Speaker 1: Pushkin too quick.
Speaker 2: No, it was perfect, pushkin stop, you got it.
Speaker 3: Jacob Goldstein, I want to tell you a story about
Speaker 3: two brothers from Georgia. One was a goofy looking peanut farmer.
Speaker 3: The other one also a little goofy looking, also peanut farmer,
Speaker 3: also the President of the United States of America, Jimmy
Speaker 3: Carter and Billy Carter. They looked similar, Billy and Jimmy,
Speaker 3: but their temperaments were different. Jimmy Carter, the President was sober,
Speaker 3: both in the sense that he rarely drank, but also
Speaker 3: in the sense that he had pretty strong religious views.
Speaker 3: He felt that if you looked at a woman who
Speaker 3: was not your wife with lust in your heart, this
Speaker 3: was actually a form of adultery. His brother, Billy, loved drinking,
Speaker 3: loved beers, and he would drink them with this unquenchable thirst.
Speaker 3: And he judged the nineteen seventy seven Miss Piggy's Pizza
Speaker 3: Beauty pageant. I'm going to argue that Billy and his brother,
Speaker 3: the President were essential to an important moment in business history,
Speaker 3: specifically the history of the beer industry in the United
Speaker 3: States of America. Between the two of them, they were
Speaker 3: responsible for possibly the very lowest point in American beer history,
Speaker 3: which we will tell you about, and eventually the birth
Speaker 3: of the fantastic American craft beers we have today. It's
Speaker 3: a fall and rise story, and surprisingly it is the
Speaker 3: teetotaling president, not the drunkard, who saves the great American Bruski.
Speaker 3: I'm Robert Smith.
Speaker 4: Have you ever said Bruski before in your life?
Speaker 1: I have never said brusky before?
Speaker 4: In this business history A show about the history of beerness,
Speaker 4: no show about the history of business.
Speaker 1: No, do it, do it, do it. We're going do
Speaker 1: it all the way.
Speaker 3: This story answers some questions that I have always had
Speaker 3: about beer. How did a nation of immigrants, each of
Speaker 3: which brought delicious beers with them, create an American beer
Speaker 3: industry that, at least in the sixties, seventies, and eighties
Speaker 3: served bland, watery swill. And how did craft beers finally
Speaker 3: break that curse? And the answer this is going to
Speaker 3: delight you is tax policy and regulation.
Speaker 4: It does delight me, the two most powerful forces in
Speaker 4: the universe.
Speaker 3: I was a kid during this era and the news
Speaker 3: just loved stories about Billy Carter. And maybe it was
Speaker 3: because Jimmy was a goodie two shoes. But Billy, Oh.
Speaker 3: People would tell these stories about the president's brother is
Speaker 3: a redneck, he's a good old boy, and Billy Carter
Speaker 3: embraced those terms. Jimmy Carter's route to the presidency was
Speaker 3: a classic one. He left the small town of Plains,
Speaker 3: Georgia as soon as he could to attend the Naval Academy.
Speaker 3: He joined America's nuclear submarine fleet, and when his father died,
Speaker 3: he went back to run the family business, the family
Speaker 3: peanut farm. Billy, twelve years younger than Jimmy. Billy flunked
Speaker 3: out of university. He left a four thousand dollars beer
Speaker 3: tab behind. A lot of beer, was a lot of drinking.
Speaker 3: He ended up working and managing the peanut farm. But
Speaker 3: he was smart. Billy Carter was smart. He was a
Speaker 3: voracious reader. He did a great job of running the
Speaker 3: peanut farm. But he did find that the drunken, good
Speaker 3: old boy shtick was effective in the peanut business. He
Speaker 3: once told a reporter, I got a redneck white sox
Speaker 3: and blue ribbon beer.
Speaker 4: Blue ribbon beer like PBR, like Pabst, blue ribbon.
Speaker 3: Paps, blue ribbon. He would roll up to farmers and
Speaker 3: peanut buyers in his pickup truck with an open perhaps
Speaker 3: blue ribbon, driving while drinking between his knees, and the
Speaker 3: customers just loved it.
Speaker 4: So in nineteen it was like a business show. He
Speaker 4: was like a salesman selling this character of Billy Carter
Speaker 4: to some extent.
Speaker 3: Yeah, of this southern farmer you know who loved America,
Speaker 3: loved his beer, and.
Speaker 4: He's a good time. You're happy if you're in business
Speaker 4: with him and he shows up, you know it's going
Speaker 4: to be a good time.
Speaker 1: I think it still works in business to this day.
Speaker 3: Like you were not unhappy when Billy Carter rolled up
Speaker 3: with a six pack of PBR. In nineteen seventy two,
Speaker 3: Jimmy Carter was governor of Georgia and Billy Carter also
Speaker 3: made his big career jump. So he was living at
Speaker 3: this time planes Georgia in a dry county, meaning they
Speaker 3: couldn't sell alcohol. You could find alcohol, but they didn't
Speaker 3: officially sell alcohol in the county. So Billy Carter joins
Speaker 3: the town council for the sole reason of voting to
Speaker 3: allow alcohol sales in the county, and once that vote
Speaker 3: went through, he resigned from the town council. About the
Speaker 3: only gas station in town and Plains, Georgia. And he
Speaker 3: put up a big beer sign and said, we are
Speaker 3: selling beer, which I helped legalize. Here at the only
Speaker 3: gas station in Plains, Georgia, and it became this community
Speaker 3: hub for the city. With Billy holding court, why don't
Speaker 3: you give me his quote?
Speaker 4: We were a beer joint that sold gas as a sideline.
Speaker 4: I probably drank or gave away more beer than I sold.
Speaker 4: That second part is the is the trick right. It's
Speaker 4: great if your business is selling beer. Good classic business,
Speaker 4: giving the beer away that's going to hurts you in
Speaker 4: the end, and drinking it also.
Speaker 3: Now at this point, I want to leave the Carter
Speaker 3: Brothers for a moment, and I want to follow the
Speaker 3: beer itself, the Paps blue ribbon, because, unbeknownst to Billy's belly,
Speaker 3: Paps is a perfect way to tell the story of
Speaker 3: how beer got to America and how it got so bad.
Speaker 3: We're going to flash back now one hundred and thirty
Speaker 3: years to eighteen forty four.
Speaker 4: I'm there, I'm ready. I love the eighteen hundreds in
Speaker 4: business history, as you know, my favorite business history century.
Speaker 3: So since this is a beer store, you know it's
Speaker 3: going to feature Germans. Eighteen forty four, a lot of
Speaker 3: Germans are coming to America, including Jacob Best, who starts
Speaker 3: the Empire Brewery in Milwaukee, Wisconsin. Now, in this era
Speaker 3: of German migration, they brought a new style of beer.
Speaker 3: They brew a beer it's all cloudy, has all this
Speaker 3: stuff in it, and they would store it somewhere cold,
Speaker 3: like in a cool cellar, and the stuff inside the
Speaker 3: beer would sort of drop down to the bottom. And Jacob,
Speaker 3: do you know what store away is in German? No, no, no,
Speaker 3: it's Lagern, where we get the term lagger. So this
Speaker 3: is the beer that the Germans have brought to America
Speaker 3: and this new process. And after the lagurn process, you
Speaker 3: had a clear, mellow beer that stayed fresh longer than
Speaker 3: other ales. And the timing of Jacob Best was impeccable
Speaker 3: because soon after the reopened came the Great Lagger Drought
Speaker 3: of eighteen fifty four. No put it on the calendar.
Speaker 3: It's like a bank panic, But for beer, I knew
Speaker 3: all the bank panics. I did not know about the
Speaker 3: Great Lagger Drought of eighteen fifty four. It had apparently
Speaker 3: been a hot summer. There's all this newly arrived German
Speaker 3: population in Saint Louis and Chicago, and they drank the
Speaker 3: city's dry. The Chicago Journal wrote about.
Speaker 4: This here give it to us, Jacob, Germans disconsolate and
Speaker 4: haggard wander from hall to hall, and as yet there.
Speaker 1: Is no beer.
Speaker 4: Something must be done. A newspaper loves nothing more than
Speaker 4: to say something must be done.
Speaker 3: The problem was that most lagger at this point was
Speaker 3: sold within a mile or two of where it was brewed.
Speaker 3: Number one, it's heavy, so it's expensive to move. But
Speaker 3: number two, it's because once the beer gets warm, it
Speaker 3: starts to go bad. But luckily for Jacob Best, this
Speaker 3: is the beginning of the age of the cold shp
Speaker 3: So you had ice, you had railroads, you had shipping,
Speaker 3: you had a way to transport beer.
Speaker 4: So call back to our ice king show. Of course,
Speaker 4: right around this time mid eighteen hundred's kind of early
Speaker 4: to mid eighteen hundreds, they're they're industrializing ice before they
Speaker 4: have refrigeration. They're cutting it out of frozen lakes and
Speaker 4: using it to keep beer coll It was actually one
Speaker 4: of the first places that spread from Boston was Milwaukee
Speaker 4: for the beer business.
Speaker 3: So you have a new way to transport beer. You
Speaker 3: have a beer panic in the big cities. And so
Speaker 3: Jacob Best starts to ship barrels of their logger on
Speaker 3: the Lake Michigan ferry to Chicago and then down a
Speaker 3: canal to Saint Louis. Lagger drought over Jacob Best, and
Speaker 3: eventually his son Philip started to build their brand. The
Speaker 3: other thing happening in eighteen hundreds is the launch of brands.
Speaker 3: They put their last names. They put worst Beer first, No,
Speaker 3: it was best select, and they put it on the bottle.
Speaker 3: And they came up with a drinking song specifically for
Speaker 3: their beer. Here are the lyrics printed in Maureen Ogle's
Speaker 3: great book Ambitious Brew. Jacob sing Us sing Us a
Speaker 3: drinking song of the bests.
Speaker 4: When the glasses loudly ring, all the waiters quickly spring,
Speaker 4: serving promptly all the guests with the bestest of the bests, with.
Speaker 3: The bestest of the best. I want a tuba for
Speaker 3: that the best. We're soon making enough profit to expand.
Speaker 3: They built a new brewery in Milwaukee look like a
Speaker 3: Gothic castle, and the Lagger vaults extended for several city
Speaker 3: blocks under the city.
Speaker 1: It's all beer below the water.
Speaker 4: We need a comic book. We need a beer comic
Speaker 4: book down there.
Speaker 3: Eventually a steamboat captain married into the family and he
Speaker 3: took over the business and renamed it. His name was
Speaker 3: Frederick Papst. He tied a little blue ribbon around the
Speaker 3: next of the bottles, like an actual blue ribbon. Yeah,
Speaker 3: as part of the marketing they could stand out.
Speaker 4: I always thought it was it's like they won a
Speaker 4: blue ribbon at a contest or something.
Speaker 1: They later did.
Speaker 4: Also, Yeah, the actual blue ribbon seems impressive.
Speaker 1: It's nice.
Speaker 3: Now you needed a gimmick like this to stand out.
Speaker 3: Because everyone was getting into the brewing business in the
Speaker 3: late eighteen hundreds, we start to see companies like Schlitz, Miller,
Speaker 3: Anheuser Busch, and Papst. Now, maybe because it was a
Speaker 3: product of the German immigrants, beer did not enjoy the
Speaker 3: best reputation in the late eighteen hundreds. This is when
Speaker 3: the temperance movement was rising in America. People who said
Speaker 3: we should outlaw alcohol. It's terrible, and these German and
Speaker 3: Irish immigrants, they were painted as being drunks invading and
Speaker 3: destroying America. The beer industry fought back with science. They said, listen,
Speaker 3: beer is a low alcohol alternative to the devil that
Speaker 3: is whiskey. They said in court, you could drink twenty
Speaker 3: pints of lager before you could get drunk.
Speaker 4: It's a lot of pints.
Speaker 3: The brewers might have won this argument, but just as
Speaker 3: the prohibition movement was growing, the US declared war on
Speaker 3: Germany in nineteen seventeen, and beer became an easy target
Speaker 3: for the propaganda of the war. Here's what one pro
Speaker 3: prohibition politician had to say.
Speaker 4: No, Germans in the war are conspiring against the peace
Speaker 4: and happiness of the United States more than Papst, schlitz
Speaker 4: Miller and others of their kind. We don't like that
Speaker 4: phrase their kind.
Speaker 3: It's never good. No, we should do a prohibition show
Speaker 3: in the future.
Speaker 4: Yeah, there's a lot of sort of tax and regulation.
Speaker 4: I mean, even just al Capone. I think there's a
Speaker 4: business case study about al Capone that I've been meaning
Speaker 4: to dig into.
Speaker 1: Oh, we should definitely do it.
Speaker 3: Just after the war, the Eighteenth Amendment passed, which meant
Speaker 3: that prohibition was in effect in the United States of America.
Speaker 3: Production of alcohol is now banned, and the big beer
Speaker 3: companies converted their giant factories to make near beers like
Speaker 3: low alcoholics, soft drinks. Essentially, it would have been very
Speaker 3: popular today.
Speaker 1: That is the trend.
Speaker 3: And because they had ice houses and refrigeration plants, some
Speaker 3: started to produce ice cream. Paps made spreadable cheese delicious.
Speaker 3: In fact, got sued by Craft. Perhaps also had a
Speaker 3: big real estate portfolio from all the beer gardens and
Speaker 3: hotels and taverns, and it acquired it developed these properties, rented,
Speaker 3: sold them off. It did anything to survive prohibition. And
Speaker 3: because all of this, you know, a lot of the
Speaker 3: small breweries went out of business, but paps they made
Speaker 3: it through. When prohibition was repealed in nineteen thirty three,
Speaker 3: they could reopen the factory and start to sell beer
Speaker 3: again in America. But the paps that they were about
Speaker 3: to brew, the one that Billy Carter was to come
Speaker 3: to love, would not be the same beer. It would
Speaker 3: taste different than the one that carried that first blue ribbon.
Speaker 3: It would be much worse after the break. I think
Speaker 3: we've all heard about the celebrations when prohibition was repealed
Speaker 3: and people are drinking in the streets. It feels like
Speaker 3: it was this anomaly in America. But prohibition really changed
Speaker 3: the industry. Obviously, people drank less, they just did after prohibition,
Speaker 3: and the industry structure was altered. In the old days,
Speaker 3: if you were perhaps blue ribbon, you would have a
Speaker 3: beer guarding.
Speaker 4: A lot of bars were owned or financed directly by brewers, right,
Speaker 4: it was like a it was a vertical integration.
Speaker 3: Basically, when prohibition was repealed, the US government was like, well,
Speaker 3: wait a minute, let's not go back to the way
Speaker 3: things were. Let's create something new called a beer distributor.
Speaker 3: It was ended up being a what is a three
Speaker 3: tier systems?
Speaker 4: Three tier system? This is the phrase everybody is.
Speaker 3: Yeah, so rather than sell the beer you made to
Speaker 3: someone who wants to drink the beer you made.
Speaker 4: Or even rather than sell it to a store that's
Speaker 4: going to sell it.
Speaker 3: The brewer would sell it to a distributor. The distributor
Speaker 3: would sell it to a store, and the store would
Speaker 3: sell it to the customer.
Speaker 4: Yes, and so the three tiers, to be clear are brewer, wholesaler,
Speaker 4: slash distributor, and store. And like, just like, why did
Speaker 4: they do that? What is the rationale?
Speaker 3: I think the government was worried that the brewers had
Speaker 3: incentive to, first of all, to take over markets because
Speaker 3: they owned the bars and the beer halls, and also
Speaker 3: an incentive to encourage people to drink more than they
Speaker 3: probably should because because it is their product. So they
Speaker 3: were concerned about alcoholism. But also they were concerned about
Speaker 3: taxing the industry, and they felt like if they reduced
Speaker 3: the power of all parts of the brewing industry, it
Speaker 3: would be easier to track the beer and to tax
Speaker 3: the beer.
Speaker 4: And maybe you know, I'm kind of making this up,
Speaker 4: but antitrust was pticularly aggressive around this time, and there
Speaker 4: was that famous case. You know, movie studios used to
Speaker 4: own movie theaters, yes, and there's the famous case that
Speaker 4: went to the Supreme Court where the government didn't want
Speaker 4: that to happen anymore. They didn't want that vertical integration,
Speaker 4: and they won and movie studios were no longer allowed
Speaker 4: to own theaters anymore. This is the analog of that, right,
Speaker 4: beer brewers can't own bars anymore. And it seems like
Speaker 4: there are some I don't know whether they're intended or not,
Speaker 4: but there are some interesting structural consequences of this shift.
Speaker 4: One of them of this three tiered system is it
Speaker 4: seems to be quite bad for small brewers, right, They
Speaker 4: already were having a hard time. A lot of them
Speaker 4: had gone out of business in prohibition.
Speaker 3: They don't have a lot of leverage with the distributors, right.
Speaker 3: Distributors have a limited storage space, limited truck space, and
Speaker 3: limited shelf space. These are the things that distributors care about,
Speaker 3: and so in theory they could negotiate with every small brewery.
Speaker 3: But if you're a distributor, it's easy to just talk
Speaker 3: to Paps Blue Ribbon and to like fill up your
Speaker 3: truck with Paps we Ribbon and to put it on
Speaker 3: the shelf.
Speaker 4: And I bet Paps we Ribbon will give you a deal.
Speaker 4: I mean, it kind of reminds me of the Amp
Speaker 4: story as well, where the big player it just has
Speaker 4: economies of scale and efficiencies, and the distributor just wants
Speaker 4: to do the easiest, cheapest thing, the most efficient thing,
Speaker 4: and why wouldn't they And that's good for the big
Speaker 4: brewers and bad for the small brewers. So now we
Speaker 4: have beer distributors and the big breweries seem to get bigger.
Speaker 4: The smaller ones seem to be hurt after this. And
Speaker 4: it's interesting when you have a market like this and
Speaker 4: there's a few big players, there's a couple of ways
Speaker 4: the market can divide differentiate. One way would be that,
Speaker 4: you know, some people could start making beers for a
Speaker 4: more sophisticated palette. You could have basically a rich person's
Speaker 4: beer costs a lot, has great flavor, and then a
Speaker 4: cheaper swell you could sell to the masses. What actually
Speaker 4: happened was that all the big breweries decided they were
Speaker 4: going to cut costs and compete to be the cheapest, blandest,
Speaker 4: most generic beer out there. This feels very mid century
Speaker 4: to me. I feel like in the we're in the
Speaker 4: kind of post war period here, right, We're in the
Speaker 4: nineteen fifties, sixties. It feels like this very mass market era.
Speaker 4: And you can imagine the three tiered system being highly
Speaker 4: relevant here, right. We just we want to fill the
Speaker 4: distributor's trucks with our couple beers, with our one or
Speaker 4: two basic beers that everybody's going to want, and send
Speaker 4: them out by the case.
Speaker 3: So, with this philosophy, perhaps and the other brewers decide
Speaker 3: they need to cut costs become more efficient. They add
Speaker 3: corn and rice to make the beer cheaper and blander
Speaker 3: and at this point they decide they're going to compete
Speaker 3: through advertising, not the flavor space. Flavor space, flavor space.
Speaker 3: So by the nineteen seventies, basically every beer is weak.
Speaker 3: It's very light, very pale, very dry, and the only
Speaker 3: thing to differentiate is the name on the label and
Speaker 3: the tagline. The tagline became so important here. Why do
Speaker 3: you read me some of these taglines? Miller makes it right.
Speaker 3: Where there's life, there's bud. If you'll like beer, you'll
Speaker 3: love Schlitz. You know what things made me think of?
Speaker 3: You remember the Homer Simpson line beer.
Speaker 4: The cause of and solution to all of life's problems,
Speaker 4: something like that.
Speaker 3: Well, he's making fun of this era of beer. And
Speaker 3: because it is the mad Men era and they are
Speaker 3: starting to advertise on television and sponsor big league sports,
Speaker 3: these beer names are everywhere, and everyone's looking for their
Speaker 3: competitive advantage in terms of how can I get the
Speaker 3: name of my beer to stand out? Who can I
Speaker 3: get to hold up my beer and say this beer
Speaker 3: is the best. And their eyes turned towards planes Georgia.
Speaker 1: It's nineteen seventy six.
Speaker 3: Governor Jimmy Carter runs for president and the world's press
Speaker 3: descends on planes Georgia. You know, I've been there myself.
Speaker 3: You have to do the puff piece about the people
Speaker 3: running for president where you interview all their neighbors and
Speaker 3: their relatives and who should be there at the gas
Speaker 3: station when you drive into planes Georgia. But the President's brother,
Speaker 3: Billy Carter, and they loved him. Jimmy Carter, the President
Speaker 3: later said, why don't you give me this quote?
Speaker 4: He could play the country bumpkin as well as anyone.
Speaker 4: His beer drinking helped promote that image. He had a
Speaker 4: can of beer in his hand in every photo I
Speaker 4: ever saw. And I just want to point out that phrase,
Speaker 4: play the country bumpkin, right, because what President Carter is
Speaker 4: saying here is Billy knew what he was doing. He
Speaker 4: was conscious that he was putting on an act, creating
Speaker 4: a persona, and he was good at it.
Speaker 3: And what Jimmy Carter didn't say is that this act,
Speaker 3: this image, the country bumpkin, actually helped his run for president.
Speaker 3: This is just after Vietnam and Watergate, and Americans were
Speaker 3: suspicious of the same old politicians in Washington, DC. And
Speaker 3: Billy Yeah, he was embarrassing. He used some unfortunate language,
Speaker 3: but he humanized Jimmy Carter. He made it seem like
Speaker 3: this is an authentic politician from an authentic small town,
Speaker 3: and who amongst us doesn't have a brother that says
Speaker 3: the wrong thing occasionally. So Billy took advantage of this.
Speaker 3: He went on TV game shows, he judged belly flop competitions,
Speaker 3: and eventually he hired an agent to handle all the
Speaker 3: media requests and business propositions that flooded in. Definitely taking
Speaker 3: advantage of his brother's run for president. And you could
Speaker 3: imagine the beer companies taking a look at this guy
Speaker 3: who is never without a beer in his hand, and
Speaker 3: they think, this guy, we can make money off of
Speaker 3: this guy. One company in particular, this was a small
Speaker 3: trying to compete against the paps and the Budweisers of
Speaker 3: the time. It was called Fall City Brewing Company. They
Speaker 3: were a little desperate. They had started in nineteen oh
Speaker 3: five in Louisville, Kentucky. Just a little side note, Fall
Speaker 3: City were the first people at the time to start
Speaker 3: using the state tab opener for their beer cans, which
Speaker 3: we talked about in our can show.
Speaker 4: The state tad is the way you open a can now,
Speaker 4: the misticulous three lever thing.
Speaker 3: Instead of instead of the ring poll.
Speaker 4: Which was a deadly device.
Speaker 1: People can swallow them. It's terrible.
Speaker 3: So False City looks at Billy Carter and they think, yes, yes,
Speaker 3: what if we craft an entire beer around this beer
Speaker 3: god's image. What if we make Billy beer? And they
Speaker 3: were going to take it up a nuts. They weren't
Speaker 3: just going to put his name on it. They were
Speaker 3: going to have Billy pick the beer. Okay, So they
Speaker 3: send a private jet to Georgia to pick up Billy Carter.
Speaker 3: They bring in Billy Carter. His quote is, perhaps I'll
Speaker 3: become the Colonel Sanders of beer.
Speaker 4: It's interesting that he should say Colonel Sanders because today
Speaker 4: a celebrity not just endorsing a beer, but you know,
Speaker 4: starting a brand that has become a thing. If you're
Speaker 4: famous and you want to not just be really rich,
Speaker 4: but really really rich, rather than just acting in another
Speaker 4: movie or releasing another album, you start a tequila brand
Speaker 4: or a line of skin care products, and if it
Speaker 4: goes well, you go from mega millionaire to maybe billionaire.
Speaker 1: Yeah.
Speaker 3: If you know Jay Z like bought into a champagne company.
Speaker 4: Yeah, George Clooney and Rihanna.
Speaker 3: Billy Carter is going to be that guy so he's
Speaker 3: flying to Louisville. He is going to pick out the
Speaker 3: beer that will bear his name. Only problem is, Billy
Speaker 3: at this point is drinking a little bit more than beer.
Speaker 3: He had graduated to the hard stuff. So Lanny and Louisville.
Speaker 3: Billy later admitted quote, I'd been knocking vodka and grapefruit
Speaker 3: juice all the way there.
Speaker 4: At least there was the juice.
Speaker 3: It's good for you. It keeps the scurvy away. Billy
Speaker 3: was set up with all these different recipes of beer,
Speaker 3: and his one job was to taste them all and
Speaker 3: to pick out the one that would become Billy Beer.
Speaker 3: Here's what Billy said of that tasting session, Jacob I was.
Speaker 4: So drunk that they could have given me water in
Speaker 4: a glass and I wouldn't have known the difference. I
Speaker 4: finally just pointed at one and said that's the best.
Speaker 3: And so that was the batch that got the green
Speaker 3: light for full scale production start the factory, and False
Speaker 3: City was going to make so much of this beer
Speaker 3: that it couldn't handle the brewing on its own. It
Speaker 3: licensed Billy Beer to several small outlets across the nation
Speaker 3: so that Billy Beer could all roll out the same time,
Speaker 3: and they designed it around the image of Billy. It
Speaker 3: said billion, big blue letters, and it had this claim
Speaker 3: in smaller print, Jacob brewed.
Speaker 4: Express and with the personal approval of one of America's
Speaker 4: all time great beer drinkers, Billy Carter.
Speaker 1: It's a pretty good copy.
Speaker 3: And then even more there was a personal endorsement from
Speaker 3: Billy that was the company speak.
Speaker 4: Really leaning in. So on the can, Billy says, I
Speaker 4: had this beer brewed up just for me. I think
Speaker 4: it's the best I ever tasted, and I've tasted a lot.
Speaker 4: I think you'll like it too. It's very country bumpkin.
Speaker 4: It's very much in that persona.
Speaker 3: Do you remember that Billy was drunk and had no
Speaker 3: detailed memory of the tasting, and when he tried it again,
Speaker 3: he realized he did not like the taste of his
Speaker 3: own beer. He said, I have trouble believing a reputable
Speaker 3: brewery would pick it. Dude, you picked it fine. Contractually,
Speaker 3: he had to be seen with Billy beer in his hand,
Speaker 3: but he would often pour out the contents and fill
Speaker 3: up the can with a vodka.
Speaker 4: That is a that is kind of a grim turn
Speaker 4: in our story. That is not as fun.
Speaker 3: Billy at this point is a pretty serious alcoholic, and
Speaker 3: he's drinking a lot, and they're parading him around the nation.
Speaker 3: He would go to these events and people would sing
Speaker 3: Hello Billy to the tune of Hello Dolly. They had
Speaker 3: Billy Beer Day in Carter's hometown, complete with a branded
Speaker 3: hot air balloon. It was one of the wildest days
Speaker 3: ever in planes, said Billy. Everyone in town except the
Speaker 3: Baptist got drunk. But this huge buzz, as I'm sure
Speaker 3: you can imagine, did.
Speaker 4: Not last long like any buzz.
Speaker 3: Like any buzz, there is a hangover, and that happened
Speaker 3: in nineteen seventy eight. Distributors start returning the beer to
Speaker 3: the manufacturer by the case load. It was discounted. It
Speaker 3: was a flop, and that year fALS City Brewing shut down.
Speaker 3: Nineteen seventy eight was also the same year that Jimmy Carter,
Speaker 3: the President's approval ratings started to drop. Probably not connected.
Speaker 3: The economy was weak, There's an energy crisis. It was
Speaker 3: a tough time, and it seemed like everyone needed to
Speaker 3: just chill and relax and.
Speaker 1: Have a good beer.
Speaker 3: But there were no good beers to be had. It
Speaker 3: was the low point of beer in the United States
Speaker 3: of America. The nation needed an optimistic hero, someone who
Speaker 3: could show us that there's morning in America and drink
Speaker 3: a beautiful craft beer to celebrate it. I am not
Speaker 3: referring to Ronald Reagan. He was a one drinker. I'm
Speaker 3: referring to the man who will bring back good beer.
Speaker 1: We will meet him after the break.
Speaker 4: Robert Smith, We're back from the break, and you're about
Speaker 4: to tell me the story of the birth of craft
Speaker 4: beer in America, or the rebirth of craft beer in America.
Speaker 3: We had reached the bottom. Seventies were a dark time
Speaker 3: for beer. If you didn't like what they were serving,
Speaker 3: you did not have many options. The five big beer
Speaker 3: companies controlled seventy five percent of the market beer oligopoly,
Speaker 3: and even if you wanted to brew your own beer
Speaker 3: at home, you were out of luck because it was illegal.
Speaker 3: When prohibition was repealed, the law allowed for making a
Speaker 3: small amount of wine at home, but not beer. Essentially,
Speaker 3: what the law says is that all beer production has
Speaker 3: to be taxed, but there was no mechanism to collect
Speaker 3: taxes from home brewers. So if you somehow brewed beer
Speaker 3: and didn't pay taxes because you can't pay taxes.
Speaker 1: You could be charged.
Speaker 3: And you know, have to pay up to five thousand dollars.
Speaker 4: Fine homebrew Catch twenty two.
Speaker 3: Why is the seventies and there were some people who
Speaker 3: were illegally brewing the hop stuff. This included a young
Speaker 3: Californian named Ken Grossman.
Speaker 1: Give us a quote from the beer Rebel.
Speaker 4: I don't remember the exact day I made my first
Speaker 4: batch of homebrew, but it was some time between Junior
Speaker 4: and Senior High. Junior and Senior High. He's a little
Speaker 4: boy baking beer. I did what any teenager would and
Speaker 4: hid my equipment in my closet. Of course, my mother
Speaker 4: found it, but I managed to convince her that it
Speaker 4: was just an experiment and I wouldn't drink it.
Speaker 1: I don't.
Speaker 3: I don't believe him. His mother parents was cooler in
Speaker 3: the seventies. My parents were not paying attention to the seventies.
Speaker 3: I think you know that it's hard to believe that
Speaker 3: anyone would not see what their teenage son was doing.
Speaker 3: It was also amazing because this was pre internet. It
Speaker 3: wasn't something you could just ask AI, how do I
Speaker 3: make beer at home? Ken Grossman had to figure this
Speaker 3: out by himself. One of the things he did was
Speaker 3: to order books from the UK, Like, really.
Speaker 4: Nobody was brewing beer in America. They were not homebrew books.
Speaker 3: Yeah, how do I do this? And then he had
Speaker 3: to find his ingredients at local supermarkets. He continued homebrewing
Speaker 3: through high schooling into college and this was his main
Speaker 3: hobby other than hiking in the Sierra Nevada mountains. Loved
Speaker 3: the Sierra Nevada. He and his wife had a child,
Speaker 3: a daughter named Sierra Heavy, foreshadowing Ken starts to teach
Speaker 3: others how to homebrew, and they really struggled to get
Speaker 3: the one thing they really needed to make the beer's great,
Speaker 3: and that was the hops.
Speaker 4: Beer people loved to talk about hops.
Speaker 3: I'm gonna make you talk about hops. Why do you
Speaker 3: give me? A quote from Ken Grossman.
Speaker 4: Finding quality hops was nearly impossible because the homebrew trade
Speaker 4: consumed an insignificant amount of hops and apparently, in the
Speaker 4: eyes of hop growers and merchants, wasn't worth pursuing.
Speaker 1: But then.
Speaker 3: President Jimmy Carter comes to the rescue. This is literally
Speaker 3: as his brother Billy is signing on the dotted line
Speaker 3: to be the face of Billy Beer. The low point
Speaker 3: of beer in America. Jimmy Carter is about to create
Speaker 3: the high point for beer. Now. President Carter did not
Speaker 3: drink much himself, but he wasn't anti alcohol In Georgia,
Speaker 3: he had lowered the drinking.
Speaker 1: Age to eighteen.
Speaker 3: He argued big argument at the time that if Georgia
Speaker 3: boys were going to go off to fight in Vietnam,
Speaker 3: they should be able to down a beer at home.
Speaker 3: So Carter's not anti alcoholic, just doesn't care for himself.
Speaker 3: And on October fourteenth, nineteen seventy eight, he signs a
Speaker 3: federal transportation Bill HR one three three seven into law.
Speaker 3: It's about taxing trucks and buses, but it also held
Speaker 3: an amendment, an amendment that solved this tax problem for beer.
Speaker 3: The amendment said, any adult may, without payment or tax,
Speaker 3: produce beer for his personal or family use, and not
Speaker 3: for sale. The aggregate amount shall not exceed two hundred
Speaker 3: gallons per calendar year if there are two or more adults,
Speaker 3: one hundred gallons if there's only one adult.
Speaker 1: Whatever. Quite dull language. But in his book.
Speaker 3: Beyond the Pale, great title Beyond the Pale, Ken Grossman
Speaker 3: calls this the turning point. This is the turning point
Speaker 3: for beer. President Carter has done what his brother could not,
Speaker 3: inspire beautiful beer. The homebrewers start to come out of
Speaker 3: the cold. They start having trade shows, start homebrew supply shops.
Speaker 3: There's a whole generation that's learning a more sophisticated palette.
Speaker 3: And eventually, and this was the key, they start to
Speaker 3: make small breweries to make larger batches of this beer
Speaker 3: that they had perfected at home. Ken Grossman is one
Speaker 3: of these brewers. He borrowed fifty grand from his friends
Speaker 3: and family, and then another fifty grand, and they beg
Speaker 3: borrow and scavenge pipework and vats and bottling machines. And
Speaker 3: after some false starts eleven they have eleven failures, they
Speaker 3: finally mass brew a batch of ale they call Sierra Nevada.
Speaker 3: Saw it coming a beer I drink to this day.
Speaker 3: Turns out, scaling up from homebrew to industrial capacity is
Speaker 3: quite hard. It is tricky to make a consistent product.
Speaker 3: You have to keep everything very clean, you have to
Speaker 3: keep it refrigerated. And it's the thing we talked about
Speaker 3: it before. You have to get buy the distributors. The
Speaker 3: distributors who are dealing with paps and Budweiser. The don't
Speaker 3: want to take to Ken Grossman for his like three
Speaker 3: cases of beer.
Speaker 4: It is quite inefficient for them to do that. It
Speaker 4: is costly for them to do that. It is rational
Speaker 4: for them to not talk to him. What it means
Speaker 4: is that Ken has to take on an inefficiency himself.
Speaker 4: He has to get in his car and visit local
Speaker 4: taverns and restaurants and ask them individually to stock Sierra
Speaker 4: Nevada or to ask their distributors. Right, they can't even
Speaker 4: buy it from him, right, he has to get them
Speaker 4: to ask their distributor to sell it to them.
Speaker 1: But these home.
Speaker 3: Brewers turned industrial brewers are a clever lot, and they
Speaker 3: figure out that there are loopholes to this distributor thing.
Speaker 3: And you know what's coming. You can open a brew pub,
Speaker 3: which I remember at the time, I'm like, this is incredible.
Speaker 3: They brew the beer and whatever they serve you some
Speaker 3: French fries, and you can drink their beer and see
Speaker 3: it being made behind the glpe.
Speaker 4: And in fact, these brew pubs tap rooms sometimes they're
Speaker 4: called they're slightly different. They're enabled by these state laws
Speaker 4: that start getting passed in the eighties. They are part
Speaker 4: of this shift, and it is very much as we've
Speaker 4: seen through this story, a legal and regulatory story all
Speaker 4: the way through, and a.
Speaker 3: Little bit about taste. If in the fifties and sixties
Speaker 3: people wanted this bland, industrial taste, by the eighties people
Speaker 3: are starting to seek out things that are different, finding
Speaker 3: a new beer, telling your friends about you're not going
Speaker 3: to believe this ipa.
Speaker 4: Food and being more into food goes with that. Having
Speaker 4: particular sophisticated taste in food is more of a thing.
Speaker 3: And it was a big breakthrough to have regional beer.
Speaker 3: Remember regional foods were a thing. But when you thought, like, oh,
Speaker 3: beers can taste different everywhere you go, this becomes a
Speaker 3: kind of collect them all thing.
Speaker 1: That's big.
Speaker 3: But micro brews, I guess microways in the name, was
Speaker 3: still a small business in America. It's going to take
Speaker 3: one more person to really make this an industry craft brewing.
Speaker 3: His name is Jim Cook, and Jim Cook was not
Speaker 3: a brewer, but he had roots back in the brewing industry.
Speaker 3: The way he tells the story is he found an
Speaker 3: old family recipe for beer, found it in his parents' attic,
Speaker 3: and he tries to recreate it in the kitchen and
Speaker 3: it ends up stripping the wallpaper off the walls, but
Speaker 3: he persists. He wants to make his own homebrew. But
Speaker 3: more importantly, Jim has a day job, and his day
Speaker 3: job is at the Boston Consulting Group. He is a consultant,
Speaker 3: a businessman at heart, and he starts to think about
Speaker 3: this as a business proposition. How can I leverage capital?
Speaker 3: How can I leverage scale for this recipe that I love.
Speaker 3: What he figures out is he doesn't need his own
Speaker 3: brewery and employees. That's the hardest part is buying all
Speaker 3: the vats and brewing the actual beer. He realizes that
Speaker 3: all around the country are breweries with excess capacity. Ah
Speaker 3: they have times where the vats are empty, and he thinks,
Speaker 3: what if I can just hire out the vat space,
Speaker 3: hire out the brew masters and the employees to make
Speaker 3: my recipe. I can put my name and my recipe
Speaker 3: in the bottle and have someone else sort of take
Speaker 3: on the capital risk.
Speaker 4: This eliminates a huge amount of risk. I mean starting
Speaker 4: a brewery. Building a brewery from nothing when you haven't
Speaker 4: sold any beer is extremely risky. And if you have
Speaker 4: capacity just sitting there, you would imagine people would rent
Speaker 4: it out to you quite cheaply. The marginal cost to
Speaker 4: them is low, and they should pass that low cost
Speaker 4: onto you. It's really a lovely big idea.
Speaker 1: I will also say that.
Speaker 3: These big factories have refrigeration and so they're able to
Speaker 3: make that German style lagger, the one that requires a
Speaker 3: whole cold chain to make and cook launches his baby
Speaker 3: Sam Adams Boston Lagger, another great beer, and it's.
Speaker 1: Not a light logger.
Speaker 3: It's sort of ready and bitter, and it immediately wins
Speaker 3: best Beer in America, which of course they put on
Speaker 3: the bottle. And this was the real breakthrough. Craft brewers
Speaker 3: rise all over the United States. Group pubs are in
Speaker 3: every small town and to this day, Boston Beer Company
Speaker 3: that makes Sam Adams and Sierra Nevada are in the
Speaker 3: top ten list of brewers in the United States by size,
Speaker 3: and they sell their products around the world.
Speaker 4: I was shocked, honestly that they're both still independent, because
Speaker 4: what we've seen a lot is there a few giant
Speaker 4: beer conglomerates that are sort of have come down from
Speaker 4: the big beer companies that were dominant in the billy
Speaker 4: beer era that still exists, and what they've done is
Speaker 4: bought up a lot of the craft brewers. So there'll
Speaker 4: be a beer that is a craft beer by a
Speaker 4: certain sense that tastes interesting maybe, but it's owned by
Speaker 4: a giant company. It's it's impressive to me in a
Speaker 4: way that both Sam Adams and Sierra Nevada are still independent.
Speaker 3: Yeah, these big companies are doing what they probably should
Speaker 3: have done back in the nineteen fifties, which is, you know,
Speaker 3: I can walk into a place that only has Budweiser
Speaker 3: products but also get Goose Island you know IPA, which, yeah,
Speaker 3: which was a craft brewer in Chicago that is now nationwide.
Speaker 1: Because of the distributors.
Speaker 3: Here at the end of the show, let's go back
Speaker 3: to our two main characters, Jimmy Carter and Billy Carter.
Speaker 3: Jimmy Carter, of course, lost his re election bid in
Speaker 3: a landslide to Ronald Reagan, who, as I said, was
Speaker 3: a wine drinker and does not feature in this story.
Speaker 3: Carter would go on to become one of the most
Speaker 3: respected ex presidents in history, and he won the Nobel
Speaker 3: Peace Prize in two thousand and two. Billy Carter's story
Speaker 3: is tougher. It's sad he was a severe alcoholic by
Speaker 3: the end of Carter's presidency. He said, basically, from October
Speaker 3: to December of nineteen seventy eight, I didn't do anything
Speaker 3: but drink. He was behaving erratically. He urinated on an
Speaker 3: airport runway, which was big news at the time. He
Speaker 3: started to work as a paid agent for Libya's Momar Gadaffi,
Speaker 3: and it became known as Billy Gate, maybe one of
Speaker 3: the first post Watergate other gates.
Speaker 4: I was looking at this. There was apparently a Banana
Speaker 4: Gate in nineteen seventy four, like right around the time
Speaker 4: of Watergate. Very soon after I had to do something
Speaker 4: to payments to a Central American government buy a fruit company.
Speaker 3: Bananagate and Billy Gates, so the second gate perhaps doubtful.
Speaker 3: Billy Carter went into a hospital to dry out, and
Speaker 3: he stayed sober after rehab, although he admitted it feels
Speaker 3: funny not having a beer can in my hand. He
Speaker 3: died at the age of fifty one. I had hoped
Speaker 3: to order a can of Billy beer we could taste here.
Speaker 3: Couldn't do it, but I read about what it did
Speaker 3: taste like, and I assumed it was going to be
Speaker 3: a terrible light beer like paps.
Speaker 1: But it was not.
Speaker 3: When Billy's Sun tried the beer, his quote was, it
Speaker 3: was strong and heavy and a couple could kick my
Speaker 3: young ass all over town. I don't know why his young.
Speaker 1: Son's drinking the beer, but sure, sure, sure.
Speaker 3: One of the brewers said that Billy Carter, in his
Speaker 3: drunken haze, had actually picked one of the more complex
Speaker 3: test recipes put before him. He said it had a
Speaker 3: combination of three tastes, soft, a little on the light
Speaker 3: beer side, and hoppy with a strong aftertaste. It was probably,
Speaker 3: and this is a quote, too sophisticated for American tastes.
Speaker 3: When he launched Billy beer, people were expecting that blandness,
Speaker 3: that sweetness, not bitterness and happiness. And in nineteen seventy eight,
Speaker 3: Billy Beer may not have been bland enough for the
Speaker 3: mass market. Makes me think, I don't know, maybe if
Speaker 3: you had launched it twenty years later, the craft brewing craze,
Speaker 3: maybe you could have walked into one of these giant
Speaker 3: beer bars that have the one hundred and twenty seven
Speaker 3: taps and said, you know, I'm going to try the
Speaker 3: Billy Beer. I hear it's a regional brew named after
Speaker 3: the brother of a popular ex president.
Speaker 4: So we've done a beer show now.
Speaker 1: Yes.
Speaker 4: If you have other ideas for beer shows for us,
Speaker 4: or closer to my heart, other ideas for tax and
Speaker 4: regulation shows?
Speaker 1: Are you talking about whiskey?
Speaker 4: Email us at Business History at Pushkin dot fm, or
Speaker 4: get in touch with us on Twitter. I'm at Jacob Goldstein,
Speaker 4: you're at Radio Smith. I'm on LinkedIn. We do love
Speaker 4: to hear from you. Today's show was produced by Gabriel
Speaker 4: Hunter Chang was engineered by Sarah Bruguer. Our video editor
Speaker 4: who puts us on YouTube is Matt Nielsen, and our
Speaker 4: showrunner and editor who did most of the work on
Speaker 4: this show he did is one Ryan Dilly. I'm Jacob
Speaker 4: Goldstein and I'm Robert Smith.
Speaker 1: Thanks for listening.