provided a welcome nutritious addition for the monks
and their guests. Fourth, although beer contained alcohol, it was seen as
a liquid like water, and was, as such, not forbidden during a fasting
period. Beer was the ubiquitous social lubricant and this not only
because it was an essential part of the—often dire—medieval diet, but
also because during the Middle Ages every even remotely social occasion
called for a drink.
But the general medieval population consumed far less beer on a daily
basis than did the monks. Medievalist Richard Unger estimates that
citizens of the Low Countries of Europe were likely consuming not
much more than half a liter to one liter per day per capita. What’s
more, class and age determined just how strong the beer would be.
Children drank beer, but only beer with a very low alcohol percentage.
Barley and a mixture of additives would be rebrewed two, three, and
sometimes four times until all that remained was essentially boiled
water with a hint of beer and an alcoholic content of as little as 2 percent.
Called “table beer,” third and fourth brews were consumed by children,
paupers, and for breakfast. Averaging about 250 liters per capita per year,
people during the early Renaissance did drink much more beer than we
do today—but not necessarily more alcohol.
As religious organizations, monasteries were exempt from taxes; how-
ever, they were also forbidden from selling beer at a profit. Monastic
brewing played an important role in the social fabric rather than the
economics of medieval continental Europe. The monks later started to
brew beer for noblemen and began to provide their produce for church
celebrations and feasts where peasants could drink for free, but it was
never a for-profit organization. Around the fourteenth century, the
introduction of one spice to the brewing process changed all of that.
13
2
As we’ve discussed, beer wasn’t always brewed with hops, though its use
as a preservative had been known for some time. One of the earliest
mentions of hops from medieval Europe is a document stating that
Pepin the Short, the father of Emperor Charlemagne, gifted a church
with a hops garden in 768 AD. Archaeological evidence indicates that the
spice was commonly grown in monastery gardens in those days but
not actively used in brewing. Unger dug up some records from 822 and
830 written by abbots that do mention the use of hops in brewing, but
there isn’t much. Unger concludes that prior to 1200 AD, brewers in the
16
A Revolution Every Thousand Years
monasteries had known of and likely experimented with hops, but the
practice did not catch on until centuries later.
Why didn’t they prefer hops from the beginning? Most likely because
they didn’t like the taste. The advantages hops lent in terms of preser-
vation were not necessary or necessarily appealing to monks and abbots
that brewed frequently and exclusively for internal consumption. It was
not until beer took on a more important economic and political role
that the use of hops spread. Even then, it spread unevenly.
Following the decline of Charlemagne’s empire, a considerable source
of income for the Catholic Church and local rulers came from the
regulation and taxation of beer additives, or gruit—a blend of spices
used for brewing. The system was known as the gruitrecht. Around the
tenth century across the Low Countries and Germany, gruitrecht began
as the exclusive right of the Catholic Church. Bishops maintained a
monopoly on gruit, and its recipe was kept secret to prevent tax fraud,
though we know bog myrtle was a major component. Those outside the
monasteries who wanted to brew beer were required to bring their barley
to a central authority and mix it with gruit before brewing to prevent
them from diluting the recipe and evading taxes.
By the twelfth and thirteenth centuries, the gruitrecht was decentralized
and secularized at the discretion of its original arbiter—bishops and counts
found it easier to pass along the responsibility to local officials than to
collect taxes from towns. On one hand, the gruitrecht was a fundamentally
regressive tax, serving as an excise tax on frequently the poorest sectors of
the population for whom beer was a source of nutrition and a safe beverage.
But on the other hand, a basic principle of the gruitrecht was that anyone
had the right to brew beer, as long as they could afford the gruit for it.
The arrival of hops changed all that. With this new additive anybody
could brew beer without paying taxes for gruit. Hops were also much
better at preserving beer. This enabled brewers to produce larger batches
and merchants to travel with and trade beer over much longer distances
than had previously been possible. The spread of hops marks the spread
of true commercial brewing and beer as an industry. By the fourteenth
century, the gruitrecht was on the path to obscurity—but the politics of
beer and local taxation remained a strong point of resistance to these
globalizing forces.
In 1284, a great fire tore through the trade city of Hamburg in modern-
day northern Germany, all but destroying it. What was a great tragedy
17
Beeronomics
for Hamburgers came with the silver lining of eerily fortunate timing
for the burgeoning merchant class—it was just becoming clear that
mass-producing and exporting beer could be a profitable venture,
and the timing was perfect for rebuilding facilities to maximize this
new approach to brewing beer. The rebuilt Hamburg was nicknamed
“Brauhaus der Hansa”—the Brewing House of the Hanseatic League.
The growth of Hamburg as a center of an emerging international beer
industry necessitated two preconditions: the Hanseatic League, and a
reconsideration of the usefulness of hops. By the late twelfth century,
merchants in port cities realized that trade routes could only be main-
tained with a quasi-military network protecting traders from pirates and
thieves. In response to these conditions, they established the Hanse, a
confederation of merchant guilds in designated towns that facilitated
trade routes from the Baltic to the North Sea. Safety encouraged invest-
ment in tools of trade—craftsmen built ships and liquid-proof barrels to
transport clothes and spices. In Hanse towns, the mass production and
export of such items carried the potential for profit—salt, wax, and
clothing were all elevated to industrial levels of production and sold
abroad at a profit to traders.
Unger also points to the thirteenth-century appearance of records of
hopped beer. Traders in northern German towns began to cast a critical
eye on the brewing practices of the monasteries. Of particular interest
was hops—the spice may not have made for the best-tasting beer,
but its preservation qualities were recognized as the key to heretofore
unrealized profit from large-scale brewing and trade. Hamburg was
well positioned as a center of brewing since it could easily source the
raw materials: the surrounding Elbe Valley provided brewers with
grains, while hops were imported from small Baltic towns to the
north. Hamburg shed the antiquated gruitrecht early on and began to
mass-produce and export hopped beer to less-developed beer markets
in the Low Countries, southern Germany, and Britain.
The total destruction of Hamburg actually benefited these efforts.
Breweries were rebuilt with an eye on new lucrative export markets—
with wide cellars, roomy floors, high ceilings, and the latest copper
kettle technology. These facilities were constructed strategically near
waterways. From the beginning, hopped beer was designed for profit-
able export. The fourteenth century marked Hamburg’s crowning suc-
cess: Unger estimates that some 40 to 50 percent of the city’s income
came from beer exports.
But the success of Hamburg brewers did not go unnoticed. Brewers
from other northern German trade towns such as Wismar, Bremen, and
Hannover started producing hopped beer and capitalizing on lucrative
18
A Revolution Every Thousand Years
export markets. One of those towns was Einbeck, 150 miles south of
Hamburg—today it is a small town compared to Hamburg but in the
Middle Ages it was part of the Hansa trading system and one of the
major cities in northern Germany. Einbeck’s wealth was based on its
production and export of beers—a reputation which today is still
reflected in “Bock beer,” a beer style popular in Germany and parts of
the United States which derives its name from Einbeck (“Ein Bock” in
southern German dialect where the beer became popular).
Walking around the old city center of Einbeck, largely untouched by
the bombings of the world wars which destroyed many German old city
centers, one cannot but notice the large rounded doors of many of the
historic houses. These doors tell an amazing story of “homebrewing
avant la lettre.” The doors were large to allow brewing kettles to be rolled
in and rolled out. In its heyday as a brewing center around 900 houses
were owned by families who would take turns brewing beer. The families
supplied the ingredients for the brewing and the town, which owned
the brewing rights, provided the infrastructure and knowledge. Sixteen
large brewing kettles were rolled around from one house to the next
during the brewing season, and town brewmasters followed the kettles.
The brewmasters oversaw the brewing and were in charge of quality
control—which they applied rigorously. The bottom of barrels with low-
quality beer was chopped to pieces to prevent side-selling of bad beer.
This was to maintain Einbeck’s beer reputation in its overseas markets,
from the north to the south of Europe.
Hence, Hamburg brewers found themselves in fierce competition
with brewers in their fellow northern German trade towns. The muni-
cipal government of Hamburg reconfigured its brewing laws and regu-
lations to capitalize on its advantage as a major port and brewing center
and maintain the position of their export market. Brewers couldn’t
just hop beer—Hamburg brewers had to produce high-quality, desirable
hopped beer that citizens abroad would pay good money for. By the end
of the fourteenth century, city government officials were dedicating con-
siderable time and energy to ensuring only high-quality beer was exported
under the name Hamburg. From 1381 onwards, the town council’s official
blessing was needed to export hopped Hamburg beer. Export-oriented
breweries faced completely separate regulatory guidelines from those filling
domestic demand. The hopped beer that Hamburg had become known for
was rarely consumed within the city itself.
The year 1411 brought even more stringent regulations: the city
revoked the exporting rights of several breweries, effectively increasing
the average size of those that continued to export. They passed guide-
lines delineating a minimum time between brews and mandated export
19
Beeronomics
20
A Revolution Every Thousand Years
cities in Brabant and Flanders were dealing with the decline of their
textile industries, the influx of imported hopped beers from Hamburg
and Bremen began. Complicating things even more, the imported
hopped beers were untaxable by the gruitrecht that was in place.
Governments imposed heavy trade taxes on imported beer or made
imports illegal, but consumers complained that the foreign beers were
of much higher quality. Some local brewers started experimenting
themselves with hops. Cities in the northern Low Countries, such as
Amsterdam and Haarlem, were quicker to catch on to the new hopped
beer and large-scale production style. Amsterdam brewers quickly began
imitating the strategies of those in Hamburg.
Once they did, brewers in the southern Low Countries faced increased
economic pressure as they struggled to compete with hopped beer from
even more cities. The pressure grew as proximate cities such as Amsterdam
began exporting hopped beer, reducing travel costs and the chance that
merchandise would be stolen en route. The pressure was adding up.
In 1380 part of the southern Low Countries, including Brabant, came
under the control of Philip the Good, Duke of Burgundy. Their duke was
also the King of France. One of his first measures was to replace the
gruitrecht with a general excise tax on all beer. The law changed several
times as authorities experimented with the balance between raising tax
revenue, stimulating the local brewing industry, and keeping consumers
happy. This tax reform transformed the local brewing industry. Leuven
rose to prominence as the major brewing center of Brabant. In 1378, just
before the tax change, records showed that brewers made seventy-seven
times as much gruit beer as hopped beer. Fifty years later, by 1436, they
had switched completely to hops. Leuven produced almost five million
liters of hopped beer by the late fifteenth century.
With the shift to hopped beer, commercial brewing and consumption
of beer grew. The ability to store beer for longer periods of time made
brewing a profitable way to maximize calorie intake—always the fore-
most concern among medieval folk. Unger identifies a correlation
between the spread of hops around the continent and what he refers
to as the “golden age of brewing.”
During this golden age of the 1500s the capacity of brewing kettles for
commercial brewers significantly increased. In economic terms, it’s the
first recorded indication that economies of scale were bringing about
an early consolidation of brewing—a precursor of what would happen
at a much larger scale during the industrial revolution (discussed in
Chapter 4). Smaller brewers were undercut by larger ones that could
afford the capital investment in bigger capacity kettles.
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Beeronomics
22
3
through conquests of new lands abroad and import raw materials from
their colonies. This belief guided foreign policy. Then, in 1776, Adam
Smith published The Wealth of Nations, a brick of a book with a detailed
critique of mercantilism that would change the way the entire world
thought about trade—eventually. On his heels were Ricardo and David
Hume: the new paradigm of free markets was in its infancy.
Today, Smith, Hume, and Ricardo are canonical thinkers in economic
theory. But back then they were advocating a break from dominant
thought—one that, they believed, if enacted would bring about a period
of both peace and greater wealth. They argued that mercantilist policies
both inhibited wealth and encouraged war. Rather than trade with
France, Britain fought with her over trade routes and colonies abroad.
Following the wool–wine trade example, Ricardo argued in his 1817
work On the Principles of Political Economy and Taxation that free trade
would “diffuse general benefit and bind together by one common tie of
interest and intercourse, the universal society of nations throughout the
civilized world.”
Economists found a platform for arguing theoretical truths on trade,
wealth, and welfare in Britain’s Corn Laws, a number of tariffs designed
to protect domestic agriculture from foreign competition. At its core,
Smith’s proposition was deeply moral: all ships rise with a rising tide. He
knew that competition brought on by free trade would bring about
greater economic inequality, but he was observing a world where peas-
ants couldn’t afford the calories necessary to survive and aristocrats had
no idea exactly how their estate in the abstract paid for their day-to-day
luxuries. As England industrialized, the school of Manchester Liberalism
continued in the tradition of Smith, arguing that free trade and efficient
markets would make the necessities of life affordable for a growing
urban proletariat. The Anti-Corn Law League advocated the repeal of
these tariffs with cries for “Cheap bread!”
The rest is history: in 1846, after continued advocacy, policymakers
slowly came around to the new school of thought and repealed the
mercantilist-era Corn Laws. This watershed moment marked Britain’s
unilateral move toward free trade. At least, the rest was history—until
trade historian John Nye decided to take a second look at the archives.
24
The Brew that Launched a Thousand Ships
head in the sand,” he explains. “But I noticed that no one had actually
ever conducted a substantive comparison of the trade policies of Britain
and France.”
This was in the early 1990s, when digging through archives still
meant braving dusty filing cabinets, but a curious Nye pursued the
task. What he found debunked a narrative that political historians had
come to treat as common sense. Britain actually had much higher tariffs
than France in the early nineteenth century, and they still had higher
tariffs after the repeal of the Corn Laws. Britain’s overlooked tariffs were
on particular goods, notably French wine. Parliament did not touch the
long-standing wine tariffs until the bilateral Anglo-French Treaty of
1860. In fact, earlier attempts by the British to promote “free trade”
with France had been rebuffed because Britain refused to lower its tariffs
on wine and spirits.
Nye’s first paper, published in 1991, sparked much academic contro-
versy. The “myth of free-trade Britain and fortress France” had been
treated as an assumption in history, political science, economic theory,
and international politics. Britain’s unilateral tariff repeal has been used
for theories of hegemonic stability, arguing that the Corn Law repeal
was possible because Britain had obtained enough economic and geo-
political power to act as an economic hegemon. Its position afforded it
the possibility of single-handedly bringing about a new paradigm.
But Nye’s analysis argued that the repeal of the Corn Laws was more
of a symbolic gesture than anything else. Except for lowering tariffs on
imported grain, most of the tariffs they repealed were on industry,
and at that point Britain was the world’s industrial leader. This could
be compared to modern-day Japan unilaterally repealing its tariff on
American compact cars.
“People just looked at the way people talked about trade during this
period without looking at what was actually happening,” explains Nye.
“The way something is discussed politically or journalistically is often
not the way it’s working economically.” But now Nye was tasked with
answering a far more interesting question: what function did these taxes
serve in Parliament’s foreign policy? Next, he did what every good
investigator does—he followed the money.
“A big part of the struggle over trade with France was the struggle over
wine,” says Nye. “But wine was tied to the big picture of alcohol.” He
soon learned that he couldn’t understand international trade and
domestic tax policy on French wine without considering its foremost
domestic substitute: beer.
It became the passion project he never anticipated. “No one had ever
linked wine and beer policy to tax and trade policy.” He dedicated nearly
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two decades to researching and writing his magnum opus, War, Wine
and Taxes: The Political Economy of Anglo-French Trade, 1689–1900.
The story gets even more remarkable. In his book, Nye not only
challenges the basic assumptions of international economic history,
but also identifies Britain’s alcohol protectionist and taxation policy as
an important factor in the country’s military success during the eight-
eenth century. Drawing on his calculations of beer taxes and wine
tariffs, Nye was able to piece together a much greater historical puzzle.
Far from being inconsequential, wine tariffs and beer taxes were the
lynchpin of British mercantilist strategy. Their stated reasoning was to
deprive Britain’s rival France of wealth, but their real power came from
the strategic protection and taxation of a burgeoning oligopoly of
London beer barons capitalizing on the industrial revolution. In effect,
Parliament was able to fund its imperialist conquests overseas by price-
gouging London’s growing urban proletariat on their post-work pints.
The British weren’t always beer lovers. During the high Middle Ages,
wine was the glorified drink. The marriage of Henry II and Eleanor of
Aquitaine in 1152 gave the English crown control of France’s Bordeaux
region. Its dark, bitter red wines, Anglicized as “clarets,” shaped the
tastes of the British aristocracy in the following centuries. And, in fact,
claret continued to be imported in large quantities throughout the
seventeenth century.
But all of this changed in 1688 with the Glorious Revolution.
A primarily Protestant Parliament had grown frustrated with the rule
of absolutist King James II and his pro-French policies, Catholic reign,
and ill-advised tax policy. Members of Parliament conspired with Dutch
republican leader William of Orange to invade Britain and steal the
crown. In exchange for their support, William of Orange imparted to
Parliament the power to administer and enforce taxes.
Following the Glorious Revolution, Britain’s constitutional monarchy
more closely resembled the representative model of the Dutch Republic
than its absolutist peers in the Catholic regions of Southern Europe.
A powerful Parliament gave Britain’s growing bourgeoisie—the class of
increasingly wealthy trade merchants and industrialists with no noble
blood—greater say in political affairs. Social power could be obtained
through bottom lines rather than bloodlines. But the rift between Prot-
estant Britain and Catholic France was about more than religion and
government. On the eve of European imperialism, mercantilist ideology
26
The Brew that Launched a Thousand Ships
led both nations to colonize lands in the New World so they could ship
raw materials back to the homeland. The two great powers of Europe
were revving up for centuries of competitive expansion, ready to battle
for control of new markets overseas. The battles would be numerous and
bloody. They would also be very expensive.
From 1689 to 1815, Britain was at war for ninety-one years—an
astonishing 80 percent of one-and-a-quarter centuries—mostly fighting
against the French House of Bourbon, followed by the French Republic
during the Napoleonic Wars. Britain either won or fought on equal
terms with France in all of these wars. By the nineteenth century, the
United Kingdom had come to be known as the “Empire where the Sun
Never Sets,” with colonies all over the world and trade routes protected
by their formidable navy.
But these fortunes had changed tremendously over a century and a
half. In the seventeenth century, at the dawn of the Glorious Revolu-
tion, France was a far more powerful political entity than Britain. So how
was Britain able to raise enough money to fund all their warring?
During the eighteenth century, the British Parliament oversaw the
quadrupling of its tax revenue, and its navy grew vastly more powerful
(see Figure 3.1). As Britain’s fleet of battleships grew more fearsome, so
25
20
Millions of pounds sterling
15
10
0
1750 1760 1770 1780 1790 1800
27
Beeronomics
did its fleet of tax collectors. In Sinews of War, John Brewer gives an
account of Britain’s military supremacy dealing “with bookkeeping, not
battles, with ink-stained fingers rather than bloody arms.” He attributes
British naval power to the success of its tax bureaucracy, documenting
its internal system of checks and balances and meticulous accounting
practices. But the tax bureaucracy doesn’t tell the whole story, according
to Nye. It wasn’t just the efficiency of tax collectors; it was the taxes
themselves. Britain was able to pay for more than a century of almost
non-stop warring through the strategic regulation and taxation of beer
and wine.
After the Glorious Revolution, the British were faced with a problem:
they didn’t want to continue lining the pockets of their Catholic rivals
by importing French wine. But they weren’t exactly prepared to put
down the bottle. Sir Thomas Moore stepped up with a series of pamph-
lets on alternatives to French wine. Titled “England’s Interest, Or, The
Gentleman and Farmer’s Friend,” Moore’s pamphlets instructed British
citizens to plant fruit trees in order to increase national wealth. He
promised that ciders made from apples, pears, crabapples, cherries,
currants, gooseberries, and mulberries had the potential to be just as
“strong, wholesome and useful as French Wines.”
King William of Orange and the Protestant merchant elites were
concerned with how their citizenry’s taste for French wine was filling
the war coffers of their rivals in the House of Bourbon. France’s
public revenue relied heavily on export taxes levied on wine. In 1689,
when France declared war on the new Protestant alliance, Parliament
seized the opportunity to enact an embargo on French imports. The
thirteen-year War of Spanish Succession followed quickly on its heels.
When peace was finally declared in 1714, Britain kept customs duties on
French wine prohibitively high. By this point, lines had been drawn—
literally.
Alcohol was at the center of the conflict, fueling the new British
nationalist paradigm. Historian Peter Mathias describes the symbolism
of “ ‘Protestantism, constitutional government and beer’ as a triumvirate
which faced the alliance of ‘Catholicism, autocracy and wine’.” Drink-
ing songs that accused French wines of “spoiling the products of our
land | and of her Coin disrobe her” encouraged Brits to drink beer as a
patriotic way of increasing national wealth.
A crucial element was that the tariff on wine was based on volume,
not value. This had the important economic effect of shifting demand
almost exclusively to high-end wines, as low-quality wines became too
expensive for the masses. Prior to the Glorious Revolution, cheap French
wine was imported in barrels to Britain. But the volume tariff had all but
28
The Brew that Launched a Thousand Ships
29
Beeronomics
30
The Brew that Launched a Thousand Ships
31
Beeronomics
Beer Cartel
32
The Brew that Launched a Thousand Ships
33
Beeronomics
The looming threat of competition with cheap wine meant that tax
evasion was just too big of a risk to take—and the government’s
potential punishment too severe.
34
The Brew that Launched a Thousand Ships
1,400
1,200
1,000
1,000 Barrels
800
600
400
200
0
1750 1770 1790 1810
Figure 3.2 Production of strong beer in London by top twelve brewers (in 1,000
barrels), 1750–1810
Mathias, P. (1959). The Brewing Industry in England 1700–1830. Cambridge University Press.
35
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36
4
Citizens of the Czech lands have always held their brewers to a high
standard of craftsmanship. But in the medieval period, they had some
weird ways of showing it. “Because beer is sticky, they believed that
when beer is really sticky, it is really good,” says Tomáš Raboch, press
representative for Pilsner Urquell. He describes a medieval ritual test
of quality in his hometown: brewers would brew their beer and spread
it on a bench. Members of the city council wearing leather trousers
would then sit down on the bench for a designated period of time.
The clincher: “If they didn’t stick, if they could stand up, the beer was
not perceived as good.” Unsurprisingly, the public test’s impact on the
quality of beer was just as questionable. “Because they didn’t know at
that time how to achieve it, they were adding weird stuff to beer,” he
continues. “They believe, if we add the bones of dead people, it will
allow the beer to be better. But how could they do it? They didn’t have
any tools or any methods. They just had to try.”
Raboch’s anecdote illustrates just how much beer lovers everywhere
owe to the past brewers of the Bohemian city of Plzen in the modern-
day Czech Republic. Plzen became a city in 1295 when Bohemian King
Wenceslaus II gave 260 citizens the right to brew and sell beer, protect-
ing their sales up to nine kilometers from the city center. The right to
brew beer was passed down through families. As power shifted to the
Habsburgs in Austria, the official name became the German Pilsen,
Beeronomics
38
A Revolution Every Thousand Years, Part II
39
Beeronomics
not anticipate the future of beer, as best evidenced today by their chosen
site on top of a huge hill. “There’s no room to expand!” jokes Zarnkow.
At Weihenstephan, the decline of brewing-as-craft can be traced to
1803, when the monastery was secularized as a result of negotiations
with Napoleon’s occupying armies. At that point, monasteries were
important components of the agricultural sector, spreading knowledge
on farming and harvesting practices. Forced secularization served to
alter the purpose of monastic breweries as centers of knowledge. These
would serve the impending scientific revolution, when Munich became
the center of knowledge on the science of beer. Zarnkow can’t help but
look back on Weihenstephan’s brewing history with wistfulness. “For a
thousand years, we have a good feeling for this product, but now we
have an understanding: what really happens.”
The scientific revolution utilized deductive reasoning and controlled
experimentation as a means of establishing certain principles about the
natural world. It wasn’t long before scientists became interested in how
and why alcohol happened. Antoni Van Leeuwenhoek, George Ernst
Stahl, and Hermann Boerhaave contributed theories on how yeast facili-
tated the fermentation of beer. Their studies were continued by Antoine
Laurent Lavoisier, who outlined for the first time what was happening at
a molecular level: sugar molecules are broken down into alcohol and
carbon dioxide, thus explaining how sweet barley mash becomes the
beverage, both carbonated and alcoholic, we all love. By 1818, scientists
had discovered that the beer fermentation process could be split up into
a first phase, in which sugars were transformed into alcohol and carbon
dioxide, and a second phase, in which the beer ripened and the remain-
ing impurities were removed.
“Pasteurization” is associated with milk today, but Louis Pasteur’s inter-
est in fermentation and preservation actually began with alcohol. During
the 1850s, Pasteur conducted a series of experiments on wines, which led
him to the theory that yeast are living cells responsible for the fermenta-
tion process. The pasteurization method he is famous for involves heating
fermented products to a certain temperature and cooling immediately,
thus killing bacteria and allowing products to be preserved.
Other important work had also been done on yeast to produce new
beers by manipulating the yeast’s environment. Traditional Bavarian
brewing practices involved lagering beer by storing it in cold environ-
ments (usually caves in the hilly mountainside). But all lagered beer is
not necessarily bottom fermented: “Bottom fermentation” refers to beer
brewed with slow-acting yeast that grows heavier over the course of the
fermentation process, falling to the bottom of the storage barrel so that
brewers can easily filter the beer. Spaten brewer Gabriel Sedlmayr owned
40
A Revolution Every Thousand Years, Part II
41
Beeronomics
strategic advantage was being the first in the city with a connection to
the new, golden pils beer.
Pils-style beer also became popular in America during this period,
primarily as a result of German immigrants brewing their native style of
beer in new American cities. Most famously, in 1865, Bavarian immigrant
Ebenhard Anheuser founded the Bavarian Brewing Company—the
predecessor to Anheuser Busch—in St. Louis, where he began brewing
Budweiser beer. Of course, his signature style was named after the
Bohemian city of Budweis, which had a robust export market to rival
Pilsner. The name duplication would come to a head many decades later
(see Chapter 10). But at this point, consolidation and competition was
not quite global, though it was certainly on its way.
Another technological advance was also critical: glass bottles were
known for their superiority over casks for preserving beer on long jour-
neys, but in the seventeenth century glass beer bottles were handblown
and therefore expensive. The invention of the chilled iron mold meant
that, by the 1890s, glass bottles could be produced relatively cheaply
and in mass quantities. Equally important was the invention of new
methods to close beer bottles. Glass beer bottles were initially closed
with a cork held in place with wire. In 1882, Henry Barrett invented the
screw stopper, while twenty years later, William patented the crown
cork, at last enabling automated bottling machines to be developed. In
the first half of the twentieth century, metal beer cans were invented
and introduced in the US, where they soon became popular, though
their widespread use in Europe did not materialize until much later.
Brewers were on the crest of the industrialization wave, and they were
being rewarded handsomely in Munich and Plzen. The innovations of
the nineteenth century benefited the Pilsner Urquell and the Spaten
breweries—large enough to have the capital to invest in upgrades—
more than the small breweries scattered across the Bavarian and Bohe-
mian countryside. In Munich, the market was dominated by seven
famous brauhauses that still today sponsor tents at the city’s annual
Oktoberfest. These breweries honed their recipes for bottom-fermented
pils-style beer, enabling them to offer a relatively inexpensive, stand-
ardized product that quickly became popular among the urbanizing
populations.
In this way the industrial revolution paved the way for a massive
consolidation in the global beer industries in the first part of the twen-
tieth century. Between 1900 and 1940 the number of breweries declined
rapidly and the size of breweries grew, as many small breweries closed or
merged into larger ones. The number of breweries fell by more than 60
percent in the US (from 1,816 to 684), in Belgium (from 3,223 to 1,120),
42
A Revolution Every Thousand Years, Part II
Number of breweries
Belgium UK US
43
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44
A Revolution Every Thousand Years, Part II
12
10
8
Billion Liters
0
1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960
Germany UK USA
Figure 4.1 Beer production in Germany, UK, and USA, 1860–1960 (billion liters)
Mitchell, B. (1998). International Historical Statistics: Europe 1750–1993. Springer.
45
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46
5
The Brooklyn Dodgers earned their team name from borough residents’
famous prowess dodging trolley cars. In 1947, the team made history
by signing Jackie Robinson, the first African American player to be
recruited by a major-league baseball team. After a year of racist death
threats and national controversy, the Dodgers emerged victorious with
their third World Series pennant. But the 1947 season was significant
for another reason that would come to change the future of baseball
dramatically: broadcast television was now possible in New York, with
more cities pending Federal Communications Commission (FCC)
approval every day. Commercial producer James C. Beach smelled an
opportunity for his client Schaefer Brewery. In an editorial for Television
Magazine published in 1947, he wrote: “Customers were lined up at bars
all over New York watching telecasts of Brooklyn Dodger baseball games
from Ebbets Field. Now—to get those fans to order Schaefer Beer.” His
idea employed techniques unique to filming with camera: “We make
the television camera the ‘I’ character—the guy standing at the bar.
Then we have the camera ‘drink’ a foaming glass of Schaefer.” The
goal: “To make his [the viewer’s] salivary glands spring a leak, and let
him carry on from there.”
Breweries were among the first American industries to recognize the
potential of television advertising to expand their business. “They just
got it—that this could really change the market,” says Lisa George.
George didn’t set out to study beer. As an economist at CUNY Hunter,
George specializes in media markets. Specifically, she studies how the
introduction of new media technologies influence product markets.
And once she set her sights on broadcast television, it wasn’t long
before she identified its co-evolution with the brewing industry. “The
more I learned about it, the more I realized: these industries grew up
together,” she says. “Television made a huge difference in what the
brewing industry looks like.”
Beeronomics
400
350
300
250
200
150
100
50
0
1950 1955 1960 1965 1970 1975 1980
48
How TV Killed the Local Brewery
49
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50
How TV Killed the Local Brewery
51
Beeronomics
The difficult thing about history is unraveling the causes and correl-
ations of historic threads. Historians may argue about the interplay
between certain movements, for example the role of television in facili-
tating the civil rights movement using archival data. But making a
scientific case for cause-and-effect relationship between these two phe-
nomena is trickier. It’s the basic issue that correlation is not causation.
Just because civil rights and television happened at the same time and
were implicated in the same conversations doesn’t mean TV caused the
civil rights movement. Historic changes tend to grow slowly, building
on, feeding off of, and reacting to each other in the process.
Lisa George explains the challenge of determining cause and effect:
“When you do a statistical type of economic study, relating historical
data to one another, you’re never really sure: is it causing it, or is it just
related?” George searched for other ways to find a cause-and-effect
relationship between the spread of network television and the consoli-
dation of the brewing industry. But, as any economist or statistician will
tell you, this is difficult. To conduct an econometric analysis of the past,
she needed to figure out a way to isolate the variables of television and
consolidation of the brewing industry. “What you really need is for the
world to conduct an experiment for you. What you look for is some-
thing that happens in the world that lets you say: this happened for
totally different reasons than the one I want to study, so let me go and
look at the consequences,” she explains. “If I had just linked the spread
of TV with the decline of local beers, people would have said ‘Interest-
ing, but it’s just technology.’ So one way you can pin down the causality
is because of these shocks.”
George found one such shock in the spread of television advertising.
The FCC issued the first commercial broadcast licenses on July 1, 1941.
Television had only penetrated New York, Philadelphia, Chicago, and
Schenectady before America found itself embroiled in World War II and
expansion was curtailed. Living up to its postwar reputation, the true
spread of television came at the end of World War II. In the first three
years following the war, forty-two cities hosted seventy-one broadcast-
ing stations. But in September of 1948, the FCC froze station licensing
briefly to study signal interference, color standards, and spectrum allo-
cation. What was supposed to be a temporary freeze was extended when
infighting in the FCC met with the outbreak of the Korean War. No new
licenses were issued until 1952. After the freeze ended, television spread
rapidly, with 440 VHF stations reaching about 95 percent of the US
population by 1960.
George recognized this idiosyncratic nature of expansion as a unique
opportunity to apply the tools of econometrics to history. The wartime
52
How TV Killed the Local Brewery
construction ban and the FCC freeze created three distinct sets of mar-
kets: markets with stations licensed before Pearl Harbor, which were
able to resume commercial broadcasts immediately after the war; mar-
kets with stations licensed after the war but before the freeze; and
markets with stations licensed after the freeze. This natural historic
experiment is exactly what George needed to study the cause-and-effect
relationship between television and the consolidation of the brewing
industry.
Her analysis showed that greater television penetration is indeed
associated with a decline in local beer production. The introduction of
television advertising appears to have influenced tastes in the long term.
After seeing one commercial, drinkers might not automatically switch
to a national brand from a local one. But a few years after the introduc-
tion of TV into a market, a pattern of decline in the production levels of
local breweries emerges. George estimates that increasing television
access from 0 to 100 percent in a market appears to reduce local produc-
tion by almost 30 percent. Since locally produced beers were generally
consumed locally, the results suggest that television played a crucial role
in the decline of local production. When considered along with histor-
ical evidence that national brewers were expanding output, these results
further support the hypothesis that television hastened the decline of
local beer.
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54
6
Beer Monopoly
56
Beer Monopoly
The postwar shakeout saw local brands exit the market en masse, while
big regional breweries grew to national giants. By the 1970s, Budweiser,
Miller, and Coors had safely claimed their spots as the holy trinity of
American brand dominance. For the most part, this consolidation pro-
cess didn’t happen through mergers and acquisitions but through the
growth of a few regional brands into dominant national brands. One of
the primary reasons for this was the advertising economies of scale
afforded by broadcast television, as elucidated in Chapter 5. It made
more sense for breweries to expand their brands than to buy up rights
to pre-existing local ones. By the 1980s, the Big Three easily claimed
more than 90 percent of the world’s largest beer market. This was
the beer market that August Busch III knew. Under his tight hold on
Anheuser Busch, Budweiser had beat perennial number two Miller and
cornered the American beer market.
America led the world both in market size and concentration. The
industrial revolution, the introduction of new technologies, TV adver-
tising, and the rise of cheap and widespread canned lager had brought
about a shakeout in all traditional beer-drinking nations (further
described in Chapter 11). But nowhere else did a beer market consoli-
date so rapidly. Both the consolidation and the size of the American beer
market meant that the biggest American firms were also the biggest
firms in the world. As the 1990s approached, Anheuser Busch main-
tained position number one, while Miller and Coors followed behind.
Even long-straggling Pabst and Stroh were of formidable size on the
global playing field.
Busch III had ridden the wave of consolidation in the world’s largest
beer market for a long time. The domestic beer market afforded the
brewery continued growth, and as such, the firm held an exceptional
place among American firms. They were treated like royalty in the
St. Louis area, where high-level careers brought privileges and respect.
The legacy of “Budweiser” was deeply engrained in the mythology of
American capitalism. The entire Busch family was involved with the
company in some capacity, leading many business partners to assume
that they had controlling share of the company. But most of the Busch
family had gone into the cushier leg of the beer industry as distributors.
Such aggressive domestic growth also blinded execs to some fundamental
changes in beer markets that took root during the 1980s. Postwar con-
solidation had been fueled in no small part by the popularity of light
lagers among the baby boomer generation. Bud Light and Miller Lite
were all about volume: cheap to make, cheap to buy, and profitable
to boot. Both firms were able to respond to the bump in popularity of
high-end super-premiums in the early 1980s by releasing Michelob and
57
Beeronomics
Löwenbräu. But by the late 1980s, the star of the American macrobrew-
ery was beginning to fall. Drinkers were demanding greater variety and
pricier, higher-end beers. The market again began to fragment. The
market share for imported beers—actually shipped over, not license-
brewed in the US, as the Millerbräu fiasco forebode (see Chapter 13)—
exploded from the 1990s onwards. On its heels was the less aggressive
but increasingly significant growth of the craft sector. By the 1990s, in
the American market for cheap domestic lagers there just wasn’t any-
where for the Budweiser brand to go.
58
Beer Monopoly
59
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Beer Monopoly
Ina Verstl has watched the industry she set out to cover invert before her
eyes. A chain-smoking Brit living in the suburbs of Munich, she’s
the editor of the multilingual industry publication Brauwelt (Brewing
World) and a professor of continental philosophy—which means she
can wax Hegelian or Heineken depending on the occasion. Today, it’s
Heineken. Or more specifically, her book project Beer Monopoly. She’s
been covering the same story as Riepl and MacIntosh, but from a global
perspective.
From time to time, her Hegelian views take over. Verstl calls the recent
industry developments promiscuous. “They’re all in bed with each
other.” It’s a perpetual game of mergers and acquisitions and forced
divestitures when competition authorities crack the whip.
In the past fifteen years, the global beer market has grown exponen-
tially more concentrated by way of both foreign acquisitions and
foreign direct investment (FDI) in countries with growing beer markets.
In 2001, the top four firms claimed 21.7 percent of global market share.
In 2005, this number was 35.8 percent. In 2014, AB InBev, SABMiller,
60
Beer Monopoly
61
7
Socialist Lubricant
64
Socialist Lubricant
upgrade the local breweries and get them back up and running. A crucial
part of this was to upgrade their supply chains and make the farmers
happy so that they were willing to produce quality barley for the market
rather than for the communist central plan.
In 1990, Peter Lelkes, the head of a cooperative farm, filled the barley
order of a newly privatized food-processing firm. He then requested the
agreed-upon payment of eight million crowns. The firm refused to pay.
It hadn’t occurred to him that this could happen. But his cooperative
farm quickly learned they had few options for retrieving their money.
There was no legal precedent—lawyers and judges were just as baffled as
Lelkes with regard to how to deal with private contract disputes. Their
previous familiarity was with one contract: the central plan, where
personal profit was illegal.
“Today, eight million crowns could buy three tractors,” he offers, still
frustrated. It was two years until Lelkes retrieved the payment. But the
farm had already taken a significant financial hit and inflation had
reduced the real value of the payment.
Anecdotes like this were a dime a dozen in the years following the
reforms. In the West, markets had co-evolved organically alongside
basic regulatory institutions. Contract law, the means to enforce it, a
socialized understanding of free market logic: none of these existed in
post-communist countries immediately following the reforms.
Many farmers didn’t understand how a market economy worked. The
farmers at Lelkes’ cooperative were accustomed to receiving an order
passed down by the ministries from the Committee for Central Plan-
ning. “Planning and the economy were so simple then,” he ruminates.
Not only was there a guarantee he would sell his harvest, but the prices
were fixed in advance. He also knew the price of all inputs: seeds,
fertilizer, technology.
Farmers had no experience with making savvy market decisions when
it came to their crops. “For years, some produced wheat nobody wanted
to buy,” explains Professor Pokrivcák. “They were shocked—they didn’t
understand why they weren’t getting paid.” The milk industry had the
opposite problem. Dairy farmers started selling to international markets
for a higher price, while milk-processing plants went broke when they
had nothing to process.
The market was especially hostile to barley farmers in post-communist
nations. In the ten years following the reforms, Slovakia’s production of
65
Beeronomics
barley took a huge hit, dropping from 998 to 665 million tonnes per
year. In the Czech Republic, Hungary, and Poland, barley production
also fell by about a third. Bulgaria’s drop was even more dramatic: from
1,487 to 662 million tonnes in 2000. There were many reasons why
barley took an especially hard hit. The most obvious was that commun-
ist Czechoslovakia had overproduced barley under the central planning
system with its subsidies and protected agricultural production system.
The barley farms were not efficient enough to produce the same
amounts in a competitive free market.
Another major reason was that farmers were reluctant to invest at all
with no guarantee that processing plants would purchase their harvest.
The communist supply chains that had guaranteed farmers a fair price
were in disarray. Barley farms, malt-processing plants, and breweries
comprise the supply chain for beer. In free market economies, coordin-
ation between firms in one supply chain is made possible by negotiated
contracts between firms in the chain. Following the reforms, the legal
infrastructure necessary to implement this type of coordination just did
not exist.
Even when markets began to stabilize, early losses took a major
toll on the agricultural sector. Agriculture operates on debt—firms
need to buy inputs months before they receive payments for their
products. Burned once, and a farm was devastated. As an industry in
decline, credit channels were all but non-existent for farmers. No
money, no seeds, no harvest, no beer.
The Takeover
66
Socialist Lubricant
67
Beeronomics
Estonia 50 0 1 0
Latvia 28 0 1 0
Lithuania 41 0 0 0
Russia 24 0 9 0
Ukraine 23 0 29 0
Hungary 0 9 25 25
Czech Republic 0 1 10 37
Bulgaria 0 23 37 0
Romania 4 36 13 12
Poland 8 33 0 22
Slovakia 0 37 0 24
The Restructuring
68
Socialist Lubricant
Slovensko was established to turn a profit; its arrival could have been
nothing but ambivalent. After all, Slovakia was still mired in an eco-
nomic decline, domestic industries were still suffering from the post-
reforms free-for-all. At one point during the Elsevier interview, Bolland
ruminated on his three years in Slovakia: “I lived in the countryside,
among the peasants, a conscious choice. If you need to lay off hun-
dreds of people, you cannot do it from the capital, with a show car
for driving.”
During Bolland’s three years orchestrating the restructure, he main-
tained one party line: “This is a long run game.” It was an even longer
run than he was anticipating. Bolland arrived in Slovakia armed with
a sharp aesthetic sense and marketing savvy. He had big dreams for
Zlatý Bazant as Slovakia’s ambassador brand, similar to internationally
renowned Czech exports Pilsner Urquell and Budweiser Budvar. But
first, he would need to secure some high-quality barley.
Heineken never intended to get into the barley business, but they didn’t
really have a choice. The story is the same across the former Eastern Bloc:
multinationals had jumped at the chance to acquire breweries in tran-
sitional markets, but they found that restructuring their new acquisi-
tions to run as competitive enterprises was only the first of many
challenges. Many didn’t intend to enter the malting industry either,
but breweries and malt houses were sold as package deals by post-
communist governments. The bigger challenge was sourcing high-
quality barley from local farms. Barley farmers were facing a credit
vacuum—they needed capital upfront for seed, fertilizers, pesticides,
and equipment, but banks were reluctant to lend to a sector in decline.
Heineken stepped up to the challenge early on. The newly established
subsidiary Heineken Slovensko launched credit and farm assistance
programs that advanced capital to farms to purchase inputs. “Farmers
had two possibilities: from bank and from us,” Alaxa says. “It’s cheaper
from us because three, five, ten percent,” referencing to interest rates
charged by banks as he counts on one hand. They also solicited the help
of the university in co-sponsoring an agricultural consulting program.
Farmers were educated on innovations in agriculture, including pesti-
cides, fertilizer, and new technologies.
Similar ventures took place across Eastern Europe. Robert Persyn, a
global expert in barley seed production and quality, sits in his renovated
farmhouse in the outskirts of Hoegaarden, home to the famous Belgian
69
Beeronomics
white beer (see Chapter 8), reflecting on his own early naiveté about
supply chain restructuring. He was hired in the early 1990s by Interbrew
as a consultant to help them improve the quality of malt barley produc-
tion in Bulgaria and Croatia. Interbrew came to him, frustrated that
their attempts to import high-quality malt from the world market
were blocked by the governments’ reactionary increase of import tariffs
on malt imports. They were forced to upgrade the entire domestic
supply chain, bringing in foreign experts on malting and barley to
improve quality, and working with local farmers and seed companies.
Alaxa could not agree more: “Our farmers produce this barley. It is
tradition, it is history.” For Heineken in Slovakia it was also the only
viable long-term strategy. Imported barley would be more expensive in
the long run.
It took Persyn a few years to identify the problems in the local barley
supply chains in the Balkans and to upgrade them, with financing from
the multinational brewery. It takes time because there is only one
growing season per year. But his efforts in Croatia and those of Heineken
in Slovakia paid off. Data collected by Pokrivcák and his colleagues at
the university in Nitra show that farms with Heineken contracts con-
sistently had a higher yield than the national average following the
implementation of credit programs. In 2000, the Slovakian average
yield was 1.99 tonnes per hectare; for Heineken’s farms, it was 2.77
tonnes per hectare. Similarly, in Russia, malting firms Soufflet and
Champagne Cereals financed seeds and fertilizer programs for barley
farmers through interlinked contracts. The programs were hugely suc-
cessful in improving the quality of Russian barley. Prior to 2001, only 49
percent of Russian demand for barley was purchased locally. By 2007,
that number was 85 percent.
Persyn also found himself upgrading barley quality in Russia and
beyond. Encouraged by his success in Bulgaria and Croatia, a 15,000
hectare farm in Siberia hired Persyn to manage the production of barley
for the local breweries. Since then he has worked for most brewing and
malting multinationals, setting up improved barley production systems
across the world wherever the companies are taking over breweries or
malting plants, from India to the Egyptian desert.
Vít’az Vít’az
70
Socialist Lubricant
In 2004, Slovakia joined the European Union (EU) and the circum-
stances of Heineken and its barley farmers changed yet again. Barley
farmers became entitled to generous subsidies as part of the EU’s Com-
mon Agricultural Policy (CAP). Government payments to farmers
increased more than fivefold over the next five years. For the farmers,
it was a return to a world of subsidies, fifteen years after the transition
away from subsidies under the communist system to a free market
economy.
Soon after EU accession, Heineken and the biggest malt processors in
Slovakia dismantled their credit and advance payment programs to
farmers. A study by the World Bank in 2003 had shown that most
brewing and malting companies in Slovakia were providing credit pro-
grams for their suppliers. A revisit of the companies by Pokrivcák and
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Beeronomics
his colleagues in 2008 found that these programs had been terminated
and that the CAP payments were the main reason. With so much in
subsidies coming to the farms, there was no longer a need for the
breweries or malting companies to assist farms with credit programs.
In fact, with guaranteed payments from the EU coming in at the end of
the season, banks were happy to step in and pre-finance the farms. It was
a highly secure loan system.
Heineken was able to take a backseat role as creditor, while the CAP
payments actually directly added to the profit margin of Heineken
Slovensko. The malt-processing branch had spent years establishing
relationships with barley farms across Slovakia. After 2004, the EU’s
subsidies changed the financial circumstances of these farms. While
they benefited directly from the extra income, it also changed their
contract negotiations in unexpected ways. The extra subsidies changed
the minimum fixed price they could sell barley for and continue to run
their farm. And nobody realized this better than Heineken Slovensko.
After many years of working with the barley farms, they had good
insights into their suppliers’ activities, profits, and bottom lines. More-
over, as a buyer with significant market power, Heineken Slovensko was
perfectly positioned to renegotiate the contract terms and demand
lower fixed prices from newly subsidized farms when contracts came
up for renewal.
Bolland’s marathon mentality had paid off in an unexpected way.
72
8
In April 2011, beer lover and journalist Roger Protz of The Guardian took
a moment to salute Pierre Celis, the enterprising Hoegaarden milkman
who pulled Belgian white ale from the brink of extinction. Celis will be
remembered for his dedication to brewing excellence and his single-
minded passion for the traditional Belgian white ale that drove him to
resurrect the ancient recipe after the last brewery closed in Hoegaarden,
his hometown in central Belgium, in the 1950s. Today Belgian and
Belgian-style white ales enjoy worldwide popularity in recognizable
brands like Hoegaarden, Blue Moon, and Shocktop.
Obituaries hail Celis as the “father of Hoegaarden beer,” but the
famous white beer recipe predates Celis by at least 1,000 years. Belgian
white beer—witbier and bière blanche as it is known by the Flemish and
Walloons in its region of origin—is a top-fermented wheat and barley
Beeronomics
ale spiced with hops, coriander, and bitter citrus. The recipe was refined
by the brewers of Hoegaarden and exported across the Low Countries
for centuries.
74
The Belgian White
A Rising Star
75
Beeronomics
The 1990s marked the early stages of the American love affair with
imported and craft beers. The US market share for domestic lagers began
falling in the early years of the decade as demand for imported beers
increased. The beer-drinking public saw imports as a higher-end substitute
for popular premium brands like Michelob. Pockets of adventurous con-
sumers also began to seek out craft beers like San Francisco-based Anchor
76
The Belgian White
Steam and Boston Beer Co.’s Sam Adams. And while domestic light lagers
continued to dwarf the market share for imports and craft beers, it became
increasingly clear to the big industrial brewers that investment in nascent
beer markets was necessary. Number two and three brewers Miller and
Coors began to explore tapping into the emerging markets for imported
and craft beers.
But back to Celis. The father of Hoegaarden beer emigrated to Austin,
convinced of the potential for craft beer in an American market
dominated by industrial lagers. In 1992—the same year microbrewer
New Belgium of Colorado released the amber ale Sunshine Wheat—the
Celis Brewery brought its flagship brand, Celis White, to the local Austin
market. Both beers used the traditional barley/wheat and spice recipe of
the Hoegaarden white ale.
Though light lager was deeply entrenched in the Texan culture, Celis
White attracted a small but enthusiastic following in Austin. He also
received critical acclaim for his American-made white beer from the
budding US craft movement. His Celis White brand garnered gold
medals for several years running in the “herbs and spices” category at
the Great American Beer Festival, the top tasting competition for the US
craft brewing industry. The unfamiliar style of beer initially confused
judges, but the organization would soon establish a separate judging
category for the Belgian whites.
The Celis Brewery and its seasoned, Old World brewmaster attracted
the interest of the Miller Brewing Co., which was exploring opportun-
ities to enter the developing market for domestic and imported boutique
beers. Pierre Celis accepted Miller’s offer of state-of-the-art facilities and
access to its US distribution network. Celis had been drawn in by the
potential to expand the market for his beer, but his brewery lacked the
capacity to meet even local demand. Problems of scale and transporta-
tion hampered operations. In 1995 America’s number two brewer took a
controlling stake in Celis Brewery of Austin, Texas.
However, it soon became clear to Miller that the beer’s critical acclaim
did not necessarily translate into profit. With Belgian white beer slow
to catch on, Miller grew increasingly unhappy with its investment in
the Austin brewery. Only a few months after the acquisition, Celis was
once again confronted with a flock of corporate executives focused on
the bottom line. The new cost-cutting strategies affected the quality of
Celis White and dampened the local cult following that Celis had built
in Austin. In 1997—only two years after its initial investments—Miller
abandoned its quest for a white beer brand and auctioned Celis Brewery
and its rights to the small craft brewer Michigan Brewing Company.
Renowned beer writer Michael Jackson would later describe Celis’
77
Beeronomics
78
The Belgian White
79
Beeronomics
Again, Pierre Celis did not stick around to watch all of this unfold. After
his second unpleasant takeover by a large commercial brewer, this time
on the other side of the Atlantic Ocean, Celis again left the brewery—
and the country. He returned to Belgium in 2000 to find the market for
white beer flourishing once again in his home country. His former
Hoegaarden brand had saturated the Belgian market. With Interbrew’s
merger spree, soon-to-be AB InBev was prepared to take Hoegaarden
global. Celis’ objective to save his favorite beer from extinction had
been achieved—and then some. Never before had the world consumed
so much Hoegaarden-style white beer. Yet the incredible success was
different to how he had envisioned it.
And the battle for Hoegaarden was not over yet. Soon after returning
to Belgium, Celis witnessed another episode in the Leuven–Hoegaarden
saga: an attempt to take the beer away from its roots. With growing
Hoegaarden sales, InBev was looking to reduce the cost of production. In
2005, from its headquarters in Leuven, InBev announced plans to shut
down the Hoegaarden brewery and move production to its larger facil-
ities in Jupille-sur-Meuse, fifty kilometers down the road. The newly
appointed CEO, Carlos Brito, the Brazilian businessman with an MBA
from Stanford (see Chapter 6), had already developed a reputation as a
take-no-prisoners executive with an unflinching focus on the bottom
line. In 2004 he caused a stir in England with the decision to move
production of Boddingtons beer from its 200-year-old brewery in Man-
chester to a new facility in Lancashire. While InBev shareholders favored
Brito’s unsentimental approach to corporate acquisition, many Belgian
consumers were about to change their minds. Until that moment, despite
the takeover of the Brazilian management team that came with the Inter-
brew merger with AmBev, many Belgians still thought of InBev as “their
company.” This sentiment died with the announcement that InBev
would move production of Hoegaarden the white beer out of Hoegaarden
the village.
Local protests were frequent and visible. Residents plastered signs all
over town reading “Hoegaarden is brewed in Hoegaarden.” InBev workers
80
The Belgian White
81
9
The Reinheitsgebot
Munich, the capital of the southern German region of Bavaria, hosts two
of the most important symbols of German beer culture. Each fall the
city’s world famous Oktoberfest attracts hundreds of thousands of beer
lovers from Germany and all over the world for two and a half weeks of
beer-drinking and dancing.
The second, much quieter, symbol stands tall in the center of Munich’s
Viktualienmarkt: a blue-and-white striped maypole depicting scenes of
dancing, song, and conversation. The pole commemorates the medieval
Reinheitsgebot, or “Purity Law”—a decree mandating that all beer be
made from four ingredients: barley, water, hops, and yeast. Duke Wil-
helm IV signed the Reinheitsgebot into law for Munich in 1487 and for all
of Bavaria in 1516. It’s the oldest food law still in effect and almost
certainly the most celebrated. And according to Bavarian history profes-
sor Karl Gattinger, the celebrations were about to get a lot bigger when
we met on the eve of half a millennium of Reinheitsgebot. “You can just
imagine how big the celebration will be for five hundred years,” the
thick-accented and mild-mannered history professor said over a mass of
beer at Munich’s iconic Hofbräuhaus, a “beer palace” built at the end of
the nineteenth century.
However, not everybody was celebrating the Reinheitsgebot. Critics
argue that while it may at some point have served to protect beer
consumers against the use of unhealthy ingredients in the production
of beer (or against rising bread prices, with wheat prohibited in brew-
ing), more recently the effect has been to stifle innovation in brewing
and protect German brewers from competition.
Beeronomics
84
The Reinheitsgebot
during the summer months, but close enough for moderate tempera-
ture. Bavaria and Bohemia, two of the biggest beer-drinking populations
in the world to this day, are characterized by these ideal climatic condi-
tions. Hallertau, a rural county an hour north of Munich where green
hills are marked by long green vines climbing toward the sunlight, is
one of the global powerhouses of hops.
The Reinheitsgebot may have served as a public health measure and
insurance policy for consumers at a time when plagues and unknown
diseases were commonplace, but this wasn’t its only effect. The original
Reinheitsgebot also set maximum prices for beer based on time of year.
Beer sold between April 23 and September 29 could be sold for no more
than one Munich pfennig, and twice that much the rest of the year. The
price regulation and quality control was said to protect consumers from
predatory practices by brewers, but regulations also protected the exist-
ing brewers. The requirements for beer licensing served as a form of
guild protection by raising the cost of entry. Established brewers were
advantaged compared to start-ups. The law thus reduced incentives for
innovation and advantaged already big brewers that could brew at
economies of scale. Lastly, the Reinheitsgebot also served as a form of
trade protectionism, preventing brewers from other areas introducing
their products to Bavaria.
85
Beeronomics
86
The Reinheitsgebot
87
Beeronomics
families in that region (Degenberg) who were given the exclusive priv-
ilege to brew weissbier. No one in northern Bavaria thought much of it
at the time.
When Maximilian became the new ruler of Bavaria around 1600, with
increasing expenditures to finance the Catholic Counter-Reformation
against Luther’s growing success, he set out to find ways to collect more
tax revenue. He began eyeing the growing demand for beer as a poten-
tial source.
Under the Reinheitsgebot, lager beer was the drink of Bavaria. Brewers
brewed from fall through spring, storing beer in caves in the Alps. In
accordance with the Reinheitsgebot, they would brew the last beer in
March, fermenting it to make it extra strong for consumption after the
mandated April 23 cut-off. This was the origin of the marzen style.
But there was growing demand for beer, particular in the summer.
Maximilian saw the opportunity for weissbier. Weissbier was a top-
fermented beer, using a different yeast that did not require storage and
so could easily be produced for the extra summer demand. It was brewed
under special privilege in a small part of southern Bavaria near the Czech
border. It is unclear whether Maximilian bought the brewing rights
from the Degenbergs, or whether the privilege came back to the Duke
of Bavaria as the Degenbergs died off. What is certain is that Maximilian
now had a monopoly on weissbier brewing (Weizenbierregal) and used it
effectively. Gattinger’s historical analysis shows that weissbier indeed
became the revenue stream the ruler had hoped for. In fact, according to
Klaus Salhofer, professor in economics at TU Munich, it became the
main budgetary income for the state of Bavaria and the monarch family
during the eighteenth century, as the pubs were forced to serve the beer
in order to keep their licenses.
Maximilian appeased the Bavarian brewers of lager beer by giving
them a share of the pie. During the summer months, he allowed them
to make extra profits by selling his weissbier to their customers. The
Hofbräuhaus, the royal palace founded by his father, became the center
for brewing weissbier during the summer months.
As demand for weissbier during summer months grew, more brewer-
ies were founded. Maximilian used the growing demand to raise more
income as well as directly supporting the Counter-Reformation by sell-
ing the right to brew weissbier to those fighting the Protestants and to
cities staying loyal to the Catholic Church. Building and maintaining
Catholic cathedrals drained local coffers. Protestant simplicity was an
appealing option for town politicians. Maximilian offered these cities a
deal: the right to brew and sell weissbier if profits were used for the
establishment and maintenance of Catholic churches.
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The Reinheitsgebot
89
Beeronomics
Competition or Contamination?
90
The Reinheitsgebot
5
Percent
0
1985 1990 1995 2000 2005 2010 2015
efforts, the Reinheitsgebot continued for five centuries, placing strict and
burdensome red tape on the sale of beers beyond the traditional bottom-
fermented pilsner style. The history of the Reinheitsgebot is a testament
to the political influence of brewers’ guilds and trade associations in
southern Germany. Through legal and political arguments in state and
national courts, it determined the beer style of Germany.
Van Tongeren explains that the taste component and consumer per-
ception probably played a big role in the slow change after the ECJ
ruling of 1987—“the adherence of Germans to what they think is
quality beer.” In fact, far from fading from relevancy, the Reinheitsgebot
transitioned to function as a signal of quality. German breweries began
advertising their adherence to the Reinheitsgebot prominently on bottles,
and consumers responded.
The preference for tradition in beer is nowhere better on display
than at Oktoberfest. Each fall, locals and tourists alike don traditional
Bavarian garb, lederhosen for the men and cleavage-accentuating
dirndls for the woman. Though the bright colors and synthetic fabrics
seem out of place on postured mannequins, the antiquated cuts retain a
timelessness once inside the tents, where the clash of thick liter glasses is
drowned out by the sound of accented voices singing in unison.
91
10
into a trade city, connecting Canada to New Orleans, while its eastern
border to the wooded Missouri is known as gateway to the West—the
cross-section of established American colonies and frontier first navi-
gated by Lewis and Clark. Residents identify with the Midwestern cul-
ture of Chicago and Detroit, despite Missouri’s complicated status as
part of the American South. It was the only slave state to staunchly
support the Union from the beginning of the Civil War. Even its fam-
ously unpredictable climate points to the city’s ever-changing regional
identity: the seasonal extremes from the landlocked Northwest inter-
sect with tropical storms by way of Louisiana. And then there’s the
population: historically home to Southern belles and gentlemen,
Mississippi merchants, and Western-bound working-class families
looking for opportunity—just not looking hard enough to brave the
wilderness, with many of these migrants coming from old Europe:
Ashkenazi Jewish and German Catholic immigrants, demographically
distinguishing the city from its staunchly Evangelical peers south
of the Mason–Dixon line. One such German immigrant, Ebenhard
Anheuser, established the city’s most recognizable icon in 1860: Bud-
weiser beer.
There’s nothing Czech beer drinkers scorn more than American Bud-
weiser. It’s injurious, really, that the biggest brand in the world co-opted
the German name of their city České Budějovice. The added insult: the
perceived inferiority of America’s favorite light lager. Central European
loyalty rests squarely with Czech Budweiser Budvar, the “Budweiser”
part of the name a German relic from its past as a city with two names.
American beer drinkers, on the other hand, either don’t know about the
dispute or don’t see why a Czech-speaking nation should have inherent
trademark rights to the German word for their city. The difference in
opinion highlights just how radically the political economy of beer has
changed in a short period of time. Less than a century ago, in pre-World
War I Europe, the idea that an American brewery might attempt to sell
their beer as “Budweiser” to the Pilsner-loving Viennese royal courts
would have just been confusing: American Budweiser wasn’t a “brand,”
it was an oxymoron—a contradiction in terms. A century later, it’s a
billion-dollar question for an entirely new type of court.
Every couple of months, there seems to be some new ruling in the
battle between Budweiser Budvar and Anheuser Busch over some iter-
ation of all or part of the word “Budweiser.” Myths and recycled facts
cloud the issue of each new lawsuit: who registered the trademark first,
which trademark laws are in violation of which international trademark
laws, the extent to which Budweiser Budvar’s tenuous claim to geo-
graphic origin applies. And when the fight over “Budweiser” is settled,
94
From Land to Brand
the fight over “Bud” begins. Fifteen years ago, the firms were duking it
out in a hundred separate legal battles all over the world, according to
Budvar spokesperson Petr Samec. But the dispute has calmed down in
recent years. These days there are only twenty cases still active. Budvar is
definitely the “David” of this story, the small state-owned brewery
heading up against “Goliath” Anheuser Busch, which was the biggest
brewery in the world for most of the twentieth century and is today part
of the biggest global multinational, AB InBev.
It’s easily the oldest international trademark dispute, and the number
of issues it forces courts to consider is mind-boggling. “Budweiser” was
one of the earliest registered trademarks in America. But while Anheuser
Busch cornered the politically stable US market with Budweiser, its
counterpart in modern-day České Budějovice found itself in the crossfire
of political and ideological tensions and military conflict. In one cen-
tury, from the beginning of the twentieth to the beginning of the
twenty-first century, the small city of České Budějovice went from
being part of the Austro-Hungarian Empire, to independent Czechoslo-
vak Republic, soon to be invaded and occupied by first Nazi Germany
and then the Soviet Union. The fall of the Berlin Wall in 1989 sent the
Soviets packing and brought back democratic elections in Czechoslo-
vakia. This lasted for a few brief years, until the country split in two in
1993 with the Czech Republic separating from Slovakia. Ten years later
both countries integrated into the EU. Phew.
All the while, Budweiser Budvar’s reputation for quality beer was an
asset serving different ends for political regimes that were directly at
odds with one another. In short, this makes for a messy trademark
dispute, one that forces every nation to call into question the validity
of trading agreements established between entities that may or may not
be politically relevant any longer. Should neighboring countries con-
tinue to honor their 1970s treaties with communist Czechoslovakia?
But also, what right does a Czech-speaking country have to the German
name after expelling German people from their borders after World
War II?
For preceding the tale of two beers with one name is a tale of one city
with two names: German Budweis and Czech České Budějovice. Beer
has played an imperative role in the political economy of Budweis, one
of many cities where Czech-speaking peasantry immigrated to German-
speaking towns during the industrial revolution. Historian Jeremy King
has analyzed archives and town political records kept since the mid-
nineteenth century, documenting how the political economy of Bud-
weis and České Budějovice serves as a microcosm of Europe as a whole.
The depiction that emerges is of a period and a continent where
95
Beeronomics
96
From Land to Brand
97
Beeronomics
98
From Land to Brand
For two decades since then, trademark disputes between Anheuser Busch
and state-owned Budéjovický Meštanský Pivovar have been fought in
courts all over the world, running the gamut on claims regarding which
one could obtain exclusive marketing claims to three letters: “Bud”.
It’s easy to grasp the conceptual necessity of exclusive trademark
rights to free market economies. Put simply, they give firms the incen-
tive to maintain standards of quality and consistency by preventing a
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Beeronomics
100
From Land to Brand
In the past fifteen years or so, the Budweiser trademark battle between
Budweiser Budvar and Anheuser Busch has been fought in courts in
countries all over the world, with diverse results. The fate of the two
brands has diverged in each EU state contingent on national laws and
historical context. The following two case studies, of Austria and the UK,
offer a lens through which to view how different EU member states have
approached the trademark dispute.
The linguistic, ethnic, and cultural differences between Austria and
the Czech Republic today belie a deeply intertwined history, shared
border, and taste for hoppy Pilsner. After all, the city of Budweis has
had its fair share of hand-offs. Budweiser Budvar found itself exported
from the Kingdom of Bohemia to the Czechoslovak Republic to Nazi
occupation to Soviet occupation to communist Czechoslovakia to liberal
Czechoslovakia to the Czech Republic. And then the Czech Republic
joined the EU. The other big question that the Budweiser trademark
dispute has brought to the forefront is: which of the treaties made
by governments of the past carry over to regulatory organizations in
the present?
In 1976, Austria signed a bilateral treaty with communist Czechoslo-
vakia granting Budvar exclusive rights to market its beer as “Bud” in
their neighboring nation. When the Czech Republic joined the EU in
2004, American Anheuser Busch seized the opportunity to contest this
treaty. They began exporting American Budweiser to Austria under the
brand names “Bud” and “American Bud.” Budvar took the issue to court.
The trademark dispute was decided in the Vienna Commercial Court
with a simultaneous advisory hearing in the ECJ. The issue at stake: to
what extent did the Austria-Czechoslovakia Treaty of 1974 apply to the
post-EU Czech Republic?
The Vienna Commercial Court and the ECJ reached the same deci-
sion. The ECJ decided that the Czech Republic and Austria were both
Member States of the European Union, and any pre-2004 agreements
that contradicted EU community law were deemed void. EU community
law includes the TRIPS agreement with America rescinding Budvar’s
claim to exclusivity of “Bud.” It was still in Austria’s power to decide
the individual fate of “Bud” under its own appellate of origins laws. The
Vienna Commercial Court was the one to make this decision. Yet
another blow to Budvar. The court decided that “Bud” did not meet
the standards for exclusive appellate of origin. It was fully within the
rights of American Budweiser to export their beer to Austria under the
“Bud” name.
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Beeronomics
A similar decision was made in Britain, to which both beers had been
exported for over thirty years. Not only did both brands have an estab-
lished product presence, but they viewed the island nation as a promis-
ing market for growth. Britain has no national lager, so the popularity of
the style falls on Canadian Carling, Belgian Stella Artois, and both
nations’ iterations of Budweiser for their lighter beverages.
Budweiser Budvar had long been producing its lager within the UK
through a domestic subsidiary. This alone rescinded claims to appellate
of origin in export. But American Budweiser had also been exporting
to the UK for some time. Both firms had tried and failed to register
Budweiser and Bud for decades. In the latest suit, Anheuser Busch
sued for the exclusive trademark rights to “Budweiser” within Britain.
They argued that they had tried to register Budweiser before Budvar,
and therefore had the right to the trademark. Courts had a vacuum of
precedent, and little guidance from previous treaties.
The courts opted to allow both brands trademark rights. The ruling
argued that based on over thirty years of exporting, different packaging
and logos, and the general familiarity of British beer drinkers with
brands and reputations, exclusive right to the trademark by one brand
was not necessary.
The two breweries continue duking it out in courts around the world,
establishing precedents for trademark case law as they go. In addition to
being the world’s first and longest trademark dispute, the “Battle of the
Buds” exemplifies the inherent tension in formerly land-based com-
modities seeing their value derived from the rise of branding in an
increasingly globalized world.
102
11
You can’t be a real country unless you have a beer and an airline. It
helps if you have some kind of football team, or some nuclear
weapons, but at the very least, you need a beer.
Frank Zappa
Forget lederhosen and lager pride: which nations actually consume the
most beer? Global beer consumption has long been concentrated in
three nations: the United States, Britain, and Germany (Figure 11.1). In
1960, these three accounted for more than half of worldwide beer
consumption by volume. Fifty years later, in 2010, they claimed less
than one quarter. What happened?
The simple answer is: China, Russia, and Brazil—and fast. Over the past
decade, China surpassed the United States as the single largest beer
market, Russia overtook Germany, and Brazil surpassed Britain (Table 11.1).
These simple observations suggest major changes in global beer
markets but not what caused them. It may be that beer consumption
45
40
35
30
Billion Liters
25
20
15
10
5
0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
104
The Great Convergence
1. US 11.2 26.0
2. Germany 6.8 15.7
3. UK 4.7 10.9
4. Russia (USSR) 2.7 6.2
5. France 1.7 3.9
FAOstat
105
Beeronomics
140
120
Liter per capita
100
80
60
40
20
0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Belgium Germany United Kingdom USA
80
70
60
Liter per capita
50
40
30
20
10
0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Brazil China Russia
106
The Great Convergence
World War II and through the 1960s and the 1970s. But beer consump-
tion did not grow forever. It peaked sometime in the 1970s or 1980s,
depending on the country. Since then, beer consumption has declined.
This decline has been long (almost forty years in Belgium) and deep
(from 145 to less than 100 liters per capita in Germany).
Total beer consumption in these nations has declined as a conse-
quence. The exception is the US. Because immigration (and thus popu-
lation growth) is much stronger in the US, total beer consumption has
not fallen, despite the fact that per capita consumption has declined
significantly.
What caused these changes? The fact that both China and Russia
started consuming more beer when they switched from communism
to capitalism may suggest that economic ideology (or the market)
has something to do with it. Our research together with Liesbeth
Colen, an economist formerly of the University of Leuven and now at
the European Commission, suggests it may have, but indirectly so. We
find two crucial factors: economic growth (income) and globalization.
What happens when people have more or less money to spend? Econo-
mists and psychologists have argued about the impact of economic
recessions on alcohol consumption patterns. Psychologists suggest
that alcohol consumption, in particular alcohol abuse, increases during
recessions as a response to the stresses of economic downturns. How-
ever, economists argue that as people’s incomes fall during recessions
they have less money to spend, and thus beer consumption will fall.
Donald Freeman, an economist from the Sam Houston State University
in Texas, who has carefully analyzed various datasets with different
methodologies, concludes that, at least for the US, the data say that
beer consumption does fall when incomes decline, and vice versa,
but that the effect is modest.
But these studies typically focus on the short run—recessions typically
last only a few years, after all. So what about the long run? Would we see
the same reaction between income and consumption during, say, the
Great Depression? Our research suggests probably not. The relationship
between income and beer consumption is not fixed; it changes when
countries get richer. In other words, the impact of increasing incomes in
poor countries like China is different than increasing incomes in rich
countries like the US. Look at the lines in Figure 11.2. For the “emerging
countries” there is a clear increase in beer consumption over the past
107
Beeronomics
108
The Great Convergence
room and pint of mixed from the next. And the habitual after-work pint
of Guinness is a given. Or is it?
Recently, Dublin has become somewhat of a magnet for foreign
investors and headquarters of global companies thanks to low taxes on
corporations. And as the big glass office buildings for multinationals
have reshaped the horizon line, a crop of airy wine bars with inter-
national specialties, trendy décor, and tasting menus have found unex-
pected success among the old public houses of yore.
Dublin is not an exception. Trendy wine bars have opened up all over
London and Brussels. As traditional beer-drinking nations get richer,
they can afford to drink more exotic, imported beverages, such as wine
and spirits. Inhabitants of traditional beer-drinking nations travel more
as incomes increase, they are exposed to different tastes, and they’re
living in a more globalized world where the cost of imported wines and
spirits has fallen. Declining prices for imported wines and cosmopolitan
tastes may make the traditional pilsners of their grandparents seem old
fashioned, as the next generation opts for something exotic: wine and
spirits. Interestingly, this trend works the opposite way in countries
where spirits and wine were the traditional drink. While Dubliners
and Berliners now increasingly sip on wines, Parisians, Romans, and
Russians now see an exotic quality to beer that they didn’t before. As
incomes increase in traditionally wine- and spirits-drinking nations, we
observe an increase in beer consumption.
This change is dramatic, as Figure 11.3 illustrates. The graph shows
the share of beer in total alcohol consumption for three traditional
“beer-drinking nations” (Ireland, the UK, and Belgium) and three trad-
itional “wine-drinking nations” (Spain, Italy, and Argentina). In the
1960s, the share of beer in the beer countries is around 80 percent and
less than 10 percent in the wine countries. However, the gap has con-
sistently narrowed since then. By now, there is little difference between
beer and wine consumption in these categories. In fact, some of the
traditional wine countries have even overtaken some of the traditional
beer countries. The share of beer in total alcohol consumption has fallen
from around 80 percent in the 1960s to less than 50 percent today in
Ireland, the UK, and Belgium. Meanwhile, the opposite has occurred
in countries like Spain, Italy, Greece, and Argentina. Beer is their new
favorite drink, while wine is on its way out. In Spain, the share of wine
in alcohol consumption fell from 65 to 38 percent between 1960 and
2010, and Greece experienced a similar fall in wine consumption from
86 to 50 percent. In all these countries, the share of beer increased
sharply. A similar trend appears to be at work in traditional spirits-
drinking nations. Russia and Poland have seen a sharp fall in vodka
109
Beeronomics
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Argentina Belgium Ireland Italy Spain UK
A Beer-Drinking World
110
The Great Convergence
111
12
90
80
70
60
50
40
30
20
10
0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
114
From Vodka to Baltika
115
Beeronomics
The Russian government worried about the role that television might
play in glorifying excess consumption, so alcohol was banned from TV
commercials. But there was a loophole. Beverages with an alcohol con-
tent of under 10 percent weren’t legally categorized as alcohol.
West of the former Iron Curtain it may sound like a joke, but the
notion that beer is not alcoholic has deep roots in Russian culture.
In fact, current beer market leader Baltika was founded with this con-
viction in mind. In 1978, the Gipropishcheprom-2 Institute submitted a
plan to the Leningrad Association of Beer Brewing and Nonalcoholic
Beverages Industry for a new brewery. Construction took a woeful
twelve years, and by the time it was completed in 1990, the Soviet
Union had disbanded, Leningrad was gone, and Baltika was located in
St. Petersburg. They were also free to pursue profits.
The Soviet Union was a major producer of cheap cereals across its vast
landscape, so when the markets opened, Russia was suddenly the
world’s leading producer of barley. However, this barley was usually
grown for animal feed. Soviet-era breweries used low-quality barley to
produce a watered down, subpar brew. But this was about to change.
Like in the rest of the former Eastern Bloc, the brewing and malting
sector in Russia was one of the earliest to attract FDI from the West
when the breweries were privatized and sold. In 1992 the Scandinavian
joint venture Baltic Beverages Holding (later taken over by the Carlsberg
Group) bought Baltika. Other multinational breweries such as Belgium’s
Interbrew, Turkish Efes, and Indian SUN breweries soon followed suit.
French malting specialist Groupe Soufflet partnered with Baltika early
on to build a malting subsidiary, Soufflet-St. Petersburg. The influx of
foreign capital enabled major strides in stabilizing supply chains
and investing in quality improvements to the barley malt and brewing
sector.
These developments were well timed for Baltika’s sudden strategic
advantage over its competitors in the vodka industry: the ability to
advertise on TV. Advertising was a new phenomenon in Russia. Never
before did firms have the incentive to compete with each other, per-
suading customers into loyalty through memorable slogans and exag-
gerated claims of superiority. This was a population previously familiar
only with Soviet propaganda at a time when loyalty to the state wasn’t
exactly “consumer choice.” With the new possibility of drumming up
sales through advertising, breweries found themselves poised to exploit
their strategic advantage over high alcohol content competitors on
broadcast television. When the regulations went into effect in 1994,
116
From Vodka to Baltika
Drinking Age
They say you can’t teach an old dog new tricks, but does this truism
apply to the Russian beer market? Deconinck was interested in investi-
gating how the changing demographics of Russia may have come into
play in the beer spike. He approached the question with two hypoth-
eses. It could be that a growing number of people began switching from
vodka to beer, or that a small subset of society was driving the trend by
drinking much more beer than vodka.
According to consumer surveys, the first hypothesis is more accurate.
Rather than a small group of beer aficionados driving the trend, it
appears that, across the board, Russians are drinking more beer and
less vodka. The number of Russians drinking beer has been growing
steadily since 1994 when the advertising started. And the changes indi-
cated by these reports are significant: in 2003, 57 percent of the popu-
lation reported drinking beer regularly, compared with 23 percent
in 1995; the number of vodka drinkers decreased from 78 percent to
53 percent during this same time period.
Deconinck assumed that young people were driving the beer-drinking
trend. Studies on consumption usually indicate that younger people
shift habits more readily than older people. But when Deconinck
broke the consumption surveys down by age group, he was surprised
to find that beer drinking wasn’t just a generational trend. More young
people reported drinking beer, yes, but the increase in beer drinkers was
fairly consistent across age groups. Even among the older generation
(the fifty-plus age group), beer drinkers increased from 12 to 38 percent,
while vodka fell slightly from 66 to 58 percent.
117
Beeronomics
A Perfect Storm
So what does it take to turn a nation of diehard vodka drinkers (no dark
pun intended) into beer lovers? Rather than point to any definitive
factor, Deconinck prefers the “perfect storm” model to explain the
long-lasting shift in habits. Quality improvements in barley, malt, and
beer production after privatization and foreign investments changed
what “beer” tasted like. While vodka advertising was banned, Baltika
and Sun breweries launched major TV advertising campaigns of their
new beers in the mid-1990s, around the time that vodka prices increased
and incomes continued to fall.
Consumer survey data suggest that these initial changes in drinking
behavior were propelled forward by peer pressure. Alcohol is social;
people usually have what the rest of the group is having. After quality
improvements, price changes, and television advertising convinced a
critical mass of Russians to switch to beer in a short period of time, the
rise in beer consumption was sustained by peer effects: once people
started drinking beer, their friends did, establishing beer-drinking pat-
terns in social groups and making permanent what might have been a
temporary shift in habits. As Deconinck summarizes it: “People saw beer
advertised, they saw that vodka was suddenly more expensive and beer
cheaper, while their wages were falling, so they opted for beer and said,
‘Hey, this isn’t as bad as it was back in the Soviet days’.”
And it appears that this perfect storm will have long-lasting effects.
The younger the generation, the more likely they are to drink beer rather
than vodka. Of the generation born after 1980, almost 80 percent drink
beer, compared to around 40 percent of those born before 1960. This
perfect storm may have changed the future of alcohol consumption, life
expectancy, and eventually, Russian literature.
118
13
At some point in 2008, the American blogosphere got wind that Foster’s,
the imported lager heavily marketed for its Australian origins, was
actually brewed by Molson and “imported” from Canada. Three years
later, one Australian newspaper article made its rounds, revealing to
customers that many of their favorite European brands—Peroni, Beck’s,
and Whitbread—were actually brewed under license by Foster’s. The con-
sumer reaction tended toward “How dare they?” After all, the “Australian
for Beer” marketing campaign laid the Aussie accent on thick. But few
people stepped back to point out one thing: how much sense does it make
to ship beer to and from Australia, which is more than 7,000 miles from
San Francisco and more than 10,000 miles from Europe?
Melbourne is no Champagne and claims to terroir are tenuous at best.
Beer is mostly water and imported beers are packaged in heavy glass-
ware, making them extremely expensive to ship. Unlike many of its
alcoholic counterparts, most beers do not improve with age—they go
bad. Despite these barriers, from 1990 to 2014, beer exports rose from
2 percent to 7 percent of the global beer market. Interestingly, this
dramatic growth in beer trade is caused by two different processes.
Multinational brewers are using takeovers of foreign brewers and their
marketing infrastructure—and the associated scale economies—to sell
their premium exports. On the other end of the beer market, the shift in
consumer preferences toward craft beers has contributed to an increased
demand for variety and for specialty beers, which are partially imported.
But even as globalization allows marketing export brands to be more
seamless than ever, the beer trade still contains an inherent paradox.
Export-oriented breweries may have more in common with elite Evian
Beeronomics
Miller learned the hard way that people don’t just want a foreign
name—they want a foreign beer. In the 1970s, Heineken and the
Munich pilsner Löwenbräu were America’s two leading imports,
together dominating the 1 percent total market share of non-domestic
brews. Translating to “Lion’s Brew,” Löwenbräu’s popularity was rooted
in the reputation of Bavarian beer among Americans. With Anheuser
Busch promoting its Michelob line of super-premium beers, Miller was
looking for an entrance into the still-miniscule but promising high-end
beer segment. Miller purchased licensing rights to the Löwenbräu
brand name in 1974 and began brewing the recipe at their facilities in
Milwaukee. Uninhibited by the German Reinheitsgebot (see Chapter 9),
they added corn grits as an adjunct to lighten the recipe. But Anheuser
Busch fought back by accusing Miller of falsely marketing Löwenbräu
as an imported beer. In 1977, the Federal Trade Commission (FTC)
ruled in Anheuser Busch’s favor and Miller was forced to retract the
“imported” label on its green bottles. The fiasco also brought quite a bit
of bad press.
In the early 1980s, both Löwenbräu and Michelob benefited from the
rising popularity of high-end beers. But the dominance of super-
premiums was short-lived, and Löwenbräu sales peaked in 1983 as the
imported beer market segment began what would be a long and steady
rise. Löwenbräu could have been Miller’s ticket to the top, but it had
already lost its advantage as an “imported” brand. In an effort to recover,
Miller launched a multimillion-dollar advertising campaign in 1986
emphasizing Löwenbräu’s Bavarian roots. But nothing worked. Now
nicknamed Millerbräu, the brand was unable to shake the FTC suit
stigma. In ten years, sales fell from a 1983 peak of 1.4 million barrels
to just 400,000 barrels. Meanwhile, former leading import competitor
Heineken rode the rising import wave as number one for decades.
Löwenbräu did leave America with one lasting legacy: the FTC precedent-
setting ruling that foreign brands are not legally allowed to call their
beer imported if it’s brewed in the United States.
120
Trading Water or Terroir?
15.00
12.00
Market Share (percent)
9.00
6.00
3.00
-
1970 1975 1980 1985 1990 1995 2000 2005 2010
Victor and Carol Tremblay, a husband and wife economist duo, have
spent a significant part of their careers studying American beer markets.
They contextualize the Millerbräu fiasco by identifying three subcat-
egories of America’s high-end sector: domestic super-premium beers
produced by macrobreweries, imported beers, and craft beer produced
by microbreweries. The market share of the high-end sector has risen
since the late 1970s, closely corresponding with a rise in disposable
income. While domestic super-premiums dominated the high-end sec-
tor for the initial rise, in 1985 they were surpassed by imports and never
recovered. The market share of imported beers rose sharply throughout
the 1990s and continued to rise steadily in the 2000s (Figure 13.1).
When the 2008 financial crisis hit, the market share fell while that
of super-premiums briefly recovered. The sort of reverse parallelism
between imports and super-premiums suggests that the two subcategor-
ies act as substitutes: domestic super-premiums are inferior beers of the
high-end sector, so consumption increases during recessions. The ascent
of imported beers is certainly remarkable: from 1980 to 2014, the market
share of imported beers rose from about 2 to 14 percent. But the inter-
esting question as far as taste is concerned is why domestic super-
premiums haven’t been able to compete with imported beers.
121
Beeronomics
For most of the twentieth century, the beer trade was widely considered
to be local. We can credit Alfred “Freddy” Heineken and Arthur Guin-
ness with the modern-day global brand. Guinness had great branding.
The “My Goodness My Guinness” campaign and the Guinness Book of
World Records—created to settle bar fights—cemented the beer’s iconic
reputation. But Guinness’s export market also made sense from an
industrial organization perspective. There’s only one Guinness because
stout isn’t in high enough demand for every nation to have their own
stout macrobrewery.
The same is not true of lager beer. The idea of a “global brand” just
didn’t make sense: every nation had its own domestic macrobreweries
122
Trading Water or Terroir?
and popular brands. Why would consumers pay extra for a lager brewed
somewhere else?
Freddy Heineken was convinced they would. After thirty years of
employment at his family’s company, Freddy was appointed chairman
of the board for Heineken in 1971. His directorship was shaped by his
oft-cited conviction that “beer can travel,” and he had big travel plans
for Heineken. Freddy’s formula was simple: a consistent product, mar-
keted to young consumers, and sold in green bottles with a prominent
“export” label. He added one final aesthetic touch when he trade-
marked a font for Heineken: Heineken sans and serif, characterized
by “smiling e’s.” If you look closely, each of the three e’s in “Heineken”
is tilted diagonally to the left. Under Freddy’s leadership, Heineken
became the first truly global brand, proving that consumers will pay
more for a lager brewed in Amsterdam with the right approach. At the
same time, these early-comers—Heineken, Carlsberg, and Guinness—
never lost sight of their domestic markets.
The same cannot be said for Stella Artois. Today, it’s the sixth most
valuable beer brand in the world. It’s easily the most popular Belgian
beer in every nation, with the exception of one: Belgium. At home,
Stella is trumped by Jupiler, but this is part of the strategy. Stella
and Jupiler were domestic competitors for decades, until they merged
in 1987 to form Interbrew (see Chapter 6). Jupiler had been more
successful in the domestic market, so Interbrew developed an alternate
branding fate for Stella: a premium export brand with a global reach.
Other newcomers to the global branding game tend to follow this model
rather than the Heineken and Guinness models. Australia exports Foster’s
while Australians drink Victoria Bitter; Germany exports Beck’s, which
trails domestically as the fourth biggest lager.
Successfully marketing a global export brand is tricky because it has
to justify the higher price resulting from transportation costs. Busi-
ness journalist Wolfgang Riepl thinks the key to success is exclusivity.
If a brand becomes too common in a domestic market, customers
will lose their willingness to pay the extra cost of transport. But
with the profitability of global brands comes the necessary tension
between branding country-of-origin and actually brewing there.
The most profitable option is to not import and say that you did.
Or just heavily imply it, as was the strategy of Japanese Kirin and
Australian Foster’s.
Heineken and Stella Artois have made a point of brewing exclusively
and importing from their respective countries-of-origin with only a
few exceptions. Heineken has only established licensing agreements in
Mexico, Vietnam, and Thailand apparently because those emerging beer
123
Beeronomics
124
Trading Water or Terroir?
125
Beeronomics
16 8
14 7
12 6
% of production
Billion liters
10 5
8 4
6 3
4 2
2 1
0 0
1960 1970 1980 1990 2000 2010
Trade % of Production
Figure 13.2 Beer trade in the world (billion liters, % of production), 1960–2013
FAOstat
126
Trading Water or Terroir?
their premium exports, and on the other hand the shift in consumer
preferences toward more local and craft beers which has contributed to
an increased demand for variety and specialty beers, which are partially
imported. The rapid growth of beer multinationals through mergers and
acquisitions in the 1990s and 2000s (see Chapters 6 and 7) has provided
these multinationals with the local infrastructure and access to beer
retailers, pubs, and consumers in many more countries. In this way
they have been able to channel their export brands into many more
markets and in areas where they were not able to go before, also realizing
scale economies in marketing and shipping. These days, in many major
cities in the world it is much harder to find a bar where they do not serve
one of the prime export beers of the major beer multinationals, includ-
ing Stella Artois, Heineken, and Guinness, than to find a bar where they
do. Hence, these takeovers have made it cheaper to export “water” to
other countries.
At the same time, it also has become more lucrative to capitalize on
beer’s claims to “terroir.” The rapidly growing demand for craft beers in
many countries in the world, and twenty-first-century consumers’ will-
ingness to pay extra for specialty beers, both local and imported, have
created export opportunities for smaller brewers. With craft and
specialty beers linking their quality more closely to their geographic
roots and “terroir,” the beer trade has fundamentally changed in recent
years. Nowhere is this more obvious than in countries like Belgium.
127
14
Craft Nation
Spain, both grew up in Belgium, giving them the sort of tacit expertise
that comes with a lifetime of experience. Beer has long been an integral
part of both Belgian culture and its political economy. It’s no surprise
that an emerging class of globally curious connoisseurs has taken to
Belgium’s diverse selection of unusual and highly localized brewing
styles. But amid discussions of tripels and gueuzes, the economic factors
contributing to Belgium’s current reputation for great beer frequently go
unexplored.
When did people start thinking that Belgian beer was so great, anyway?
Americans may have first taken notice thanks to Michael Jackson—the
Beer Hunter, not the King of Pop. In 1996, he published Great Beers
of Belgium, a guide to diverse styles produced by smaller breweries
around the small nation. As the market share for craft beer has grown
in America, the reputation of Belgian imports seems to have taken on a
life of its own.
Most prominently, attention has been paid to the nation’s Trappist
beers, specifically those produced by abbey Westvleteren, famous
thanks to their notorious scarcity. In the past year, the Economist,
National Public Radio, and the New York Times have all featured this
brewery and its unusual decision to not brew to demand. Beer lovers
must call and set an appointment for a given hour at a future date, at
which point they can drive to Westvleteren and buy a crate of beer.
Their schedule is booked more than a year in advance. But the Trappist
monks wouldn’t have it any other way, subscribing to the philosophy
that “We’re not monks that brew beer, we brew beer to be monks.”
The scarcity only makes Westvleteren more desirable. Meanwhile, those
Trappist monasteries more generous with the fruits of their labor are
more popular than ever both in Belgium and abroad. High-end restaur-
ants like San Francisco’s Monks Kettle pay tribute to the history of
monastic brewing while pioneering the burgeoning art of beer gastron-
omy. Here, diners will shell out a whopping $17.50 for a third of a liter
bottle of imported Rocheford 10. The prestige of Trappist beers is cer-
tainly their connection to history and tradition. It’s a marketing appeal
that breweries like AB InBev have attempted to capitalize on by produ-
cing abbey ales like Leffe, paying royalties to the monastery for the right
to use its name.
But breweries capitalizing on the reputation of monastic beer is con-
trary to the function of such beer. “It is a temptation for other beer
producers to use a name they do not deserve to use,” explains François
de Harenne, a spokesperson for the International Trappist Organization
(ITO). “The Trappist producers wanted to protect their name and give an
insurance to the consumers.” In response to the proliferation of abbey
130
Craft Nation
1,400
1,200
1,000
Million Liters
800
600
400
200
0
1980 1990 2000 2010
Consumption Exports
Figure 14.1 Belgian beer exports and domestic consumption (million liters)
Union of Belgian Brewers
ales in the market, the ITO rolled out the “Authentic Trappist Product”
label, which is found on products that are actually produced in the
monasteries. This assures consumers that if they pay for abbey ale,
their money is actually going to the monasteries. Likewise, it protects
the monasteries themselves from unfair competition. “From the rules of
the order, they must live from the work of their hands,” explains de
Harenne. “They must produce what they need for living.” The label has
been a success, as Trappist-brewed beers enjoy a prestige above the
abbey ales from major multinational corporations like Leffe. But the
monasteries aren’t the only Belgian breweries interested in securing a
quality insurance label, nor are they the only ones that need to.
The recent media fascination with Belgian beer is matched by tremen-
dous growth in Belgium’s export market. The export boom started in
1990, and since 2005 Belgium exports more beer than it consumes
domestically (see Figure 14.1). The export growth is driven both by the
mergers and acquisitions which have culminated in AB InBev and the
associated global spread in sales of Stella, Hoegaarden, and Leffe; and
by the strong growth in exports by much smaller Belgian breweries,
mostly selling specialty beers. From the perspective of trade economists
Vanormelingen and Persyn, the sudden success of Belgian specialty
brews as exports is unusual. “Next to that one big player [AB InBev],
you have all these other small Belgian breweries that are able to sell their
131
Beeronomics
beers in the United States and faraway places like Japan and China,”
they describe. “To us as trade economists, this is a little surprising
because normally we find that the largest firms are the biggest exporters.”
The popularity of specialty brews seems rooted in a mythic claim to
craftsmanship, and the prevailing idea that Belgium has the best beer
in the world. With medieval coats of arms and origin dates around the
year Columbus sailed the ocean blue, Belgian brews are steeped in a
history and tradition of small-scale brewing that the American craft
beer movement lacks.
But what many self-styled beer aficionados don’t know about “the
best beer in the world” is that the success of these high-value specialty
brews is a relatively recent phenomenon within Belgium as well. After
German-style lager was introduced to the region in the late nineteenth
century, all the unusual local styles that we revere today looked certain
to die out.
The Shakeout
At the end of the nineteenth century, Belgium boasted more than 3,300
breweries. Every village had several brewers producing a regional style
based on available ingredients. They didn’t yet have access to tempera-
ture- and time-measuring tools, so brewers were true craftsmen. They
had to develop a sophisticated sense of smell, touch, and taste to brew
the best beers they could. Many brewers were too poor to toss out
ingredients if any step didn’t go as planned, so damage control in the
face of error was a necessary skill. If malting went wrong, they’d dilute
the batch or add spices to disguise flavor. These spice combinations and
technical tricks comprised the toolbox of the ancestors of today’s diverse
styles of Belgians.
Though German lager was first introduced in the 1870s, it really took
hold during the World War I German occupation of Belgium. The
bottom-fermented style could be brewed big and sold cheap, masking
problems with standardization that plagued the efforts to scale up top-
fermented brews. In Leuven, Artois Brewery was quick to catch on to
the new style. In 1922, they released a Christmas edition lager, Stella
Artois—“Stella because of a bright Christmas star,” says Flemish brewing
historian Raymond Van Uytven, a retired professor from the University
of Antwerp. Van Uytven’s father worked in the refrigerated cellars of
Artois Brewery where beer was lagered for two weeks to ferment. Stella
Artois was a mainstay of his childhood. He recalls his parents drinking
the beer for breakfast, his mother adding it to every meal. “I have not
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thought on this for a long time. She used to make a soup with this lager
beer, milk, and parsley,” he recalls shaking his head.
One big selling point for Stella Artois was its bright, clear appearance—
an aesthetic and quality improvement over the cloudy, inconsistent
top-fermenting recipes of local brewers. The little guys couldn’t compete.
“There was a vogue about the clearness,” says Uytven. “They were
obsessed!” The numbers confirm this. For most of the twentieth cen-
tury, the traditional beer-drinking nation underwent an extended sha-
keout and consolidation, transforming from a small, scattered network
of breweries to a market dominated by several midsize and large lager
breweries; the two early leaders were Artois Brewery with Stella and
Piedboeuf with Jupiler. Vanormelingen and Persyn describe the transi-
tion to a dual market structure, where many very small breweries coexist
with a few very large breweries (similar to the current market structure in
the United States, following the entry of craft breweries). But the shake-
out was extended and brutal for old-fashioned brewers. The number of
breweries declined until 1980, when it finally stabilized around one
hundred—less than 5 percent of the number at the beginning of the
twentieth century (see Table 4.1).
The styles and the breweries that survived did so thanks to the efforts
of a few men who couldn’t imagine a world without them. One of them
was Pierre Celis, the man who single-handedly saved the traditional
white style of Hoegaarden (see Chapter 8). Another was Frank Boon, a
longtime close friend of Celis: “We were called the revival guys,” he
laughs. Boon and Celis both began their careers against all the odds,
driven by the impulse to preserve and the insight that this could only
be achieved through forward-thinking innovation. “They thought of
us like ‘museum guys,’ from the times that steam engines disappear
from the railways. It was considered that gueuze and Hoegaarden—all
these impossible local styles from our grandparents—they are going to
disappear and that is OK because we want to drink lager beer. It is
cheap, efficient, and easy to drink.”
Frank Boon speaks of his job today with a hint of self-satisfaction that
most only dream of—the most elusive kind that only accompanies
verifiable evidence that you were right all along, and that never fully
fades. In Boon’s case, he was right about gueuze. He runs Boon Brewery,
a small but successful producer of traditional gueuze and kriek sour
beers—a style of brewing dubbed “lambic” after its place of origin,
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over, people still cleaned the barrels with chains,” he says, with the
incredulous look of a true history buff. Then he digs around in his drawer
before pulling out an old metal tool. Brewers used these to scrape the yeast
out of old gueuze barrels. “My friend gave this to me because he says,
‘Frank, you are the only person still alive that knows what this is for.’”
We meet him at an opportune time—two weeks after the brewery’s
initial switch to a fully automated digital system in a new high-tech
brewhouse. Before this, Boon still relied on the industrial-age mash-and-
brew kettle from the days of De Vits. Boon built the new, streamlined
system in a larger structure around the old stone brewhouse. The masher
and brew kettle are obsolete here, but Boon still uses the same spontan-
eous fermentation chamber as before. This is part preservation, part
practical. After all, spontaneous fermentation is impossible to standard-
ize fully —there’s a point at which you just don’t know what’s in the air.
After describing the pipe system, he smiles and looks at us, “In the old
days, you would not be allowed in here. It was a belief that women
contaminate the wild yeast.” Myths such as these were spread among
the gueuze brewers of Lembeek, says Boon, where the practice was
refined over centuries, designed to brew to the specific cocktail of wild
yeasts found in the area around Brussels.
This built-in element of chance is one of a few reasons why traditional
lambic brewing is necessarily a craft. Persyn puts it simply: “With top- or
bottom-fermenting beers, your goal is to be as hygienic as possible. You
only use one strain of yeast. But spontaneous fermentation, you let
everything in,” he says. Brewers like Boon who have dedicated their
lives to refining and perfecting the process for their gueuze still don’t
understand it top-down. They couldn’t brainstorm a new gueuze recipe
for a new location. “You could try to make a pilsner beer in a different
place and leave it out to spontaneously ferment. It would taste terrible!
It’s not the brew, it’s not the yeast, the place, everything must match up,”
he explains. Many lambic connoisseurs believe that the area around
Brussels has a unique combination of airborne yeast that is capable of
producing great gueuze. “People hear sour beer and they say, ‘Oh your
goal is to make this beer as sour as possible.’ That’s not correct, the goal
is to accept some sour so that it does not get more sour. With wine you
accept some sour, but too much sour and it is vinegar,” he explains. The
barrel conditioning limits the extent to which Boon is able to scale up
production in response to demand. The market is small for now because
lambic and gueuze are an acquired taste, yet a small market may also
mean higher prices if customers appreciate the nature of the product.
Boon’s continued success looks safe for now, but he didn’t always brew
with such confidence.
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the first decade, he still cleaned out all the barrels by hand—not with
chains, but with soap and water. He stayed patient and diligent for
fifteen years of uncertain future.
And then, in 1990, things took off. The number of small breweries
started growing again as consumers started getting bored with the
taste of ubiquitous lager and began appreciating the taste of Belgium’s
native brews again. Boon summarizes the remarkable turnaround:
“We’ve grown every year since then. Today, we’re selling thirty times
what we did in 1990.” The dawn of Belgian specialty beers had at last
arrived, and decades of thankless dedication had given Boon Brewery a
much-deserved early lead in the burgeoning high-value beer market.
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of employees living and working abroad to get the pour right, every
single time.
Prior to 2000, Duvel Moortgat relied on one product and one market—
80 percent Duvel and 80 percent Belgium. However, in recent years the
firm has expanded its portfolio of products and markets significantly.
When Krug began working at Duvel in 2000, they had three employees
working abroad. Thirteen years later, they have 400 employees working
abroad. The company has grown three and a half times bigger, and their
exports have grown sevenfold. From the beginning, Duvel was looking
for a specific kind of customer in a specific market setting. “The main
focus for Duvel is declining beer markets—beer markets where the con-
sumers are drinking less, but they are drinking better,” says Soenen. As a
general trend, traditional beer-drinking nations are seeing volume con-
sumption decline as the market share for inexpensive lagers is replaced
by growth in higher-end segments. This had been going on in Duvel’s
four initial target markets: France, the UK, the Netherlands, and the
US. The idea was to target customers that might drink three glasses of
lager at a bar, and present the alternative of savoring one Duvel instead.
Duvel frequently fills the role of Belgian specialty ambassador, giving
drinkers in lager-dominated nations a taste of the world that could await
them. Duvel has taken it upon itself to communicate the basics of a
Belgian approach to beer: the correct glassware, the pour, the sip, and
the savor necessary lest drinkers experience the hellish consequences of
its namesake.
In recent years, they diversified their brand portfolio by acquiring
well-respected small breweries: La Chouffe, the bitter blonde beer with
a playful elf icon; Liefmans, a line of mixed fermentation fruit beers;
Maredsous, a line of abbey ales; Vedett, a youthful brand with a sharp
aesthetic; and De Koninck, an amber beer. Two international acquisi-
tions added to their brand portfolio as well: in 2001, Czech pilsner
brewery Bernard and in 2003, American craft brewery Ommegang.
These brands all cater to high-value niche demographics, an important
facet of Duvel’s strategy. “We don’t want to be the mass brewer, we want
to be the best in certain segments,” notes Soenen.
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is the plan. With a frenetic charisma, Gatz reveals his vision of Belgian
beer as the “drink of choice for the new middle class in new urban
areas.”
The beautiful thing, from Gatz’s perspective, is that multinational
mammoth AB InBev is not actually in competition with the small family
breweries and Trappist monasteries when it comes to achieving its
international goals. The latter don’t have the capital to create demand
in foreign countries for Belgian beer, which AB InBev clearly does. Many
small and midsize Belgian breweries have found great success in the
export markets piggybacking on AB InBev and Duvel’s strategy. Small
breweries that can’t afford to create demand in faraway export markets
are actually pursued with invitations to enter these markets thanks to
the global reputation of Belgian beer. Rubens lists off the inquiries for
Gouden Carolus: “I have received this week—four inquiries from China,
from different companies, people to work with our beers. We have a
request from Paraguay, you can have a Carolus in Panama City since two
weeks ago, Colombia is on the way, and you wonder . . . How would they
even know of the existence of the beer Gouden Carolus?”
By advertising themselves as Belgian beers and advertising “Belgian
beer” as a concept, breweries such as AB InBev and Duvel Moortgat have
inadvertently laid the foundation for their domestic competitors to
follow in their footsteps. Meanwhile, AB InBev’s premium export trio
of Stella-Leffe-Hoegaarden derives a good deal of name recognition and
credibility from Belgium’s reputation among connoisseurs—even if con-
noisseurs might not be talking about them. The end result: instead of
competing for domestic consumers, advertising for the industrial
exports of AB InBev and praise for the high-value specialty exports
among connoisseurs are working synergistically to enhance the brand
of Belgian beer all over the world, and inadvertently increasing the
salability of both. It’s a trade association director’s dream. Branding
Belgium as a beer mecca is key to ensuring that growth in the export
market stays robust. “We will never be the volume market—never. And
it’s a small country so it’s impossible,” says Gatz. “But the added-value at
the top of the pyramid, that’s where we want to be. That’s where we are,
and that’s where we want to stay.”
But not everyone is as optimistic as Gatz, and some worry that
the profitability of the Belgian beer brand might attract brewers to
export without considering the long-term stakes they all share in main-
taining a reputation of quality. Gouden Carolus’ Rubens employs the
pointedly non-European trope “cowboys” to describe “more aggressive
[brewers] with less long-term vision.” Duvel shares the same concern.
Soenen speaks derisively of some of the rapidly growing number of new
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breweries, many of whom present their new brews at the annual Zythos
Beer Festival in Leuven: “Some of the small brewers here, they make beer
that is completely acidic. And then they sell it as a gueuze-style beer and
they sell it as twice the price! If we make that beer, we throw it away. It’s
just a failure, you see?”
The resentment is not unwarranted or petty: the extinction of so
many styles and breweries during the shakeout in the twentieth century
goes hand in hand with the quality and commitment of those that
survived. The quality of these breweries has shaped the international
reputation of Belgian beer. They argue that it’s not just unfair for free-
riders to profit from this reputation without maintaining their quality
standards. Breweries that fail to maintain a quality standard, and yet
profit from the label of Belgian exports, will be working counterproduc-
tively to tarnish the good reputation of Belgian beer. “What happens if
you are a customer who comes into contact with a Belgian beer which is
a very poor, technically insufficient, discounted Belgian beer?” Rubens
poses a hypothetical. “It takes a one-time incident to lose a customer, to
have a completely different view of Belgian beer.” Experts such as Theo
Vervloet, long-time chairman and éminence grise of the Belgian Brewers
Association, and Guido Aerts, brewing professor at the University of
Leuven and organizer of the biannual Trends in Brewing conference,
agree and further emphasize the logistical problems of guaranteeing the
optimal quality with growing exports of small breweries. While large
brewers have sufficient scale and capacity to organize their exports both
in terms of (short) travel time and optimal travel conditions to reduce
quality loss, small brewers often do not have this scale and capacity,
particularly for long-distance exports, which may affect the beer’s qual-
ity at the far away consumption site.
They all agree that amid the excitement about the international
attention that Belgian beer is receiving, it’s easy to forget that the stakes
are very high. Many small and midsize breweries rely on international
demand for Belgian beers to stay afloat. Domestic beer consumption has
been steadily declining for decades, a trend which will likely continue. If
the world suddenly decides Belgian beer is overrated, there will be
another major shakeout because breweries have been relying heavily
on growth in international markets.
In 2007, Het Anker and Duvel Moortgat were two of twenty-two
breweries that banded together to form the Belgian Family Brewers
Association. Membership in the association requires three qualifica-
tions: fifty years of continuous operation in the same site; family run
and independently owned; and brewing traditional Belgian beers.
A curved black, yellow, and red label acts as a quality indicator that
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15
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3,500 14
3,000 12
2,500 10
2,000 8
1,500 6
1,000 4
500 2
0 0
1980 1990 2000 2010
Number of Craft Brewers Craft Beer Market Share
Figure 15.1 Number of craft brewers and craft market share in the US (%),
1980–2014
Elzinga K., Tremblay C., and Tremblay, V. (2017). Craft Beer in the United States: Strategic
Connections to Macro and European Brewers. In C. Caravaglia and J. Swinnen, The Craft Beer
Revolution: An Economic Perspective. Palgrave Macmillan.
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fog would cool them, creating a steam-like effect. The amber beer is
brewed using lager yeast while fermenting in warmer ale-like temperat-
ures. Anchor Brewery revived the steam beer for local consumption after
prohibition. The brewery was shut down in 1959, sold and reopened in
1960, then sold again in 1965 because of struggles with finances. The
third time was the charm: none other than Fritz Maytag, heir to the
household appliance fortune, bought a 51 percent controlling share in
the brewery within a few hours of visiting. A young Stanford graduate at
the time, Maytag had the means to invest in Anchor, and he quickly
developed a strategy: “Extremely traditional attitude towards materials
and process, absolute basic old-fashioned brewing with purity and sim-
plicity, but combined with modern food processing and equipment,” he
describes in an interview with Reason TV in 2010. Or, no more short-
cuts. Maytag is something of a spiritual godfather to the craft beer
movement, and Anchor is considered the “first craft brewery.”
His vision was radical amid a culture resistant to change. The vanguard
for small breweries at that time was the Brewers Association of America
(BAA), founded during World War II by Bill O’Shea. In 1940, there were
684 breweries producing 54.9 million barrels of beer a year (see Table 4.1).
When Maytag bought Anchor, the number of breweries had fallen to
197 producing double that amount of beer. By 1980, there were only 101
breweries but production had nearly doubled again, to 188.1 million
barrels—the top five breweries produced more than three-quarters of that.
Americans were drinking more beer than ever, but this beer was coming
from a falling number of increasingly large-capacity macrobreweries.
The BAA was one of two institutional parents to the modern Brewers’
Association (BA), the trade organization charged with protecting all
things “craft beer.” Recently, the BA hosted a night of reflection for
the early-comers to the second-wave craft beer movement and small
brewery survivors of the postwar shakeout. The forefathers of craft
gathered, drinking and discussing the early days of the industry, May-
tag, O’Shea, and their first BAA meetings. The recording of this conver-
sation was made available on the BA Web site.
Nick Matt reminisced about his entry into the market, when he
was asked to take over his family’s Albany, NY-based brewery FX Matt
Brewing Co. “When I joined our brewery, they [the macrobrewers] were
selling beer at prices we couldn’t make our beer for. That puts you in a
pretty difficult competitive situation,” Matt explains. “We are one of a
handful of historic regional breweries in the United States.” FX Matt,
Anchor, and Philadelphia-based Yuengling were a few of the old class of
American breweries that somehow managed to survive the great post-
war shakeout and consolidation. But it was a struggle.
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brave souls directed their own experimentation not just to the con-
sumption but also to the production of said intoxicants.
Charlie Papazian was another Boulderite homebrewer prompted to
action by the new law. In 1979, he founded the American Homebrewers
Association (AHA) and later, the Association of Brewers (AOB), complete
with bimonthly newsletter-turned-magazine Zymurgy. The surrounding
Rocky Mountains provided a wealth of high-quality brewing water,
which Papazian and his kin believed was wasted on the industrial lagers
of Coors. Eventually, the AHA and AOB would merge with old guard
BAA in a marriage that was messy, to say the least, and during the early
1980s the divergent cultures of the AOB and the BAA were immediately
apparent to both parties. The Coloradoans and Californians leading
the microbrewery movement were from the West: they sported hippie
hair and aviators and were a far cry from the full-suited constituents of
old brewing families at BAA conferences. Grossman and Papazian
speak about the old days and Maytag’s Anchor Brewery with a certain
aspirational reverence, and the old BAA meetings as slowly fading fig-
ments of yesteryear’s breweries.
Maytag took a young Grossman under his wing, inviting him to his
first BAA conference in Fort Lauderdale. These were the O’Shea years,
when times were looking dire for the regional brewing industry. Gross-
man describes feeling out of place: everyone was wearing a full suit and
tie, feasting at banquets in hotel lobbies every night, reciting the pledge
of allegiance, and singing Auld Lang Syne. It was a very different scene
from the type of conventions that Papazian and his ilk would soon be
hosting. “When we started having our conventions, people thought
we were being disrespectful by not being in a tie and a jacket,” says
Papazian. “Boy has the industry changed a lot. Now we’ve got people
wearing sandals to conferences.”
At this point, Grossman didn’t know his Sierra Nevada would be one
of the best-selling craft beers in America. “I came back feeling very
depressed because, during the evening, you talk about ‘Oh, these guys
closed last year, these guys aren’t making it—they’re going to close next
month.’ It was a very dismal time for the brewing industry—it was a
survivors club—it was very negative, there wasn’t a lot of excitement,
except for Fritz.” Maytag had been able to generate a following for his
Anchor Steam beer by capitalizing on the high-end hippie chic reputa-
tion of San Francisco. Grossman was hoping he could do the same with
Sierra Nevada, and he began soliciting Maytag for advice on how to run
the operation.
Meanwhile, Papazian and his Colorado posse were at work expanding
the activities of the newly founded AHA and AOB. First on their list of
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great ideas: a beer festival. They solicited the efforts of Tom Burns,
brewer for Boulder Beer Co. and a thoroughly Western hop head who
had somehow managed to win the hearts of the old fogeys at the
BAA. Papazian marvels at how Burns’ social prowess somehow
enchanted the old guard. He was able to convince breweries to send a
case of their beer for their new event: the Great American Beer Festival.
They didn’t know it at the time, but these baby boomers were early to
recognize the excitement that could be generated around creative and
innovative beer recipes. But the shuttering of New Albion in 1982 served
as a cautionary tale for these young businesses. Convincing the lager-
chugging American masses to switch over from Bud, Miller, and Coors
would require a persistent reworking of beer-drinking culture away from
“what you do when the game’s on.” Cultural changes that last generally
take a while to take hold.
Jim Koch was very aware of this. A departure from the free love and
homemade beer mentality of his Western counterparts, Koch was an
East Coast establishment man, a recent graduate from Harvard Business
School with a family history in the brewing industry. Like Maytag, he
recognized the untapped market for hand-crafted beers with quality
ingredients. His business-savvy nature convinced him that rushing in
heedlessly would be a mistake. He studied the failure of New Albion
closely to figure out what not to do. The main struggle for small brew-
eries early on was capital investment. So Koch employed a strategy that
would be pivotal to the early success of many craft breweries: contract
brewing. Koch’s idea: build a customer base before you build a building.
He founded Boston Beer Co. in 1984, but he did not build facilities for
the brewery until 1997. The American beer market was ripe for excess
capacity to be contracted out to craft aspirants. During the late 1980s
and 1990s, when many potential craft brewmasters were starting out,
macrobreweries had extra capacity, making it mutually profitable for
large breweries to contract space and workers to start-up brewers, freeing
up funds for brand management and grassroots marketing.
However, contract brewers had to fight the stigma of contract brewing
as not “authentic” craft beer, though many in the industry defend the
practice. Bart Watson, spokesperson for the BA, disagrees with the
stigma. “Brewing is very capital intensive and that made it difficult
for breweries to get the start-up capital they needed,” he explains.
“Contract brewing helped fill a niche that people saw, this demand for
full-flavored beer, [but] didn’t necessarily have the resources or the
infrastructure to produce it.” By contracting space at already existing
breweries, the high sunk costs associated with building extensive facil-
ities could be avoided, reducing barriers to entry for many brewmaster
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Electrical engineer Jeff Lebesch and social worker Kim Jordan were a
Colorado couple with a love of bikes and the great outdoors. During the
late 1980s, they embarked on a cycling expedition around Belgium
that would change their lives. After tasting the diverse array of sweet
and spiced top-fermented ales that the small nation had to offer,
Lebesch and Jordan had their calling: bring Belgian flavors back home
to Colorado. In 1991, they founded New Belgium Brewery in Fort
Collins, Colorado. Fort Collins could be called the poor man’s Boulder.
Also the site of a university, and about an hour outside metropolitan
Denver, the city has a history as a brewing center, hosting both Anheu-
ser Busch and Coors facilities. But today, it’s New Belgium that domin-
ates the conversation. With smooth jazz playing in the background and
a folksy décor consisting of mutilated bike parts for tables, chairs, and
everything in between, the bar and restaurant are designed to emphasize
the spaciousness typical of the American West. One may even mistake
it for an actual workplace. The open kitchen feels more like a living
room than a break room, while a white board lists the birthdays and
workplace anniversaries of employees for the upcoming month. It’s no
secret that New Belgium workers love their jobs. Quality of life is so high
here that spokesperson Bryan Simpson reports the brewery boasts a 97
percent retention rate among workers. Additional job security is also
facilitated by the brewery’s steady and likely-to-continue success. Jordan
and Lebesch’s flagship ale, Fat Tire Amber Ale, took off soon after
opening and has since shown no signs of slowing down. Today, their
brewery is the third biggest in the craft segment, trailing Sierra Nevada
and Boston Beer Co. Like the two other market leaders, New Belgium
had the benefit of an early start in the market. But their timing was by no
means a guarantor of their later success.
During the early 1990s, the main contenders in the craft beer segment
were Sierra Nevada, Boston Beer Co., and two Seattle-based breweries,
Pyramid and Redhook. Between 1992 and 1998, the number of craft
brewers suddenly quadrupled. Then, for almost a decade between 1998
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turn it over in four or five years—that’s what they want to get out of it.”
Influenced by her background as a social worker, she opted for an
alternative corporate structure model: reorganize New Belgium using
an employee stock ownership plan (ESOP). Rather than sell shares of
the company to highest bidders looking to quickly turn a profit, Jordan
sold shares of the brewery to employees of the company—the workers
invested in the brewery’s long-term health and growth and in their
fellow employees, who were more interested in their craft than their
portfolio. With this model, workers at New Belgium take pride in and
ownership of their role in the company because they actually do have a
stake in its success.
Simpson glows when he discusses the ESOP model. It’s responsible for
not only making New Belgium more of a home than a workplace, but it
actually facilitates an entrepreneurial culture that has led to some key
changes in efficiency and improved operations. “This is the kind of
culture where you can float an idea, if your proposal’s got weight and
you’ve done your research, you can make some big changes.” People can
get immediately involved in upper-level decision-making committees if
they want to. He notes the success of one proposal to scratch an extra-
neous cardboard insert which was being used to package bottles. “We’ve
got guys on the line making proposals that save us millions of dollars a
year and tons of cardboard,” he says. “When you are really literally an
owner of a thing, you’ve got the power to say this.” It’s also something
Simpson has experienced firsthand. As a long-time journalist, Simpson
was looking for a communications-type job during the 1990s when
New Belgium was just starting up. He could tell the brewery was a new
type of workplace, so he opted for a temporary position just to get in:
working on the bottling line. Soon enough, he had basically created his
own job description as marketing and public relations director at the
fledging brewery. From what he’s observed, the branches of operations
have grown more specialized as the brewery has expanded. However,
Jordan’s ethos of bottom-up cross-pollination perpetuates itself at this
point. It’s an integral part of the brewery as an institution, and it’s not
going away any time soon.
There’s a reason people at New Belgium love their jobs. After their first
year working, the brewery provides veterans with both a high-end bike
and a customized key-holder braided by Jordan herself. Simpson
describes how even the most masculine members of the team find
themselves tearing up at the hand-off ceremony. At the five-year
mark, workers get an all-expenses-paid trip around Belgium similar to
the one that inspired the brewery. And at ten years, workers themselves
exercise their ESOP power to bring about a much-coveted, rarely
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Advertising Authenticity
Nestled in the Marin foothills, led by fearless leader Tony Magee and his
gang of hop heads, Lagunitas has successfully capitalized on an outsider
image that’s made it a national hit. In fact, their resistance to federal
authority remains as silently subversive as California’s drug laws. The
name for their innovative ale, internally called “Kronik” with a back-
ward “k,” was approved by state regulatory laws but nixed at the federal
level. The interstate commerce-approved label instead reads “Cen-
sored,” though every year they chip away at the size of the stamp
relative to the text underneath. Their tagline of “Beer speaks, people
mumble,” might as well come with an addendum that labels insinuate.
Daily tappings at 4:20 aside, Lagunitas is more interested in dealing
NorCal’s cannabinoid cousin: hops.
Such innuendo adds to an off-beat aesthetic that has fueled Lagunitas’
success in new markets. “The biggest compliment you can get is, people
come out here and say ‘I drank your beer in New York, in Florida, I had
an idea of what you guys would be,’ and to come up here and say, ‘Yea
this is exactly you’,” says spokesperson Don Chartier. Lagunitas hosts a
tasting tour distributing free and generous portions of seven select
brews—the Sonoma County model meets That ‘70s Show. Fuzzy chairs,
vintage comic book posters, and bumper stickers alongside a series of
beer bottles labeled with cover art from Frank Zappa’s complete discog-
raphy, a gigantic “Duff Beer” flag, and a foosball table serve to decorate
this manchild cave. Here, drinking on the job is not only encouraged—
drinking is the job.
In this setting, the placement of these relics hints at the divergent
marketing strategies of craft brewers. In the early days of craft beer’s
emergence, capital constraints prevented small breweries from relying
on the large-scale print and television advertising campaigns common
among macrobreweries. The one exception is Boston Beer Co., which
spent $14.11 per barrel advertising Sam Adams in 2009, far above the
industry average of $4.88 per barrel. Though the market dominance of
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Boston Beer has grown significantly with its advertising efforts, small
microbreweries have been holding their own without billboards and
commercials.
Rather, the low-budget and grassroots marketing tactics of craft brew-
eries seem to have played an important role in their early success and
appeal. Simpson describes one of his early maneuvers to increase the
exposure of New Belgium. He points to an old junker van, apparently
called an Airstream trailer—thoroughly a relic of the 1950s. It was in this
van he took his self-created job as marketing director on the road to set
up beer schools educating Denver’s bartenders on the joys of Belgian
beer. “We’d drive that into an account, bring all the front-line servers
out, then we’d do a slide show—an old-school slide show, it was really
anti-technology,” he jokes. “We’d put on the music, we’d talk about
‘Here’s the brewhouse,’ pour the beers, and then talk about the beers.”
Market research suggests that small craft breweries may benefit from
the absence of advertising efforts because craft beer tends to appeal to a
demographic that frowns on large-scale campaigns. Simpson would be
inclined to agree: “A lot of the intuitive things we did early on were fun
and quirky and weird, and I think craft beer drinkers want to see that—
they want to see the personality behind the brands and the people
making them. That’s part of the allure and the appeal of the category.”
This is the philosophy behind Lagunitas’ “Beer speaks, people mumble”
tagline: they want their beer to advertise itself. “More than getting the
word out, it’s getting the liquid out,” Chartier explains. Lagunitas’
primary strategy is to donate its beer to local nonprofit organizations
to sell at fundraisers. “It’s a win–win for us. It helps get our beer into
your hands, and it helps nonprofits,” Chartier says.
New Belgium has similarly taken the philanthropy-as-advertisement
route with its much-anticipated annual Tour De Fat. Simpson describes
it as “basically a critical mass, without all the anarchy.” Many have
questioned what bikes have to do with beer, to which Simpson simply
replies, “Bikes and beer: where’s the connection? Well, where’s not a
connection?” The Tour De Fat is hosted in a different city each year
with a chosen nonprofit to which all proceeds are donated. It starts
as a legally sanctioned critical mass ride: streets are shut down so
cyclist beer lovers can ride together. The race is followed by music
and festivities in a park where one person vows to give up his car for
a year in exchange for a high-tech cruiser bike. Simpson describes
the goal of Tour De Fat as both philanthropic and empowering in
the face of the “gloom and doom preachy thing,” he says. “We’re
very pro-bike, less anti-car.” And it seems to be working so far. But
for New Belgium, Lagunitas, and Sierra Nevada, the days of shoestring
157
Beeronomics
158
Hop Heads and Locaholics
but the new stature of the American craft brewing world has also opened
up the potential for mutually beneficial international collaborations. As
always, small brewers hold true to another part of their core ethos:
collaboration—rather than competition—with each other.
“Look at how many brands Sam Adams or Sierra Nevada or New
Belgium have, and they frequently have one-offs or seasonal beers, or
collaborations that they do at a much smaller scale than their flagship
brands,” lists off Watson. He’s defending the segment against criticisms
of these breweries’ newfound size. “Yes, it’s an industrial process, but
you’re seeing people within the craft push the limits, explore, take the
beer back to its roots and meld that with modern methods.”
In 2015, Heineken announced that it was purchasing a 50 percent
stake in Lagunitas. For a company like Lagunitas where authenticity is
central to its brand, this caused uproar among many folks, who decried
the brewer as selling out. “The fact is, what we emulate is what we put
out there,” Chartier explained to me prior to the announcement of
Heineken’s acquisition. “We’re being sincere—this is not a marketing
campaign, this is just what we do.” Announcing the joint venture with
Heineken, founder Tony Magee inexplicably quoted Nietzsche and
pondered whether history was ready for this new model of brewing.
Though the Heineken acquisition made waves due to the immense
popularity and authentic feel of Lagunitas, it exemplified macrobrew-
eries’ interest in capitalizing on the growing market share of craft beer.
AB InBev has similarly acquired Goose Island, Bluepoint, and Elysian in
an attempt to claim their piece of the lucrative value-added craft beer
market pie. Whether the highly publicized acquisition by Heineken
will affect Lagunitas fans’ loyalty to their favorite Marin brew remains
to be seen. Chartier did point to formerly dominant breweries Pyramid
and Widmer’s decision to go public as a reason for their decreasing
market share in the early 2000s. At the same time, the partnershi!p
with Heineken will offer Lagunitas access to markets at a much faster
rate than relying on organic growth. It’s a risky move for a brand that
credits so much of its success to perceived authenticity. But as Frank
Boon can attest, taste in beer has bucked surefire market predictions
before, and it certainly will again.
The recent developments have not deterred new entrants in the US
craft beer markets, in fact they may have stimulated them, with access to
finance and small-scale brewing technology and know-how more avail-
able than ever. Since 2008 a second wave of explosive growth in craft
breweries has occurred. Since then one new craft brewery a day on
average has opened in America.
159
Conclusion
The power of the British Royal Navy, the success of the Counter-
Reformation in southern Germany: what do they have in common?
They can all thank beer for their position in the annals of European
history. Or, more accurately, beer taxes. Beer has shaped the trajectory of
Western civilization more than most political philosophers might like
to admit. And in fact, an archival glance back reveals that beer taxes
underwrote events that shape our modern world. The introduction of
hops, the growth of commercial brewing, and changes in tax policies are
among the many innovations that have shaped Western civilization at
pivotal moments. Beer taxes became a major source of revenue for the
ruling classes, strategically employed to consolidate political power,
spur or hinder innovation, and finance wars.
At some point around 700 AD, one medieval spice thought to promote
fertility, and associated with mystical powers, was added to beer. Five
centuries later, hops would revolutionize the global brewing industry.
But not just yet. A curious aspect of this story is why the most ubiquitous
ingredient in beer took so long to become a widespread practice—and
when it did, it did so completely. So why didn’t monasteries employ
hops’ preservational powers in their own brewing? It all began when
brewers in the trade cities of Hamburg and Bremen found a way to
monetize hops’ unique function as a preservative. When imported bar-
rels of hopped beer arrived in England and the Low Countries, the new
style undermined a major source for local tax revenue: gruit, the additive
blend that municipal governments taxed and distributed to local brew-
eries. For hundreds of years this side-effect of the use of hops led to its
prohibition in some of the major beer-producing countries. It was only
when commercial brewing developed, and with it a shift to a new tax
model, that hopped beer was permitted. The slow dissemination of hops
exemplifies the struggle that innovations faced in overcoming political
obstacles before entering ubiquity.
After a century and a half of non-stop warring, the Great Britain of
the nineteenth century was truly remarkable: imperialist superpower
abroad, industrial powerhouse at home. But how did such a small island
162
How Beer Explains the World
163
Beeronomics
in and around beer, and contributed to the lager beer style which
was so conducive to profitable large-scale brewing. Scientists were
fascinated by the process of beer (and wine) fermentation and made
major contributions to biology and chemistry. Even basic elements of
statistics were developed in brewing. In his fascinating research on “Guin-
nessometrics,” Steve Ziliak of Roosevelt University in Chicago traces
the origins of the ubiquitous t-test to the nineteenth-century Guinness
brewery in Dublin where new statistic techniques were developed to
calculate what was the optimal quantity and quality of hops to maximize
the Guinness brewery’s profits.
Early refrigeration technology joins pasteurization and inferential
statistics as nineteenth-century scientific developments produced by
the brewing industry. In the Czech Republic, almost every brewery is
located near a pond. This may seem surprising, as water for brewing
did not come from ponds but from rivers. The purpose was different.
Before refrigeration technology, brewers would cut ice from the pond
every winter and shovel it into underground cellars for the refriger-
ation, or lagering, process. The bottom-fermentation method allowed
brewers to scrape out the yeast easily and made for a more consistent,
reliable style of beer. It had originally been co-opted by Bavarian
brewers who took up the practice of storing beer in caves in the Alps
during the summertime. Brewers in Munich, Plzen, and Ceské
Budejovice recognized the potential for profit this style of beer offered
in newly urbanizing cities. This started the search for a technology
that could keep beer cool without relying on extracting ice blocks
in January.
The reason behind beer’s role in the scientific revolution is that, as
urbanization brought large populations of rural migrants together in
condensed cities, the possibility of brewing on a large scale presented
lucrative opportunities to profit—for whoever could figure out the tech-
nology necessary for success.
While brewers contributed to the emerging canon of applied scien-
tific research, these new technologies in turn revolutionized the
brewing industry. Steam engines, refrigeration, and commercialized
yeast made it possible to manage the production process closely and
produce new types of beer, paving the way for low-cost, large-scale
brewing of consistent quality. The industrial revolution thus changed
the nature of the beer market (from top to bottom fermentation)
and the structure of the brewery sector. Small, local breweries shuttered
en masse throughout the twentieth century while a few, large-scale
industrial operations cornered domestic markets. The UK entered the
164
How Beer Explains the World
twentieth century with more than 6,000 breweries. By 1980, there were
less than 150. By 1990, three American breweries produced more than 95
percent of domestic beer.
However, change not only came from within the sector but also from
outside. In fact, the spread of television advertising served as an unlikely
culprit in the decline of small local breweries. In America this force of
brewery consolidation started in the 1950s as commercial TV swept the
country. In Europe, where TV stations were publicly owned, this process
did not start until the end of the twentieth century as commercial TV
took off.
165
Beeronomics
166
How Beer Explains the World
167
Beeronomics
168
How Beer Explains the World
169
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172
Index
Note: Italic f and t after page numbers denote Figures and Tables respectively
AB InBev 4, 55, 58, 60, 76, 80, 95, 125, 167 regulations limiting advertisement and
abbey ales 130 sale of 166
advertising for industrial exports of 142 subject to legally mandated minimum
“Best of Belgium” campaign 129, 140–1 prices 59
international goals 142 taxing 26, 108
mergers and acquisitions 61, 131, 159, 161 television advertising banned 5
rising tide of industrial lager that alcohol abuse 107
culminated in 138 alcohol consumption 105, 162
trademarked property of 169 changing patterns 111
see also Anheuser Busch effect of economic growth and
Abbaye Notre-Dame de Leffe 59, 129–31, globalization on traditional habits 4
140–2 excess 116
abbey ales 5, 130, 131, 141 future of 118
blonde 59, 129, 140 high levels of 115
market share of 1 historic influence on production and
popularity of 2 104
sweet 103, 169 monopolistic hold of porter brewers
traditional, authentic 168 on 34
additives 13, 16, 87, 162 potential negative health effects of 108
animal products as 84 recessions and 107
regulation and taxation of 17 share of beer in (1960–2010) 109, 110f
ubiquitous 15 UK adept at deriving tax revenue from
Adorno, Theodor 49 imperialist conquests 35
Aerts, Erik 137 vodka share in 113
Aerts, Guido 143 wine share in 109
Affligem abbey ale 141 working class burdened by way of 34
African economies 165 alcohol content 13, 39, 46
African Americans 47 deceptive 139
AHA (American Homebrewers decreased 125
Association) 151 high 116, 146
Alabama 150 increased 145
Alaxa, Imrich 67, 68, 69, 70 lower 45
alcohol 10, 25, 28, 40, 119, 134 alcoholism 113, 115
female deities assigned specifically to amber ale/beer 140, 148
production of 9 see also De Koninck, Fat Tire, Sunshine
government legally categorizing beer Wheat
as 117 AmBev 59–60, 76, 80
lives spared by stricter rules 115 America 25, 45, 119, 129, 139, 165
loosened license restrictions 35 closure of breweries 46
nationwide prohibition of (1919–33) 45 earliest registered trademarks in 95
protectionist policy 26 early industrialist, immigration in 167
Index
174
Index
175
Index
176
Index
177
Index
178
Index
England 41 Freising 39
imported barrels of hopped beer 162 see also Weihenstephan
see also Glorious Revolution, Henry II, French wine 25, 141
Leeds, London, Manchester pamphlets on alternatives to 28
Enkidu 7–8, 9 tariffs/customs duties on 23, 28, 35
Epic of Gilgamesh 7, 8 see also Bordeaux, Burgundy, Champagne
Erdinger 89 fruit beers 140
ESOP (employee stock ownership FTC (US Federal Trade Commission) 120
plan) 155, 156 FX Matt Brewing Co. 148
Estonia 67, 68t
EU (European Union) 71–2, 95, 101 Garrick, David 32
TRIPS signed by America and 100 Gattinger, Karl 83, 87, 88
see also ECJ, European Commission Gatz, Sven 141–2
Euphrates River 8 Gatza, Paul 149
European Commission 107, 129 Gaul 11, 12
excise tax 17, 149 Gemer 67
doubled 150 George III, King of UK 32
general 21 George, Lisa 47, 48–53
high, on cheap beer 163 Georgia 149
unprecedented rise in revenue from 31 German-style lager 132
dominance of 6, 75
Falls City Brewing Company 149 introduced 132
Family Brewers Association 143, 144 popularity of 75
Fat Tire Amber Ale 153, 154 Germanic tribes 7, 11, 12
FCC (US Federal Communications Germany 16, 37, 44, 46, 48, 94, 99, 100, 167
Commission) 47, 52–3 beer stats: consumption 104f, 106f, 107,
FDI (foreign direct investment) 4, 60, 61 108, 114, 166; markets 43, 105t;
attracting 67, 116, 165 production 45f
fermentation 8, 10, 15, 84, 148 Brewers’ advertising budgets 54
extended 38 Federal Courts 86, 87
mixed 140, 141 integration into EU 84
spontaneous 134, 135, 141, 158 monastic brewing 12
theories on how yeast facilitated 40 top four firms and market share 53
see also bottom fermentation, top see also Bavaria, Berlin Wall, Bürgerliches
fermentation Brauhaus Budweis, East Germany,
Flanders/Flemish people/places 21, 73, Einbeck, Hannover, Hanseatic League,
134, 139 Nazi Germany, Saxony, Weimar
drinking songs 141 Ghent 20
Trends (industry paper) 55 global brands 5, 61, 76, 126
see also Bruges, Brussels, Gatz, Ghent, modern-day 122
Hoegaarden, Riepl, Van Uytven profitability of 123
Florette, Jean de 125 specialty 141
Florida 156 globalization 4, 16, 17, 56, 102, 107, 109,
see also Fort Lauderdale 110, 119, 162, 167
Fort Collins see New Belgium after the fall of the Berlin Wall 165–6
Fort Lauderdale 151 dawn of 145
Foster’s 5, 61, 119, 123 Glorious Revolution (England 1688) 26,
France 11, 12, 24–6, 126, 138, 140, 28, 35
141, 163 Goebel Brewing Company 50
beer market 105t Goldsmith, Jonathan 124
beer production 44 Gorbachev, Mikhail S. 115, 165
see also Brasserie du Pêcheur, Florette, Gouden Carolus 137, 138, 142
French wine, Gaul, House of Bourbon, Great American Beer Festival 77, 79, 152
Napoleonic Wars, terroir, Valois Great Recession (2008) 146
free-rider problem 100 Greece 109
179
Index
180
Index
Italy 11, 12, 109, 110f see also German-style lager, industrial
see also Milan, Peroni, Rome lager, light lager; also under various lager
ITO (International Trappist brewers e.g. Beck’s, Budweiser, Carling,
Organization) 130–1 Carlsberg, Coors, Foster’s, Heineken,
Labatt, Miller, Pabst, Stella
Jackson, Michael 130, 168–9 lager louts 125
Japan 1, 25, 132, 141, 169 lagering practice 38, 40, 41, 84, 132,
see also Kirin 147, 164
Jedlik, Ánios 44 Lagunitas 145, 146, 154, 156–9, 161
Jordan, Kim 153, 154, 155, 156 lambic 59, 133–4, 135
Julius Caesar 7 Lancashire 80
Jupiler 2, 56, 58, 123, 133 Latin America 59
Jupille-sur-Meuse 76, 80 see also Costa Rica, Panama City, South
America
Keely (brewery) 50 Latvia 67, 68t
Kirin 123 Lavoisier, Antoine Laurent 40
Klaas see Brouwerij de Kluis Le Corbusier 93
Klosterbrauerei Neuzelle 86–7 Lebesch, Jeff 153
Koch, Jim 152 Leclef, Charles 137
Korbinian 39 Leclef family 138
Korea (Oriental Brewery) 59 Leeds 44
see also North Korea Leffe see Abbaye Notre-Dame de Leffe
Krankenstraat 137 Lelkes, Peter 65
kriek 59, 133–4, 136, 158 Lembeek 134–6
Kristallweiss 39 see also lambic
Kronik (innovative ale) 156 Leningrad 116
Krug, Daniel 139–40 Leuven 20, 21, 74–5, 80–1
Kwak beer 159 Zythos Beer Festival 143
see also Stella Artois, University of
La Chouffe 140 Leuven
Labatt 59 Levittown 49–50
lager 59, 78, 86, 88, 104, 124, 148 Lewis, Meriwether 94
canned 57 liberalization 63–4, 105
cheap 57, 58, 133, 169 Liefmans 140
classy 125 Liège 74
conducive to profitable large-scale light lager 46, 57, 77, 122
brewing 164 first 100
consistent 169 industrial 168
craft beers out-competing mainstream perceived inferiority of America’s
macrobreweries 161 favorite 84
dominance of 3, 129, 140, 168 styles that offer visceral departure
going price for 136 from 146
high-end 125 Linde, Carl von 41
hopped 84 Lithuania 67, 68t
imported 76, 119 London 33, 34
inexpensive 140 common brewers 29, 31
introduction to the beer market 58 porter brewers/drinkers 3, 26, 30–2,
light-colored 38, 41 35f, 103
market share for 76, 140 trendy wine bars 109
national 102 see also Anchor Brewery
premium 140 London and Country Brewer, The 30
price-competitive market 138 Louisiana see New Orleans
savvy macrobreweries producing 2 Louisville 149
seasonal 75 Low Countries 18, 162
taste of 137 beer consumption 13
181
Index
182
Index
Viktualienmarkt 83 popularity of 30
see also Löwenbräu, Oktoberfest, Paulaner, signature 150
Spaten, TU Munich see also IPA
Panama City 142
Napoleonic Wars 27, 33, 34, 74 Papazian, Charlie 151, 152
Narragansett 50 Paraguay 142
National Bohemian Beer 50 Pasteur, Louis 40
National Public Radio 130 pasteurization 3, 40, 164
nationalist politics 93–102 Paulaner 41, 89
Nazi Germany 49, 95, 101 “Pax Britannica” 34
see also Hitler peasant beers 129–44, 169
Neolithic Revolution 8 Pemberton, John S. 44
Netherlands 2, 12, 138, 140, 141, 163 Pennsylvania 50
Belgian exports to 126 see also Philadelphia
Dutch lexicon 16 Pepin the Short 16
see also Amsterdam, Dutch Republic, Perkins, David 29
Elsevier, Haarlem, Heineken, William of Peroni 119
Orange Persians 10
New Albion brewery 146, 152 Persyn, Damiaan 129–30, 131, 133, 135
New Belgium (microbrewery) 77, 150, Persyn, Robert 69–70
153–9 Peter Fox (brewery) 50
New Orleans 94 Philadelphia 52, 148
New York 47, 52, 156 Philip the Good, Duke of Burgundy and
Albany 148 King of France 21
Schenectady 52 Piedboeuf Brewery 58, 76, 133
see also Brooklyn Dodgers Pilsen 37–8, 96, 97
New York Times 130, 141 see also Plzen
Nietzsche, Friedrich 159 Pilsner 39, 46, 91, 94, 99–101, 103, 108,
Ninkasi (goddess) 9–10 109, 120, 135, 140
Nitra 63, 70 Pilsner Urquell 37, 38, 41, 42, 69, 96,
Noble Order of the Mashing Paddle 74 97, 100
Nordic countries 67, 104 Plato 10–11
see also Scandinavia Pliny the Elder 11, 15, 146
North America 32 Plzen 37, 42, 96, 164
see also Canada, US Po River 11
North Carolina see Asheville Poelmans, Eline 163
North Sea 18 Pokrivcák, Ján 63, 64, 65, 70, 71–2
Nye, John 23, 24–8 Poland 67, 68t, 165
barley production 66
OECD (Organisation for Economic sharp fall in vodka consumption
Co-operation and Development) 84, 109–10
90, 114 Pollan, Michael 145
Oktoberfest 83, 103 porter 23–36, 41, 103, 146, 163
sponsor tents at 42 porter brewers 34, 36
tradition in beer on display at 91 major 33
oligopoly 3, 31, 32 oligopoly of 3, 26, 31, 32
global 161 top 31, 35
Ommegang 140 Portugal 11, 23
O’Shea, Bill 148, 149, 151 Prague 38, 63–4
U Pinkas restaurant 41–2
Pabst 57, 149 premium export 58–9, 119, 127, 142
pale ale 41, 103, 146, 147, 154 branding 122–4
dortmunder 134 Přemsyl Ottokar II, King of Bohemia 93
increased amount of hops and alcohol privatization 64, 65, 67, 116, 118
content 145 prostitutes see Shamhat, tavern-brothels
183
Index
Protestantism 26–9, 88, 89, 163 sharp fall in vodka consumption 109–10
catalyst for the Reformation 87 see also Soviet Union
see also William of Orange Russian River (brewpub) 146
Protz, Roger 73
Prussia 32 Saaz hops 38, 100
public houses 29, 32, 34, 38, 108–9, Sabia, Jim 78, 79, 80
127, 166 SABMiller 59, 60
British pub-goers 125 AB InBev merger 61, 161
dispersed 35 market share in Eastern Europe
forced to serve beer to keep license 88 (2000) 68t
rural 103 race to buy up breweries in East European
see also brewpubs post-communist countries 67
publicity stunts 149 Salhofer, Klaus 88
pubs see public houses Samec, Petr 95, 99
Pyramid 153, 154, 159 Samson 98–9
Samuel Adams 77, 78, 154, 156, 159
quality beer 91, 95 San Francisco 93, 168
high- 5, 19, 154 Anchor Steam brewery 76–7, 144,
low- 19 147–8, 151
Monk’s Kettle restaurant 1–2, 130
Raboch, Tomáš 37, 38, 41 Sandlot Brewery 78, 80
Racerx X 146 Saxony see Dresden
Radbuza River 38 scale economies see economies of scale
Ramses III, Pharaoh of Egypt 8–9 Scandinavia 12, 67, 116
Raskovsky, Pavel 71 see also Denmark, Sweden
Reagan, Ronald 165 Schaefer Brewery 47, 50
Reason TV 148 Schwarzer Abt 87
rebranding 6, 79, 98 scientific revolution 3, 40, 164, 168
Redhook 153, 154 Scottish & Newcastle 61
refrigeration 3, 41, 132 Scythians 10
early technology 164 Seattle 153
Reinheitsgebot 4, 83–91, 120, 163 Sedlmayr, Gabriel 40–1
religion 74, 104, 161 Seville 129–30
major transformations 87 Shamhat (priestess/prostitute) 8, 9
women and 10, 137 Shock Top 73, 169
see also Catholics, monks, Protestantism Sierra Nevada brewery 145, 146, 150, 151,
restructuring 67, 68–9 153, 154, 157–9
Ricardo, David 23, 24 Silicon Valley 146
Riepl, Wolfgang 55, 56, 58, 59, 60, 123 Simpson, Bryan 153, 154, 155, 156,
Robinson, Jackie 47 157, 158
Rocheford 10 (beer) 130 Slovak Beer and Malt Association 67, 68
Roman Empire 9, 11 Slovakia 68t, 69–72, 95
see also Holy Roman Empire barley production 65–6
Romans 109 see also Bratislava, Heineken Slovensko,
see also Pliny SUA, Zlatý Bazant
Rome 163 small brewers 75, 76, 133, 136, 138, 142, 159
Roosevelt University 164 capital constraints on 156
Royal Navy 23–36, 162 closed 42, 43
Rubens, Hans 137, 138–9, 142, 143 emerging competitive forces from large
Russia 70, 111, 113–18, 166 and 79
beer stats: consumption 5, 104f, 105, exports of 143
106f, 107, 113, 114f, 117; market 4, growing again 137
105t, 117, 165 laws reducing the tax burden on 149
market share of multinational breweries main struggle for 152
in 68t merged 42
184
Index
185
OUP CORRECTED PROOF – FINAL, 16/6/2017, SPi
Index
186
Index
187