Ambitious Brew: The Story of American Beer (43 page)

The partners, a trio once John Scahill joined the venture, leased a hundred-year-old structure that fronted the highway and built the brewery out back. By that time, New Albion had failed, and the Mendocino partners, who had no illusions about their brewing skills, bought McAuliffe’s equipment and hired McAuliffe and Barkley to operate the brewery.

Mendocino Brewing’s beer traced its ancestry to McAuliffe’s hearty ale and to the “Thunder Beer” that Laybourn and Franks used to brew for their friends. As for the name, the owners wanted something that paid homage to the time and place. They settled on Red Tail Ale, in part because of the beer’s color. But the main inspiration came from a song much loved by northern Californians, “The Redtail Hawk,” a simple hymn to the “golden rolling hills” of California, where the redtail hawk “writes songs across the sky.” The peregrine falcon served as namesake for their second beer, a lighter, more delicate ale. An image of a black hawk adorned bottles of the brewery’s stout, and Blue Heron honored a nearby preserve for that bird. The labels, vivid ovals of color and life, depicted their respective creatures with wings spread in triumphant salute.

An enthusiastic and appreciative crowd packed the place when it opened to the public on August 14, 1983. California’s first brewpub was in business: a beer garden and brewhouse that would warm the hearts of Phillip and Jacob Best.

O
N THE OTHER SIDE
of the country, a sixth-generation descendant of German brewers chose a different approach to reinventing the industry. The family of Charles James Koch—“Jim” to one and all—spanned the history of beer in America. Jim’s great-great-great-grandfather, a brewer by trade, emigrated from Germany in the mid-nineteenth century and settled in the Soulard district of St. Louis, where son Louis founded the Louis Koch Brewery. The next three generations of Kochs (pronounced “Cook”) worked in beer as well, including Jim’s father, Charles Joseph Koch, Jr., who settled near Cincinnati.

The elder Koch graduated from brewing school in 1948—just in time to see one Ohio brewery after another close its doors. As the 1950s wore on and breweries vanished, Charles Koch traveled farther from home to find work as a brewmaster. To hold his last job in the industry, Koch left home on Sunday and drove back Wednesday, arriving late to spend a few hours with his three children. On Thursday he left the house before daybreak and returned again Friday for an abbreviated weekend. Jim, born in 1949, realized early on that he, the oldest son of the sixth generation, would not make a life in beer.

But Charles Koch taught his children to appreciate what was left of the fine Cincinnati beers, and to distinguish good brew from bad. This is green, he’d say; not lagered long enough. This is infected. This was overpasteurized. He taught them how to enjoy beer as well: You may drink as much as you want, he told them, but you must drink it with me. One day he brewed beer at home with his three children, so they would understand what he did all day long.

Jim graduated from high school in 1967. Many of his peers joined communes or departed for Haight-Ashbury, but Koch headed east, into the heart of the nation’s establishment: Harvard. Cambridge socked him in the gut with a culture punch. There’d been no sex, drugs, and rock and roll back in Cincinnati, at least not any that he’d noticed. Harvard Square was awash with all three. Awash, too, with East Coast, oxford-shirt, loafers-and-no-socks, prep-school culture that bore no resemblance to the world he’d known back in Ohio. He rose each morning at 5:30 and, while his trust-fund dorm mates snoozed, Koch delivered newspapers, “schlepping bags of papers up and down stairs at apartment buildings.” Then he returned to the dorm, donned a jacket and tie—required attire—and ate breakfast.

After graduation, he applied to the four-year Harvard law/ business program. Koch figured that the joint degrees would get him somewhere, and, at the very least, law school would provide more of the liberal arts—based education he’d enjoyed for the past four years. It did not. Law school, he discovered, was nothing more than “vocational school” for the ambitious. Two years into the program he sensed that he was careening toward a place he was not ready to go. Once you launch your career, his dad reminded him, you don’t get summers off.

It was time to slow down. Koch took a leave and spent the next three years working odd jobs in between stints with Outward Bound, teaching people how to climb mountains and camp in winter conditions. He returned to Harvard, married in 1976, graduated in 1978, and accepted a position at Boston Consulting Group.

BCG pulsated with intellectual excitement thanks to founder Bruce Henderson, who devoted his career to challenging the paradigms of basic economics. He expected his troops—talented, smart, imaginative people like Jim Koch—to rethink basic business models, and to employ creative thinking to solve even the smallest problems. Koch was good at the work, and making more money than any of the five generations of firstborn Koch sons had dreamed possible. He was also dissatisfied. His clients, big names like General Electric and International Paper, were located outside Boston, so he spent most weeks on the road. His wife hated that he was not home at 5:30 every night. He knew that in another year or two, he might make partner. But did he want that? Did he want to wake up someday at fifty-five and regret this choice?

Jim Koch’s life became, in short, a nearly perfect example of the way the 1960s Zeitgeist had settled into Americans’ bones. A man of his father’s generation would have celebrated that kind of success and tucked his discontent, assuming he even noticed it, away in a dark, hidden corner. A woman of his mother’s generation would have accepted her husband’s long hours and travel. But that was back before life tumbled down a rabbit hole and several generations of Americans chased after it. Koch decided he had to get out while he could.

But what to do next? He didn’t want to work for a corporate behemoth. “When you think of the values that are associated with the survival and prosperity of the human spirit,” he said later, “they are not found in big corporations.”

The answer was all around him. By the early 1980s, microbreweries, as their proprietors were starting to call them, had become regular fodder for newspaper features. The story of New Albion, of Sierra Nevada, of the fifty-odd breweries and brewpubs that made up the craft beer industry, had been reported in the pages of the
New York Times,
the
Washington Post,
and
Newsweek.
Fritz Maytag’s beer was available on both coasts. “Yuppies,” as the press was fond of calling baby boomers with big incomes and a penchant for the expensive and exotic, were sitting in fern bars sipping $3 bottles of imported beer.

This beckoned a guy like Jim Koch, steeped as he had been since birth with a love and knowledge of brewing. Gradually the strands of his life merged: His years at Harvard and with Outward Bound and BCG had shaped his entrepreneurial vision. The industry that had fed his family for decades was reinventing itself on a daily basis. All of it, he decided, added up to “destiny.” Jim Koch, oldest son in his family, would continue the tradition. He would make beer.

Koch’s investigative and business instincts kicked in. He had to learn about this new wing of brewing and find some niche that he could call his own. He contacted Bill Newman, an Albany, New York, craft brewer, who generated income for his ailing business by offering a one-week course for people interested in commercial brewing. Koch paid his money and headed to Albany. He was not impressed. Newman’s beer had a shelf life of about a week; worse, it was inconsistent, which Koch knew doomed any brewer. Newman also sold only draft beer, a bad move in a nation where 80 to 90 percent of beer was packaged. Add in mediocre equipment and Koch could see the writing on that brewery wall.

Koch probed deeper. He discovered what Camusi and Grossman had learned a few years earlier: Most of the new brewers, many of them coming from homebrewing, were making bad beer, or, worse, inconsistent beer, and palming it off on a gullible public that could not tell the difference between fine beer and slop. Part of the problem was their equipment: Brilliant mechanics like Grossman and McAuliffe could get away with using homemade equipment fabricated from salvaged material, but for most brewers it spelled certain contamination and spoiled the beer.

Koch concluded that, Sierra Nevada and Anchor aside, microbrewing consisted of mostly bad beer and even more “marketing smoke and mirrors, marketing baloney.” The same was true, he discovered, of the import beer craze: People were paying big bucks for beer gone skunky and stale after thousands of miles of travel under poor conditions.

The McAuliffe—Grossman model of microbrewing became even less attractive once Koch had refined his vision: He wanted to brew from superior ingredients; he wanted to provide Americans with an alternative to skunky imports, bland corporate beer, and sour amateur microbrews; and he wanted it to be lager. In that he was nearly alone. Most craft brewers made ale, either because they shunned corporate lager’s reputation or because ale required less fermenting time. Lager brewing also demanded an investment in storage space and expensive cooling equipment.

Those two goals—to brew lager rather than ale and to produce a high-quality, fresh beer—led Koch to another conclusion. The means mattered less than the end, and if that were the case, he “didn’t feel the need,” he said later, to own an actual brewery. All he needed was access to professional-grade equipment and a professional brewmaster. A bit of research revealed that many old-line small and regional breweries were operating under capacity. Surely he could rent vat space and a brewmaster’s services from one of them.

In one swoop, Koch reduced his start-up costs by hundreds of thousands of dollars and eliminated the two bugaboos that felled so many microbrewers: bad equipment and undercapitalization. This was the BCG mind at work: Apply creative thinking to worn-out problems. Think so far outside the box that you end up back at go, reinventing the wheel, but making it better than anyone else.

The rest involved number-crunching and details: How much for bottles? How much for cartons? How much for malt and hops? How many barrels must he brew and sell to earn a profit? How many employees did he need to make and sell those barrels? His father found recipes in the attic of his family’s house in Ohio, a precious inheritance from great-great-grandfather Louis Koch.

Recipe and statistics in hand, Koch wrote a business summary for Boston Beer Company. “Sales of 5,000 barrels per year are required for attractive profitability based on the Boston market alone,” he informed potential investors. “I believe this will take 3—5 years, but appears to be achievable.” The sales pitch drew in about $140,000 from family and friends; he added another $100,000 of his own. That was enough to produce a sample batch, which he brewed on contract at Pittsburgh Brewing, a struggling small brewery with plenty of vat space for rent.

By early 1985, he was ready for phase two: rounding up some retailers. Koch believed the beer’s quality would sell itself: Based on his family’s nineteenth-century recipe, it was made only of the four basic ingredients—no adjuncts. Of himself, he was not so sure. Up to that moment, he said later, he’d “never sold anything in [his] life.” He packed his briefcase with six bottles of beer and some ice and set forth to launch his sales career at a bar not far from the BCG office. Koch unrolled his sales pitch and offered to pour a glass for the manager. The manager looked at the guy in the pinstriped suit, tasted the beer—and ordered twenty-five cases.

The rest, as the saying goes, was history. Koch and his sole employee, Rhonda Kallman (his secretary at BCG), traveled from one Boston tavern and restaurant to another, carrying beer samples and wooing owners and managers. Distributors refused to touch the stuff, so the pair rented a truck and delivered the beer, too.

That projection of five thousand barrels in five years? It took Koch and Kallman all of five months to hit the mark. A decade later, Koch was selling 700,000 barrels of lager a year and Boston Beer Company was the nation’s tenth-largest purveyor of beer.

Koch’s success was not hard to understand. His father had taught him the cardinal rules of brewing: consistency and quality. Koch was able to achieve both because he hired the services of a professional brewmaster who employed state-of-the-art brewing equipment. In that sense, he had more in common with, say, the Leinenkugel family than with most craft brewers. The Leinenkugels invested their slender profits in the services of a trained brewmaster and in replacing and repairing outmoded or damaged equipment because they understood that just one batch of bad beer would destroy their reputation and their livelihood.

But Koch’s decision to rent brewery space also provided him with a flexibility denied the owners of microbreweries. Because he had not invested in an actual plant, he could free some of his funds for marketing and promotion. Too, as his sales grew, he could increase production by renting more vat space. More conventional craft brewers were stuck with the equipment they had started with, and had to raise money before they could build new plants.

In the early days, Koch’s methods and success fueled animosity. As far as many craft beermakers were concerned, he was not a “real” brewer because his beer came out of a rented brewery, just as Carl Conrad’s Budweiser had back in 1876. “I think contract brewers should represent themselves as just what they are . . . ,” Ken Grossman argued, “brokers who are having their beers manufactured by another brewer. I don’t think they should put themselves over as brewers.” Kurt Widmer of Widmer Brewing in Portland, Oregon, accused contract brewers of being “more interested in making a buck than in actually brewing quality beer.” “I’m not sitting here in a three-piece suit telling you I’m a serious brewer,” Maine craft brewer David Geary, owner of D. L. Geary Brewing, told a reporter. “I’m dripping wet [with beer], wearing torn shirts and rubber boots up to my knees.”

Even Matthew Reich joined the chorus of outrage—ironic given that he had been the first of the new contract brewers, paying the Matt family in Utica, New York, to brew New Amsterdam Amber for him in 1982. He sold 44,000 cases in 1983,and doubled his sales the following year. That gave him enough money to open a brewery of his own in Manhattan’s Chelsea district—and disavow his own past. When questioned about contract brewing in