The Craft Beer Edition (Live)

Summary

Slate Money: The Craft Beer Edition (Live)

Date: December 31, 2016
Podcast: Slate Money
Summary by: Podcast Summarizer

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Episode Overview

This lively Slate Money episode, recorded at Union Hall in Brooklyn, delves into the booming world of craft beer. Host Felix Salmon and co-hosts Cathy O’Neil and Jordan Weissmann bring together pioneers and new faces from the craft brewing industry—including leaders from Harpoon, Brooklyn Brewery, and Night Shift—as well as industry advocates, to discuss what craft beer is, why it matters, the economics, regulatory hurdles, and the brewing world's rapid evolution. The show covers business, taste, history, distribution, and the tangled web of American alcohol laws—with plenty of wit, candor, and audience energy.

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Key Discussion Points & Insights

1. Defining Craft Beer

• What Makes a Craft Beer?

  • Craft beer is not defined solely by production size, but by distinctive flavor, aroma, and color—unlike the mass-market light lagers dominating the US market for decades.
  • Steve Hindy (Brooklyn Brewery):

    "Craft beer has flavor, it has color, it has flavor, it has aroma, and it's very distinctive. And you can tell one from the other.” (05:05)

  • Major breweries make “tasteless” beer by design, aiming for mass appeal rather than character.
    • Steve: “They make beer for the masses. ... They don't want to determine that the vast majority of people don't like flavor in beer.” (06:02)

• Imports vs Domestic Light Lagers:

  • Most international mass-market beers (Heineken, Stella, Corona) are stylistically and taste-wise light lagers, like mainstream US brews. (07:12 onwards)

2. The Rise of Craft Beer in America

• In the 1980s, imports and craft beer collectively made up just 2% of the US market. Today, that’s jumped to about 30%.

• Number of breweries in the US soared from ~2,000 in 2011 to ~5,000 in 2016.

  • Felix Salmon: "We've gone up two and a half times to 5,000 breweries in the past five years.” (13:00)

• Historical Context:

  • In the late 19th century, there were 4,000 breweries for 40 million Americans; now there are 5,000 for 325 million.

  • Brewing was and is often tied to locality, though brands like Brooklyn Brewery now have global reach.

  • Steve Hindy on locality:

    “Many craft brewers starting up today are hyperlocal. They're really focused on the local community.” (17:09)

3. Business Realities: The Best or Worst Time for Craft Brewing?

• Corporate Buyouts:

  • Major conglomerates (AB InBev, Constellation, etc.) have been snapping up successful craft breweries for huge sums—e.g., Ballast Point sold for $1 billion, Lagunitas for $500 million (21:31).
  • Dan Kenary (Harpoon):

    “It's the best of times and the worst of times… It's gotten incredibly crowded and confusing… they [AB InBev] really don't want people to know who's independent and who's not.” (20:23)

• Valuation & Distribution:

  • Distribution is a bottleneck: with consolidation among distributors and restrictive franchise laws, smaller brewers struggle for shelf space and market access.
  • Some breweries, like Night Shift, now self-distribute or even own a distribution company to guarantee market access. (23:01 onward)

• Supply Chain Constraints:

  • Limited manufacturers for bottles and cans means supply issues, especially with canning lines (only two major suppliers in the US: Crown and Ball).
  • Rob Burns (Night Shift Brewing):

    “We get a phone call saying … we don't have the capacity to make cans for you anymore. … And that was a day after we signed a $250,000 purchase on a canning line.” (25:46)

4. Tasting & Beer Culture

• While brand and marketing remain important, all agree that flavor is essential; “It all starts with the liquid that’s in the bottle or can.” (27:43)
• The can vs bottle debate: Can technology has improved; cans keep out light and are actually superior for freshness.
  • Cathy O’Neil:

    “Tastes better out of a can than a bottle?” (28:06)

  • Rob Burns:

    “The can format is a better format for beer. It doesn’t allow light in there. … It’s lightweight to ship.” (28:27)

• Enjoy beer however you want—"enjoy the damn beverage.” (29:55)

5. Trends & Anti-Hop Backlash

• Hoppy IPAs are the dominant style, but there’s chatter about an upcoming backlash—possibly with more interest in less-hoppy, more balanced styles (e.g., Golden Ale, Kolsch, sours).
• Jordan Weissmann:

  “Every bar you go to, there's a lot of sour beer. ... Where should our listeners be paying attention to?” (36:35)

• Trendsetting cities: Portland, Seattle, Asheville.

6. Regulation, Distribution, and the Three-Tier System

• America’s alcohol laws are a tangled mess, with most regulation handled at the state level—resulting in bizarre rules (e.g., you can’t buy beer onsite at Georgia breweries; PA only allowed cases until recently; requirements for name/address records).

  • Nancy Palmer (Georgia Craft Brewers Guild):

    “In Georgia, when you walk into a brewery, you cannot buy a beer. ... You also can't buy a sandwich.” (40:43)

  • Katie Marisick (Brewers Association):

    “If you're in Maine, you can only get a growler filled if the growler is from the brewery that you're buying it from.” (40:17)

• The Three-Tier System:

  • Post-prohibition, to prevent vertical integration (brewers owning bars), a system was put in place: Brewer -> Distributor -> Retailer.
  • This was intended to raise prices (for tax and public health reasons), but has led to a tightly-controlled, often monopolistic distribution bottleneck—hurting small brewers’ access and consumer choice.

• Franchise laws: In many states (e.g., Georgia), breweries can be “locked in” with a single distributor, with no ability to change if poorly served (47:31).

• Result: Both monopsony (brewer with only one buyer) and monopoly (retailer with only one source for each brand).

7. Magic Wand: What Should Change?

• Katie Marisick: More government investment in hops and barley (better ingredients), and franchise reform (more flexibility for small brewers).
• Nancy Palmer: Uniform, level playing field across states, ending the over-regulation and patchwork “arms race” of local laws. (51:48, 52:10)

8. Craft, Micro, and Nano Breweries—What’s What?

• Definitions (57:23):
  • Craft brewer: Less than 6 million barrels/year, independent.
  • Microbrewer: Fewer than 15,000 barrels/year.
  • Nano brewer: Even smaller, often homebrew scale.

9. What Does America’s Beer History Say About America?

• Post-prohibition America’s decentralized, heavily-regulated beer market reflects the country’s values on local control, risk aversion with alcohol, and suspicion of monopolies.
• Nancy Palmer:

  “We created a system that would kind of encourage local control, and a craft brewer is exactly that... wonderful corporate citizens inside of small communities.” (61:08)

• Regulation is both a major business barrier and, paradoxically, has enabled the local craft boom.

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Notable Quotes & Memorable Moments

• On the soul of craft:

  "The first hint I have that I'm drinking a craft beer is it tastes of something.”
  —Felix Salmon (05:34)

• On distribution pain:

  "You got your brand and you're selling it to a wholesaler and they're doing a lousy job, but you can't move your brand.”
  —Dan Kenary (24:38)

• On regulation:

  “In Alabama, if you buy a beer to go, then you have to register your name and address for every purchase.”
  —Nancy Palmer (41:04)

• On America’s beer laws:

  “You get tons of rules about this... these big bad giant brewers from God knows where are going to be kind of negatively influencing our hometown community.”
  —Nancy Palmer (54:00)

• On industry optimism and entrepreneurship:

  "We wouldn't exist without the pioneers … But one of our keys to success has been our distribution. We've self distributed all our beers from the beginning because the access to market was such a fragile and scary thing for us.”
  —Rob Burns (23:01)

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Timestamps for Important Segments

• Defining Craft Beer: 03:40 – 06:46
• Business/economic history of craft beer: 12:00 – 17:09
• Corporate buyouts & distribution bottlenecks: 20:23 – 24:30
• Supply chain, glass/can shortages: 25:35 – 26:36, 30:27 – 32:01
• Taste vs marketing/brand: 27:21 – 28:06, 29:13 – 30:02
• Beer trends (hoppy IPAs, sours, etc): 35:15 – 37:16
• US alcohol law oddities and regulatory hurdles: 38:20 – 43:18, 44:28 – 47:31
• Three-tier system and monopolistic distribution: 45:00 – 48:49
• Definitions: craft vs micro vs nano: 57:23 – 58:42
• Audience Q&A: Beer in America and regulation: 59:14 – 62:09

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Concluding Thoughts

This episode offers a detailed portrait of the modern American craft beer landscape—equal parts celebration, cautionary tale, and call to fix outdated and protectionist booze laws. The deep affection for flavor, entrepreneurship, and local business weaves through every topic, even as guests lament the corporate incursions and regulatory spaghetti that complicate independent brewing. If you care about business innovation, regulation, taste, or just enjoy a good pint, this episode is a memorable, entertaining, and surprisingly educational roundtable.

Bottom Line:
Craft beer is booming—despite massive regulatory hurdles, distribution squeeze, and corporate “giants”—all driven by entrepreneurs, passionate fans, local love, and the perennial American thirst for something a little different, a lot tastier, and not afraid to challenge the old guard.

Transcript

[A]

Hello, Slate Money listeners. Felix here. Guess what? This is the craft beer episode that we've been talking about for so long. It finally happened. We recorded it at Union hall in Brooklyn. It was a huge amount of fun. I hope you enjoy it. So, as a little present from me to you on New Year's Eve, enjoy the podcast and stay safe out there tonight.

[B]

The following podcast contains explicit language.

[A]

Hello, We are here in Brooklyn, in Union Hall. Not actually live. This was recorded a couple of weeks ago. But we are in Brooklyn. We are drinking beer. We are talking about craft beer. This is Slate Money. I'm Felix Salmon Infusion. I'm here to talk all about craft beer all night with some amazing guests. We do have the entire Slate Money crew here. First and foremost, the one and only Cathy o', Neill, author of Weapons of Mass Destruction and generally the best person in the world. We also have Slate's Money Box columnist in general, Slate Money sidekick, Jordan Wiseman.

[B]

My official title on the show is Chopped Liver.

[A]

Apparently, Jordan is seriously the guy who made this entire show happen. Who cares about craft beer? We are going to be talking about craft beer. What it is, why it is, what's happened to it, the whole reason why we've managed to devote an entire episode of Slate Money to it. We're going to talk about whether it makes any sense from a business perspective now that everyone and their mother is drinking beer and making beer. And we are also going to be talking about the regulatory aspect of things, which, honestly, is not boring. Stick around for that because it's kind of the most interesting bit. But first, we need to get the first two amazing special guests on stage. Now, I'm pretty sure you've heard of Harpoon Brewery because you're all beer nerds. And so we have the CEO of Harpoon Brewery, whose name is Dan Canary. Come on out.

[C]

Thank you.

[A]

Thank you, Dan. You. You founded and own and generally are responsible for this operation to some extent.

[C]

Absolutely, yes. Many years ago, 30 years ago, we started Harpoon.

[A]

And on top of that, we have Steve Hindy of Brooklyn Brewery, right here in Brooklyn, up in Williamsburg. Steve is not only a beer maker, but also used to be an AP war correspondent.

[D]

It was good training for starting a brewery in Brooklyn.

[A]

Okay, so this is. This is basically the last bit of me taking up space on the stage is I am. I have in my hand here a pint of Brooklyn Lager. Now, I am a. I am a wine drinker. As I say, I know nothing about beer. What do I do? How do I drink this?

[B]

You Say cheers. And you do this? Yeah, like the same way.

[A]

What am I looking for? Am I sniffing?

[D]

Well, okay, you might take a look at it. You might sniff it a little, and then you would drink it.

[A]

So we don't really stand on ceremony here in the beer world.

[D]

No, we're in Brooklyn.

[C]

We don't spit it out either.

[A]

It tastes good, I have to say. I mean, I don't want to sound surprised about this because there must be a reason why everyone likes beer, but. Well, it's got a kind of citrusy tang to it.

[D]

Yeah, that's the hops.

[A]

See, now I'm learning something. Hops being one of the ingredients, a.

[D]

Flowering plant that seasons the beer.

[A]

Okay, so I'm so out of my depth already, but I'm going to try and barrel through this. This is what is known as a craft beer.

[D]

Right.

[A]

What is a craft beer, and how is it different from anything which isn't a craft beer?

[B]

This is actually sort of an existential question. I'm really curious. I'm really curious.

[D]

Do you want to tackle that one?

[B]

I'm going to be quiet. This episode, like I said.

[A]

And can I tell just by drinking it that it's a craft beer?

[D]

Well, yes.

[A]

Something which I just did. If I knew about beer, I'd be, oh, that's a craft beer.

[D]

Well, probably 80% of the beer drunk in America today is light lager beer. And if you took the top 10 brands of light lager beer and put them on a table without any kind of identification, you might have difficulty distinguishing one from the other. But craft beer has flavor, it has color, it has flavor, it has aroma, and it's very distinctive. And you can tell one from the other.

[A]

Okay, so the first hint I have that I'm drinking a craft beer is it tastes of something.

[D]

Yes.

[E]

I'm going to jump in and ask, why do the big beer companies like Miller, Budweiser, why do they make such tasteless beers?

[A]

Why does.

[E]

How is that optimizing anything?

[A]

Yeah, because we're economists here and we kind of think to ourselves, you know, that if you. If I'm drinking beer, wouldn't it be obvious I want to taste something? Maybe not.

[D]

Well, they make beer for the masses.

[A]

The masses.

[D]

They don't want to determine that the vast majority of people don't like flavor in beer. They prefer a more tasteless kind of product. And obviously, they've gotten a long way with that. But we've really beat them back over the last 30 years. When I started Brooklyn Brewery and dan started imports were 2% of the US market, 98% of the beer drunk in America was that light lager beer. Today, imports have grown to, like, 15%. Craft beer is about 15%. And so we pushed the light lager people way back.

[A]

Okay, no, wait. Next question. I have another stupid question.

[B]

All right, because that's your last one.

[A]

Jordan has an entire segment of intelligent questions, but I have. This is my moment to ask stupid questions. First stupid question. The imports, if I'm drinking Stella or Heineken or Corona, are those not exactly the same tasteless light lager beers that the Americans make?

[C]

Dan? Well, I would not use the term tasteless because, you know, to their credit, these major brewers brew to very high quality standards. It's just the styles are all very similar. And we many years ago, really were very frustrated. There was such a lack of choice. But, yes, the answer to your question, they're all light yellow lagers. You go around the world. That is by far and away the lead style around the world. So consumers clearly have a real preference for. For light lagers. But not all consumers. And what we saw all those years ago was, you know, you went to Europe and you could still find all different kinds of styles of beer, and you came back to the US and it was not. There was no choice at all. So the pendulum had swung way, way too far. And our job, really, as pioneers in the industry was say, this is.

[A]

I'm gonna jump in here and say that my favorite light yellow lager. Cause you're allowed to like that, aren't you? My favorite light yellow lager is. Is red stripe, because it comes in, like, a fun shape bottle. And the slogan. And the slogan is Hooray beer.

[B]

Okay.

[A]

Which is just an awesome slogan for.

[B]

So, yeah. For the love of God.

[C]

When you were in Jamaica. Yeah.

[B]

Anyway, triumph of marketing. But. So it has never been cheap to start a brewery. Right. And, you know, you guys, I mean, you. You're going on 30 years, and you're about two years older than. I mean, Dan, you've been doing this for 30 years. You're about two years older than Brooklyn Brewery. When you were just launching, how did you make the case to people that there was any future in this when there was very little market for anything but fizzy yellow lager? I'm curious, what was your pitch to people who were going to invest?

[C]

It was a very steep learning curve. People had no idea basically, what we were trying to do. I mean, you had urban enclaves where folks had traveled, and then maybe they liked Guinness or Bass Ale from England or whatever. So they were willing to experiment. But you really. It was explaining to them that beer was not just light yellow lagers. That was a real education thing, that it could be something very, very different.

[A]

All right.

[C]

Getting into our breweries was the key part of it, to kind of meet us and see what we were doing and having fun drinking beer.

[A]

Okay.

[D]

So, yeah, it was a real struggle in the beginning. I remember a lot of very depressing nights in bud bars here in Brooklyn trying to get bud drinkers to try Brooklyn Lager.

[B]

What did you tell them?

[A]

I said, do this to me right now. I'm here, Felix. Yeah, I'm a drink. I'm drinking this. So the first thing I. The first thing I will. I will note is that you call it lager now. You know, as an Englishman, I think, well, you have two kinds of beer. There's lager and then there's ale. And the lager is the light yellow stuff which doesn't taste of anything. And then ale is the stuff which does taste of something. And honestly, if I had to say, is this a lager, an ale? I'd say that was more of an ale because it tastes of something. So why are you calling this a lager?

[D]

See, this. This is a case of two people separated by a common language. Lager doesn't have to be light and tasteless. It can have flavor. And the lager beers that were made in Brooklyn back in the day when there were 50 breweries in Brooklyn were very richly flavored and richly hopped lager beers. And this beer is based on those lager beers.

[A]

And how many other lager beers are there which tasted something? I mean, now I guess there are millions, right? Because everyone and their mother is a brewer.

[D]

There are many more today.

[E]

Can I ask a. I've got a dumb question, Felix. Dumb question.

[A]

This is the dumb question segment.

[E]

So if I went to, like, I had a friend in Prague, like, way back when, and like, in Prague, you go to the local, literally local brewer, and they have one beer. So I'm wondering if this, like, the fact that there was like one lead strain of beers, the lager, is partly because everyone just had one beer on tap and that's all they had. It was like. In other words, it was like a. It was the beer that everyone kind of liked. Nobody hated it. Whereas if they chose that one beer to be something interesting, then some people would hate it. And it was essentially because they only had this one tap. Is that part of the story? Or is. Am I just making that Up.

[D]

Well, I think that's the way it used to be. I mean, it's a thrill for me to walk into a place like Union hall and see, you know, 25 different beers on tap. I mean, that. That didn't exist in Brooklyn 25 years ago, and that that was a real battle to bring that to Brooklyn. But.

[A]

So I'm assuming that the heyday of Brooklyn Brewing is. Is. Is today just. Just going by this chart, which. So we can all give a little baby round of applause to Steve. I don't know if he gets applause for this or not, but you recently sold a quarter of your company to Kirin in Japan.

[D]

That's right.

[A]

And Brooklyn and Bloomberg wrote an article about this, and it came with a handy chart. I love charts. And I have the chart in front of me. It shows.

[B]

The chart goes like this.

[A]

It's basically a straight line. It's a straight line which goes up and to the right and shows the number of breweries in the U.S. and five years ago, in 2011, it's about 2000. Then in 2012, it goes up to 2500. 2013, it's 3000. 2014, 2015, it goes over 4000. 2016, it's 5000. We've gone up two and a half times to 5000 breweries in the past five years. And Jordan is going to get into the economics of this. But, like, right now, there can't be a shortage of breweries anywhere, even. Not even in Brooklyn. Am I right?

[D]

Well, I don't know about Georgia. We have a representative of the Georgia Craft Brewers Guild. And, no, there are still a number of states where there are a lot of obstacles to starting a brewery. And, you know, think about this. Before, say, 18, 1880, there were about 4,000 breweries in America, and the population of America at that time was 40 million people or something like that. Today, there are 5,000 breweries. There are 325 million people in America. I don't think there are too many.

[E]

Breweries.

[C]

And I think there are about 7,000 wineries. So we have a ways to go.

[B]

I want to get to the question you didn't get to answer before, which was 25 years ago when you were trying to convince Union hall or whoever to sell your beer. What was your pitch? How did you convince people to say, yeah, I mean, it's not even to the drinker, right? It's to the bar that your product was something they could sell. What did you tell them?

[D]

We told them we were bringing brewing back to Brooklyn. The last two big breweries had closed in Brooklyn, 1976. So, you know, we said, we're determined to bring brewing back to Brooklyn and reestablish this great tradition. And we've made this beer based on the great beers that were brewed in Brooklyn back in the day. The bar. Thank God for the handful of bars that actually took us in, because it was probably one in 25 that we pitched to. And the ones that took us in were typically bars that had some imported beer. So they knew something about flavor. But, you know, thank God for those. Those bars actually right around here. I don't know, you probably don't remember. McFeely's on Union street was one of my first customers. And Santa Fe, they also own Santa Fe on 7th Avenue. They were one of my first customers. But it was very, very difficult. And. And I'm not kidding about those lonely nights trying to sell the bud guy. I mean, you know, bud guys are out to, you know, throw darts or something. The last thing they want to do is try some, you know, beer that's rich and fully flavored and hoppy. It's like, get this stuff away, you know, give me my Budweiser and my Duds.

[A]

All right.

[C]

I have to say, you know, Steve said, in those early days, the shout outs got to go to those independent bar owners for the most part. And wholesalers, we were turned down by wholesalers. They had. They just didn't know what we were trying to do. And the number of breweries have been going like this for 50 years.

[A]

And it's like, you mean down? We're on. We're on the radio now.

[C]

Going down, going down. Thank you, thank you. And these guys took a chance on us and said, you know what? We'll give it a shot. We don't know if it's going to make it, but you're good guys and we'll give it a shot. And without them, there wouldn't be a craft beer.

[A]

Okay, so this is. This is the perfect segue into the next segment. But as we go in there, I just want to pick up on something Steve said about the mid19th century, when there were thousands of breweries and many fewer people. Back then, I'm going to assume on the basis of absolutely nothing that the breweries were very local. And if you wanted a certain beer, you needed to go to where the beer was made and you drink it. And then if you left that area, you couldn't find that beer anymore and you'd drink someone else's beer. Now you have brands and you just, you know, you're exporting your beer to Japan and I'm, you know, congratulations, you're big in Japan. But this whole thing about beer being associated with a locality, like, is there a terroir of craft beer?

[D]

I think there. There are going to be all different kind of models, business models developed by craft brewers. Many craft brewers starting up today are hyper local. They're really focused on the local community. There are some craft brewers that are national in the US Some are focused only on their state. We happen to have had good fortune, which, through just really luck, has taken our beer to Europe and Asia and around the world. The name Brooklyn has been an incredible calling card for. Which is very satisfying to me because in the beginning, many people said to me, you're really going to call it Brooklyn. But, you know, Brooklyn's turned out to be an incredible calling card for us all around the world. And, you know, when you create a brand, it kind of has a life of its own. It goes. It takes you places. And I want to sell beer, so I follow my brand. And that's taken us to Scandinavia and, you know, Brazil and Australia and Asia.

[E]

I feel like when I was in Stockholm, that's all anyone ever drank was Brooklyn Lager. Am I right?

[D]

We sell a lot of beer in stock when.

[A]

When I was in Paris. They're obsessed with Brooklyn, which is one of the reasons I don't like the Parisians. But that's a whole. A whole other thing. Okay, so we are going to have Jordan's, like, nerding out on the business of beer and localities and whether the beer is a brand or drink.

[B]

Dan is sticking around. And we've got another Massachusetts brewer right here with us. We got Rob Burns from Night Shift Brewing in.

[C]

Where.

[B]

Where are you? Where's your hometown, technically?

[F]

Or Everett, Massachusetts. We're just on the fringe of Boston.

[B]

All right. And so I wanted to have Rob on because we're going to talk about the. We're going to talk about the business of Brewing in 2016 as it now stands. And I want to have one like, old, old timer, like, big brewer on the craft scene. Dan. Sorry. And Rob's brewery is much newer. It started in 2012. So I actually, I want to start second off by just reading a few names. Goose Island, Blue Point Brewing, 10 Barrel, Elysian, Golden Road, Breckenridge, Four Peaks, Devil's Backbone. I'm wondering if anyone in the audience actually. Do you. Does anyone have any idea what unites all those. Okay, there are people adding. So, yeah, I Just heard someone shout sold out. And these are all breweries that have been bought by Anheuser Busch and Bev, all former craft breweries bought by AB and Bev. And so we're at this point where there are more craft brewers than ever. More people are drinking craft beer than ever. But you've got these huge majors coming in, the big guys like AB and Bev who are now kind of infringing on the scene and trying to buy their, you know, trying to, trying to buy up the biggest names. And so I'm kind of curious and I'm going to basically stop talking after this is I just want to ask you as people in the business, is this the best time to be running a craft brewery or the worst time now that you've got the kind of the imbevs of the world coming for you? Start, Dan, since you've got the long.

[C]

View, it's the best of times and the worst of times. In some ways we talked earlier that you know, there's never been higher interest or excitement or knowledge about craft beer where certainly when you're Talking about it versus 30 years ago is a sea change. But it's gotten incredibly crowded and confusing for people. And I think that's actually part of ABI and others strategy which is they really don't want people to know who's independent and who's not independent. And it's always fascinating reading. At Harpoon we became a 48% employee owned company two years ago. So that's the course that we've charted. When you read the press releases from these acquisitions and how many times they say independent and we're going to chart the ability to chart our own course and it's like all I care about is honesty and like just be honest. We got a really big check and it feels good and I'm going to the Bahamas or something. But it's not a question of the quality of the beer, it's just the question of being honest, I think with your consumers and saying this is an Anheuser Busch ABI production.

[A]

Okay, so this is a money show. How big are the checks? What, what's the, what, what are the ratios that the breweries are valued on these days?

[F]

The biggest recorded check was $1 billion for ballast point.

[C]

Ballast Point Lagunitas was a half a billion dollars. $500 million. Yeah.

[B]

And that was only for 50%.

[C]

50%. So there are some very big numbers. Wow.

[B]

I mean is there, what is, what is the calculation there? Do you have any idea? I mean like when you're cutting a billion dollar check for a craft brewery. I mean, what is the business case for that? I mean, I assume you've been approached at points.

[C]

We were approached by all of them and the private equity guys. And with Constellation, they're Corona, they have import Corona to the United States. They're really trying to build out what they call a gold network of distribution across the country. And they wanted to get some other really great brands. So when they go to wholesalers, I mean, if you're Corona now already, you command a ton of attention. You layer on top of that some other really strong craft brands. All of a sudden there are some wholesalers where in most cities have like three wholesalers, by the way, for all of us to get to market. They're making the wholesalers making more money now off their Corona portfolio than they are off potentially MillerCoors. So when you're going in there and you can say, hey, I want your attention to sell our beer, they get their attention. And if you could pile on some more hot craft brands, you just are going to get more and more attention.

[B]

Interesting, Rob. I mean, as someone who's relatively new to the business, what does it look like you're basically just getting started up at a moment when you've got monsters coming in and trying to take up market share.

[F]

Yeah, it's definitely, I mean, like Dan said, it's a good time for us. We wouldn't exist without the pioneers of Steve and Dan kind of paving the way. But for one, one of our keys to success has been our distribution. We've self distributed all our beers from the beginning because the access to market was such a fragile and scary thing for us. And as of two months ago, we split off that business and now we own a separate distribution company to kind of preserve that access to the marketplace.

[B]

So for people who don't think about like the tiers of distribution for beer in the US too often, which is I think 99%. Can you, I mean, since you now own a distributor, can you explain how that works? I mean, how does the beer get from the brewery to my glass, which is now empty?

[F]

There's the three tier system, which is basically the supplier, the distributor and the retail or bar location. And you need to pass the product through those various tiers in order for it to get to the end consumer. And it was set up so that everyone would have equal access to market. But what has kind of ended up happening is it's kind of limited access to market as there's fewer and fewer distributors. And more and more brewers. There's a pinch point there, and that's a fragile pinch point.

[B]

And so you dealt with that by starting one.

[F]

Yep.

[C]

And we self distribute as well. And we used to distribute through Steve when Brooklyn distributed themselves, and they distributed a lot of other breweries beer because we couldn't get access to market.

[B]

I mean, how important has that kind of business fix been to craft beer even being a thing?

[C]

I think it's been tremendously important. And Rob's new to the game, but runs a great brewery up just outside of Boston. He's figured it out. And, you know, no one cares about our brand like we do. And you're going to get into the regulatory side later, but there are franchise laws that preclude us from moving our brands between wholesalers. So think about that. If you got your brand and you're selling it to a wholesaler and they're doing a lousy job, but you can't move your brand, It's a very tough situation to be in. Our, our answer to that was, hey, Boston's, our crown Jewel is still 20, 22% of our business. We've got to do it ourselves. And I think Rob concluded the same way, because when you're down in a wholesaler's house and they've got, let's say, Anheuser Busch, you're maybe 0.2% of their business. And so the idea that they're going to give you the attention you think you need to build your brand doesn't happen that often.

[E]

So it's a distribution issue that we're talking about. Is this like your biggest bottleneck for your business? Like, what is the biggest existential threat for your business?

[F]

I think it's the full gamut. I mean, even just raw material. Access to raw materials is a scary thing.

[E]

So, like hops.

[F]

Hops, even cans, you know, glass, those things are being bought up in bigger quantities.

[B]

Wait, there's literally not enough glass.

[E]

Someone has the corner on glass, for example. Goldman Sachs.

[C]

Yes.

[F]

For cans. There's only really two manufacturers in the, in the country that make them. It's Crown and Ball Beverage. When we started canning our product, we were with Crown. And you know, literally one day we get a phone call saying, you know what? We don't have the capacity to make cans for you anymore. And that was a day after we signed a 250 grand purchase on a canning line. So we were like, oh, shit, what do we. I don't know if I can say that.

[B]

Oh, you're absolutely encouraged say that yes, you can go for it.

[F]

And we panicked because we were. We were hinging our whole business on this can format. And we had to pivot really quick, and luckily we made the right sell pitch, the other manufacturer.

[A]

So I'm going to jump back in here and ask one of my stupid questions because I'm again, hearing all of this talk about distributors and tiers and brands and formats. This seems to be the nuts and bolts of the business. If you peel back that little layer of, ooh, it's beer, which tastes of something, you wind up in a relatively kind of gnarly and not very sexy thing about, like, help, you know, building brands and building formats and that kind of thing. So where in this does taste and, you know, like, where does. Where. Where does the whole, like, taste of the beer come in? And how. And is that important? And because it never used to be.

[E]

Right.

[C]

It's hugely important.

[A]

When we were dealing with, like, yellow fizzy beer, it wasn't important. The only thing that was important was the marketing and the brand. So now there's 5,000 things. Again, marketing and brand has to be, like, very important. Right? Because no one can taste 5,000 beers and decide which one they like the most. But does that mean that taste is not important?

[C]

No. Again, in my opinion, it all starts there. It all starts with the liquid that's in the bottle or the can. You've got to have great beer or you're not going to be relevant in the Marketplace. Now, with 5,000 breweries, though, distinguishing your brand from those other thousands of breweries is incredibly important. But part of the way you do that is based on the taste and flavor profile of your beer.

[E]

To that question, I mean, I've always been under the impression that things taste better out of a can if you drink it straight from a can than from a bottle. Do you guys agree or is that just like. Is that just me? It might be because my mom drank Miller Lite from a can, and I was just. I always associated with a terrible taste that's possible. Tastes like aluminum.

[F]

Well, there's. There's actually a lining in there, so it doesn't actually touch metal.

[C]

Oh, it shouldn't.

[F]

It shouldn't. Yeah. Unless they made it the can bad. But I think that's been a perception that the big beer guys have always created. That crappy beer goes into cans and not good craft beer. In a lot of ways, the can format is a better format for beer. It doesn't allow light in there. It doesn't allow oxygen. It's more Portable. It's lightweight to ship.

[A]

This is like screw tops versus corks in wine. Right? The thing which feels cheaper is actually better.

[F]

Yes, exactly. Same thing it is now.

[C]

Technology's gotten a lot better with canning. Yeah.

[E]

Oh, okay. I was wrong.

[A]

No, you're right.

[C]

No, you were right. Then you got. But people used to say it was always better out of a glass, out of a bottle than a can, typically.

[D]

Right?

[C]

You flipped that on its head and said that you had heard.

[E]

So I was right.

[C]

You were right.

[A]

You were right.

[C]

You were ahead of your time.

[A]

Yet again, Kathy o' Neal is right. You know, it gets a bit boring after a while.

[E]

I never get bored, so. And Felix, can I have your beer?

[A]

Kathy, have your beer.

[B]

You get the beer.

[C]

We're empty over here.

[A]

One quick question. We're empty because as a wine drinker, I need to ask this. Does it matter if I'm drinking it straight out of the can or should I pour it into a glass and then drink it out of the glass? Does it matter whether I'm drinking it out of a glass or out of a plastic cup or out of a paper cup? These things really matter if you're drinking wine. I just don't know if they drink beer.

[C]

And stop this wine nonsense.

[B]

Thank you.

[C]

And that's the difference between wine and beer. We just wouldn't, you know, we don't talk that way. It's like, enjoy the damn beverage.

[B]

When we.

[E]

When we did a rose special, we talked about wine, and Felix's, like, conclusion was that you enjoy wine more if you have a better story about the wine. And I just. At the moment. That moment, I was like, that's not true with beer. Enjoy the beer more if you have more beer.

[A]

That. That was a fist bump live on stage in Brooklyn.

[B]

So, wait, so right now is, you know, if you can't find enough cans at this moment, which still boggles my mind, but, like, is that because there are so many other craft brewers coming for them, or is it because the big guys are now also trying to, like, push out your market share? Or is it all the above? What is it?

[F]

I think it's all of the above. I think that that is a bit of big concern. And the brewers association has also been looking at that of the big guys trying to purchase all the quantities of, like, the specialty hops that go in the IPAs to stuff like cans. But we also compete with cans. You know, we compete against soda, we compete against monster energy drinks. You know, that kind of crap, too. So it's everything that goes into that type of product.

[C]

There are huge capital intensive industries, bottles and cans. And we found over the years why we had to buy so much of our equipment from Europe. When we started, There were about 100 breweries in the U.S. most of them were huge. There was not any kind of an industry that was making equipment for our size brewery. We had to go to Germany where there were 2,000 breweries and they were roughly our size Here. Everything was geared huge. There was one manufacturer, brewhouse equipment out in Portland, Oregon. So you just couldn't get it. So and with cans and bottles like the bottle, there were. There were two and a half bottle glass manufacturer companies in the US and two of them basically were in and out of bankruptcy. So there really was one supplier. So it's been, it hasn't caught up to where it is now. You've had this incredible growth on the number of breweries, but the number of suppliers have just consolidated, gotten bigger and bigger and they love just doing business with big companies.

[B]

So I have another shortage. Like two words that really terrify me. Hop shortage. This is. Yeah, I know. Strikes fear into the.

[A]

So one of Jordan's numbers on a previous episode of Slate Money was that the United States is now the largest grower of hops in the world. And it's not enough, thanks to you guys.

[B]

So how, you know, how much should I be worried about that?

[A]

Is this like limes? Because there's a lime shortage as well. I worry about that for my Corona, you know.

[C]

Yeah, I stop the wine, stop the Corona.

[F]

I mean, I think there's kind of two pieces to that, to that question. I think first that hops are agricultural production. There's good harvest years and there's bad harvest years.

[C]

Yeah.

[F]

Shortages have been caused by bad harvest years where mildew or drought or over rain has caused problems. I think generally though, the brewer or the hop growers are planting more and more of the aromatic varieties that that craft drinkers really like and they're ripping up some of these older varieties that, that no one really cares because they taste like wood and rather replace them for ones that taste like pineapple. So I think from my perspective, there's still plenty of hops out there. When we started, that wasn't necessarily the case, but today I'm feeling pretty confident. There's a lot of breweries that you contract your, you contract your hops years in advance. We have ordered hops five years out, which is a crazy.

[A]

You did that when you were how old?

[E]

Yeah.

[F]

15. No.

[A]

No, I mean like how old Was the brewery when you started ordering hops?

[F]

2012, right away, like literally the year you started? Yeah, the first year we started, we didn't brew any hoppy beer. One of the reasons was we didn't have any access to the good hops to make the IPAs that we wanted to make. So we didn't. We got to make like one or two actually that year because Sam Adams sold us some citra hops, which was very kind of them. But that was the only way we, we were able to get our hands on that in our first year.

[C]

I think you should be okay. Yeah, the market's responsible, the hop supply is. I think it's going in the right direction. Another issue is it's a two or three year cycle to bring hops. It's not like just planting grain in the spring and harvesting it in the fall. So it's a longer lead time, but that's why it tends to over swing. But I think now we're entering a pretty good phase, don't you think, Rob?

[A]

So I think relief. Yeah, that's a relief. I have one last question here about the hops, because one of the things I hear from beer people is a bit like, what happened in California was that it came out with all of these massive fruity cabernets serving you on big fruit bomb, highly alcoholic wines. And there was a bit of a backlash. I'm kind of feeling a backlash against the very hoppy IPAs. And everyone's saying that's easy, that's cheap, you should just, you know, the craft is in the Burgundian Pinot Noirs. You know, the craft is in the things where you don't just bury everything under a layer of hops. Is there going to be an anti hop backlash? Is that a thing?

[F]

I think that it's got a lot of legs on it. I mean, it's the number one style in the craft beer segment. I think it's like 25% of craft beers are hoppy hoppy products. You know, I don't totally love that. There's plenty of really amazing beer that isn't hoppy. That doesn't get the right attention. It does, but it is what people want and we'll continue to make them. I gotta pay my bills.

[C]

There's so much ferment going on. I mean, Golden Ale, the Kolsch, that category is growing at almost 50% a year too. So there are lots of people can find balance if they want it. And the certainly the double ipa, the big hop beers are out There. And I think they're absolutely here to.

[A]

Be a quick, really stupid beer question, since I have a beer founder expert, what is the difference between the Golden Ale and the lager ale?

[C]

Yeast versus Lager yeast. And again, in the US and the day, we would be asked whether our beer was a beer or an ale. So even here, it was not even lager versus Ale. We didn't know what lager was, but it's a type of yeast. Lager's top fermenting yeast. It was not really identified until the mid 19th century, actually. So prior to that, really, everything was an algae ale. But it's just different strains of yeast. And your stouts, your porters, all the different styles of beer fall under one of those two families.

[B]

So what right now in New York.

[C]

I quieted him down there.

[E]

Did you notice?

[C]

You see that?

[B]

You're good at that.

[F]

Yeah.

[A]

I thought we were like, this is.

[B]

This is the last. Right now in New York, every bar you go to, there's a lot of sour beer. That's like, the hit there. Sour. I love sour beers. Ever, like, go says whatever. I'm curious, how do you know when, like, the next. What the next beer trend is coming? If someone is, like, really wants to be on top of, like, what's a cool beer that's being made, where would our listeners, like, be paying attention to?

[A]

Portland.

[B]

Portland, Is that it? Like, seriously, what's ground zero for awesome beer? I guess that's my question.

[C]

Besides Boston? Yeah.

[B]

I don't know.

[F]

I mean, traditionally, the ground zero has been Portland, Oregon, Asheville, North Carolina, California, Seattle. Seattle.

[B]

So whatever going on there, that's what you want to go to Seattle, taste what they're or drink what they're making.

[E]

Follow the socialists. Socialists make good beer.

[B]

It's the proletariat. Well, I like it.

[A]

What is the best red state beer?

[C]

The best red state beer? Man, I'm not going to touch that one.

[B]

That might be in Georgia, actually.

[C]

There are plenty of them. Yeah, all over the country, thankfully.

[E]

All right, thank you.

[A]

Enough of the beer makers. Thank you very much, Robbie Buns and damn Canary.

[B]

Thanks so much, guys.

[E]

So, hey, guys, we're going to talk now with some lobbyists from the craft beer industry, and it's going to be super exciting. I'd like to welcome Nancy Palmer. And I'd like to welcome Katie Maricik. Guys, can you just quickly tell. Tell everyone what you guys do? And I know you're located in Georgia and you're actually in D.C. right?

[G]

I am Nancy Palmer. I'm the executive director of the Georgia Craft Brewers Guild, which is the state traded organization that represents all the breweries in the state. I also passed my first year sommelier exam nine years ago.

[E]

Wow.

[G]

So I am also a wine person that transferred to the beer world.

[H]

I'm Katie Marisick and I am the Federal Affairs Manager, or the manager of Federal Affairs. I don't always remember. For the Brewers Association. I represent all of the small and independent brewers in the United States.

[A]

All of them.

[H]

All of them.

[E]

I have the best job ever also. Okay, so here's the guiding question for me, guys, and it actually has to do directly with Georgia. So I have a friend in Georgia. I visit my friend and he knows I love beer, so he brings me to his local growler shop, which is this place. I've never been to anything like it because I grew up in Massachusetts and I live in New York City, although I've heard they do exist in New York City, but I've never been to one. Growler shop is a place where really cute guys explain beer to you for as long as you want, let you taste things, and then you can buy growlers, which are these, like jugs of beer which they pour and then seal, and you can have like one per day for your entire visit to Atlanta. And I was like, why the fuck aren't there growler shops in Massachusetts and every block of the country? And I just. I couldn't understand it. I was like, where are my growler shops? So I started looking into it and I found out that the laws around beer are crazy. Can you give me some examples of the craziness? Go ahead, you start, Katie.

[H]

So it started with prohibition.

[G]

That was the first crazy law. Prohibition was the first crazy law.

[E]

Don't tell us why yet. Just tell us examples, because we're going to get into why after the examples.

[H]

So you may or may not know that the majority of. Well, that beer and alcohol laws are done on the state level. So we've got some fun stuff. If you're from Pennsylvania, until recently, you have never been able to purchase a beer in anything other than a case form. If you're in Maine, you can only get a growler filled if the growler is from the brewery that you're buying it from, which completely defeats the entire purpose of growlers. Let's see.

[G]

Can you bring your microphone just a little closer?

[H]

Yes.

[E]

Thank you.

[G]

In Georgia, when you walk into a brewery, you cannot buy a beer. You can't buy a pint of beer. You can't buy a six Pack of beer. You can't buy a beer at all. You also can't buy a sandwich.

[H]

But.

[G]

You could buy an armadillo or like a T shirt or. Right. So in Alabama, if you buy a beer to go, then you have to register your name and address for every purchase.

[E]

No.

[G]

Yes.

[E]

Oh, yes. So let's contrast what you just said about Georgia.

[A]

Wait, tell me about Utah. I feel like, yeah, we're gonna feel like if that's what you need to do in Maine.

[E]

No, we're gonna get to. We're gonna get to Utah. But, like, let's compare this to what you. You can do in wine for wine in California, like, where, like, you're, in fact, you're required to go on a wine tour and drink wine and. And then bike drunkenly to the next vineyard and then drink more wine and get food.

[H]

Right.

[E]

So this cannot happen for beer. It's very sad.

[G]

Certainly the wine industry, I don't know, maybe they have better lobbyists. I feel like Katie and I are pretty good, but they. They have. That's not it.

[E]

That's not it.

[G]

They've really done very well for themselves. And I think some of it's because it's agriculture that they've gotten some preferential treatment. But there's this only in one state. Well, the Georgia wineries would take offense, but, yes, it's not unreasonable to say they're mostly in one state. In fact, until recently, the state of California had more wineries than breweries in the entire country. Right. And so there. There's clearly a market for this agriculture that promotes tourism. And I think that beer really has that ability. But the laws are kind of way behind. Wineries have this kind of warm, fuzzy tourist feel. And breweries are clearly very dangerous establishments run by very dangerous people.

[E]

Katie, tell us about Utah.

[H]

Oh, Utah. Well, I mean, we were talking about it a little bit earlier when you had, you know, Brooklyn beer harpoon on here. These breweries have been around for a long time, but being open since 2012 in our industry, that's a long time. You're a teenager by now. You're driving your parents nuts. Utah is a very interesting state because they only want you to be able to buy alcohol at a certain percentage. So anything that's over 3.2%, it's going to be really bad. You're going to go out, you're going to do horrible things, and that's on draft. You can get stuff in bottles. That's a little bit higher percentage. Now as more people, younger people are moving To Utah, there's a chance that you might see that change, but for right now, they have one of the more interesting state laws.

[A]

This is. This is stupid question from Felix. Time.

[G]

Yes.

[A]

Is it the case that craft beer in general and good beer in general, or tasty beer in general, has more alcohol in it than the fizzy yellow stuff?

[H]

Not necessarily. One of the top growing beers after IPAs, which are delicious, is sessionable beer. And sessional beer tends to have a lower alcohol content, something you can drink a few of. They have them, ipa, saison, other forms. It's something that's changing. It still has good flavor. You don't have to have high alcohol to have a delicious beer by a craft or small independent breweries.

[E]

Okay, so we've established that states, different states have different rules, but can you explain a little bit of the history of, like, why that happened? And. And I mean, from the example of Utah, it sounds like a moral thing, but then we have the. And of course, the history of prohibition is all about morality, but as I understand it, it's also about taxation and it's also about market share and protecting the little guy, at least originally. Can you. Can one of you try to tackle that?

[G]

All right, I'll try. So part of the reason that we instated Prohibition, one of the problems that we had was that breweries were opening bars, right. So brewery X would open bar X and then brewery Y would open bar Y. And so you had this proliferation of saloons and bars.

[A]

And this is a problem why?

[G]

Because this society was denigrating and men were getting drunk and beer was too cheap and all sorts of terrible things. But also women needed to get the right to vote, but we needed to do some other things first. So we, you know, had a bit of a movement.

[B]

This is all true. This is 100%. It's a weird history.

[E]

So I'm going to jump in and say one of the reasons they inserted middlemen into this process, which we also called distributors in this conversation and sometimes are called wholesalers.

[F]

Yes.

[E]

One of the reasons we just, we inserted those guys into this whole system was in fact to raise the price of beer.

[G]

Absolutely. And we still do that.

[E]

We still tap too much for our beer.

[B]

Oh, yeah.

[E]

Because we have these middlemen and they charge a fee to basically distribute the beer from the brewery to the stores or to the restaurants. But they also take taxes.

[G]

Right.

[E]

And they also just have a monopoly. Explain that system. It's so crazy.

[G]

It's so crazy. That's why it's hard to explain. But the idea is the brewer sells to the wholesaler, who sells to the retailer, who sells to you. And everybody gets a cut down the way. And, and anytime anybody gets skipped, that's bad because taxes are lowered and beer might be cheaper and God knows what else might happen. Mayhem, right? Mayhem. Sky falls, et cetera. So in the state of Georgia, we have like a very strict three tier system. Like there is no mechanism for like the Sweetwater IPA to get to the local grocery store or then to go through United Distributing to the Kroger grocery store physical location. It can't go to corporate, it has to go to that one location where, where it is then sold to the consumer. And that's the only mechanism. You can't go to Sweetwater and buy the beer. Sweetwater can't sell it to Kroger. There's no way around it, right? It all travels downhill and that's how the taxes get collected and the beer stays expensive.

[E]

Okay, final question, and then we're going to go to the magic wand question. The final question is I actually don't care about you guys at all. I don't care about the breweries. I care about consumer choice, right? And I care about the fact that when I go to a restaurant, I want a good selection of craft breweries brews. That doesn't happen. And that doesn't happen because the one thing we haven't talked about with these wholesale distributors and what happens Everywhere except Washington D.C. is that the guys who source the beer, the restaurant dudes who source the beer, they have, if they want a specific beer, they have to find the single distributor who has the rights to distribute that beer. So that's a weird situation. So what actually ends up happening is that restaurant guy just chooses the dude that has like a big palate. Going back to your point, right? A big pallet of brews. How messed up was that? What do you call that? A monopsony?

[G]

Well, so it's a monopsony when a brewery like only has one potential customer. So I have breweries in the state of Georgia who have one statewide distributor and they literally cannot sell to anyone else. Not their wives, their kids, anyone who walks in the door. Not a single person can this beer be sold to besides the one guy who is their distributor in the entire state of Georgia and that's it. And they can't get out of that contract. They can't fire that guy. They can't move. But they can be moved without cause. I mean, they can, they can be moved, they just can't choose that.

[E]

So they're basically having people work for them to distribute their beer, but they can't fire those people.

[G]

Right. So it doesn't end up so much working for them.

[A]

And it gives them no pricing power. Right. Because it's up to the distributor. How much the distributor wants to pay, is how much they wind up getting.

[G]

Sure.

[E]

On the end again, of the restaurateur or the store, they would like to only deal with one distributor or two distributors. They don't want to have to deal with a long list of distributors because it's that many more of human relationships.

[G]

Right. So you're getting. You're missing. There's kind of two sides, right? So there's one guy that one of my brewers can sell to, but then whatever retailer wants that beer, there's only one person that they can buy from. So they get the monopsony on one side, breath brewer to distributor, and then they get the monopoly on the other side being the only place you can buy that brand for the retailer. And that's where you make a lot of money. A lot of money.

[A]

So if I want to make a lot of money, I should just become a distributor in Georgia?

[G]

Ah, no, you certainly could. But one of your problems is that you would only be able to sign up new brands. You wouldn't necessarily be able to poach anyone who currently exists in the state of Georgia. So you couldn't sell Budweiser or Yuengling or Corona or any of the wines or anything. You'd have to have an entirely new portfolio.

[B]

Why can't you poach?

[G]

You would have to have a lot of money. You're talking about, like, an incredible startup cost. So one distributor could sell the rights from one brand to another distributor. So you could sell the rights for Corona from one person to another person without asking Corona or telling Corona. And you can make money in that transfer. But this is like British footballers. It's a bit like it, actually.

[A]

The British footballers just get transferred for vast amounts of money and the footballers themselves never.

[E]

See, distributors are like teams that have their players and they have. Like Budweiser is like Lebron James, right?

[G]

Yeah.

[E]

No, no, wait. LeBron James is my boyfriend. I gotta give him a better brand than Budweiser. Anyway, last question. You guys are lobbyists, so you guys want to change the rules. If you had a magic wand, what rule would you change?

[H]

I'm real quick gonna go back to the other question that you said.

[E]

Okay, you have to answer the magic wand.

[H]

I definitely will, but I don't want the consumers to be downplayed in this situation. Franchise reform is absolutely an issue that should be addressed. But there would not be 5,000 small and independent brewers in the United States unless you were out there asking to have that beer. These bars, these restaurants that have started selling this product, they're doing it because people are asking for it. It is a consumer driven situation. So if you're in Georgia and you don't like the fact that you're not able to buy a beer at the brewery, say something we've got the ability for Nancy. You know, Nancy can tell you how to reach out to people. She can tell you what.

[E]

Write a letter to your congressperson.

[G]

Yes, do that.

[A]

Yeah. Because that's clearly the number one most important issue facing a Congress person today.

[B]

We are all going to need beer to make it through the next four years. Essential. Okay, Felix, do not downplay this. Now, where's your magic wand?

[H]

We're building a little beer bubble.

[E]

Beer bubble right here. Yeah.

[H]

Taxes are absolutely an issue. I think that there's a way that we can incentivize breweries, continue to grow and also make sure that new ones are starting and people are getting hired. That's a big deal.

[G]

So.

[H]

But we also talked about access to markets and ingredients. I think being able to grow hops and barley in different regions of the country, having things that are disease resistant. I think if we could make or if we could encourage the government to put more funding into those types of things, that would have a major benefit to a lot of the brewers in the United States.

[E]

So your magic wand is have more investment by the government into hops.

[H]

More ingredients equal, better beer.

[E]

Okay.

[A]

All right.

[E]

What about you?

[G]

I. It's a. It's a difficult one for me. You know, we have two constitutional amendments. We're, by the nature of our industry, overregulated. Right. I mean, we really did it up from the start. And so I think that kind of the second part of the 21st Amendment says. You know, the first part says prohibition's repealed, but the second part says, and states can do whatever they want.

[F]

And.

[G]

And that bit has really led to a proliferation of laws that are so wildly different from state to state that brewers have a hard time competing across state lines. The rules are so different. And there's this kind of arms race of legislation happening in bordering states. I kind of wish everyone was just on a level playing field and everyone could do the same things and those things would be myriad.

[E]

Except they wouldn't be Utah's things.

[G]

Right. They would be like, yeah, they'd be like Colorado things.

[A]

So let's all. Okay, so that's utopia, is that we all moved to Colorado, which is utopia.

[B]

Weed and beer I can get behind.

[A]

So, so I was just having beer with a Belgian and no one knows more about beer than Belgians. And the Belgian informed me, because he was Belgian and knows everything, that the reason why Anheuser busch is the 8 million pound gorilla in this space, it's because they were a big brewery before Prohibition and then they were the only brewery who kept their facilities open during Prohibition because they were making root beer. And then when Prohibition ended, they were up and running and they had that first mover advantage. And somehow that first mover advantage has now lasted for like a century. That there seems to be an enormous amount of path dependency going on here. So is this true? Is the entire history of where we are right now in beer, is it all path dependent to stuff which happened back in the 20s and 30s?

[G]

So it's kind of true. Right the time in the US history where we had the fewest number of breweries. 1980. That's the fewest number of breweries we've seen in the history of America. Right. So the history isn't all kind of crash at Prohibition. Everyone kind of started growing after that. There's, there's been some ups and downs. But when we, when we instated Prohibition, the idea was that there were too many bars. So the idea was to keep breweries from opening bars, which is where we get tied house, which Katie mentioned. So breweries now can't own bars and breweries can't talk to bars and they can't influence bars and they can't coerce bars and they can't vaguely be in the vicinity of bars and things like that. You get tons of rules about this. And so the idea was that if you keep breweries from opening bars, and bars will be independent and they'll have a wide variety of product and they'll be locally owned, which is sometimes a rule, and everything will be better for everyone. And it's led to some of those things. You know, retailers do tend to be more independent, but it's also led to this kind of forced distribution system where these middlemen were meant to kind of reinforce this like we're local and tax is going to be collected and this is regulated, and these big bad giant brewers from God knows where are going to be kind of negatively influencing our hometown community.

[A]

One more econo wonk question here is it strikes me as a wine drinker that beer is Cheap, because I drink wine and wine is more expensive than beer. But I hear a lot of this talk about taxes and stuff. And what I'm hearing is there's a significant price elasticity in beer. And if we only made beer cheaper, maybe by collecting fewer taxes or getting rid of a tier of distribution or something like that, then we would all be drinking more beer and we would be happier. So a quick, like, poll of the audience here, like just vocally, like, how many of you do you think would drink significantly more beer if it was cheaper? And how many of you would drink pretty much the same amount of money if it was cheaper, but you would save money?

[B]

This is like a public health nightmare right now.

[A]

What's. What, what's the, what's the, what's the empirical answer to this question?

[H]

I mean, Rob, do you think your beer should be cheaper? I don't.

[G]

Right. I mean, I'm kind of on board with like, you guys have already given it up. We know how much you'll pay for a six pack.

[E]

Right.

[G]

I don't see any, like, I don't see any reason. Right. We don't need to disintermediate the price. We just, you know, someone needs to be making the profit and it doesn't necessarily need to be the middleman or the government. Maybe it could be the brewers.

[A]

Okay, guys, so basically what these lobbyists are saying is you're gonna pay just as much for beer as you always did. And the promise of cheap beer is a chimera. We will never achieve it. Questions? Hi, what's your name?

[B]

My name is Brendan. I've been listening to the show for a while. I've actually been binge watching or binge listening to the show for the last couple of months. Called My masochist or crazy. God help you.

[A]

So.

[B]

So on another podcast that I listened to, Benjamin Walker's Theory of Everything, there was a two part episode over the summer called Sud Culture in which they talked about the regulations for what determines the volume you are allowed to produce before you are no longer considered a microbrewer and you are considered a macro brewer. And by the same token, luckily enough, when I was growing up, my best friends, dad liked to brew his own beer. So can you talk about what is a microbrewer in the purest sense?

[A]

Craft brewer versus microbrewer. What is the difference?

[H]

Absolutely. So you keep saying craft brewer. That's. We tended to use craft brewer, small and independent brewer. The brewers association doesn't define craft beer. We define the craft brewer. So our thing is Any independent breweries who produces less than 6 million barrels of beer a year is considered a craft brewer. Now, 6 million barrels, to some people, might seem like a significant amount. Boston Beer, Ying and Lager are just under 3 million. Somebody like AB InBev just in the United States is producing 100 million barrels of beer. So to us, there is a very large distinction between what is a craft brewer and what is a macrobrewer and what's a microbrewer.

[G]

So technically, a microbrewer generally is considered fewer than 15,000 barrels. Then you get into nano brewers, which are microscopic. You get into home brewers, which is, you know, in the basement or the bathtub, etc.

[A]

And that's like one barrel.

[G]

Yeah, well, sure, but. But it's. It's. It's. To Katie's point, you know, just. The Anheuser Busch plant just north of Atlanta makes about 9.5 million barrels a year. They make more beer in a week than all my brewers in the south of Georgia combined making a year.

[B]

Where did the number 6 million come from? Like, why is that the cutoff?

[H]

So it was essentially based off of growth of the industry since Prohibition. And within the 80s, when AB and BEV and Miller were locally owned breweries, they were producing, or locally American owned breweries, they were producing around 30 to 45 million barrels of beer a year. In the United States, that number is significantly higher. So we just sort of did the math and multiplied it.

[E]

All right.

[C]

All right.

[A]

My name's Cole. I'm from Baltimore, Maryland.

[G]

Yeah.

[B]

Can't believe you made it up here.

[A]

It's a really cold day to come here. It was a very horribly cold day to come here.

[D]

But my question is more.

[A]

I guess it's more of a general.

[D]

History kind of question, but the fact.

[A]

That there is so much regulation around.

[D]

Beer and alcohol in general in America.

[A]

In comparison to other countries, what does that really say about our country? Everyone here, Cole, has a great question. What do we know? What does this tell us, the state of beer in America? What does this tell us about America?

[F]

We're no fun.

[B]

We're fun now.

[F]

I mean, you know, they always talk about, like, getting the economy to grow and everything, and how do we do that? And I think one of the biggest hurdles for small business people is all the regulations, all the hoops, all the licensing, all the permits that you have to go through. It's a huge barrier to entry, and it's so damn confusing. Even talking to lawyers, they get confused and they don't know. And you're like, well, Am I playing by the books? Am I gonna go to jail next week? I don't know. So I think. I think, you know, we gotta. We gotta use common sense and maybe deregulate a little bit and stimulate business that way and have fun.

[H]

We're working on getting more fun. We're getting there. It's growing. I think regulation is a big thing. Dan was here earlier. Harpoon, you can tell me if I'm wrong on this, but Harpoon has the first beer license in Massachusetts. That it was just something people weren't doing. There wasn't necessarily money involved. There was a lot of regulation. And now it's something that they're seeing as the ability to create more jobs. I think people are getting more creative. I think that the recession might have had a little bit to do with it, too, that people are looking for something that they can make, that they can produce and something they can do here and sell to their friends and do locally.

[G]

Yeah. Building on what Katie said, I think that post prohibition, what we came up with is that we needed local control, that there was something kind of dangerous about alcohol. And I'm not willing to say that there's not. Right. It's clearly problematic for some people, and it's. I don't mind that it's regulated, but the idea was that local control was the right thing and that NIMBYISM was, in fact, the kind of moment where people could take control of their own communities and their own lives. And I would say that the craft brewer is the best possible version of that. That we created a system that would kind of encourage local control, and that a craft brewer is exactly that. They invest in their communities. They want to sell products in the side of their communities, they want to invest in their communities. They contribute philanthropically. Like, they're wonderful corporate citizens inside of small communities. And so I think we should be, you know, in some ways, say, yeah, the way that we came out of prohibition was actually about local control. So let's get serious about it. And craft breweries are the epitome of that.

[A]

I'm misting up here. This wonderful, like, romantic notion of small, little crazy craft breweries, mom and pop businesses in the heartland, all American now.

[B]

Selling for a billion dollars apiece.

[A]

Becoming billionaires. That's the American dream.

[B]

It is.

[F]

It is.

[A]

Anyway, okay, I think that's it, people. You've made it to the end. Congratulations.

[B]

Let's all drink more beer.

[A]

That was fun. So thanks again to our guests, Steve, Dan, Rob, Nancy and Katie. Thanks to our producers, Vernon Williams, and Zach Dynastein. And of course to the executive producers Steve Lichti and Andy Bowers. The Panoply network [e-mail] panoply and a huge thank you to Union hall and their amazing staff for hosting us. Thanks to all of you who are listening right now and who came out, especially those of you who came out to drink with us. Have a great new year and we'll talk to you in 2017 on Slate.

[G]

Money.

[H]

Be.