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06.2007

Massachusetts Beverage Business

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Article By: Lew Bryson

Those are the opening lines from the first article I wrote on organic beer, over ten years ago. How things have changed. "Organic beer" doesn't sound funny at all any more, any more than "organic carrots" or "organic coffee" does. The Amish, well . . . we assume that hasn't changed.

Organic beers are taking off, one of the hottest segments of a sharply rising organic foods category. "In 2005, organic beer sales increased 40%," says Susan Evans at Orlio Organic Beer Company, a new wholly-owned subsidiary of Magic Hat Brewing, in South Burlington, Vermont. "Organic beer was tied with coffee for fastest-growing organic drink. You see more organic in supermarkets, big companies have organic lines of foods."

The creation of Orlio by Magic Hat is one more proof of the interest in organic beers. If you need heavier, solid proof - maybe even eye-opening proof - look no further than Stone Mill Pale Ale and Wild Hop Lager. Yeah, that's right: those would be the new organic beers brewed by Anheuser-Busch (marketed under the Green Valley Brewery label). Now that's proof of market interest.

Where's the interest coming from? Organic foods had a "crunchy" aura about them for years, something you expected hippies to eat, and they'd probably eat it raw and dirty. Organic foods were a hairshirt you wore on the inside, something you did even though it was unpleasant, because it was the right thing to do.

That's changed, notes Morgan Wolaver, the organic-minded chief at Wolaver's Brewing in Middlebury, Vermont, one of the biggest and fastest-growing organic breweries. "It's not like back when you did it to do it, and everything was bland and tofu. Now it has to be good. If you're going to spend an extra dollar, it's got to be good."

Wolaver isn't saying that organic beer's got to be better, just good. That's something Geoff DeBisschop, who brews a beer with organic ingredients at the John Harvard's brewpub in Cambridge, Massachusetts, agrees on. "I hear a lot of people saying 'I buy organic tomatoes because they taste better, but organic beer? That's not going to taste good.' It does taste good, but it's not going to taste better. It's not about that. It's about saving the planet. Really. Living in America, you can't go off the grid, not realistically. But you can make decisions that make things a little better."

Not everyone in the business agrees. Jon Cadoux started Peak Brewing in Burlington, Massachusetts, three years ago because of the taste of organic beer. "The big reason is that it tastes great. It's delicious. Ten or so years ago there was a perceived taste and quality sacrifice. But [organic farmers] have really figured it out. It's not a big environmental/social consciousness thing. The organic stuff tastes better, it's a slight price premium but not much, and it's good for the environment and the farmers . . . why wouldn't I do it?" Cadoux brewed his first batches himself, as a homebrewer, but Peak is brewed under contract at Shipyard, in Portland, Maine.

Wow. That doesn't sound quite as crunchy. Wolaver does agree that it's not really about direct benefits, for healthiness of the beer. "Is organic beer healthier for you? If you drank the beer over the next 6O years, maybe. It is better for the planet. Benefits in that way trickle all the way back to the farmer. But when you're sitting at the bar, do you really give a shit about the farmer? It has to be a quality beer."

That's an encapsulation of the chain of thought that led to the point where we are now, with organics suddenly attractive to a wide spectrum of consumers. When stores first started organic food sections, the produce was often still caked with soil, smaller and not as 'perfect' in appearance as non-organic foods. It was something you did out of duty. Now that organic producers have become more focused on selling the food as well as producing it, and the produce looks great and tastes great, people are willing to listen to the rest of the message, often with their mouths full.

"I would say that there is more awareness of organic products in general," says Holly Givens, who works with the Organic Trade Association, based in - appropriately - Greenfield, Massachusetts. "There's also more understanding of how organic products come from particular farming techniques, and how they're processed after that.

"Organic is first and foremost about what happens on the farm," Givens explains. "The major focus is on building healthy soil in ways that protect the environment. So they're not using toxic pesticides or herbicides or fertilizers. How we build soil fertility could definitely have an effect on public health. When people want a refreshing beverage, they're not thinking of soil health, but when you get down to organic, that's what it's really about."

That may sound kind of heavy, but that's the kind of thinking that drove the first all-organic brewery. Pinkus Muller, of Munster, Germany, has been all organic "since 198O", confirms Craig Hartinger, who works with Seattle-based Merchant du Vin, the importer for Pinkus. "They were the first organic brewery we know of in the modern era. Everything they brew is organic."

Looking at that article from back in the mid-'9Os again, I see that all the American organic breweries I wrote about are no longer in business. But Pinkus survived, chugging along with their Pils, Munster Alt and Hefe-Weizen, still family-owned, still organic.

Merchant du Vin founder Charles Finkel told me how that happened in that original piece. "The Pinkus brewery went all organic . . . when the father suddenly found himself with three environmentally-aware daughters. They thought that if one organic beer was doing well, they should be able to do well with a whole line. The ingredients are all organic, the processing equipment is environment-friendly. The water filtration system is incomprehensibly complex."

That's right, there's process involved, too. Organic is not just about growing crops or raising animals without chemicals, it's about the processing as well. It's like those little labels you see on candies that tell you the candy doesn't contain nuts, but that it was made in facilities that process nuts. Organic can be squeaky clean sometimes.

For example, speaking of "squeaky" clean, Wolaver's uses an organic exterminator at their brewery. Breweries have a lot of grain storage, and that's very attractive to vermin. But, as Wolaver says, "The brewery has to be certified organic, and that means that the exterminator has to be certified organic. This is part of sustainability, of social responsibility. So when you look at it with that mindset, I don't want a lot of toxins around here to kill the pests. We don't have a lot of problems with pests, and it's done humanely."

As you might imagine, humane pest control costs more than putting down some poison and rat-traps. Certification costs. Extra equipment costs. Not using the usual caustic cleansers for brewery equipment costs. Organic malt costs about 1O cents more a pound, says Wolaver, and organic hops are two or three times as expensive. "It's not huge," he says. "But when you add it all up, it's adding 2O% to the cost of the whole product. The Wolaver's sells for about a dollar more a six than the Otter Creek. The margins are tighter than a typical craft-brewed beer, but we're starting to be able to push that envelope. I feel it needs to go up a bit more."

As long as the cost of organic materials remains high, that extra cost and tighter margin will remain in place. And as long as demand continues to grow, the cost will continue to go up. There might not be anything available at all to the smaller brewer.

DeBisschop describes how hard it can be. "People think you can just go out and grab some organic malts. Bullshit. There's not a lot of barley farmers that are certified organic out there, and hops are even worse. There's the organic certification for the maltster, you have to have the grain certified, there's the GMO (genetically-modified organism) thing . . . it's a winnowing down, and when it's over, your choices that are left aren't that much, it's a tiny selection. Then there's suddenly this demand, and people can't find it."

"This demand" may have come from Anheuser-Busch. The Green Valley beers "have 1OO% organic barley malt, certified by the United States Department of Agriculture (USDA) and the independent organic organization Quality Assurance International (QAI)," according to Andy Goeler, A-B's Import, Craft, Specialty Group vice-president. "This barley malt is supplied by small, family-owned organic farms. Even the packaging is made from 1OO percent recycled materials."

Morgan Wolaver felt the squeeze, but says it passed. "All of a sudden there was just a tightening in the market for organic malts," he says, reminiscent of a Star Wars-like 'great disturbance in the Force'. "Then it came out that A-B was looking for organic malt on the market, but they would have sucked up everything. I understand that they went direct to the farmers."

When a big company like Wal-Mart or Anheuser-Busch decides to jump in the organic pool, there's a huge ripple effect. Is it good or bad for the organic producers who're already in the market, sometimes for years?

"It's both," thinks Givens. "It definitely draws attention to organic products, and makes them available to consumers that didn't have them before. We surveyed our members who are manufacturers and they said it's fairly consistent over the past five years that one of the barriers to growth is restricted supply of raw agricultural material. That's something OTA is encouraging, putting better infrastructure and resources in place for farmers who want to expand their organic production or get into organic production in the first place. It's a good option for getting really high-quality product."

Wolaver understands that, but is obviously still working on internalizing it completely. "It makes you angry, but at the end of the day, if they grow the sector, there's going to be more farmers growing it, and the farmers are going to be making more money. If everyone gets shut out, that would be frustrating. But so far, there was a tightening, but it's relaxed. We haven't seen any problem this year."

What's perhaps the most interesting thing about the Anheuser-Busch beers is that they chose to bring them out in a craft vein - a relatively hoppy lager and a pale ale. Why not an organic beer along the lines of Budweiser or Bud Light?

Goeler explains the rather interesting reasoning behind that decision this way. "Today's adult consumers are open to, and have come to expect, variety when selecting their beverage of choice. Perhaps like never before, beer drinkers are also open to trying a variety of beer flavors and styles, which speaks to the gaining popularity of craft/micro brews and provides an important opportunity for beer innovation. We make different beers for different consumers and different occasions. While the organic category is certainly an emerging market, it is still very niche and we developed a beer that we know would be well-received in this market."

"Very niche" and "well-received in this market". Goeler proves that while Anheuser-Busch may be more used to selling mega-amounts of macro-brews, they are still masters at market analysis. It just looks like organics are selling across the board. The demand and interest is still a choice, not a pattern, and the people who are making that choice are definitely not your average consumer. It's not a coincidence that the market for organic beer looks a lot like the market for craft beer: picky, well-informed, deliberately different, curious, and willing to pay more for perceived quality.

To get those kinds of consumers, "you've got to go where the core consumer is," says Wolaver. "And you've got to be real all the way through. They read labels, and they're interested in your company, too. 'Here's an organic beer,' they'll think. 'It tastes good. But what's Wolaver's the company like?' They really kick the tires."

Organic consumers that will buy organic because they believe solidly in the "good for the planet" principles are Wolaver's'core consumers', and he's built his company's success around them. One of the brewers in my 199Os story that's no longer in business was the Riverosa Company, which made a beer called Perry's Majestic, and Wolaver took a hard look at how they sold beer. "We read about Perry's Majestic, and that sounded more like marketing than brewing. Where were their consumers? You could only sell so much at the local organic co-op. That's why we went to the metro areas, because the core consumers were concentrated there."

If organic consumers are still that hard to get, do you want to bother with organic beers? Absolutely. But don't just add one or two. Create a section, and make it worthwhile for that core consumer to come to you. Jon Cadoux would love to see more organic beers around his Peak brand. "Look," he says, "organic wine is now 1.5% of the wine category, and growing like a weed. That's a massive number. Fetzer was in really early, and then there got to be a solid group of six or seven wineries, and now it's a category. When you get a handful of people making great products, and consumers see it and understand it, you've got something that can take off."

Who's out there to put in that section? Cadoux's Peak beers include a brown ale, an amber, and a pale ale. Wolaver's has a brown ale, pale ale, oatmeal stout, IPA, and a seasonal witbier. Merchant du Vin brings in the Pinkus beers already mentioned, and also the Samuel Smith Organic Lager and Ale. Orlio is just getting started; they plan to have a Common Ale out year 'round, with an IPA in the spring and summer and a black lager in the fall and winter. Anheuser-Busch has their two aforementioned entries.

You may also find some much more exotic organics, like Cantillon's Lambic-Bio, an organic gueuze lambic, and the Sara Buckwheat Ale, an organic beer from Belgium's Brasserie Silenrieux.

Finally, the demand may be growing, but the supply is still questionable. The major brake on organic beers in the future is going to be the availability of organic hops. "It's an unspoken agreement that we're going to have to push to get hops growers to grow organic hops," admits Wolaver. "That's the missing ingredient."

Hops, however, are a crop that is grown with major applications of chemicals to fight insects, fungi and molds. So, says Wolaver, "the push is to look at varieties that are resistant. That's why they're having success in New Zealand; it's probably because those pests were never introduced there. We do use some New Zealand hops."

But Wolaver has a secret plan that he hesitated to mention. Keep it under your hat. "We have been approached by some fairly large hops growers who are interested in growing organic hops, on the west coast and the east coast. We're working with them, but it's still all experimental."

He's optimistic about the future of the project. "Pinkus has been doing this for years, so you know it can be done. We have to be involved in it. It's like global warming: you can't leave it to the government, it's too important. It takes us to keep saying, 'We'll do it, we'll pay for it'. As an individual, I believe in it."

But he'd still like to make some money, if only to pay for those hop projects. "Someone said, "Won't it be great when the whole craft beer industry goes organic?" Wolaver pauses, then blurts out a hearty laugh. "Yeah, great, I just hope it goes slowly!"

It doesn't look like that's going to happen, Morgan. Better grab hold and ride the organic beer tiger.

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