ON THE VALUES OF BEER from Cloudwater blog

The price of beer is probably more varied now than it has ever been, and with recent attempts at provoking outrage in corners of the national press I’d like to clear up a few concerns I have, and try to shed some light on the values that set modern, independent breweries apart.

Beer Is Expensive

This may seem obvious, but it’s worth stating. As a beer lover since the late 90s I’m not sure I’ve ever seen prices on the bar per litre as high as they are now. The reasons for this are varied (and beyond those outlined in the following list): there’s still a strong focus on import beer in forward thinking UK bars (where in some cases imports cost more than double that of domestic beers of near identical recipe composition); there’s an ever greater number of styles of beer, from rustic barrel aged mixed fermentation Saisons, spontaneously fermented and fruited wild ales, through to extremely heavily hopped beers that have taken production costs to previously unseen highs; beer drinkers are in part ever more adventurous and committed to exploration of flavours and textures; and all this and more is happening on a foundation of many start up or still fledgling businesses.

It is also obvious but vital to state that a sense of value is highly variable across the marketplace's mix of subjective and objective concerns. I see a minority of people recoil at the thought of paying anything above a historical yet recent norm set by traditional cask beer for a pint (where in some cases a pint of strong modern beer would be irresponsible, and may not be a pleasurable measure with which to seek the greatest enjoyment of a particular beer), and a majority that are able to happily (and mindfully) invest their disposable income in the higher cost beers on a bar/shelf because it’s the higher end of the market that offers the bold experiences they seek.

Comparing the prices on the bar of a traditional pint, where the majority of the cask market from buyer to drinker actively works against prices above a recent norm, to that of a beer with significantly higher production costs is beyond reasonable. Let’s compare stripped back production costs of two fictional, yet somewhat representative draft beers.

Malt: £0.08 per pint
Hot side hops (kettle, whirlpool, hopback, etc): £0.09 per pint
Yeast: £0.00 per pint*
Cold side hops: £0.00-0.05 per pint (many traditional bitters are not dry hopped).
Packaging materials: £0.02 per pint (cask shive, keystone, and pump clip)
Total: £0.19-£0.24 per pint
*Many traditional bitters are made with house yeasts that whilst needing management and infrastructure impose no additional ingredient cost per se.

9% ABV IIPA (ingredient costs)
Malt: £0.14 per pint
Hot side hops (assuming 6g/L whirlpool addition, fairly normal for Cloudwater): £0.10 per pint
Yeast (assuming 24hL pitching quantity used for 6 generations): £0.02 per pint
Cold side hops (assuming 25g/L as is normal for Cloudwater): £0.51 per pint
Packaging materials (BBT CIP and CO2 purge/carbonation/KeyKeg): £0.26 per pint
Total: £1.03 per pint

Not quite the same production costs, so not quite the same price on the bar.

When there's celebration of the price of a traditional bitter and decrying of the price of the modern IIPA (often around £4 per pint, and £12 per pint respectively), I wonder how much of this back story about such varied costs of production is present in the foundation of any outrage. Of course the ingredient costs above don’t include beer duty, which for a brewery our size would be around 23p and 51p per pint (based on the strengths above) respectively, and assume similar operational costs, and exclude other such costs which further the divide in on the bar prices.

Wait, So Breweries Aren’t Raking It In?!

Very likely not. Whether we discuss a traditional brewery making cask bitters and struggling against market forces squeezing the acceptable price for cask beer, or a brewery somewhat more like us, a modern brewery looking to satisfy the modern beer drinker with fresh and very hoppy beer, making enough margin to keep the wheels turning is a struggle.

From my knowledge of mark up strategies in distribution (where at least one of our customers struggles to serve their customer base and pay themselves a fair wage too), to my knowledge of bar mark ups and margins there are few people making much over a decent return on invested resources. Exceptions exist with high volume (large brewery output/nationwide distro/high bar catchment area or multiple sites) or high margin sales (high percentage of self retail direct from the brewery – worth noting here that the UK barely achieves 10% of production as self retailed beer at best, as opposed to examples in the US that climb as high as 100% of production output as self retail). I can’t speak with conviction of the positive effects on profits distros might see by offering deals in exchange for permanent or rotating taps, or for busy bars serving a customer base with higher than average incomes, but I do get a sense that the majority of people in the industry in the UK have rather humble and healthy profit ambitions.

What About When Something Goes Wrong With Pricing?

For us as a producer that operates with very little variation in wholesale price, to the bar that makes sense of their mark up strategy, to the consumer who ultimately pays the money that feeds all the way back to farmers and brewery equipment manufacturers, it is very much in our mutual interests to offer good, reliable value. But there are times when we have seen our beer on a bar for a price that we strongly believe to be unfair to everyone in the chain, and we are grateful to be tipped off so that we can investigate. We know we are sometimes a popular brand, and we are painfully aware we simply can’t keep up with demand, but neither realities are anywhere near adequate excuses for charging a premium for our beer, and taking more money than needed out of any drinkers pockets.

I’ll repeat my invitation to let us know if you see a price or prices that seem out of the ordinary. The price drinkers end up paying for our beer is our issue, even when it’s not entirely our doing. But I’d like to add that in the interests of recognising the range of operational strategies (same mark up per litre, capped mark ups for stronger beers, loss leading or chipping on a premium for in demand short supply beers, etc), and giving room for human error (anywhere in the chain) it’s probably best to flag up concerns privately, rather than reaching to name and shame when any doubts remain as to why a particular price is what it is.

Of course our baseline loyalty as a brewery are the drinkers interests, followed by those of our team, and our immediate trade customers. We have enough battles to face without devoting out of hours resources to averting twitter storms, so whilst I’m not suggesting you ever remain silent in the face of possible injustice, please be sure there is injustice in the first place. We are ever deeply on your side, and will do everything in our power to influence reasonable and responsible pricing, through to and including cutting off any trade accounts we suspect of misrepresenting the value we work hard to build into the on the bar price of our beers. 

Direct From Producer Pricing

Some of our customers have commented that we ought to be cheaper than elsewhere for cans or draft pours of or beers. Fair comment, but I’d encourage a broad view of our concerns around not starting a price war with our local trade customers, not having the capacity (in both retail hours and physical space) to satisfy local demand should we succeed in bringing many more people to buy direct at this time, and further concerns of wanting to protect our margin (and the margin of other breweries that may not have the production volume or percentage of self retail sales to sustain keener retail margins) until we develop our new retail space.

I’m confident that once we are up and running in our new space in Unit 9 we may spot opportunities to deepen the value we offer across the bar for both draft pours and take out cans.

I’ll round things up by repeating something I said to one of the many reporters I spoke to last week, that I’m really happy to see drinkers looking out for each other, and the reputation of breweries they support by raising questions about value. It’s a great sign of just how mature our still young modern beer marketplace is. Keep up the good work folks – we’re all in this together, and we are committed here at Cloudwater to doing our bit to offer as many people as our production allows the best value for bold flavour experiences!

For Some Craft Brewers, Sales Are Tapping Out


U.S. beer companies are bracing for a shakeout after years of strong gains


Some of the country’s biggest craft brewers are struggling with falling sales, hurt by a glut of competitors crowding retail shelves and moves by megabrewers to scoop up some of their rivals.

“It is more competitive than it has ever been,” said Ken Grossman, founder and chief executive of Sierra Nevada Brewing Co., the No. 2 U.S. craft brewer by volume.

His company’s retail-store sales were off 7.5% this year as of July 16, according to Beer Marketer’s Insights. The brewer’s shipment volumes fell 6.9% in 2016—its first decline since Sierra Nevada was founded in 1980. Just two years ago, the Chico, Calif., company logged record sales after opening a second brewery in North Carolina.

After years of strong gains, American craft brewers are now bracing for a shakeout. Shipments are falling for many independent brewers stuck in the middle between local niche brands and competitors that were bought by heavyweights such as Anheuser-Busch InBev BUD 0.22% and Molson Coors.

Besides Sierra Nevada, those losing ground include Sam Adams maker Boston Beer Co. , the biggest independent brewer, as well as smaller producers such as F.X. Matt Brewing Co., which brews Saranac in upstate New York, and Abita Brewing Co. in Louisiana, according to Beer Marketer’s Insights.

Benj Steinman, president of the tracking firm, said many craft brewers trying to push into regional and national markets are finding they hit a wall once they surpass 100,000 barrels. Some have stretched themselves too thin and lost ground in their home markets, while others took on too much debt to expand brewing capacity, brewers said. As they expand, they also lose the cachet of being a local brand—something many consumers seek out.

“They used to say a rising tide lifts all boats. And it is definitely not that now,” Mr. Steinman said. His firm estimates that shipment volumes declined for 16 of the top 36 craft-style U.S. brewers last year.

The troubles have continued this year. Retail-store sales of craft-style beers—from brewers big and small—fell $143 million to $2.3 billion in the first half of 2017, according to data from Nielsen. Craft beer shipments grew for years in the double digits, even as overall beer sales fell. But craft demand began to decelerate in 2016.

“We really had to put our big-boy underpants on and up our game,” said Sam Calagione, founder and CEO of Dogfish Head Craft Brewery in Milton, Del. The company’s volumes were flat in 2016, but have grown 27% so far this year, he said. “Is it too crowded, the market? We’re almost at the pace of two new breweries a day. That pace isn’t sustainable.”

There were 5,562 total breweries in the U.S. as of June 30, up roughly 900 from the previous June, according to the Brewers Association.

Shipments are still rising for many of those craft brewers that sold themselves to industry heavyweights, including Lagunitas, which was bought by Heineken in May; Goose Island, owned by AB InBev since 2011; and Ballast Point, which was purchased by Constellation Brands Inc. for $1 billion in 2015. Those brands benefit from their parent companies’ distribution networks, capital and marketing.

‘Local is still growing, and the larger ones are having problems’

—Ryan Sentz, co-founder of Funky Buddha Brewery


National Independent Craft Brewers Continue to Struggle

Stone Brewing CEO After Laying Off 5% of Its Employees: "I Have Been Charged With Keeping Stone Independent"

Brewers, journalists, and beer drinkers alike are abuzz over the news that Stone Brewing laid off about 5 percent of its workforce last week. At least 55 employees, some of whom had been with the company for over a decade, have been affected, though all were given a "substantial notice period, including 60 days paid salary (more for those with extensive tenure) and career-transition services."



11-Hour Lines for a New Ale? Fans Wait, Breweries Worry


Shortly before 11 on a Friday night in January, Justin Saurer parked his car on a gritty Brooklyn street that was best known for its McDonald’s and proximity to the toxic Gowanus Canal until Other Half Brewing Company opened in 2014.

Mr. Saurer craved a first crack at the special India pale ale that Other Half had created to celebrate its third anniversary. But the cans wouldn’t go on sale until the brewery opened at 10 a.m.

What was 11 hours, given his plum perch?

“When you’re the first one here, you don’t have to worry about parking,” Mr. Saurer, 38, said the next morning. A firefighter and a father of an infant daughter at home, he drove in from Amityville, on Long Island, with a sleeping bag. “I have the best sleep in the car,” he said. “There are no kids screaming.”

The frigid daybreak had revealed a high-spirited line hundreds of beer lovers deep, snaking around several blocks. Among those waiting, many of them drinking cans from coolers, were Michael Roulhac and his wife, Kim Roulhac, who had left Richmond, Va., at 1 a.m. and driven straight to Brooklyn. “We’re road warriors,” said Mr. Roulhac, 40, who regularly makes the round trip to Other Half.

Scenes like this play out nearly every day across the country as supplicants (“kind of like a beer brotherhood,” Mr. Saurer said) queue up outside breweries for new releases of I.P.A.s — in particular, a cloudy, unfiltered New England style that is loved for its flavors of citrus and tropical fruit.

“People are fanatical about it, to the point they don’t want to drink anything else,” said Sam Richardson, the brew master and a founder of Other Half. “Everyone has this expectation of getting hazy I.P.A.s in a can directly from a brewery.”

The fan base for these special-edition ales has been growing since the early 2010s, creating excitement and a new revenue stream for the craft-beer business. But the waiting lines for each new release have become so unwieldy that many brewers are taking steps to contain or manage them.

Modern Times Beer in San Diego and Threes Brewing in Brooklyn presell cans online and provide pickup windows for the beer. Maine Beer Company and Hoof Hearted Brewing in Marengo, Ohio, sell advance tickets to limit crowds.

“There were a couple times where we thought we’d have a riot,” said Trevor Williams, the brewer and an owner of Hoof Hearted.

Monkish Brewing Company in Torrance, Calif., resisted the pale-ale madness for its first four years, specializing in Belgian-inspired beers and even posting a sign declaring, “No MSG, No I.P.A.” But last year it caved to popular demand and started canning fruity I.P.A.s like its Sip the Juice.

The owner and brewer, Henry Nguyen, expected a line but not a crowd of more than 300 enthusiasts in his parking lot at 3 a.m. “People were camping out,” Mr. Nguyen said.

With each new release, fans would arrive earlier and earlier, when the brewery was still open. “They would set up chairs, go inside and drink and come back out and spend the night in the parking lot,” he said. “It was about 15 hours of waiting, sometimes for only six cans.”

To curb that behavior, Monkish began in September to release ales at unpredictable times, announcing them on social media with only a few hours’ notice. All the same, he said, he spots cars of people lurking outside, waiting for word, every day. “People just show up,” he said.

Tree House Brewing Company in Monson, Mass., posts daily Twitter updates on which brews are available and their quantities, but it sometimes maintains silence to dampen demand. Most small brewers, after all, would rather sell to a broad audience than to see supplies swallowed up by a few zealous shoppers.

“You have this beer that you’ve busted your butt for, had steam in your face, gotten blasted with hops, and everybody at the brewery is jazzed — and you can’t tell anybody,” said Nate Lanier, a founder and the head brewer. “It’s the weirdest thing.”

Still, on most days, more than 2,000 people visit Tree House, which makes a transaction every seven seconds during the most hectic days. When the brewery announces on Twitter that the day’s stock is running low, Mr. Lanier said, “all walks of nature pop out of their car and sprint across the parking lot.” From men in suits to older women, he said, “it touches all facets of life.”

As the breweries have become more creative at managing waiting lines, so have the customers.

The line at Tired Hands Brewing Company in Ardmore, Pa., is notable for what’s lacking: people. The hordes leave chairs as placeholders, then go inside to drink until sales begin, an arrangement that grew organically. “We don’t encourage or discourage chairs,” said the brewer and owner, Jean Broillet IV.

But the brewery forbids chairs before noon and polices the lines, 800-strong during the frenzy for its Milkshake I.P.A.s. “It’s a phenomenon, and if you want to work with it,” it will work for you, Mr. Broillet said, adding that a local hairstylist and employees of a sushi restaurant hit the line to drum up business.

Some beer fans prefer not to wait, hiring professional line sitters like Same Ole Line Dudes, several of whom were stationed at Other Half’s recent release in Brooklyn.

The prize is not just beer. There are bragging rights for those who post photos of their haul on Instagram. Others trade the ales with fellow beer lovers.

Brewers put up with the fuss because the lines are economic lifelines. On-premises sales cut out the middleman distributors and increase profits, letting a beer maker control its path in a crowded field. “This is the best thing that’s happened to breweries in the 30-plus years of the craft-beer revolution,” Mr. Richardson said.

But the long lines can be a migraine as well as a boon.

In November, the Longmont, Colo., outpost of the Oskar Blues Brewery peddled cans of Ten FIDY Imperial Stout aged in bourbon barrels. They sold out within two and a half hours because the brewery had failed to limit sales per person.

“We had some people drop, like, $3,200 on beer,” said Chad Melis, its marketing director.

A 12-can limit was in place for a release at the brewery in December. “It was negative 5 degrees here in Colorado, and we had up to 400 people outside,” Mr. Melis said. “We had a meeting the night before, and we were like: ‘Hey, this is not good. There are serious health risks.’” (Customers congregated inside before the orderly sales began.)

An often-suggested solution — make more beer — is usually unfeasible. “It’s all we can package,” said Mr. Nguyen of Monkish. “Our goal is not to be a big brewery.”

To make waiting for its in-demand Swish double I.P.A. less onerous, the Bissell Brothers brewery in Portland., Me., upgraded its internet speeds to trim seconds off transactions, and it serves free doughnuts and coffee. “If people are going to wait in the cold, we need to do something for them,” said Peter Jensen Bissell, the business director and an owner.

As the clock inched toward the start of sales at Other Half in Brooklyn, Kevin Weinisch was tailgating around his station wagon, drinking a beer. “You party in the morning, then dad in the afternoon,” said Mr. Weinisch, 36, a traffic engineer who planned to drive home later to Patchogue, N.Y., to be with his two children.

The first in line, Mr. Saurer, was ready to buy his cans and leave. “After waiting here all night, all I want to do is go home,” he said. “I’m broken.”

Hangover Series: "Ruh-Ro!"...... Legal Weed Is Hurting the Beer Business

Major brewers like MillerCoors have seen the largest drops in sales.

In states that have legalized recreational marijuana, more people are looking to take a bong hit than sip on a hoppy brew.

Research firm Cowen & Company analyzed the state of the beer industry in Colorado, Oregon and Washington—states where both recreational weed is legal and craft beer has become popular. In those states, beer markets have “collectively underperformed” over the last two years, trailing behind beer sales around the country, industry websiteBrewbound reported.

“With all three of these states now having fully implemented a [marijuana] retail infrastructure, the underperformance of beer in these markets has worsened over the course of 2016,” the researchers wrote.

Domestic brewers like Anheuser Busch-InBev and MilllerCoors have seen the largest drops. Sales volume of premium brews like Coors Light and Bud Light dipped by 4.4%, while economy brews—the regular forms of mainstream beers like Budweiser or Coors—dipped by 2.4%.

Craft beer also took a hit: Though it continues to grow, smaller breweries aren’t performing as well as their counterparts around the nation. Weed’s popularity has also started to affect breweries’ bottom lines: Individual yearly spending on legal weed has outpaced that of alcohol, a survey found in July.

The shift is most prominent in Denver, where total beer volumes plummeted by 6.4%. The gravitation toward legal weed particularly noticeable in 18 to 25 year-olds, who are using more cannabis yet have also stopped drinking as much alcohol, according to government data.

Hangover Series: Rise of Artificial Intelligence (what will all the people do?)

Marc Benioff: We're on the cusp of an AI revolution 

published in World Economic Forum

Over the last 30 years, consumers have reaped the benefits of dramatic technological advances. In many countries, most people now have in their pockets a personal computer more powerful than the mainframes of the 1980s. The Atari 800XL computer that I developed games on when I was in high school was powered by a microprocessor with 3,500 transistors; the computer running on my iPhone today has two billion transistors. Back then, a gigabyte of storage cost $100,000 and was the size of a refrigerator; today it’s basically free and is measured in millimeters.

Even with these massive gains, we can expect still faster progress as the entire planet – people and things – becomes connected. Already, five billion peoplehave access to a mobile device, and more than three billion people can access the Internet. In the coming years, 50 billion things – from light bulbs to refrigerators, roads, clothing, and more – will be connected to the Internet as well.

Every generation or so, emerging technologies converge, and something revolutionary occurs. For example, a maturing Internet, affordable bandwidth and file-compression, and Apple’s iconic iPhone enabled companies such as Uber, Airbnb, YouTube, Facebook, and Twitter to redefine the mobile-customer experience.

Now we are on the cusp of another major convergence: big data, machine learning, and increased computing power will soon make artificial intelligence, or AI, ubiquitous.

AI follows Albert Einstein’s dictum that genius renders simplicity from complexity. So, as the world itself becomes more complex, AI will become the defining technology of the twenty-first century, just as the microprocessor was in the twentieth century.

Consumers already encounter AI on a daily basis. Google uses machine learning to autocomplete search queries and often accurately predicts what someone is looking for. Facebook and Amazon use predictive algorithms to make recommendations based on a user’s reading or purchasing history. AI is the central component in self-driving cars – which can now avoid collisions and traffic congestion – and in game-playing systems like Google DeepMind’s AlphaGo, a computer that beat South Korean Go master Lee Sedol in a five-game match earlier this year.

Given AI’s wide applications, all companies today face an imperative to integrate it into their products and services; otherwise, they will not be able to compete with companies that are using data-collection networks to improve customer experiences and inform business decisions. The next generation of consumers will have grown up with digital technologies and will expect companies to anticipate their needs and provide instant, personalized responses to any query.

So far, AI has been too costly or complex for many businesses to make optimal use of it. It can be difficult to integrate into a business’s existing operations, and historically it has required highly skilled data scientists. As a result, many businesses still make important decisions based on instinct instead of information.

This will change in the next few years, as AI becomes more pervasive, potentially making every company and every employee smarter, faster, and more productive. Machine learning algorithms can analyze billions of signals to route customer service calls automatically to the most appropriate agent or determine which customers are most likely to purchase a particular product.

And AI’s applications extend beyond online retail: Brick-and-mortar stores still account for 90% of retail sales, according to the consultancy A.T. Kearney. Soon, when customers enter a physical store, they will be greeted by interactive chat-bots that can recommend products based on shopping history, offer special discounts, and handle customer-service issues.

Advances in so-called “deep learning,” a branch of AI modeled after the brain’s neural network, could enable intelligent digital assistants to help plan vacations with the acumen of a human assistant, or determine consumer sentiments toward a particular brand, based on millions of signals from social networks and other data sources. In health care, deep-learning algorithms could help doctors identify cancer-cell types or intracranial abnormalities from anywhere in the world in real time.

To deploy AI effectively, companies will need to keep privacy and security in mind. Because AI is fueled by data, the more data the machine gains about an individual, the better it can predict their needs and act on their behalf. But, of course, that massive flow of personal data could be appropriated in ways that breach trust. Companies will have to be transparent about how they use people’s personal data. AI can also detect and defend against digital security breaches, and will play a critical role in protecting user privacy and building trust.

As in past periods of economic transformation, AI will unleash new levels of productivity, augment our personal and professional lives, and pose existential questions about the age-old relationship between man and machine. It will disrupt industries and dislocate workers as it automates more tasks. But just as the Internet did 20 years ago, AI will also improve existing jobs and spawn new ones. We should expect this and adapt accordingly by providing training for the jobs of tomorrow, as well as safety nets for those who fall behind.

AI is still a long way from surpassing human intelligence. It has been 60 years since John McCarthy, a computer scientist and nominal father of AI, first introduced the term during a conference at Dartmouth College, and computers have only recently been able to detect cats in YouTube videos or determine the best route to the airport.

We can count on technological innovation to continue at an even more rapid pace than in previous generations. AI will become like electrical current – invisible and augmenting almost every part of our lives. Thirty years from now, we will wonder how we ever got along without our seemingly telepathic digital assistants, just as today it’s already hard to imagine going more than a few minutes without checking the 1980s mainframe in one’s pocket.

Brewery Builds a Pipeline, Sending Beer Lovers Into a Froth

Belgian project will carry 1,500 gallons an hour; requests for home taps fall flat.

BRUGES, Belgium— Xavier Vanneste, heir to a dynasty of beer brewers in this medieval city, had a pipe dream.

When he woke up and looked out of his window one spring morning, he saw workers on the street laying underground utility cables in front of his house, situated on the same ancient square as the brewery he runs.

“I immediately realized this was the solution,” Mr. Vanneste said.

Beer pipeline 

The brewery’s truck fleet had been bottling up the city’s narrow, cobblestone streets. Matters had been getting worse since 2010, when the brewery moved its bottling facility out of town.

His brain wave? A beer pipeline.

“It all started as a joke,” said Mr. Vanneste. “Nobody believed it was going to work.”

Four years later, the pipeline is just weeks away from completion. It stretches 2 miles from the brewery, De Halve Maan, or The Half Moon, in the city center to the bottling plant in an industrial area. It will be able to carry 1,500 gallons of beer an hour at 12 mph. Hundreds of truck trips a year will no longer be necessary.

Not long after the project was announced, the burghers of Bruges started dreaming of siphoning off personal supplies.

A local satirical TV show tricked people living near the route into believing that beer taps could be installed in their houses. Mr. Vanneste said it would be impossible to illegally tap into the polyethylene tubes, which he said are stronger than steel.

The citywide attention gave Mr. Vanneste another idea. He’d partly fund the €4 million ($4.5 million) investment by offering lifetime supplies of beer. Attracted by the liquid returns, brew-lovers sank some €300,000 into the project.

They were offered three options. The most expensive “gold” membership, which costs €7,500, entitles the holder to an 11-ounce bottle of Brugse Zot beer (retail price, €1.70) every day for life, along with 18 personalized glasses.

One of the 21 people who signed up for that was Philippe Le Loup, who runs a restaurant on the scenic Simon Stevin square, a few hundred yards from the pipeline. Mr. Le Loup, whose establishment serves about 1,850 gallons of Brugse Zot a year, said he would have preferred a direct tap into the pipeline. “It would have saved me a lot of keg-dragging,” he said.

Mr. Le Loup also bought bronze memberships, at €220 apiece, for each of his 12 employees, entitling them to a 25-ounce bottle of beer every year for life. “In total, I invested over €10,000,” said Mr. Le Loup, 35 years old, who was born in the city. “I calculated that if I pick up my free beers for 15 years, my investment will be paid back.” He said he plans to drink most of the beer himself.

A local satirical TV show tricked people living near the route into believing that beer taps could be installed in their houses. Mr. Vanneste said it would be impossible to illegally tap into the polyethylene tubes, which he said are stronger than steel.

The citywide attention gave Mr. Vanneste another idea. He’d partly fund the €4 million ($4.5 million) investment by offering lifetime supplies of beer. Attracted by the liquid returns, brew-lovers sank some €300,000 into the project.

They were offered three options. The most expensive “gold” membership, which costs €7,500, entitles the holder to an 11-ounce bottle of Brugse Zot beer (retail price, €1.70) every day for life, along with 18 personalized glasses.

One of the 21 people who signed up for that was Philippe Le Loup, who runs a restaurant on the scenic Simon Stevin square, a few hundred yards from the pipeline. Mr. Le Loup, whose establishment serves about 1,850 gallons of Brugse Zot a year, said he would have preferred a direct tap into the pipeline. “It would have saved me a lot of keg-dragging,” he said.

Mr. Le Loup also bought bronze memberships, at €220 apiece, for each of his 12 employees, entitling them to a 25-ounce bottle of beer every year for life. “In total, I invested over €10,000,” said Mr. Le Loup, 35 years old, who was born in the city. “I calculated that if I pick up my free beers for 15 years, my investment will be paid back.” He said he plans to drink most of the beer himself.

“When I’m 50, I will make profit,” he said.

Last year, De Halve Maan exported about 200,000 liters of its most popular beers, Brugse Zot and Straffe Hendrik, to the U.S., double the 2014 figure.

Ronald Martin, a music teacher, home brewer and De Halve Maan fan in Buffalo, N.Y., was one of 76 foreigners to pitch in.

When he visited Bruges, he was convinced the pipeline was happening. He wanted to be the first American to take part. “When I walked into the brewery, the secretary had a phone call from another American,” Mr. Martin recalled. He immediately went to get cash and signed up.

“When you talk about a beer pipeline, everyone thinks you’re joking,” he said. “But it’s a serious thing.”

A few European sports arenas have aboveground pipelines. In Randers, Denmark, a pipeline under a street carries beer to some bars. The annual Oktoberfest beer festival in Munich, Germany, pipes beer to some tents. In Cleveland, Ohio, the Great Lakes Brewing Company moves beer through a pipe from its brewery to a bar across the street.

The city of Bruges, which last year attracted 6.6 million tourists, has long been looking for solutions to reduce traffic in its historic center—a Unesco World Heritage site known for its canals and medieval architecture.

“The pipeline is a breakthrough,” said Renaat Landuyt, mayor of Bruges, which was the economic capital of Northern Europe between 1200 and 1400.

Mr. Landuyt said he would even consider constructing pipelines for other goods, including chocolate, one of Belgium’s other precious commodities. “Everyone who proposes alternative means of transport is welcome here,” he said.

The centuries-old brewing company, the last one remaining in the city center, said its new pipeline wouldn’t affect the taste of its award-winning beers.

Most of the pipe runs about 6 feet underground, but in some spots it goes about 100 feet under. On a recent day, workers were digging holes, connecting tubes and replacing cobblestones on Zonnekemeers, a street near De Halve Maan, attracting the attention of many bystanders.

“The beer pipeline has become a sight,” said Alain De Pré, who oversees the construction of the pipeline. “People are taking more pictures of this than of the monuments around us.”

Sylvie Melkenbeek, a 78-year-old retiree, was enjoying her espresso on a sunlit terrace in front of De Halve Maan as horse carriages rolled by carrying tourists. Ms. Melkenbeek, whose last name literally translates as “stream of milk,” said she would much prefer a pipeline filled with coffee.

“I don’t like beer,” she said.


Pabst Raids Dad’s Beer Fridge as It Looks to the Future

I read this article in the NYT and was left with more questions than the article answered. Curious....

LOS ANGELES — Eugene Kashper looks the part of someone who likes to throw back a few P.B.R.s from time to time — hipster glasses, scruffy facial hair, faded T-shirts and jeans and well-worn sneakers.

Talk to him for a few minutes in his office here, though, and you hear a shrewd businessman who blithely weaves in discussion about market shares, stock keeping units and distribution channels.

The talk is not all talk, either. Mr. Kashper, 46, is a millionaire many times over, having made a fortune reviving several all-but-moribund Eastern European breweries.

Now he’s focused on a beer project on another continent. The project is Pabst Brewing Company, which declares itself the largest American brewery. He bought Pabst in 2014 with the private equity firm TSG Consumer Partners for a reported $700 million, a deal that instantly made him one of the most-watched figures in the beer industry.

It also made people wonder: What in the world was he doing?

Pabst Blue Ribbon, far and away the company’s top-selling beer, had a loyal following among skate punks and ski bums, and some currency in hipster enclaves. But it was still classified in the industry as a “sub-premium” beer and business was not booming. The company’s share of the beer market hovered in the low single digits.

“Eugene has a million ideas and a lot of energy, and he’s very engaging,” said Benj Steinman, publisher of Beer Marketer’s Insights, a trade publication, and a longtime observer of the beer market. “But I did wonder what he saw in Pabst.”

Mr. Kashper says he saw a big opportunity. “Beer, you know, it’s just fun,” he said. Now chief executive, he is pushing an aggressive effort to leverage the company’s distribution network, a part of the business that had been built up under previous owners, and dusting off old beer recipes and brands to capitalize on consumer desire for local products.

“We’re ideally suited for the whole locavore thing,” he said.

Whether he can pull it off is another question. After decades of consolidation, two big players, Anheuser-Busch InBev and Molson Coors, last year controlled roughly 70 percent of the American market. Pabst was in fifth place, with 2.6 percent.

But Mr. Kashper offers no hint of doubt, and his partners say he has already put the company on the right path.

Brian Krumrei, a managing director at TSG, said profitability at Pabst increased by 50 percent in the first year of the firm’s ownership, though he would not disclose dollar figures.

“Eugene is a pretty passionate guy, and that has permeated the culture — the 400 people who work at Pabst today are pretty passionate about it,” Mr. Krumrei said. “We view that as a huge positive for the business and its potential.”

Born in Russia, Mr. Kashper grew up in New Jersey speaking Russian and English at home. After graduating from Columbia University in 1992 with a degree in East Asian studies, Mr. Kashper, an American citizen, went to work for Ernst & Young, which quickly capitalized on his language skills by sending him to Moscow.

Soon after that move, he left Ernst & Young and moved into the beer industry, getting a job as the lead salesman in Eastern Europe for Stroh’s, an old beer brand coincidentally now under the Pabst umbrella. He then joined forces with two Russian brothers, Alexander and Arkady Lifshits, and in 1998 they co-founded the Ivan Taranov Breweries.

After a series of deals in Russia and Eastern Europe that netted the partners hundreds of millions of dollars, the three men created Oasis Beverages, a brewer and distributor based in Cyprus. Oasis also serves as an umbrella for other offshore investment vehicles they control.

In September 2014, Oasis was announced as the buyer of Pabst, together with TSG. News outlets had a field day, portraying the deal as a Russian takeover of a quintessential if somewhat down-market American beer.

But a couple of months later, a different news release went out, saying that Oasis had never been the buyer of Pabst. Mr. Kashper, it said, was the buyer.

Why the mistake occurred in the first place and why it took two months to set the record straight remain mysteries. But in so many ways, it matched the history of Pabst, which is also filled with unusual twists and turns.


Founded in Milwaukee in 1844 by Jacob Best Sr., the brewery had a pretty good run for more than a century. But in the 1980s, sales began sliding, and in 1985 Pabst landed in the hands of Paul Kalmanovitz, a beer entrepreneur from California. He died shortly after acquiring the brewery — but not before he had taken a hacksaw to costs.

Mr. Kalmanovitz left his money to his pets and his breweries to a charitable foundation, which sold the company to the billionaire investor C. Dean Metropoulos in 2010, when it had roughly $500 million in sales. By that time, Pabst had contracted production of its beers to MillerCoors and spent virtually nothing on marketing. Mr. Metropoulos also moved the company from Chicago to Los Angeles.

The lack of marketing became a sort of renegade promotion in and of itself, increasing Pabst’s appeal among consumers who were turned off by advertising and looking for beer that was more “authentic” — even though Pabst no longer made its own beer. Sales rose, at least slightly.

“Forty years on, many brands had ground to a halt in terms of increasing market share, and that’s where the business stands today — the biggest beer companies aren’t selling more beer,” Mr. Kashper said. “Pabst was.”

The trick now will be to take advantage of those strengths. For one thing, the company is opening a microbrewery and tasting room at the site of the former Pabst brewing complex in Milwaukee, where it will serve up special selections.

Mr. Kashper is also looking to sell more of the 77 beer brands and the recipes it owns — many of which have not been brewed in decades — and ride the coattails of the craft beer craze. Pabst will soon start producing Rainier Pale Mountain Ale at a brewery in Washington State, for example, using a recipe derived from the one for a Rainier beer that was last brewed in the 1930s and 1940s. Other brands include Lone Star, Schlitz, Olympia, National Bohemian, Colt 45, Schmidt and Pearl.

“We can take advantage of the heritage embedded in our brands,” Mr. Kashper said. “We don’t have to spend money convincing consumers our brands are authentic — they already know they are.”

Stephen Rannekleiv, an investment analyst at Rabobank, said these old brands might put Pabst in a good position.

“Pabst in the past has been able to buck trends by playing up its retro feel and being a little offbeat, and those same things are helpful today,” he said.

The company is also putting more energy into leveraging its distribution system, which had been nurtured and honed by Mr. Metropoulos.

Serendipitously, he found one hit to pump through the system right after buying Pabst, in Not Your Father’s Root Beer, a “hard” or alcoholic soda made by Small Town Brewery that became the beer industry’s sleeper success story of 2015. The product helped raise Pabst’s overall sales in 2015 by 20 percent and pushed its market share up by a percentage point — even as sales of its main brand declined.

But Mr. Kashper, with his faded Pabst Blue Ribbon logo T-shirts and dilapidated sneakers, says he’s not going to forget about the company’s primary brand, either.

“We’ve become an affordable, lighter beer that appeals to people who like craft beer,” Mr. Kashper said. “And, look, selling sub-premium beer is a very profitable business for us, no matter what else we may be doing.”