Beer Necessities

Being owned by a corporate giant may not be ideal, but as small Texas breweries like Celis and Spoetzl are learning, it could be the only way to survive.

THERE’S A NEW BUZZ IN THE BEER BUSINESS, and it’s creating some strange bedfellows. Though more than three quarters of beer drinkers still buy premium domestic brands like Budweiser, Miller, and Coors, sales of those labels have remained flat for most of this decade while those of so-called craft (or specialty) beers have quadrupled. The demand for alternatives to the typical watery brews has grocery stores making room for a jungle of flavorful specialties from Rhino Chaser Peach Wheat to Beartooth Blueberry Lager. As the craft sector has boomed, the small breweries that make such beers have had to keep up, and many are entering into what their fans regard as unholy alliances with the giants of the industry. But for a small brewery, such a union could actually be a matter of survival—and that’s exactly what’s happening in Texas.

Consider two new brews made in-state: Shiner Honey Wheat Ale, from the Spoetzl Brewery in Shiner, and Celis Dubbel Ale, from the Celis Brewery in Austin. Although Shiner and Celis are brewed and bottled by their creators, they’re distributed by the breweries’ multimillion-dollar owners, the Gambrinus Company and the Miller Brewing Company, respectively. This is the sort of thing that causes some consternation among fans of craft beers. For one thing, part of the appeal of a specialty beer is that it’s usually made in a small brewery by obsessive beer lovers, not in some factory by a huge corporation; devotees of craft brews also worry that the corporate owners will tamper with the recipes of their favorite drinks. (The sentiment is so strong that this summer, the Campaign to Protect the Czech Brewing Heritage was formed in Austin to help prevent independent breweries in the Czech Republic from being bought out.) But Miller and Gambrinus insist they’re only interested in improving business operations. And, as the stories of Spoetzl and Celis suggest, the marriage of a small brewery to a large company with an extensive distribution network may be one of necessity. “It takes a big partner for a small brewery to succeed,” says Ron Christesson, the director of sales and marketing at Gambrinus. “Without a large partner to help with marketing and sales, you literally can’t afford to do it.”

Indeed, if Gambrinus hadn’t bought Spoetzl seven years ago, chances are that Texas’ oldest independent brewery would now be nothing more than a historical footnote. Shiner’s brewery, which was founded by locals in 1909 and sold to Bavarian brewmaster Kosmas Spoetzl in 1915, had long survived on its own, but by the fall of 1989 it had suffered in the hands of a series of shortsighted owners and was on the verge of producing its last batch of Shiner Bock—a dark, inexpensive beer that had a small following in Austin, eighty miles north, but was barely known beyond the capital. Inexperienced in marketing and in dealing with beer distributors (the independent wholesalers who buy beer from breweries and sell it to retailers), the Houston group that owned Spoetzl couldn’t get Shiner beer on store shelves. Its huge Texas rivals—San Antonio—based Pearl and Lone Star, which recently moved from San Antonio to Longview—were discounting their products to rejuvenate faltering sales, and Spoetzl sank itself trying to remain competitive. Spoetzl turned to making beer for other companies, such as Austin’s Pecan Street Brewing; started producing wine coolers to diversify its market; and sometimes even sold its beer below cost. But nothing worked, and by the late eighties Spoetzl was losing $200,000 a year. So in October 1989 the owners sold out to San Antonio—based Gambrinus, the Texas importer of Corona beer.

The founder and CEO of Gambrinus, 46-year-old Carlos Alvarez, grew up in Acapulco, started in the sales department of Mexico City’s Modelo brewery, which makes Corona, and worked his way up to export director in the late seventies. While testing the Austin market for another Modelo product, Negra Modelo, he had witnessed Shiner Bock’s appeal firsthand. “You could see that the beer had the acceptability, drinkability, and characteristics that could take it further,” he recalls. Alvarez caught lightning in a bottle after his Texas trip by persuading his employers to begin exporting Corona, another beer he had eyed for success, to the U.S. By 1986 Corona became so popular that Alvarez was able to strike a deal with Modelo, break off from his employer, and establish Gambrinus to import Modelo’s now-famous beer to Texas and the eastern half of the U.S. In 1989, the year it acquired Spoetzl, Gambrinus sold $75 million worth of Corona.

With the purchase of Spoetzl, however, the company expanded beyond importing, and some folks in Shiner—as well as a few industry observers—began to suspect that the company’s boss wanted to become a brewer. “There was a lot of skepticism from not only the people at the brewery but the people in town generally,” Alvarez says. A salesman at heart, he was quite content to stick with what Gambrinus did best. “We were certain that the people who worked at the brewery made a good product,” he says. “All they needed us to do was market it and provide them with the financing to improve sales and grow.”

With Alvarez at the helm, Spoetzl eventually stopped brewing for Pecan Street and other labels. Then, emphasizing its distinctive flavor and dark color, Gambrinus began marketing Shiner Bock as a specialty brew. Billboards, posters, and other paraphernalia advertising Spoetzl’s “handcrafted beer” as “brewed one batch at a time” were sent to the company’s extensive network of distributors. And shrewdly, Alvarez aggrandized Shiner Bock by gradually raising its price by $1.50 per six-pack to put it just below that of most craft brews.

The moves paid off. Spoetzl’s production skyrocketed from 35,000 barrels (one barrel equals about 330 twelve-ounce bottles of beer) in 1990 to 138,000 barrels in 1995, making Shiner Bock the best-selling bock beer in the country. This summer Spoetzl tweaked the recipe of its flagship brand, Shiner Premium, and gave it a new name: Shiner Blonde. And since

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