It's That Time Again - Great Taste Pre-Parties #1

Wednesday Night [ed note: what!? sweet!]

Tallgrass Brewing Co. (KS) at The Malt House (starts at 6pm, 2 casks tapped at 8pm)

Friday Night

Yet again, The Beer Spot are the first to report [ed note: thanks guys for kicking me in the butt and reminding me it was about time to start posting this stuff]. And, yet again, The Beer Spot is at Brickhouse BBQ with Central Waters (WI), Shorts (MI), and Nebraska (NE). "[W]e're planning on filling all of the available 40 tap lines. Central Waters and Shorts are each planning on filling 15 lines, with Nebraska filling 10 again this year. Rumors are that we'll have some cask beer this year as well, and we've been talking with a fourth brewery about taking a couple of lines."

Pearl Street Brewery (WI) at The Majestic (w/ Sexy Esther, T.U.G.G., and DJ Nick Nice; raffling off a pair of tix to the Great Taste!)

Bell's (MI) at Maduro (of course)


Capital Brewery (WI) at Capital Tap Haus


Revolution Brewery (IL) at Essen Haus


Great Lakes (OH) and Lakefront (WI) at The Rigby [ed note: great pairing]


Furthermore (WI) at Natt Spil (5pm; Natt Stock, Oak-Aged Fatty)


Three Floyd's (IN) at Argus

Founders (MI) at Glass Nickel Pizza (Atwood; for sure on tap: Frangelican Brown, Devil Dancer, and 2011 KBS)

O'So Brewery (WI) at The Malt House (6pm - 9pm) and Forequarter (9:30pm - close)

Potosi Brewing Co (WI) at The Harmony Bar (starting at 5pm)

Tallgrass Brewing Co (KS) at The Up North Pub (starting at 5pm)

DeStihl Brewing (IL) at Brasserie V (starting at 6pm)

Investing in Breweries - A Sample Treatment

So, posting around here has been a little slow lately. A lot of that is related to a busy personal life and a busy professional life. Luckily, we have a new writer, Kevin Ramakrishna, to pick up some of the slack. He's written two great articles about two great bars in the Madison area. He's got some more stuff in the works that I hope you'll like.

One of the things that I am working on is a handbook. Since it's about beer, I thought you might be interested in reading what I have to say about beer. This particular sample section is about investing in breweries; namely the complex IRS rules around what happens when you invest in multiple breweries. There are a lot of other things to note about investing in breweries, as well; for example, return on investment isn't nearly as awesome as other industries because of the high capital costs and low margins.

Keep in mind, this is still a draft and will likely change considerably to its final form.

Also, please note: this is not legal advice and me writing this and you reading this does not constitute an attorney-client relationship. If you have any questions and need legal advice about investing in breweries - please talk to an attorney.

Investing in Breweries

Brewing Groups

It is entirely feasible that someone will have a financial stake in multiple breweries.  If that someone owns a large enough stake in the breweries, the State of Wisconsin calls them a “Brewers Group” or “Brewpub Group”, the federal government calls them a “Controlled Group”; for the sake of simplicity we’ll call them “Brewers Groups” because it makes more sense and the Wisconsin definition merely references the IRC definition of “Controlled Group”[1]. Brewers Groups are treated as breweries and must abide by the same rules as if all of the breweries under management were the same brewery.

For this section, a hypothetical might be illustrative: Sam, Miller, and Bud love beer and have money that they want to invest in Wisconsin breweries. They have identified 2 breweries across the state, Brewery A and Brewery B.

A Controlled Group is a term of art defined by the Internal Revenue Code (“IRC”) for the purpose of determining who owes taxes where a group owns multiple companies[2]. The theory is that if there is a sufficient nexus of ownership, the Controlled Group owes taxes for the sum of the companies under management of the Controlled Group; in other words, for tax purposes, all of the companies under management are considered the same company. The IRC defines 3 types of Controlled Groups: Parent-Subsidiary Groups, Brother-Sister Groups, and Combined Groups.  

Parent-Subsidiary Group

A Parent-Subsidiary Group exists where the parent company owns more than 50% of the voting stock or more than 50% of the total value of shares in each subsidiary[3].

Turning to our hypothetical: our group of intrepid investors forms a company, InvestCo Inc in which all three investors own an equal share. InvestCo invests in Brewery A (5,000 bbls) and Brewery B (10,000 bbls). In exchange for their investment, InvestCo receives 50% of the common stock of Brewery A and 60% of the common stock of Brewery B. In this first example, InvestCo is not considered the Parent of Brewery A (not more than 50%), but would be considered the parent of Brewery B; InvestCo is thus responsible for ensuring Brewery B’s taxes are paid for 10,000 bbls of output. If we change this example, so that InvestCo receives 51% of the common stock of Brewery A, then InvestCo is a Parent of both Brewery A and Brewery B, and would pay taxes on 15,000 bbls of beer.

Controlled Groups particularly become an issue where the excise taxes are stepped or tiered. For example, in Wisconsin, a brewery under 300,000 bbls only pays $1 per barrel on the first 50,000 bbls, and the $2 per bbl over 50,000 bbls[4]. If the brewery is over 300,000 bbls, it owes $2 per barrel on every barrel produced.

Returning to our hypothetical: if Brewery A produces 25,000 bbls and Brewery B produces  25,000 bbls, the InvestCo owes taxes on 50,000 bbls ($1 per bbl). However, if Brewery A produces 30,000 bbls, and Brewery B produces 40,000 bbls, then InvestCo owes taxes as if it produced 70,000 bbls. In other words, while independently each brewery would only owe $1 per barrel (total $70,000), together InvestCo (as the Parent) owes $1 per barrel on the first 50,000 bbls ($50,000) and $2 per barrel on the remaining 20,000 bbls ($40,000), for a total of $90,000. You can see how this only multiplies if the Brewers Group is pushed over 300,000 bbls.

Brother-Sister Group

A Brother-Sister Group exists where 1-5 individuals[5] cumulatively own more than 50% of the voting stock or more than 50% of the total value of shares in the companies. This rule comes with a caveat: the ownership interest is considered only to the extent that the stock ownership is the same for each investment[6].

Hypothetical: Sam, Miller, and Bud decide not to form InvestCo because they don’t want to risk being a “Parent” to their investments. Instead, they each decide that they will buy stock in Breweries A and B individually. Sam buys 10% of the common stock of Brewery A and 20% of the common stock of Brewery B. Miller purchases 30% of the common stock of Brewery A and 20% of the common stock of Brewery B. Bud purchases 20% of the common stock of Brewery A and 20% of the common stock of Brewery B.

Name	Brewery A	Brewery B	Identical
Sam	10%	20%	10%
Miller	30%	20%	20%
Bud	20%	20%	20%

Under the IRS definition, Sam, Miller, and Bud do not constitute a Brewers Group because, to the extent the stock ownership is identical, the common ownership does not exceed 50%, even though all three have the majority of common shares of both breweries. If Sam had purchased 11% of Brewery A instead of 10% (or Miller had purchased 21% of Brewery B), the group would be considered a Brewers Group because the Group would cumulatively own more than 50%.

Combined Group

A Combined Group happens when a company that is part of a Brother-Sister Group is the Parent in Parent-Subsidiary Group. Then, the Subsidiary is also considered part of the Brewers Group.

Our hypothetical hits the big stage here:  Sam, Miller, and Bud went in and purchased Breweries A and B as shown in Table 1, except that Sam actually purchased 11% of Brewery A, thus making a Brewers Group. Breweries A and B are swinging along nicely; Brewery A produced 110,000 bbls, and Brewery B produced 150,000 bbls. Brewery B is looking to expand to the East Coast, but rather than open a new brewery there, Brewery B chooses to just purchase 55% of Brewery C, a 30,000 bbl brewery that is currently operating under-capacity. Brewery B has an additional 20,000 bbls brewed at Brewery C to kick-off its East Coast distribution. Under the Combined Group Rule, Brewery C is considered part of the same Brewers Group and Breweries A and B, and the combined barrel production is 310,000 bbls.

The excise tax math follows:

Brewery A (if independent): 110,000 bbls: (50K * $1) + (60K * $2) = $180,000
Brewery B (if independent): 150,000 bbls: (50K * $1) + (100K *2) = $250,000
Brewery C (if independent): 30,000 bbls + 20,000 bbls (contracted by Brewery B): (50K * $1) = $50,000

Total as independents: $480,000

Combined Brewers Group: 110K + 150K + 50K = 310K bbls: (310K * $2) = $620,000

One final note: this treatment has only dealt with Wisconsin taxes. Federal excises taxes, which also have to be paid, are stepped as well.

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[1] Wis. Stat. 125.02(2d)(2p)

[2] 26 USC 1563

[3] In the usual case, the rule is 80%, however, 26 USC 5051(a)(2)(B) amends this to 50% for Brewer Groups.

[4] Wis. Stat. 139.02

[5] Or estates or trusts.

[6] 26 USC 1563(a)(2): “…taking into account the stock ownership of each such person only to the extent such stock ownership is identical with respect to each such corporation.” For comment and explanation see: COMMENT: Proposed Revision of I.R.C. § 1563(a)(2): A New Definition for Brother-Sister Controlled Groups., 34 Hastings L.J. 665

Review: Brasserie V

Brasserie V doesn’t necessarily represent something entirely novel or innovative but it is something cohesive, interesting, and polished. From the chalk boards noting the specials to the distressed wood floors, it doesn’t feel like I’m leaving the Midwest but, instead, like a place I could linger at for hours.

Of course, if I had my way, I would be doing my drinking at home and perhaps cooking. Invariably, Katie does not much care for my attitude, and, quite frequently, I find myself actually having to interact with society.  In this case, however, Brasserie V was a place I had read about for some time before moving here and passing it up would have been a huge mistake.

Brasserie V is a Belgian restaurant on Monroe Street on Madison’s near west side.  Built into a strip of commercial enterprises, it sits in the heart of the community a few blocks from Camp Randall.  The food is local and the beer is plentiful, with the menu listing options well into the hundreds.  Getting there early on a Saturday is a must if you want to eat. And eat you should.

We are seated at the first table in from the door. The wood floors and deep mahogany bar drip with invitation to stay, talk and slowly digest every morsel of sight and smell. The tap selection is robust with Belgians and my wife orders a SaisonDupont.  Drinking Belgian on a summer day is an easy decision, but I can’t ignore a special release and go with a Sixpoint Nugget IPA from their Spice of Life series, which is something I might not get a chance to try otherwise.  The Nugget is served in a proper snifter, with the cloudy gold and orange popping from the dark corner of our table.  The hops (nugget, from whence the beer’s name comes) here are primarily for bittering. Grapefruit on the nose with a touch of harshness on the tongue from significant spice notes.  A solid beer even if not my favorite, but where it shined was on the first course.

Beer and food are often talked about as being a great combination, but, much like with wine, only rarely do great pairings come together.  We go with a cheese course: blue, 10 year old cheddar, and a creamy cheese that was something like a harder brie. The Nuggets shined with the cheddar.   Allowing the cheddar to slowly melt and coat the palate with rich fat is the best way to sample the beer.  The hop bitterness subdues, shifting the flavor profile to the citrus grapefruit and wiping clean the remains of the nutty cheese.

And in case you were wondering, the Saison Dupont was exceptional.  Served in a proper Dupont glass the banana, apple and pear shine through. Saison Dupont never disappoints but this was the first time I had a draft version. As a rule, Dupont is recommended for any novice beer drinker looking to impress a snob but still actually enjoy the contents in the bottle.

My next beer was a Bockor Cuvee des Jacobins Rouge. An unblended lambic fitting the profile of a Flemish red. I won’t attempt to pretend that more than two flavors exist here: cherries and sour.  Deep rich cherry sitting in something akin to balsamic vinegar. Outside of a Cantillon, this is as sour a beer as I’ve ever had.  Absolutely superb and perhaps the only beer to truly make me pucker like I was biting into a lemon.  While this may sound odd for a beer, the sourness is a result of wild fermentation that’s as traditional as beer itself and difficult to emulate.  Months of aging are required to truly develop the flavor of a yeast strain called brettanomyces (brett).

The beer perfectly matched the rich meat of duck confit sitting on a bed of swiss chard with bits of rhubarb.  The duck confit was perfectly crisp and moist.  The sourness of the beer cutting through the oily fat and recharging the palate.

Brasserie V is doing everything right.  The food is fresh and simple but executed exceptionally well.   The beer is served properly and tasted phenomenal.  

Madison Beer Review

Eh. She's OK. The Bieb likes her more than I do, but whatev.

Press Release Thursday: Bos Meadery

I have a love-hate relationship with mead - I either love it or hate it and there's very few that I'm indifferent to. Colleen makes the good stuff.

----------START PRESS RELEASE--------------------

MADISON’S FIRST MEADERY STARTS PRODUCTION

The Near East Side Has Another Addition to Its Vibrant Food and Drink Culture

Add mead—honey wine, the world’s oldest fermented beverage—to the growing array of craft beverages produced in Madison, Wisconsin. Bos Meadery, located at 849 East Washington Avenue, Suite 116, is Madison’s first meadery.

Mead is experiencing a renaissance in the US. In the past year The New York Times, Forbes and National Public Radio have all reported on the rise of mead as a growing trend in the world of craft beverages. As mead gains popularity on both coasts, Madison, with its community of locavores, craft brew drinkers, and beekeepers, is primed to welcome local mead. While a few wineries in Wisconsin produce mead, Bos Meadery will be the first facility dedicated solely to mead production.

Bos Meadery was founded by Colleen Bos, a long-time homebrewer and meadmaker who attended the world-renowned Siebel Institute’s Concise Course on Brewing Technology.  “Mead is similar to wine in alcohol content,” Bos notes, “but it lends itself to the same kind of creativity with ingredients—herbs, spices, fruits, and more—that craft beer offers” Bos has over 12 years of experience as a project manager in research and technology fields, and her background in medieval studies gives her a unique perspective.

“Our dry and sparkling meads are different from the traditional sweet mead of ancient and medieval lore,” she says. “These meads are a new breed of refined beverages that are lighter on the palate, and suitable for pairing with a wide variety of foods.”

Bos Meadery is committed to local agriculture and uses local and regional ingredients wherever possible. The honey used in the mead isn’t boiled, and is treated gently to maintain its natural aromatic qualities. Bos Meadery puts a great deal of emphasis on yeast science and nutrition to ensure the healthiest fermentation and a smooth drink.

Bos Meadery started production on July 13, 2012 and anticipates having mead available for sale starting September 1, 2012. The facility will produce about 1,000 gallons of mead in the first year. Tours and tastings are available by appointment, with a tasting room in the works. Bos Meadery is working with Beechwood Sales/Specialty Beverage of Wisconsin for distribution. It will be available at many local bars, restaurants, and retail locations.

Bos Meadery is also launching a Kickstarter campaign to help ensure it gets off to a good start. You can find the project at:

http://www.kickstarter.com/projects/1254954239/bos-meadery-madisons-first-meadery.

###

The New Guy Finds His New Bar

Two months ago I moved here with my wife from upstate New York to be closer to family.  Moving across the country tends to bring about a small amount of upheaval and the need to find new norms for comfort.  I drink beer which means I have a need to slip into the local beer culture in order to get a sense of the community.  My first effort was to track down a new watering hole.  Luckily, I didn’t have to go far as Eddie’s Alehouse in Sun Prairie is stumbling distance from home.    

Eddies isn’t a classy, deep mahogany kind of bar. It’s a wood paneling and grease stain kind of bar. On my first visit I am accompanied by my wife, Katie, and her mother, a pseudo-Wisconsinite by way of Illinois after spending a life time in the Northwoods.  She brings with her the claimed knowledge of the video machines that actually pay out.  I’m skeptical, but to her credit, she tends to win…

We walk into Eddie’s to find a packed house. The bar is at capacity. Two girls are nearest the door drinking some golden elixir from Chimay glasses. Proper glassware is always appreciated. More of the same all the way down to the opposite wall where the kitchen opens to the bar. Tables here range from small and round to comfortable for six. The beer menu can be found on the dry erase boards mounted to the wall behind the bar or in a handy printed format, but beware, the print might be outdated. Either way, there are no prices, only ABV content for each selection.  There is no wait staff except to clear the piled up glasses. Drinks and food are ordered through the bar tender.

Eddies, interestingly reminds me of any towny bar except for the 140 beer selection and friendly service even to us new comers. The walls are lined with marketing pieces for the large breweries and a few locals. Nothing here is over stated.  The tin ceiling may seems a bit out of place with the wood paneling, but I can only hope it is the original. This place could exist in any town, anywhere, and it could succeed on the stripped down, no frills ambiance combined with a robust and frequently changing beer menu. 

We order a round and steal a vacated chair in the corner by the video gambling.  From what I can tell of my mother-in-law’s excitement level, these machines aren’t going to pay out. Surprise.

For me, I cannot pass on my first chance to try Bell’s Hopslam. Weighing in at 10% ABV but smelling and appearing like a sweet mango fruit juice.  It is a notable occasion when I find a “rare” beer to be worthy of the accolades but this is as good as beer gets. As the hops release their chorus of aromas, the mélange seems to hang just below the rim of the pint glass waiting to engulf your nose in a syrupy nectar of pine and pineapple and mango. Not a hint of the alcohol to provide fair warning of the danger that lies between you and the bottom of the glass.  

While Hopslam is a double IPA, it is brewed with honey and uses its texture to provide richness and body.  Honey in beer is a complicated ingredient.  It is filled with fermentable sugars and can become a bittering agent if the yeast have their way with it. I’m not a brewer, so how Bells pulls this off so effectively is out of my expertise, however, I have had a few beers that use honey and only rarely does it work.  This is brewed once a year and most of the sales are done at the brewery in Michigan, thus making Hopslam difficult find under normal circumstances. 

As my pint glass finds its way to my lips at a far more rapid pace than I would normally allow the edges of the world began to soften. Soon I was staring at that last remnants of the laced foam on the glass.

This is actually an easy beer to ignore for the non-hop head.  Many who stick to Belgians and wheats are unlikely to give this a shot once they hear there are six hop varietals.  But IPAs in general have moved away from straight bittering hops to floral and citrus hops which make these massive beers far more approachable.

The drinking here is abnormally cheap for those coming from the east coast and the locals aren’t the “blogging while I’m drinking” crowd. Nevertheless,  I stole a picture of the Hopslam on my iPhone ever mindful of the eye-rolls directed at my back. It was a first for me, and posterity beckoned.  

Catching Up On The News

- From the "Let Me Up I've Had Enough" Category: How do you keep your distributor from paying attention to someone else? Do what Anheuser-Busch ("A-B") is doing: flood your distributor with so much inventory that they don't have enough time or manpower to pay attention to anything else. "This accomplishes two things. One, it eats up space in the warehouse forcing the wholesaler to control what it can control and cut inventory levels from other suppliers which leads to recurring [Out of Stock] situations in the market and less competition at retail for [A-B]. ... Two, it takes the wholesaler focus away from competing brands as they struggle to find ways to get all that [A-B] product to market before running into code date issues."

- There are a ton of new breweries open - just in the vaguely Madison-ish area: House of Brews' tap room on Helgesen Dr is now open T, W, F from 3:30pm until the last person leaves; One-Barrel Brewing on Atwood has its doors open for good beer and snacks; Port Huron Brewing Company in the Dells has product rolling off the lines; frat boys and sorority girls, past or present, can throw on a "We'll Never Forget You Brent" t-shirt, some pink faux-RayBans, and quaff a Sconnie beer or seven; and, while it's nowhere near Madison, if you happen to be in Sheboygan the "hot-thing"-du jour is the new 3 Sheeps Brewing Co

- From the "Consumers Aren't Doing Their Job, Either" Department: Wisconsin beer sales for 2010 were the lowest in 5 years with tax revenue collected at a paltry $9.3 million. Rowland's Calumet Brewery in Chilton paid its fair share: "If (customers) are going to drink a beer in a bar, they are going to drink a craft beer," said [owner, Bonita] Rowland, who sells beers including Calumet Rye and Fat Man's Nut Brown Ale. The brewery was taxed $21 for 21 barrels." So, please, do your part to help the state economy and go to Chilton and make Rowland's brew more than 21 barrels so they have can pay more taxes, sheesh.

- Finally, two hop-related notes: first, Gorst Valley Hops has released its Bine 3060 a small-scale hop harvester; for a mere $13K around 3 people can pick and sort between 30-60 hop bines per hour instead of   6 people toiling for an hour on 1 or 2 bines. Second, New Glarus Brewing Co is planting their own hop farm down at the brewery in New Glarus; they are just making way for the rhizomes this year so it'll be 2 or 3 years before you can have a New Glarus beer that uses New Glarus hops.

Four Gallons At A Time

Behold! Krausen from 4.2 gallons of 1.121-OG Black Saison in a 10-gallon keg:



I took the picture 17 hours after I pitched the yeast, but I don't know when the foam became visible. I'm glad I didn't ferment the beer in a carboy. Anyway, I plan to add raspberries during the late stages of fermentation and mature the beer on oak chips. For the five or six of you who followed the RePublic weblog, this beer will be the sequel to my anniversary beer. My previous batch, which improved over the course of five anniversaries, died of oxidation last year while rescuing its family from the remains of a destroyed sinking battleship.

UPDATE: my last anniversary beer isn't dead! Over the last week, my wife and I cracked open three bottles so I could recover the glass. To our surprise, two of the bottles were good and one was heavily oxidized. Explaining the probable reason requires a little back story. Six years ago, the first bottle I opened was completely flat. After turning the rest of the bottles upside down to re-suspend the yeast and hopefully carbonate the beer, I noticed beer leaking through a few of the plastic Champagne corks. It turns out some the corks had holes in them, and the beer in the unaffected bottles was already well-carbonated. My new theory is that the oxidized bottles had corks with holes that were small enough to prevent beer from leaking out, but big enough to let in copious amounts of air and release some of the CO2.