Craft Beer and the Business of Brewing

[Music] Hello and welcome to
Talking Points I’m Dave Kelly director of advanced
media production at Cal State Long Beach today
we’re going to talk about the business of craft beer
and why craft beer has become such a popular
product my guest today is Bill Sysak. Bill is a
certified Cicerone he is also the co-founder of
wild barrel Brewing Company in San Marcos and
additionally he happens to be on the advisory board
for the San Diego State University’s business of
craft beer certificate program welcome bill and
thank you for joining us on talking points thank
you pleasure to be here I just introduced you as a
certified Cicerone some of our members in the
audience are wondering what is a cicerone so
Cicerone is the craft beer or beer equivalent to a
wine sommelier there are different levels there’s
a certified beer server which is the initial level
that you’ll find a lot of craft beer tasting room
and restaurant servers and bartenders hold certified
Cicerone is closer to the advanced Somali a level
and then there is an advanced cicerone that has
just been developed and also a master cicerone
program where there’s about a half dozen people
in the country actually the world that actually
hold that title ok well let’s move on to a
beer and let’s talk specifically about the
history of beer for a moment before we focus in
on craft beer so if we look at the history of
beer it’s been with us a very long time in fact a
lot of archaeologists now say that beer was with us
at the beginning of our agricultural
transformation from the hunter-gatherer phase of
human development which happened somewhere between
seven to ten thousand years ago so why did beer
become an important part of the human development
process as we started to settle in with agriculture
well many anthropologists and archaeologists
actually believed that beer is the reason why we
went from hunter-gatherer to this stasis position of
being agricultural society they believed that
accidentally grains and seeds as they were picked
were fermented through being left out in the rain
and they started to make kind of a porridge or
mash with this and they realized they enjoyed
it not just for the nutritional value but for
the fact that it was kind of a happy juice for them
and if you look throughout the history of
civilization every great society actually had some
form of alcoholic beverage that they enjoyed whether
it was at their feasts when they were celebrating
victories against other tribes or a great hunt
where they had pulled down a woolly mammoth for
example or just any type of celebration through
marriage birth of a child something like that we
find that beverages have been around and beer was
one of those progenitor ‘s for that all right and you
talked about the fact that beer was kind of a happy
juice and it was a little chunkier and in the
beginning that it was today it’s all liquid but
it wasn’t always like that and there are stories
about the Egyptians when they were building the
pyramids those workers that were putting the
stones together were given litres of beer as part of
their compensation which provided them nourishment
and refreshment and that’s how the pyramids were
built apparently so it’s been with us a long time
so when we talk about the distinctions of the
different kinds of beer some people wonder what’s
the difference between a nail and a logger but you
have a very good analogy you can use that involves
cooking so all beer is beer but it’s broken down
into two main categories sales or lagers and those
are based off of the yeast strains that are used ales
have a tendency to be a top fermenting yeast
strain that works on the beer creating alcohol and
co2 by eating the starches that are converted to
sugars in the cooking process and those top
fermenting yeasts are happened very fast the
beer is made much shorter period of time it has much
more aggressive flavors where a lager is a bottom
fermenting yeast that was identified much later on
probably around 14th 15th century from cool storage
where the top fermenting yeast didn’t survive in
caverns and the lager or bottom fermenting yeast
started to they go much slow and the way I equate
that for non vers is if you look at cooking and
you take stir-fry where you’re very fast
aggressive high heat big dominant flavours of
things like garlic ginger lemongrass and it’s done
very quickly and very aromatic that is more what
an ale is they’re much more aggressive in aroma
and flavor profile where a lager is more you can
equate it to a crock pot taking a pot roast and
some onions potatoes and carrots going off to work
and coming back home sure the aroma is still great
it tastes great but it’s much more subtle and
melded so lagers are much longer to brew they take
not too brewed to ferment they take more than
anywhere from two weeks to three four months and as
we talk about the history of beer continue that
conversation into the United States of course we
had prohibition here in the 1920s into the
early 30s but after the prohibition was lifted and
the Great Depression was over the major brewing
companies in the United States such as
anheuser-busch and coolers which is now Miller Coors
and papst blue-ribbon which is right here in
Los Angeles those big companies started to
consolidate and beer became a very industrial
kind of process as opposed to the smaller much more
what we would call craft type Brewers that existed
before that time and that was part of the whole
mobilization during World War Two and a couple of
decades after but then in the 1970s there was this
movement afoot in the United States where a
small number of fellows decided we’re gonna start
doing our own brewing and they became the original
craft brewers how did that trend eventually catch on
so in you’re right it was a wasteland prior to
Prohibition there were 17 breweries after
prohibition was repealed in 1933 700 breweries
opened but by the time 1965 rolled around there
was only about a hundred these mega breweries these
big factory run breweries a gentleman named Fritz
Maytag in 1965 who had just graduated from
Stanford discovered that his local brewery anchor
Brewing Company out of San Francisco was going out of
business and he went and ended up buying a
controlling interest and eventually all of it he
was what we mark as the beginning of the craft
beer revolution over the next 13 or so years he
developed a bunch of English styles that were
became quite famous including the very first
modern IPA made in America and then by 1980 it had
slowly started to catch on a couple of things
happened before that Alan Cranston one of our US
senators in California wrote a law because when
they repealed prohibition they had forgot to
legalize home brewing so he actually had Jimmy
Carter sign a bill where they legalized home
brewing homebrew clubs started up and it became
well known that the beer could taste something
different than the fizzy yellow beer that our
fathers had tasted before that and then by the 1980s
it started up with Sierra Nevada and many other
breweries and now we have over 7,200 craft breweries
in America well let’s talk about Sierra Nevada for a
moment because they are located in Chico which is
north of Sacramento I’ve actually seen that brewery
and it was started by a gentleman by the name of
Ken Grossman in the 1970s and he did something
rather radical in the brewing industry he
decided to utilize wet hops so he went to Oregon
and found these wet hops and started using those in
the brewing process what exactly are hops wire and
why and how are they used in the brewing process and
what are wet hops so there are four main ingredients
found in beer whether it’s an ale or lager a water
of course yeast which we already talked about
activates and creates co2 and alcohol and then
there’s grain or barley primarily is used by
Brewers and that kind of acts as the body of the
beer giving off a lot of great flavors and aromas
and then hops are kind of the spice of beer if you
think of them hops have been around for a very
long time even in Egypt as we were talking about
there were over 250 different apothecary
recipes that had hops involved they weren’t
first used in beer till about the 1100 AD but what
we know about hops now are they were originally used
as an antimicrobial to stop infections happening
in beer but as modern Brewers we use them for
bitterness flavor and aroma so early on in the
brewing process you use them as a bittering agent
but what was unique about what what Ken did was he
went and took fresh hops which are what we
determine is wet hops and he used them in a dry
hopping process which is where you add them after
the fermentation has taken place and he’s put put in
wet hops and those were the Cascade hops which
basically are the most famous hops in the craft
beer revolution so to speak and those wet hops
allow it to give off these wonderful pungent aroma
Xand flavors of pine and grapefruit that made his
preeminent beer Sierra Nevada Pale Ale that
probably one of the most important beers in the
craft beer industry history and it’s
significant that we’re talking about Sierra
Nevada because they are one of the top craft beer
companies along with Samuel Adams beer from the
Boston Beer Company so when we talk about craft
beer maybe we should define what that means in
terms of production and style and size of the
brewery and all of that so traditionally the terms
craft or the term craft beer means that the
Brewing Company has to be small it has to be
independent and it has to be traditional in the way
it conducts operations so what do those terms mean
and how big is too big to be considered a small
brewing company so let’s talk about small first
small is less than six million barrels produced a
year what is a barrel of beer a barrel of beer if
you remember those keg stands that used to be at
those parties when you’re in high school in college
that’s a half barrel of beer so two of those kegs
31 gallons equals a barrel of beer so you have to
make less than six million barrels of beer to be
considered a small brewery to be independent you have
to be owned by or have no ownership by a major non
craft brewery of more than 25 percent so if a be in
Bev but 20 percent of a brewery they’d still be
considered independent but the 25 percent mark we
hold over and traditional simply means you use those
ingredients I mentioned before to improve and
enhance flavor as opposed to a lot of the
macrobrewery giants where they use those in they
substitute ingredients like rice corn syrup and
sugar to decrease the flavor of beer craft
brewers want to enhance the flavor of beer alright
we just have a minute or two before the break but
I wanted to talk a little bit about the growth of
the craft beer industry and just the last ten
years or so I know that there was a huge jump in
the number of barrels produced between 2009 and
2014 in 2009 there are about 9 million barrels of
craft beer produced in the country and then in 2014
it had jumped all the way up to like 22 to 23
million barrels annually so that was almost a
250 percent growth rate however it started to
level off as all things do nothing can grow that
fast forever right and so Fortune magazine came out
with some information recently where they said
well the era of big growth for craft beer is over
what’s your assessment of that I would say
volumetrically that’s probably close to true
like I said earlier there’s 7200 craft
breweries there’s another 2,500 in planning so I
foresee a day when there’s 10,000 craft breweries in
America but most of those will be hyperlocal where
they have a tasting room where they serve in a
smaller area just like there were most breweries
were two centuries ago so I foresee it being a
mature industry where we’ll continue to have
single-digit growth but we’ll continue to take
more market share from the beer industry as a whole
as people want that higher quality better flavor and
aroma and on that note we’re gonna have to go to
the break and when we come back from the break we’ll
talk about craft breweries in Southern California
and how the industry is thriving right
here stay tuned [Music] did you know that
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with a degree from CSULB welcome back to talking
points I’m Dave Kelly and my guest today is Bill
Tsai sack a certified Cicerone now bill before
we went to the break I said we were going to talk
about the west coast and the craft brewing industry
here which is pretty dynamic but before we go
to that I want to talk a little bit about another
trend that’s going on in the craft beer industry
and that’s the fact that the big players in the
beverage industry we’re talking about
anheuser-busch we’re talking about Miller Coors
or talking about paps those kinds of companies
they’re looking very hard at these craft beers
because that seems to be where there’s a lot of
growth and a lot of interest and so these
companies are starting to get into the business of
buying out some of these small craft breweries and
so the question is what will that do to the actual
craft beer the product line that they’re buying
out you know corporations have a little bit
different mission statement or a business
plan I should say then the smaller independent
Brewers the independent Brewers are focused on
quality quality quality at least they should be and
the corporate Brewers are interested in profits
shaving costs and returning dividends to
stockholders so let’s talk about that for a moment
what do you think that’s gonna do to the craft
beers that are purchased by the big guys well I
think there’s a couple dynamics involved one is
they realized early on in the last 12 or 13 years
that they couldn’t compete as far as devoting the
effort it wasn’t worth their effort to make these
high-quality flavorful beers they it just didn’t
make sense to them fiscally but what we’re
seeing now is they started to buy up these breweries
slow down the growth of craft beer and the problem
is when they buy these breweries they don’t
necessarily keep the same quality of the product a
lot of times it could be as simple as making the
cardboard box that the case of beer comes from
thinner less material but sometimes it’s taking that
same beer and taking it away from that little
brewery and brewing it at one of their mega
facilities so the quality isn’t always there and
that can be an issue they have a lot of problems
when they’re making these beers as far as keeping
the historical value around and the customers
so what they’re doing is going into new markets
with the beer and maintaining the same level
of growth for these little breweries that they’re
buying up well that’s an interesting point about
quality and cost because a lot of people when they go
to a restaurant or they go out and decide to take
their friends to a craft brewery they notice that
the cost of craft beer is more than the traditional
Brewers and people may say well why am I paying more
for beer isn’t beer beer why am i paying more for a
craft beer so it’s it’s an artisanal product and with
any artisanal product whether it’s a cut of meat
or a type of cheese Kraft singles versus Stilton
Bassett Colson Bassett Stilton blue cheese for
example from England you’re gonna pay a premium
the other factor that’s involved is anheuser-busch
has 11 major factories Stone Brewing which is I
believe the ninth largest craft brewery in America
at 360,000 barrels and Heiser Busch in all their
plant spills more of that beer in a month than they
then stone produces so they have the economy of
scale right so they can charge a lot less for
their beers and once again besides the factor that
we use better quality ingredients in many cases
when it comes to craft beer so let me get your
opinion if you are gonna buy a craft beer would
you buy one that’s been recently purchased by a
big brewer or would you buy one that’s independent
well other than the fact that I’m as an independent
crapper and support them I would always go
independent and that’s not just with beer it’s with
anything because I want to support that artisanal
producer and keep them in business as opposed to
buying something that’s made industrially yeah
exactly so it’s it’s just the better win-win for us
if we have more of these artisanal producers in any
aspect of business all right well let’s talk
about the west coast and in particular the San
Diego area as I understand it you grew up actually in
the LA Orange County area but your business has been
in the San Diego area we’ve been very involved
in that scene and San Diego is well known for
craft breweries it’s a very dynamic kit for that
talk about that a little bit why did San Diego
become such a dynamic market for a craft beer so
San Diego is known as the capital of craft they have
200 breweries and brewery tasting rooms just in San
Diego County alone they were not in the early
periods the very first brewery that was produced
in San Diego County was a brewery called bolt
Brewing in Fallbrook in 1987 Karl Strauss opened
in 1989 and it grew from there I think a lot of the
dynamics that made San Diego so competitive and
great is you had these bigger breweries Ballast
Point which unfortunately is no longer an
independent brewery Al Smith stone Pete support
Karl Strauss in the mid 90s that came along and
they decided to rely on just quality beer that
bred a lot of other Brewers from their
training programs from home brewing that they
brought on and they built this whole cultural shift
there where people started to appreciate craft beer
and that allows San Diego to continue to be a
dynamic market even with that many breweries in
place where is the market going for craft beer in
San Diego and elsewhere so it will continue to grow
it will stay hyper local regional breweries
considered a brewery that makes fifteen thousand
barrels a year for example my brewery were at our
first year anniversary coming up we’re just going
to make a thousand barrels this first year right so
there will be a lot of these little breweries
that stay under 5,000 barrels that support
themselves locally by having customers and
followers we’re finding that the Millennials are
really driving this hyper local ISM and quality of
products and and that’s helping the craft beer
industry as a whole and an important part of that
as you were mentioning millenials driving the
market is local sourcing and we talked about Ken
Grossman going into Oregon because he lives in
Northern California so Oregon wasn’t too far away
to get the wet hops so are we seeing that kind of
thing here too we’re seeing it on a smaller
scale there are some hop growers starting up in San
Diego County it’s more driven by the climb maduk
area that they’re at with breweries as opposed to
wineries wineries will normally place themselves
right next to where they’re gonna grow their
grapes breweries will have a tendency to just go
with the best quality ingredients so it could be
malt from the Midwest but it malted grain but it
could also be from Germany or Austria or the Czech
Republic for example so it’s not as concerning
as that it’s about the quality of the products
who has the best quality products and when we talk
about craft beer most of the craft beers seem to be
in the category of what’s called IPA or India Pale
Ale what is India Pale Ale and why is it so popular
among aficionados and also customers so there are
hundreds of different variations on beer styles
I would say IPA makes up the largest commercial
segment as far as on-premise and off-premise
sales and that’s why we look at that and they’ve
led that for the last ten years IPA means India Pale
Ale it was never produced in India it was produced
for English troops back in the days when they used to
say the Sun never set on the English Empire because
it was so large an area so they’d have to ship a beer
that was potent enough and resilient enough to
survive pre-industrial refrigeration and things
like that so the IPA became a very popular
beer style in America it started up in the 1770s
going into the 80s with anchor Brewing and Sierra
Nevada and it’s really just a big flavorful
aromatic beer because hops derive a lot of
characteristics that can be anything from tropical
fruits to citrus to pine to earthiness floral and
those are really fun beers to make so people really
like them and there’s been a huge following there’s
been a lot of variations of these IPAs coming out
there are now hazy IPAs there’s low alcohol IPAs
there’s a PhDs in Belgian yeast and that’s trend is
going to continue to move on the next trend after
IPAs is IPAs well since we’re in California and
we’re talking about the west coast what about the
wine industry versus the craft beer industry we
know that we have a lot of wineries and a lot of wine
tasting and it’s a huge draw here in California
can craft beer become like that I think it can and
we’re seeing that in a lot of small areas where we’re
seeing 20 breweries that are within a very short
area so people we have beer tourism just like
wine tourism when you go up to say Napa or Sonoma
or the Central Coast we’re seeing that same kind of
effect and with these local breweries where the
small production they rely primarily on people coming
in to their tasting rooms so by making high quality
products and beer the growth potential is there
as I said 7,200 craft breweries there’s almost
right around 900 craft breweries in California
that’s the largest State as far as burries but
there’s 7,000 wineries in California so we have room
to grow well if we’re talking about craft
breweries not all of them succeed there are some
that end up going out of business just like with
any business why is that what are the craft brewing
companies that are not making it what are they
doing wrong and what do they need to do to turn
things around well it could be multiple factors
from not having enough financing to poor quality
product which is probably the main factor to growing
up into a regional brewery and and constantly having
to chase your tail to continue to grow and not
being able to sustain that with the macro Brewers
above them and all the local little craft
breweries below but really it’s all about like you
said earlier quality quality quality if you’re
not making a dynamic product if you’re not
making a great guest experience both in your
tasting room and have well-informed staff to
teach these guests about what you’re serving you’re
not going to succeed you talked earlier about
economy of scale and whereas the big brewing
companies the major like anheuser-busch and so on
if they have a bad batch they can throw it out and
it’s not a big deal what do you tell small Brewers
if they come up with a batch that isn’t 100% the
way it should be same exact thing dump it if you
make a beer and it’s not the way it’s supposed to
be don’t call it something else dump it if you make
a beer and it tastes like something else don’t do
that and don’t throw another wine or bourbon
barrel and think it’s going to get better you
only have one chance to build a reputation with
each of your customers and you want to make stayin
the highest standards of quality when you’re
doing that so it’s very important do not rely on
that take the loss and brew it again the right
way let’s talk for just a moment about your program
in Sandy at San Diego State University and the
extended education program that folks can take in the
business of craft beer what kinds of courses do
you offer there and what do people learn so the
business craft beer has been around for the
program has been around for five years and we’ve
had over 1500 people come through and and more
than half of those have graduated from the course
I teach two courses I teach the entry-level
course which has a broad spectrum of everything to
do with beer and then I also teach the secrets
exceptional beer and food pairing which is a
six-week course where you’re basically getting
to eat and drink the whole time but there’s beer
styles and then there’s also a scope driven
towards opening a business so there’s building a
business plan how to use distrib front-of-the-house service
so there’s a whole spectrum for it doesn’t
matter whether you want to start it start your own
craft beer business whether it’s a bar or a
brewery or whether you’re in the industry and just
want to learn more or you’re just a hobbyist and
enjoy talking and drinking about talking and drinking
beer that leads to my last question we only have
about 30 seconds so how would you assess the
educational level of folks in Southern California in
terms of their knowledge of craft beer I think
there’s about 15 percent of the whole population
that understands what craft beer is and they’re
at many levels from advanced to intermediary
to beginner and the broad spectrum of people in
across the world is about 80 to 90 percent of people
that just aren’t informed about craft beer so it’s
really important that we continue to inform them
through shows like yours and educational programs
like SDSU and on that note we do have to close the
program thank you for sharing your expertise
with us today thank you it was great time and thank
you for joining us on this edition of talking points
be sure to join us again soon for the next episode
until then I’m Dave Kelly have a nice day

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