Billy Beer: When American Beer Hit Bottom, Then Bounced Back

Summary

---

Business History Podcast – Episode Summary

Episode Title: Billy Beer: When American Beer Hit Bottom, Then Bounced Back
Podcast: Business History (Pushkin Industries)
Hosts: Jacob Goldstein, Robert Smith
Release Date: August 5, 2026

---

Episode Overview

This episode of Business History unpacks the dramatic rise, fall, and rebirth of American beer — centering on the infamous story of Billy Beer, Jimmy Carter’s brother, and tracing the beer industry from 19th-century German immigration through Prohibition, the bland beer era, and finally the craft brew revolution. Hosts Jacob Goldstein and Robert Smith explore how changes in regulation, politics, and American tastes both destroyed and resurrected the nation’s beer culture, resulting in the world-class craft brews of today.

---

Key Discussion Points & Insights

1. Introducing the Carter Brothers and Their Role in Beer History

• Billy Carter vs. Jimmy Carter:
  • Jimmy: sober, religious, rarely drank, and held strict moral views.
  • Billy: enjoyed beer and playing the role of “country bumpkin” — endearing himself to the public and the press.
  • Billy’s persona became “essential to an important moment in business history, specifically the history of the beer industry in the United States” (Robert Smith, 02:26).
• Billy leveraged his reputation to legalize and sell beer in Plains, Georgia, even turning a gas station into a beer-centric hub.

2. How German Immigrants Shaped American Beer

• Early Days – The Lager Revolution:
  • 1844: Jacob Best, German immigrant, opens Empire Brewery (later Pabst) in Milwaukee, introducing lager to America.
  • “You know what store away is in German? No, no, no. It’s Lagern, where we get the term lager.” (Robert Smith, 07:24)
• Lager Drought of 1854:
  • Hot summer, exploding German population — entire cities in the Midwest run dry.
  • Early innovations in the “cold chain” and branding help breweries like Pabst expand.

3. Prohibition and Its Aftermath

• Beer’s Reputation & Survival:
  • Anti-German sentiment and the temperance movement target beer.
  • During Prohibition, big breweries pivot: near beer, cheese, ice cream, real estate — “do anything to survive.”
• Repeal of Prohibition:
  • Most small breweries die; big ones adapt and survive.
  • Post-Prohibition, the U.S. government changes the business model with the “three-tier system”:
    • Brewer → Distributor → Retailer → Consumer
    • Designed for antitrust purposes and tax control.
• Impact on Industry Structure:
  • Small brewers weakened as distributors prefer to carry mass-produced brands.
  • “It seems to be quite bad for small brewers... Distributors have a limited storage space, limited truck space, and limited shelf space.” (Robert Smith, 20:37)

4. The Era of Bland Beer

• Homogenization and Mass Marketing:
  • To win the distributor game, big breweries cut costs and watered down products, proliferating unimaginative, weak lagers through the 1950s–70s.
  • “They add corn and rice to make the beer cheaper and blander. And at this point, they decide they’re going to compete through advertising. Not the flavor space.” (Robert Smith, 22:51)
  • Iconic but empty slogans:
    • “Where there’s life, there’s bud.” / “If you like beer, you’ll love Schlitz.” (Jacob Goldstein, 23:12)
• The result: a nationwide “beer oligopoly,” with taste almost totally irrelevant and brand image everything.

5. The Billy Beer Fiasco — When Beer Hit Bottom

• The Creation of Billy Beer:
  • Billy Carter becomes a national figure thanks to his brother's presidency.
  • Fall City Brewing Co., struggling against giants, launches a beer co-branded with Billy Carter, flying him to choose (“pick”) the taste.
  • Billy's drunken selection: “I was so drunk that they could have given me water in a glass and I wouldn’t have known the difference. I finally just pointed at one and said, that’s the best.” (Billy Carter via Jacob Goldstein, 28:24)
• Disastrous Launch and Collapse:
  • Massive marketing, but Billy Beer flops: “Distributors start returning the beer to the manufacturer. By the caseload... it was discounted. It was a flop.” (Robert Smith, 30:19)
  • Billy himself didn’t like his own beer and publicly acknowledged it.

6. The Surprise Hero: Jimmy Carter and the Legalization of Homebrewing

• Regulatory Change Sparks a Revolution:
  • Until the late 1970s, homebrewing beer was illegal — a remnant of Prohibition-era tax policy.
  • President Jimmy Carter, though not a drinker, signs a bill legalizing homebrewing in 1978. “President Carter has done what his brother could not inspire. Beautiful beer.” (Robert Smith, 38:15)
• Birth of Craft Beer — Ken Grossman (Sierra Nevada):
  • Illegal homebrewers begin innovating. Ken Grossman, an early rebel homebrewer, faces challenges sourcing quality ingredients.
  • Legalization enables collective knowledge, supply chains, and eventually small commercial breweries.
  • “This is the turning point for beer. President Carter has done what his brother could not inspire. Beautiful beer.” (Robert Smith, 38:15)

7. The Craft Beer Renaissance

• Growth and Challenges:
  • Startups like Sierra Nevada navigate distribution bottlenecks and create new business models (brewpubs, tap rooms).
  • State legal reforms in the 1980s accelerate diversity, flavor, and regional experimentation.
  • “And it was a big breakthrough to have regional beer. Remember, regional foods were a thing, but when you thought like, oh, beers can taste different everywhere you go, this becomes a kind of collect them all thing.” (Robert Smith, 41:22)
• Jim Koch and Boston Beer Co. (Sam Adams):
  • Koch brings business acumen, using contract brewing to avoid capital risk, and leverages existing brewery overcapacity.
  • Sam Adams’ success proves the possibility of independent, flavorful brews at scale. “It is quite inefficient for them [distributors] to do that. It is costly... It is rational for them to not talk to him.” (Jacob Goldstein, 40:00)

8. Legacy and Reflections

• Lasting Impact of the Carters:
  • Billy’s story ends in tragedy — alcoholism and public scandals, but an unexpected legacy: “One of the brewers said that Billy Carter, in his drunken haze, had actually picked one of the more complex test recipes put before him... It was probably... too sophisticated for American tastes.” (Robert Smith, 47:39)
  • Jimmy Carter’s quiet regulatory change paves the way for America’s global craft beer renaissance and strong independent brewers.
  • Both Sam Adams and Sierra Nevada remain independent and highly successful, standing out in a landscape where most craft brands are now owned by giants.

---

Notable Quotes & Memorable Moments

• “Billy, oh, people would tell these stories about the president’s brother is a redneck. He’s a good old boy. And Billy Carter embraced those terms.”
  — Robert Smith, (04:12)

• “When the glasses loudly ring, all the waiters quickly spring serving promptly all the guests with the bestest of the bests.”
  — Jacob Goldstein, singing a 19th-century Pabst beer song (10:57)

• “You could drink 20 pints of lager before you could get drunk.”
  — Robert Smith (12:25, referencing brewers’ defense against prohibitionists)

• “It seems to be quite bad for small brewers... Distributors have a limited storage space, limited truck space, and limited shelf space.”
  — Robert Smith (20:37)

• “I was so drunk that they could have given me water in a glass and I wouldn’t have known the difference. I finally just pointed at one and said, that’s the best.”
  — Billy Carter (via Jacob Goldstein, 28:24)

• “Billy was set up with all these different recipes of beer... when he tried it again, he realized he did not like the taste of his own beer.”
  — Robert Smith (29:32)

• “President Carter has done what his brother could not inspire. Beautiful beer.”
  — Robert Smith (38:15)

• “It was probably... too sophisticated for American tastes. When he launched Billy Beer, people were expecting that blandness, that sweetness, not bitterness and hoppiness.”
  — Robert Smith, quoting a brewer (47:38)

---

Timestamps for Important Segments

• [02:05] — The Carter Brothers’ contrasting personalities and their role in beer history
• [07:38] — Arrival of German lager & the “lager drought” of 1854
• [13:21] — Prohibition’s chilling effect and breweries’ creative survival
• [18:18] — The three-tier distribution system and its consequences
• [22:09] — Postwar industrialization and the bland beer era
• [26:54] — The conception and disastrous launch of Billy Beer
• [34:25] — Rebirth: Homebrew legalization and Ken Grossman’s DIY revolution
• [40:46] — Loopholes and brewpubs: Breaking the distribution bottleneck
• [43:33] — Sam Adams, contract brewing, and the business of craft beer
• [47:38] — Billy Beer’s surprising taste and the evolution of American palates

---

Final Thoughts

• The episode deftly traces the transformation of American beer from immigrant innovation to corporatized blandness and eventually a diverse, creative resurgence, all through the lens of policy, personalities, and changing taste.
• Both hosts maintain an engaging, humorous, and accessible tone throughout, making the business of beer (and the weird saga of Billy Carter) an unexpectedly profound parable of American capitalism and culture.

---

For further questions or feedback:
Email the hosts at [e-mail] or reach out on socials (JacobGoldstein / @RadioSmith).

---

Transcript

[ChatGPT for Business Announcer]

Today's episode is brought to you by ChatGPT for business. As a listener of this podcast, you're looking for ways to help teams move faster, make sharper decisions, and turn scattered context into work they can use. ChatGPT for Business can help. ChatGPT for Business gives teams a shared workspace with admin controls, permissions, and access to work and codecs. In ChatGPT, this means your business can move from question to answer and code to rollout quicker. Join over 10 million business and enterprise users worldwide already using ChatGPT for work. Download the ChatGPT desktop app or contact sales to learn more.

[Jacob Goldstein]

Did you ever notice how you spend hours shopping online only to pause at checkout because you wonder if you trust it enough to hit buy? Now Agentic Commerce is testing that moment more than ever. That's where PayPal comes in. With 25 years of checkouts, 400 million consumer accounts globally, and the benefit of fraud protection. So no matter where a purchase starts, it ends with trust. Built for payments growth and agentic PayPal open built for all business.

[Optum Healthcare Announcer]

Visit PayPalOpen.com let's talk about something everyone has an opinion. Healthcare. We all know it should work better than it does. Optum believes that too, and they're trying to improve it. They're helping healthcare teams and pharmacy services work together, like bringing primary care and prescription drugs straight to your home so you can stay on top of your health. Optum's also building technology that connects the whole healthcare system so it can better take care of the whole person. You Optum is making healthcare work as one for everyone. See what Optum's up [e-mail].

[Robert Smith]

PushKit too quick?

[Jacob Goldstein]

No, it was perfect.

[Robert Smith]

PushKit stop.

[Jacob Goldstein]

You got it.

[Robert Smith]

Jacob Goldstein I want to tell you a story about two brothers from Georgia. One was a goofy looking peanut farmer, the other one also a little goofy looking, also peanut farmer. Also the President of the United States of America. Jimmy Carter and the Billy Carter. They looked similar, Billy and Jimmy, but their temperaments were different. Jimmy Carter, the President, was sober, both in the sense that he rarely drank, but also in the sense that he had pretty strong religious views. He felt that if you looked at a woman who was not your wife with lust in your heart, this was actually a form of adultery. Billy, his brother Billy, loved drinking, loved beers, and he would drink them with this unquenchable thirst. And he judged the 1977 Miss Piggy's Pizza Beauty pageant. I'm going to argue that Billy and his brother, the President, were essential to an important moment in business history, specifically the history of the beer industry in the United States of America. Between the two of them, they were responsible for possibly the very lowest point in American beer history, which we will tell you about, and eventually the birth of. Of the fantastic American craft beers we have today. It's a fall and rise story, and surprisingly, it is the teetotaling president, not the drunkard, who saves the great American brewski. I'm Robert Smith.

[Jacob Goldstein]

Have you ever said brewski before in your life?

[Robert Smith]

I have never said brewski before.

[Jacob Goldstein]

I'm Jacob Goldstein, and this is Business History. A show about the history of beerness. No. A show about the history of business.

[Optum Healthcare Announcer]

No.

[Robert Smith]

Do it, do it, do it. We're going all the way. This story answers some questions that I have always had about beer. How did a nation of immigrants, each of which brought delicious beers with them, create an American beer industry that at least in the 60s, 70s, 80s, served bland, watery swill? And how did craft beers finally break that curse? And the answer, this is gonna delight you is tax policy and regulation.

[Jacob Goldstein]

It does delight me. The two most powerful forces in the universe.

[Robert Smith]

I was a kid during this era, and the news just loved stories about Billy Carter. And maybe it was because Jimmy was a goody two shoes, but Billy, oh, people would tell these stories about the president's brother is a redneck. He's a good old boy. And Billy Carter embraced those terms. Jimmy Carter's route to the presidency was a classic one. He left the small town of Plains, Georgia, as soon as he could to attend the naval Academy. He joined America's nuclear submarine fleet. And when his father died, he went back to run the family business, the family peanut farm. Billy. 12 years younger than Jimmy, Billy flunked out of university. He left a $4,000 beer tab behind. It's a lot of beer, was a lot of drinking. He ended up working and managing the peanut farm. But he was smart. Billy Carter was smart. He was a voracious reader. He did a great job of running the peanut farm. But he did find that the drunken good old boy shtick was effective in the peanut business. He once told a reporter, I got a redneck, white socks and blue ribbon beer.

[Jacob Goldstein]

Blue ribbon beer. Like pbr. Like Pabst Blue Ribbon.

[Robert Smith]

Pabst Blue Ribbon. He would roll up to farmers and peanut buyers in his pickup truck with an open Pabst Blue Ribbon, driving while drinking between his knees. And the customers just loved it. So in 1972, it was like a business show.

[Jacob Goldstein]

He was like a salesman selling this character of Billy Carter, to some extent, yeah.

[Robert Smith]

Of this southern farmer, you know, who loved America, loved his beer, and he's a good time.

[Jacob Goldstein]

You're happy. If you're in business with him and he shows up, you know it's going to be a good time.

[Robert Smith]

I think it still works in business to this day. Like, you were not unhappy when Billy Carter rolled up with a six pack of PBR in 1972. Jimmy Carter was governor of Georgia. And Billy Carter also made his big career jump. So he was living at this time, Plains, Georgia, in a dry county, meaning they couldn't sell alcohol. You could find alcohol, but they didn't officially sell alcohol in the county. So Billy Carter joins the town council for the sole reason of voting to allow alcohol sales in the county. And once that vote went through, he resigned from the town council. He bought the only gas station in town in Plains, Georgia. And he put up a big beer sign and said, we are selling beer, which I helped legalize here at the only gas station in Plains, Georgia. And it became this community hub for the city with Billy Holden Court. Why don't you give me his quote?

[Jacob Goldstein]

We were a beer joint that sold gas as a sideline. I probably drank or gave away more beer than I sold. That second part is the trick, right?

[Sponsor Announcer]

It's great.

[Jacob Goldstein]

If your business is selling beer, good, classic business. Giving the beer away, that's gonna hurt you in the end. And drinking it also.

[Robert Smith]

Now, at this point, I wanna leave the Carter brothers for a moment, and I wanna follow the beer itself. The Pabst Blue Ribbon. Because unbeknownst to Billy's belly, Pabst is. Is a perfect way to tell the story of how beer got to America and how it got so bad. We're gonna flash back now 130 years to 1844.

[Jacob Goldstein]

I'm there. I'm ready. I love the 1800s in business history. As you know, it's my favorite business history century.

[Robert Smith]

So since this is a beer store, you know, it's gonna feature Germans. 1844, a lot of Germans are coming to America, including Jacob Best, who starts the Empire Brewery in Milwaukee, Wisconsin. Now, in this era of German migration, they brought a new style of beer. They'd brew a beer, it's all cloudy, has all this stuff in it, and they would store it somewhere cold, like in a cool cellar. And the stuff inside the beer would sort of drop down to the bottom. And Jacob, do you know what store away is in German? No, no, no. It's Lagern, where we get the term lager. So this is the beer that the Germans have brought to America and this new process. And after the lagern process, you had a clear, mellow beer that stayed fresh longer than other ales. And the timing of Jacob Best was impeccable because soon after the brewery opened came the the great lager drought of 1854. No, put it on the calendar. It's like a baked panic, but for beer.

[Jacob Goldstein]

I knew all the bank panics. I did not know about the great lager drought of 1854.

[Robert Smith]

It had apparently been a hot summer. There's all this newly arrived German population in St. Louis and Chicago, and they drank the cities dry. The Chicago Journal wrote about this. Here, give it to us, Jacob.

[Jacob Goldstein]

Germans, disconsolate and haggard, wander from hall to hall, and as yet, there is no beer. Something must be done. A newspaper loves nothing more than to say, something must be done.

[Robert Smith]

The problem was that most lager at this point was sold within a mile or two of where it was brewed. Number one, it's heavy, so it's expensive to move. But number two, it's because once the beer gets warm, it starts to go bad. Bad. But luckily for Jacob Best, this is the beginning of the age of the cold chain. So you had ice, you had railroads, you had shipping, you had a way to transport beer.

[Jacob Goldstein]

So call back to our Ice King show. This is right around this time, mid-1800s, kind of early to mid-1800s. They're industrializing ice before they have refrigeration. They're cutting it out of frozen lakes and using it to keep beer coal. It was actually one of the first places it spread from Boston was Milwaukee for the beer business.

[Robert Smith]

So you have a new way to transport beer. You have a beer panic in the big cities. And so Jacob Best starts to ship barrels of their lager on the Lake Michigan ferry to Chicago and then down a Canal to St. Louis. Lager drought over. Jacob Best and eventually his son Philip started to build their brand. See, other thing happening in the 1800s is the launch of brands. They put their last name Best. They put the last name no, it was Best select. And they put it on the bottle. And they came up with a drinking song specifically for their beer. Here are the lyrics, printed in Maureen Ogle's great book, ambitious brew. Jacob, Sing us a drinking song of the bests.

[Jacob Goldstein]

When the glasses loudly ring, all the waiters quickly spring serving promptly all the guests with the bestest of the bests

[Robert Smith]

with the bestest of the best.

[Jacob Goldstein]

Boom, boom, boom. I want a tuba for that.

[Robert Smith]

The best were soon Making enough profit to expand, they built a new brewery in Milwaukee. Looked like a Gothic castle. And the lager vaults extended for several city blocks under the city. It's all beer below Milwaukee.

[Jacob Goldstein]

We need a comic book. We need a beer comic book down there.

[Robert Smith]

Eventually, a steamboat captain married into the family and he took over the business and renamed it. His name was Frederick Pabst. He tied a little blue ribbon around the necks of the bottles.

[Jacob Goldstein]

Like an actual blue ribbon?

[Robert Smith]

Yeah, as part of the marketing. Make it stand out.

[Jacob Goldstein]

I always thought it was cause like they won a blue ribbon at a contest or something.

[Robert Smith]

They later did also.

[Jacob Goldstein]

Yeah, the actual blue ribbon seems impressive.

[Robert Smith]

It's nice. Now, you needed a gimmick like this to stand out because everyone was getting into the brewing business in the late 1800s. We start to see companies like Schlitz, Miller, Anheuser Busch and Pabst. Now, maybe because it was a product of the German immigrants, beer did not enjoy the best reputation in the late 1800s. This is when the temperance movement was rising in America. People said we should outlaw alcohol. It's terrible. And these German and Irish immigrants, they were painted as being drunks invading and destroying America. The beer industry fought back with science. They said, listen, beer is a low alcohol alternative to the devil that is whiskey. They said in court you could drink 20 pints of lager before you could get drunk.

[Jacob Goldstein]

It's a lot of pints.

[Robert Smith]

The brewers might have won this argument, but just as the Prohibition movement was growing, the US declared war on Germany in 1917. And beer became an easy target for, you know, the propaganda of the war. Here's what one pro Prohibition politician had to.

[Jacob Goldstein]

Germans in the war are conspiring against the peace and happiness of the United States more than Pabst, Schlitz, Miller and others of their kind. We don't like that phrase, their kind.

[Robert Smith]

It's never good.

[Jacob Goldstein]

No.

[Robert Smith]

We should do a Prohibition show in the future.

[Jacob Goldstein]

Yeah, there's a lot of sort of tax and regulation. I mean, even just Al Capone. I think there's a business case study about Al Capone that I've been meaning to dig into.

[Robert Smith]

Oh, we should definitely do it. Just after the war, the 18th amendment passed, which meant that Prohibition was in effect in the United States of America. Production of alcohol is now banned. And the big beer companies converted their giant factories to make near beers, like low alcoholic soft drinks, essentially. It would have been very popular today. That is the trend. And because they had ice houses and refrigeration plants, some started to produce ice cream. Pabst made spreadable cheese delicious, in fact, got sued by Kraft. Pabst also had a big real estate portfolio from all the beer gardens and hotels and taverns it had acquired. It developed these properties, rented, sold them off. It did anything to survive Prohibition. And because all of this, you know, a lot of the small breweries went out of business. But Pabst, they made it through. When Prohibition was repealed in 1933, they could reopen the factory and start to sell beer again in America. But the Pabst that they were about to brew, the one that Billy Carter was to come to love, would not be the same beer. It would taste different than the one that carried that first blue ribbon. It would be much worse after the break.

[Jacob Goldstein]

Foreign.

[ChatGPT for Business Announcer]

Before you jump back in, you're listening for ways to help teams move faster, make sharper decisions, and turn scattered context into work they can use ChatGPT for business can help ChatGPT for business gives teams a shared workspace with admin controls, permissions and access to work and codecs. In ChatGPT, this means your business can move from question to answer and code to rollout quicker. Join over 10 million business and enterprise users worldwide already using ChatGPT for work. Download the ChatGPT desktop app or contact Sales to learn more.

[Sponsor Announcer]

This message is a paid partnership with Apple Card. There's something interesting about how seamlessly certain tools fit into daily life. Apple Card is one of those things it can be applied for right in the Wallet app on iPhone and approval can happen in minutes, so it's ready to use immediately with Apple Pay. I'm so glad the days of finding my wallet, fishing out the credit card, using it, putting it back in my wallet, or oops, maybe I use cash. Where's the atm? Enough. The first time I used Apple Pay on my phone with my Apple Card, I was like, this is the future. There's no going back. With Apple Card, purchases earn daily cash up to 3% with no points to track and no waiting for rewards. It's simply daily cash back that I earn on every purchase. There's even an option to open a high yield savings account through Apple Card, and while I haven't done it yet, if I do, my daily cash can grow automatically over time without any extra effort. Because Apple Card lives in the Wallet app, it's always accessible on iPhone and can be used with Apple Pay at over 85% of merchants in the US and the security of Face ID and Touch ID prevents unauthorized purchases. Whether using iPhone or Apple Watch to exploit yourself, you can apply For Apple Card in the Wallet app on your iPhone subject to credit approval. Savings is available to Apple Card owners Subject to eligibility savings in Apple Card by Goldman Sachs Bank USA Salt Lake City Branch Member FDIC terms and [e-mail]

[Optum Healthcare Announcer]

okay, let's talk about something everyone has an opinion on healthcare. Everyone can agree that something this important should work better than it does. Turns out patients aren't the only ones who think that Optum does too. And it's why they're working day in and day out to improve it. Never heard of Optum. Think of them as the engine of healthcare. They bring together clinicians, care teams and the way you get and manage your medications. And they use data and technology to help the health systems we all use work better as a whole, not as disconnected pieces because they connect all these pieces. Optum can take a more whole person approach to healthcare, like helping patients connect to mental health support quickly and bringing primary care and prescription deliveries straight to their home so people can stay on top of their health. Those things make a big difference. And they show that Optum really is trying to make healthcare better. That their clinicians, pharmacists, data scientists, engineers, everyone is putting in the work to improve it every day. See what Optum's up [e-mail].

[Robert Smith]

I think we've all heard about the celebrations when Prohibition was repealed and people are drinking the streets. It feels like it was this anomaly in America, but prohibition really changed the industry. Obviously people drank less, they just did after Prohibition and the industry structure was altered. In the old days, if you were Pabst Blue Ribbon, you would have a beer garden.

[Jacob Goldstein]

A lot of bars were owned or financed directly by brewers. Right. It was like a, it was a vertical integration basically.

[Robert Smith]

But when Prohibition was repealed, the US government was like, well, wait a minute, let's not go back to the way things were. Let's create something new called a beer distributor. It was ended up being a. What is it? Three tier system.

[Jacob Goldstein]

Three tier system. This is the phrase everybody uses. Yeah, yeah.

[Robert Smith]

So rather than sell the beer you made to someone who wants to drink the beer you made or even rather

[Jacob Goldstein]

than sell it to a store that's going to sell it, the brewer would

[Robert Smith]

sell it to a distributor, the distributor would sell it to a store and the store would sell it to the customer.

[Jacob Goldstein]

Yes. So the three tiers, to be clear, are brewer, wholesaler, slash distributor, and store. And like, just like, why did they do that? What is the rationale?

[Robert Smith]

I think the government was worried that the brewers had incentive to first of all to take over markets because they owned the bars and the beer halls. And also an incentive to encourage people to drink more than they probably should.

[Jacob Goldstein]

Oh, yeah, okay.

[Robert Smith]

Because it is their product. So they were concerned about alcoholism, but also they were concerned about taxing the industry. And they felt like if they reduced the power of all parts of the brewing industry, it would be easier to track the beer and to tax the beer.

[Jacob Goldstein]

And maybe, you know, I'm kind of making this up, but antitrust was particularly aggressive around this time. And there was that famous case, you know, movie studios used to own movie theaters.

[Robert Smith]

Yes.

[Jacob Goldstein]

And there's the famous case that went to the Supreme Court where the government didn't want that to happen anymore. They didn't want that vertical integration, and they won. And movie studios were no longer allowed to own theaters anymore. This is the analog of that.

[Optum Healthcare Announcer]

Right.

[Jacob Goldstein]

Beer brewers can't own bars anymore. And it seems like there are some. I don't know whether they're intended or not, but there are some interesting structural consequences of this shift. One of them, of this three tiered system is it seems to be quite bad for small brewers.

[Optum Healthcare Announcer]

Right.

[Jacob Goldstein]

They already were having a hard time. A lot of them had gone out of business in Prohibition.

[Robert Smith]

They don't have a lot of leverage with the distributors. Right. Distributors have a limited storage space, limited truck space, and limited shelf space. These are the things that distributors care about. And so, in theory, they could negotiate with every small brewery. But if you're a distributor, it's easy to just talk to Pabst Blue Ribbon and to, like, fill up your truck with Pabst Blue Ribbon and to put it on the shelf.

[Jacob Goldstein]

And I bet Pabst Blue Ribbon will give you a deal. I mean, it kind of reminds me of the A and P story as well, where the big player, it just has economies of scale and efficiencies, and the distributor just wants to do the easiest, cheapest thing, the most efficient thing. And why wouldn't they? And that's good for the big brewers and bad for the small brewers.

[Robert Smith]

So now we have beer distributors, and the big breweries seem to get bigger. The smaller ones seem to be hurt after this. And it's interesting, when you have a market like this and there's a few big players, there's a couple of ways the market can divide, differentiate. One way would be that, you know, some people could start making beers for a more sophisticated palate. You could have basically a rich person's beer. It costs a lot, has great flavor, and then a cheaper swill you could sell to the masses. What actually happened was that all the big breweries decided they were gonna cut costs and compete to be the cheapest, blandest, most generic beer out there.

[Jacob Goldstein]

This feels very mid century to me. I feel like in the. We're in the kind of post war period here, right? We're in the 1950s, 60s. It feels like this very massive market era. And you can imagine the three tiered system being highly relevant here, right? We want to fill the distributor's trucks with our couple beers with our one or two basic beers that everybody's going to want and send them out by the case.

[Robert Smith]

So with this philosophy, Pabst and the other brewers decide they need to cut costs, become more efficient. They add corn and rice to make the beer cheaper and blander. And at this point, they decide they're going to compete through advertising. Not the flavor space.

[Jacob Goldstein]

The flavor space.

[Robert Smith]

The flavor space. So by the 1970s, basically every beer is weak. It's very light, very pale, very dry. And the only thing to differentiate is the name on the label and the tagline. The tagline became so important here. Why don't you read me some of these taglines? Miller makes it right.

[Jacob Goldstein]

Where there's life, there's bud. If you like beer, you'll love Schlitz. You know what things made me think of, do you remember the Homer Simpson line? Beer, the cause of and solution to all of life's problems? Something like that.

[Robert Smith]

Well, he's making fun of this era of beer. And because it is the Mad Men era and they are starting to advertise on television and sponsor big league sports, these beer names are everywhere, and everyone's looking for their competitive advantage in terms of how can I get the name of my beer to stand out? Who can I get to hold up my beer and say, this beer is the best? And their eyes turned toward plains, Georgia. It's 1976. Governor Jimmy Carter runs for president, and the world's press descends on Plains, Georgia. You know, I've been there myself. You have to do the puff piece about the people running for president where you interview all their neighbors and their relatives and who should be there at the gas station when you drive into Plains, Georgia. But the president's brother, Billy Carter, and they loved him, Jimmy Carter. The president later said, why don't you give me this quote?

[Jacob Goldstein]

He could play the country bumpkin as well as anyone. His beer drinking helped promote that image. He had a can of beer in his hand in every photo I ever saw. And I just want to point out that phrase, play the country bumpkin, right? Cause what President Carter is saying here is Billy knew what he was doing. He was conscious that he was putting on an act, creating a Persona, and he was good at it.

[Robert Smith]

And what Jimmy Carter didn't say is that this act, this image of the country bumpkin actually helped his run for president. This is just after Vietnam and Watergate, and Americans were suspicious of the same old politicians in Washington, D.C. and Billy, yeah, he was embarrassing, he used some unfortunate language, but he humanized Jimmy Carter. He made it seem like this is an authentic politician from an authentic small town. And who amongst us doesn't have a brother that says the wrong thing occasionally? So Billy took advantage of this. He went on TV game shows, he judged belly flop competitions, and eventually he hired an agent to handle all the media requests and business propositions that flooded in. Definitely taking advantage of. Of his brother's run for president. And you could imagine the beer companies are taking a look at this guy who is never without a beer in his hand, and they think, this guy, we can make money off of this guy. One company in particular, this was a small brewer trying to compete against the Pabst and the Budweisers of the time. It was called falls City Brewing Company. They were a little desperate. They had started in 1905 in Louisville, Kentucky. And just a little side note, Falls City were the first people at the time to start using the Stay tab opener for their beer cans, which we talked about in our can show.

[Jacob Goldstein]

The Stay tab is the way you open a can now, the miraculous three

[Robert Smith]

lever thing instead of the ring pole, which was a deadly device, people can swallow them. It's terrible. So Fall City looks at Billy Carter and they think, yes, yes. What if we craft an entire beer around this beer? God's image. What if we make Billy beer? And they were gonna take it up a notch. They weren't just gonna put his name on it. They were gonna have Billy pick the beer.

[Jacob Goldstein]

Okay?

[Robert Smith]

So they send a private jet to Georgia to pick up Billy Carter. They bring in Billy Carter. His quote is, perhaps I'll become the Colonel Sanders of beer.

[Jacob Goldstein]

It's interesting that he should say Colonel Sanders, because today, a celebrity, not just endorsing a beer, but, you know, starting a brand that has become a thing. If you're famous and you want to not just be really rich, but really, really rich, rather than just acting in another movie or releasing another album, you start a tequila brand or a line of skin care products, and if it goes well, you go from mega millionaire to Maybe billionaire.

[Robert Smith]

Yeah, if you, you know, Jay Z, like, bought into a champagne company.

[Jacob Goldstein]

Yeah. George Clooney and Rihanna.

[Robert Smith]

Billy Carter is going to be that guy. So he's flying to Louisville. He is going to pick out the beer that will bear his name. Only problem is, Billy at this point is drinking a little bit more than beer. He had graduated to the hard stuff. So landing in Louisville, Billy later admitted, quote, I'd been knocking back vodka and grapefruit juice all the way there.

[Jacob Goldstein]

At least there was the juice.

[Robert Smith]

It's good for you. It keeps the scurvy away. Billy was set up with all these different recipes of beer, and his one job was to taste them all and to pick out the one that would become Billy Beer. Here's what Billy said of that tasting session. Jacob.

[Jacob Goldstein]

I was so drunk that they could have given me water in a glass and I wouldn't have known the difference. I finally just pointed at one and said, that's the best.

[Robert Smith]

And so that was the batch. They got the green light for full scale production. Start the factory. And Falls City was gonna make so much of this beer that it couldn't handle the brewing on its own. It licensed Billy Beer to several small outlets across the nation so that Billy Beer could all roll out at the same time. And they designed it around the image of Billy. It said Billy in big blue letters. And it had this claim in smaller print.

[Jacob Goldstein]

Jacob brewed expressly for and with the personal approval of one of America's all time great beer drinkers, Billy Carter. It's a pretty good copy.

[Robert Smith]

And then even more, there was a personal endorsement from Billy that was the

[Jacob Goldstein]

company speaking, really leaning in. So on the can, Billy says, I had this beer brewed up just for me. I think it's the best I ever tasted and I've tasted a lot. I think you'll like it too. It's very country bumpkin. It's very much in that Persona.

[Robert Smith]

Do you remember that? Billy was drunk and had no detailed memory of the tasting. And when he tried it again, he realized he did not like the taste of his own beer. He said, I have trouble believing a reputable brewery would pick it. Dude, you picked it fine. Contractually, he had to be seen with Billy beer in his hand, but he would often pour out the contents and fill up the can with vodka.

[Jacob Goldstein]

That is kind of a grim turn in our story. That is not as fun.

[Robert Smith]

Billy at this point is a pretty serious alcoholic and he's drinking a lot. And they're parading him around the nation. He would go to these events and people would sing hello Billy to the tune of hello Dolly. They had Billy Beer Day in Carter's hometown, complete with a branded hot air balloon. It was one of the wildest days ever in Plains, said Billy. Everyone in town except the Baptists got drunk. But this huge buzz, as I'm sure you can imagine, did not last long. Like any buzz, like any buzz, there is a hangover. And that happened in 1978. Distributors start returning the beer to the manufacturer. By the caseload, it was discounted. It was a flop. And that year Falls City brewing shut down. 1978 was also the same year that Jimmy Carter the President's approval rating started to drop. Probably not connected the economy was weak. There's an energy crisis. It was a tough time and it seemed like everyone needed to just chill and relax and have a good beer. But there were no good beers to be had. It was the low point of beer in the United States of America. The nation needed an optimistic hero, someone who could show us that there's morning in America and drink a beautiful craft beer to celebrate it. I am not referring to Ronald Reagan. He was a wine drinker. I'm referring to the man who will bring back good beer. We will meet him after the break.

[ChatGPT for Business Announcer]

Quick one before you jump back in, you're listening for ways to help teams move faster, make sharper decisions, and turn scattered context into work they can use ChatGPT for business can help. ChatGPT for business gives teams a shared workspace with admin controls, permissions and access to work and codecs in ChatGPT. This means your business can move from question to answer and code to rollout quicker. Join over 10 million business and enterprise users worldwide already using ChatGPT for work. Download the ChatGPT desktop app or contact sales to learn more.

[Jacob Goldstein]

Did you ever notice how you spend hours shopping online, only to pause right before you hit buy? Now that tiny hesitation, the one where you wonder if it's trustworthy, can make or break the sale. Now, with AI changing the way we discover and compare things that split second, trust question matters more than ever. That's where PayPal comes in. For more than 25 years, PayPal has been a leader in online payments, and now they're at the forefront of agentic commerce, making it work for businesses, letting them maintain control of their brand and their customer relationships. So even as the way we shop changes, the moment that matters most still feels familiar and deeply dependable. Built for payments, growth and agentic PayPal open built for all business. Visit PayPalOpen.com to get started.

[Optum Healthcare Announcer]

Okay, let's talk about something everyone has an opinion on healthcare. Everyone can agree that something this important should work better than it does. Turns out patients aren't the only ones who think that Optum does too. And it's why they're working day in and day out to improve it. Never heard of Optum. Think of them as the engine of healthcare. They bring together clinicians, care teams, and the way you get and manage your medications. And they use data and technology to help the health systems we all use work better as a whole, not as disconnected pieces. Because they connect all these pieces, Optum can take a more whole person approach to healthcare. Like helping patients connect to mental health support quickly and bringing primary care and prescription deliveries straight to their home so people can stay on top of their health. Those things make a big difference. And they show that Optum really is trying to make healthcare better. That their clinicians, pharmacists, data scientists, engineers, everyone is putting in the work to improve it every day. See what Optum's up [e-mail].

[Jacob Goldstein]

Robert Smith we're back from the break and you're about to tell me the story of the birth of craft beer in America, or the rebirth of craft beer in America.

[Robert Smith]

We had reached the bottom. 70s were a dark time for beer. If you didn't like what they were serving, you did not have many options. The five big beer companies controlled 75% of the market beer oligopoly. And even if you wanted to brew your own beer at home, you were out of luck because it was illegal. When Prohibition was repealed, the law allowed for making a small amount of wine at home, but not beer. Essentially what the law says is that all beer production has to be taxed. But there was no mechanism to collect taxes from home brewers. So if you somehow brewed beer and didn't pay taxes because you can pay taxes, you you could be charged and you know, have to pay up to $5,000 fine.

[Jacob Goldstein]

The homebrew catch 22 but it was

[Robert Smith]

the 70s and there were some people who were illegally brewing the hop stuff. This included a young Californian named Ken Grossman. Jacob, give us a quote from the Beer Rebel.

[Jacob Goldstein]

I don't remember the exact day I made my first batch of homebrew, but it was sometime between junior and senior high. Junior in senior high, he's a little boy making beer. I did what any teenager would and hid my equipment in my closet. Of course my mother found it, but I managed to convince her that it was just an experiment. And I wouldn't drink it. I don't. I don't believe him. His mother were cooler in the 70s.

[Robert Smith]

Parents were not paying attention in the 70s. I think, you know that it's hard to believe that anyone would not see what their teenage son was doing. It was also amazing because this was pre Internet. It wasn't something you could just ask AI, how do I make beer at home? Ken Grossman had to figure this out by himself. One of the things he did was to order books from the uk. Really? This is.

[Jacob Goldstein]

Nobody was brewing beer in America. They were not homebrew books.

[Robert Smith]

Yeah, how do I do this? And then he had to find his ingredients at local supermarkets. He continued homebrewing through high school and into college. And this was his main hobby other than hiking in the Sierra Nevada mountains. Loved the Sierra Nevada. He and his wife had a child, a daughter, named Sierra. Heavy foreshadowing. Ken starts to teach others how to home brew. And they really struggled to get the one thing they really needed to make the beers great, and that was the hops.

[Jacob Goldstein]

Beer people love to talk about hops.

[Robert Smith]

I'm gonna make you talk about hops. Why don't you give me a quote from Ken Grossman?

[Jacob Goldstein]

Finding quality hops was nearly impossible because the homebrew trade consumed an insignificant amount of hops. And apparently, in the eyes of hop growers and merchants, wasn't worth pursuing.

[Robert Smith]

But then President Jimmy Carter comes to the rescue. This is literally as his brother Billy is signing on the dotted line to be the face of Billy Beer, the low point of beer in America. Jimmy Carter is about to create the high point for beer. Now, President Carter did not drink much himself, but he wasn't anti alcohol in Georgia. He had lowered the drinking age to 18. He argued, Big argument at the time, that if Georgia boys were gonna go off to fight in Vietnam, they should be able to down a beer at home. So Carter's not anti alcohol. He just doesn't care for it himself. And on October 14, 1978, he signs a federal transportation bill, H.R. 1337, into law. It's about taxing trucks and buses. But it also held an amendment, an amendment that solved this tax problem for beer. The amendment said any adult may, without payment or tax, produce beer for his personal or family use and not for sale. The aggregate amount shall not exceed 200 gallons per calendar year. If there are two or more adults, 100 gallons. If there's only one adult, whatever. Quite dull language, but in his book, beyond the Pale. Great title, beyond the Pale, Ken Grossman Calls this the turning point. This is the turning point for beer. President Carter has done what his brother could not inspire. Beautiful beer. The home brewers start to come out of the cold. They start having trade shows, start homebrew supply shops. There's a whole generation that's learning a more sophisticated palette. And eventually, and this was the key, they start to make small breweries to make larger batches of this beer that they had perfected at home. Ken Grossman is one of these brewers. He borrowed 50 grand from his friends and family, and then another 50 grand. And they beg, borrow and scavenge pipework and vats and bottling machines. And after some false starts, 11. They have 11 failures. They finally mass brew a batch of ale they call Sierra Nevada.

[Jacob Goldstein]

Saw it coming.

[Robert Smith]

A beer I drink to this day. Turns out scaling up from homebrew to industrial capacity is quite hard. It is tricky to make a consistent product. You have to keep everything very clean. You have to keep it refrigerated. And it's the thing we talked about before. You have to get by the distributors. The distributors who are dealing with Pabst and Budweiser, they don't wanna talk to Ken Grossman for his, like, three cases of beer.

[Jacob Goldstein]

It is quite inefficient for them to do that. It is costly for them to do that. It is rational for them to not talk to him.

[Robert Smith]

What it means is that Ken has to take on that inefficiency himself. He has to get in his car and visit local taverns and restaurants and ask them individually to stock Sierra Nevada or to ask their distributors, right?

[Jacob Goldstein]

They can't even buy it from him, right? He has to get them to ask their distributor to sell it to them.

[Robert Smith]

But these home brewers turned industrial brewers are a clever lot. And they figure out that there are loopholes to this distributor thing and you know what's coming. You can open a brew pub, which I remember at the time, I'm like, this is incredible. They brew the beer and whatever. They serve you some French fries, and you can drink their beer and see it being made behind the glass.

[Jacob Goldstein]

And in fact, these brew pubs, tap rooms sometimes they're called, they're slightly different. They're enabled by these state laws that start getting passed in the 80s. They are part of this shift and it is very much, as we've seen through this story, a legal and regulatory story all the way through.

[Robert Smith]

And a little bit about taste. If in the 50s and 60s, people wanted this bland industrial taste, by the 80s, people are starting to seek out things that are different. Finding a new beer, telling your friends about, you're not gonna believe this IPA I found.

[Jacob Goldstein]

And food, and being more into food goes with particular sophisticated taste in food is more of a thing.

[Robert Smith]

And it was a big breakthrough to have regional beer. Remember, regional foods were a thing, but when you thought like, oh, beers can taste different everywhere you go, this becomes a kind of collect them all thing. It was big. But microbrews, I guess micro is in the name, was still a small business in America. It's going to take one more person to really make this an industry, craft brewing. His name is Jim Cook. And Jim Cook was not a brewer, but he had roots back in the brewing industry. The way he tells the story is he found an old family recipe for beer, found it in his parents attic and he tries to recreate it in the kitchen and it ends up stripping the wallpaper off the walls. But he persists. He wants to make his own homebrew. But more importantly, Jim has a day job. And his day job is at the Boston Consulting Group. He is a consultant, a businessman at heart. And he starts to think about this as a business proposition. How can I leverage capital, how can I leverage scale for this recipe that I love? What he figures out is he doesn't need his own brewery and employees. That's the hardest part, is buying all the vats and brewing the actual beer. He realizes that all around the country are breweries with excess capacity. They have times where the vats are empty. And he thinks, what if I can just hire out the vat space, hire out the brewmasters and the employees to make my recipe? I can put my name and my recipe in the bottle and have someone else sort of take on the capital risk.

[Jacob Goldstein]

This eliminates a huge amount of risk. I mean, starting a brewery, building a brewery from nothing, when you haven't sold any beer is extremely risky. And if you have capacity just sitting there, you would imagine people would rent it out to you quite cheaply. The marginal cost to them is low and they should pass that low cost on to you. It's really a lovely big idea.

[Robert Smith]

I will also say that these big factories have refrigeration and so they're able to make that German style lager, the one that requires a whole cold chain to make. And Cook launches his baby Sam Adams Boston Lager, another great beer. And it's not a light lager, it's sort of bready and bitter and it immediately wins best beer in America, which of course they put on the bottle. And this was the real breakthrough craft brewers rise all over the United States. Brew pubs are in every small town. And to this day, Boston Beer Company that makes Sam Adams and Sierra Nevada are In the top 10 list of brewers in the United States by size, and they sell their products around the world.

[Jacob Goldstein]

I was shocked, honestly, that they're both still independent, because what we've seen a lot is there are a few giant beer conglomerates that are sort of have come down from the big beer companies that were dominant in the. In the Billy Beer era that still exist. And what they've done is bought up a lot of the craft brewers. So. So there'll be a beer that is a craft beer by a certain sense, that tastes interesting, maybe, but it's owned by a giant company. It's. It's impressive to me in a way that both Sam Adams and Sierra Nevada are still independent.

[Robert Smith]

Yeah. These big companies are doing what they probably should have done back in the 1950s, which is, you know, I can walk into a place that only has Budweiser products, but also get Goose island, you know, which was a B in Bev. Right, yeah. Which was a craft brewer in Chicago that is now nationwide because of the distributors here. At the end of the show, let's go back to our two main characters, Jimmy Carter and Billy Carter. Jimmy Carter, of course, lost his reelection bid in a landslide to Ronald Reagan, who, as I said, was a wine drinker and does not feature in this story. Carter would go on to become one of the most respected ex presidents in history, and he won the Nobel Peace Prize in 2002. Billy Carter's story is tougher. It's sad. He was a severe alcoholic. By the end of Carter's presidency, he said, basically from October to December of 1978, I didn't do anything but drink. He was behaving erratically. He urinated on an airport Runway, which was big news at the time. He started to work as a paid agent for Libya's Muammar Gaddafi and it became known as Billy Gate. Maybe one of the first post Watergate other gates.

[Jacob Goldstein]

I was looking at this. There was apparently a banana Gate in 1974, like right around the time of Watergate. Very soon after, it had to do something to payments to a Central American government by a fruit company.

[Robert Smith]

Banana gate and Billy Gate. So the second gate perhaps doubtful. Billy Carter went into a hospital to dry out. And he stayed sober after rehab, although he admitted it feels funny not having a beer can in my hand. He died at the age of 51. I'd hoped to order a can of Milli beer we could taste here, couldn't do it, but I read about what it did taste like and I assumed it was going to be a terrible light beer like Pabst, but it was not. When Billy's son tried the beer, his quote was, it was strong and heavy and a couple could kick my young ass all over town. I don't know why his young son's drinking the beer, but sure, sure, sure. One of the brewers said that Billy Carter, in his drunken haze, had actually picked one of the more complex test recipes put before him. He said it had a combination of three tastes. Soft, a little on the light beer side, and hoppy, with a strong aftertaste. It was probably, and this is a quote, too sophisticated for American tastes. When he launched Billy Beer, people were expecting that blandness, that sweetness, not bitterness and hoppiness. And in 1978, Billy Beer may not have been bland enough for the mass market. Makes me think, I don't know, maybe if you had launched it 20 years later in the craft brewing craze, maybe you could have walked into one of these giant beer bars that have the 127 taps and said, you know, I'm gonna try the Billy Beer. I hear it's a regional brew named after the brother of a popular ex president.

[Jacob Goldstein]

So we've done a beer show now.

[Robert Smith]

Yes.

[Jacob Goldstein]

Do you have other ideas for beer shows for us? Or closer to my heart, other ideas for tax and regulation shows?

[Robert Smith]

Are you talk about whiskey?

[Jacob Goldstein]

Email us at BusinessHistoryUshkin FM or get in touch with us on Twitter. I'm JacobGoldstein. You're @RadioSmith. I'm on LinkedIn. We do love to hear from you. Today's show was produced by Gabriel Hunter. Chang was engineered by Sarah Bruguer. Our video editor who puts us on YouTube is Matt Nielsen. And our showrunner and editor who did most of the work on this show, he did. Respect is one Ryan Dilley. I'm Jacob Goldstein.

[Robert Smith]

And I'm Robert Smith. Thanks for listening.

[ChatGPT for Business Announcer]

Before you sign off, you tuned in for ways to help teams move faster, make sharper decisions, and turn scattered context into work they can use. ChatGPT for Business can help. ChatGPT for Business gives teams a shared workspace with admin controls, permissions and access to work and codecs in ChatGPT. This means your business can move from question to answer and code to rollout quicker. Join over 10 million business and enterprise users worldwide already using ChatGPT for work. Download the ChatGPT desktop app or contact sales to learn more let's talk about

[Optum Healthcare Announcer]

something everyone has an opinion. Healthcare. We all know it should work better than it does. Optum believes that too, and they're trying to improve it. They're helping healthcare teams and pharmacy services work together, like bringing primary care and prescription drugs straight to your home so you can stay on top of your health. Optum's also building technology that connects the whole healthcare system so it can better take care of the whole person. You Optum is making healthcare work as one for everyone. See what Optum's up [e-mail] this is

[Sponsor Announcer]

Malcolm Gladwell from Revisionist History. Life moves fast at American Military University. They're ready to help you keep up. AMU's flexible, affordable online programs in cybersecurity, IT space studies and more are designed for service members, veterans and their families. AMU provides the support you need to take the next step wherever life takes you. American Military University Made for what's next. Learn more at amuapus.edu.