The Audacity of Hops: The History of America's Craft Beer Revolution (22 page)

Why did moneymen like Smart and Reich's venture-capital backers want in—especially when they might have little to no knowledge of beer and their focus was on high returns in a sector that remained largely a money loser? There were at least a couple of theories. Charlie Papazian thought it might have to do with a change in the public's perception of beer that was caused in large part by the craft beer movement (a recent AHA seminar had attracted more than thirty people who wanted to start craft breweries). Beer was no longer “a workingman's drink—take a six-pack to the ballgame, or sit and drink in
front of the TV.” There was now “this connoisseur thing. It's more acceptable at social gatherings to pull out beer instead of wine or drinking a cocktail.” David Bruso, a brewer at William S. Newman's operation in Albany, agreed and took the thought a step further. “We have a better-educated, better-traveled public that has been exposed to quality beer in Europe, and they want it here.” There was something to that “better-traveled” bit. The deregulation of the airline industry in the late 1970s (enacted the same month as the change that legalized homebrewing) led to double-digit percentage drops in international ticket prices. Routes increased, too. Residents of midsize American cities who had never had a direct flight found they could drive thirty minutes to the airport and then wake up less than half a day later in London, Paris, Brussels, or Rome. The unprecedented opportunities surely helped expose more Americans to what were then considered the best beers in the world.

Finally, craft beer showed a certain savvy from the start when it came to branding. As Jack McAuliffe had discovered with New Albion, a label could say so much in the blending of history with place. Fritz Maytag made a similar discovery with the retention of “since 1896” on bottles of Anchor despite the brewery's rebirth following his 1965 takeover. Craft beer as a relatable business idea like any other, coupled with the dawn of contract brewing, meant that you did not necessarily have to have studied under Michael Lewis at UC-Davis or at the Seibel Institute in Chicago. You didn't even have to have been a home-brewer. The growth of the movement in terms of styles and tastes meant the growth of the movement as a business model. The tab was open for the go-go 1980s.

P
ete Slosberg had a twelve-week
paid vacation coming up in 1985. He had been working since he was sixteen and had been logging particularly long hours at his current company, ROLM, which made computerized telephone systems for businesses and which had recently been acquired by IBM, and
before that at Xerox. The latter company had saved him from the bleak weather of Rochester, New York, by transferring him to the San Francisco Bay Area in the late 1970s (and it had a policy of twelve weeks' paid vacation every seven years of employment). Up to that point, Slosberg had been a northeasterner. He grew up in Norwich, Connecticut, and studied engineering and business at Columbia University, earning a BS in 1972 and an MBA in 1974, taking odd jobs along the way, including brief work during graveyard shifts as a New York City cab driver. (The first part of the medical exam? Roll up your sleeve so they could check for needle marks.) His first job out of school was in Xerox's Rochester office.

By that time, Slosberg had developed a bit of a palate for wine through Amy, his girlfriend-turned-wife. The beer he had had in college turned him off to the taste, and the most popular brand in Rochester was Genesee. Slosberg marveled at the fervency with which Upstate New Yorkers bought up cases of the regional brewery's spring beer, Genny Bock, believed (erroneously) to be made from the built-up crud inside the regular tanks. He found Genesee's flagship cream ale to be faintly sweet; that was pleasant enough. Otherwise, beer just did not do it for him. Wine did. He and his wife would make it a point to sample local wineries; and after the move to California, Slosberg had a go at wine making in the basement of their house in Belmont, about twenty-five miles south of San Francisco. Through Wine and the People, a wine-making and homebrewing shop in Berkeley, he bought two hundred pounds of cabernet grapes from a Napa Valley winery, and then ritualistically hand-squeezed them using cheesecloth. He added the yeast; he studied the fermentation; he siphoned the finished product into glass carboys for maturation; he looked at the calendar. Because this was a cabernet, it might take as long five to ten years to age before drinking. Wine making would not work as a hobby. He called Wine and the People and recounted his impatience. The guy on the line suggested white wine—it would only take one or two years to age.

No.

Then how about homebrewing? “Have you ever had a homebrewed beer?”

“I have not,” Slosberg said.

“If you haven't had a homebrew, then you haven't had real beer!”

That did it. Slosberg bought a basic twenty-dollar kit and brewed an amber ale using malt extract and hops. The result was edifying and illuminating:

Six weeks later, I opened up a bottle, a couple of weeks before I was supposed to, but I couldn't wait any longer. The amber liquid developed a glorious head as I carefully poured it into a pint glass, and the
aroma was actually quite inviting. The first taste surprised me because it didn't taste like anything I had ever had before. Sure it was odd, but the oddness evolved into a realization that this stuff did taste good. Maybe I hadn't had all that many different kinds of beer in my life, but this beer was far superior to anything I had ever tasted. I knew, then and there, that I was going to become a beer lover. Twenty-nine years old, and I finally became a beer drinker.

The malt taste in the amber ale took Slosberg back to childhood milkshakes on the Connecticut shore. It also spawned an obsessive beer can collection and the seemingly inevitable march toward a commercial brewery. Slosberg moved in the circles of what was fast becoming the late twentieth century's most storied and lucrative industry: computers. He knew people through ROLM and IBM, and through what for a few years now had been called Silicon Valley, with vast financial resources as well as oftentimes vaster skill sets. It was not an assemblage of bearded back-to-the-earth types (though Slosberg had stopped shaving after he cut himself badly on his wedding day and would sprout a black beard forevermore); it was instead a breeding ground for entrepreneurship. Like Jim Koch a continent away, whom he would compete with in the coming decade to be America's biggest craft brewer, Slosberg was an Ivy League MBA with an interest in homebrewing, not a tinkerer by trade like Jack McAuliffe, Ken Grossman, and others in the early waves of the movement. As his twelve-week vacation approached in 1985, Slosberg had a feeling something in his life was about to change.

I
t was the morning after St. Patrick's Day
in 1985, and Rhonda Kallman was a little hungover. Jim Koch, a boss at the Boston Consulting Group and now her business partner, had an assignment for her nonetheless: buy a computer. Every reputable business surely needed these desktop devices, and their company should be no exception. Kallman, who had no idea where to start, set about her task.

Later that day, Koch got a phone call. It was his mother's cousin, whom Koch considered an uncle and who was a partner at Goldman Sachs in New York and one of Boston Beer's investors. “So, what did you do today?” he asked.

Koch replied that he had started the search for a computer.

“Why?”

To keep track of things like sales and payables—all the miscellany of a business.

“Oh yeah,” Koch's uncle said. “Sales. By the way, have you got any?”

No.

“So what the hell are you doing buying a computer? You know, Jim, I've seen a lot more businesses go broke because they didn't have enough sales than I've seen go under from lack of computers. Why don't you work on first things first?”

That jarred Koch. Why
was
he looking for a computer? The company didn't even have an office! He and Kallman had spent much of 1984 and now early 1985 working around their schedules at BCG, and now were working out of their respective homes. No, his uncle was right: They needed some accounts. The first five batches of their signature lager were aging in tanks in Pittsburgh, set for delivery in five weeks. What then?

Koch was most certainly no natural salesman. There were two big reasons for this. One was Harvard. His business education there had focused heavily on marketing to the exclusion of sales—who got an MBA to be a salesman? It was an abstraction at best to Koch and his fellow grad students, something that just sort of happened at a company after the marketing team got done targeting the product. At worst, salesmanship was seen as a grimy, grubby thing you did as a last resort in the business world. He had lived professionally within this mindset during his six years as a management consultant. The work he pursued for his manufacturing clients at BCG kept him, as one later profiler put it, “by choice and by assignment … as far away from actual customers as a Douglas fir tree is from a
New York Times
reader. Selling was something he did his ‘best to avoid.'” That wouldn't do. Not when he was out on an entrepreneurial limb.

Koch called Kallman back. Scratch the computer—we need a list of potential accounts instead.

Such had been the learning curve for the Boston Beer Company, which filed with Massachusetts in December 1984 but had been going as a two-person operation for at least a year before then. Kallman was a secretary at the Boston Consulting Group, working for seven different consultants, including Koch. A bartender by night and on weekends, Kallman was a native of Lynn, Massachusetts, and was raised in Peabody. With a ready smile framed by blond hair,
she was an extrovert—as natural a salesperson as Koch was not. When he was starting the company and hunting for investors, including among the verdant financial fields of BCG on the upper floors of One Boston Place, a gleaming skyscraper that counted law firms and private-equity groups as other tenants, someone suggested Kallman as a partner. Barely into her twenties, she turned down the opportunity to help start BCG's New York office to work with Koch on this door-to-door beer-selling concern.

The beer itself sprung from Koch's earlier epiphany: he would make the freshest glass of beer the American consumer could get, and he would do it over and over. He turned, like Matthew Reich at New Amsterdam before him, to Joseph Owades. Koch's father, Charles, had known Owades when he worked as a brewer, and Owades happened to live in the Boston area at the time. The two hammered out a deal, with Owades getting 2 percent of the company as compensation, and then set about crafting a late-twentieth-century equivalent of a Koch family lager recipe from the mid-nineteenth. Much as Charles Koch served as business mentor to his son, Owades served as brewing mentor—and he had a willing and eager protégé.

Jim Koch not only homebrewed but also connected by phone with commercial brewers like the Boulder Brewing Company and Wm. S. Newman, where he apprenticed for two weeks. The apprenticeship reaffirmed his hunch: for all its pioneering, Newman, like most of the early craft breweries, struggled with quality control. Dust from the different grains drifted across the downtown Albany warehouse space, settling in beers where it wasn't called for in the recipe. Bacteria was a constant foe. The beer could be inconsistent, the best on the East Coast one batch, cloudily unappetizing the next. Koch knew if he could make the same high-quality beer time and again, he would have an advantage over other small-scale brewers (he was not even thinking of competing with Big Beer directly; they could have their business model). To gain that advantage, he brought on Owades. (Newman would file for Chapter 11 in August 1987, under crushing debt tied to a bottling deal that went wrong. F. X. Matt continued brewing the brand for a while, and Newman's Albany space, which had housed the first brewery in the New York State capital in sixty-five years, became a Bruegger's Bagels factory.)

Koch and Owades picked for his contract brewing the Pittsburgh Brewing Company, a regional founded in the 1860s by German immigrants. It would prove a fateful decision affecting the entire industry. For the time, it seemed a superb choice—the Boston Beer Company's signature brand produced there eventually started to sell itself.

First, though, Koch and Kallman were selling it bit by bit, beginning with the local bar and restaurant list they made the day after Koch's phone call with
his uncle. They figured they would need thirty accounts to make the business work initially. Thirty accounts—it didn't seem like much. One day shortly after they made the list and while Kallman was visiting her brother in California, Koch rolled reluctantly out of bed in Newton, the call with his uncle in the back of his mind, and put on his weekday uniform: a dark pinstripe suit. He would face his fear head-on: he would do his first solo cold call. He had bought Tom Hopkins's salesmanship how-to book,
How to Master the Art of Selling,
at the Harvard Coop across the street from his alma mater and committed a sales pitch to memory. Koch's mind clanged with doubt during the long elevator ride down from his cushy office with its magisterial views of Boston Harbor, through the skyscraper's polished, sunny lobby, and out onto Washington Street, where people had a million places to be and none of them a brewery. Why was he doing this? What was the point? The failure rate—the failure rate was so high! He wasn't a natural salesman!

Koch couldn't find any bars on Washington. He took his first right—you always turned right—and there, down State Street, he found a bar. It would have to do. The Dockside Restaurant and Bar sat amid the Faneuil Hall Marketplace, a Boston nightlife and shopping district that had been revamped to much success the decade before. Koch walked into the Dockside before 11:30—he knew restaurants and bars did not want to have to deal with a sales pitch during lunchtime. He was carrying his briefcase full of ice packs and lager test-batch bottles with black-and-white labels that said “Sample Beer.” He also had with him a couple of early articles from the media to paint his venture with some legitimacy. The bar was empty except for one man behind the railing. Koch began reciting his memorized pitch to the man, who said nothing in return. Remembering a lesson of the salesmanship book, Koch started asking questions—you were supposed to keep the conversation going. Still no answer; urban quietude was the only noise coming from the street. He thought of his office back at BCG. Then another man stepped from the shadows. He was the manager, and he wanted to know what this besuited fellow was doing fast-talking up his staff. Koch started his pitch over: “Hi, I'm Jim Koch. I'm starting this new brewery, and I have a new beer, and it's called Samuel Adams Boston Lager. Have you heard of it?” He poured some for the manager, who took it, held it to the light, tasted it, and promptly ordered twenty-five cases.