Dankstraction

Yesterday afternoon (May 3) I was asked by Rory, who writes Hashigo Zake’s weekly email, whether I had any news to include. This prompted a routine check of the IPONZ website for recent trademark applications under Class 32. And for the first time in a long time I hit pay dirt. On April 27 Lion made three new trademark applications – “AT LARGE”, “DANK” AND “COMMON LAGER”.

The last time I stumbled across an application from Lion that I thought was dodgy was a whole five years ago. That was for “BLIND PIG”, which is the name of a famous beer that has never been available in New Zealand, but that many would love to see here. And I thought they had a cheek trying to grab it. In a conciliatory moment I wrote to the law firm whose name was on the application and was told that the application was no longer needed and would be dropped. So… no harm no foul?

Yesterday I tried emailing the partner at Lion’s law firm that I corresponded with back in October 2012, but got an automatic reply saying that he’d left. (Much later in the day I got a response from a different partner, noting my concerns and promising to raise them with Lion.)

Ok then, time to throw a little outrage grenade. I wrote a piece that was incorporated in Hashigo Zake’s weekly email and stood back. And nothing happened. Does no-one read our email to the end any more? Sigh.

This morning BWB’s Ryan made a joke on facebook that he might be forced to change the name that he uses on facebook, which happens to be Krispin Dank – itself a comment on the use of Dank as a beer flavour descriptor. A couple of follow up questions later the cat was out of the bag.

If you follow certain people on facebook or twitter then all hell as broken loose. Admittedly it’s a pretty small circle but the level of outrage is high. It’s mostly – or probably all – about the application for “DANK”. People really love that word right now and it’s in plenty of beer names. Which is exactly why, if IPONZ do their job, Lion’s application is doomed.

If the application is doomed, and someone at Lion or their law firm should know this, why did they bother? I think the answer might be in that level of outrage being shown over DANK. No-one is talking about “Common Lager”. I find this application equally problematic, since it’s for what is, arguably, a recognised style name. Or maybe I should say that it’s for an expression that is used occasionally in the place of a certain well known style name (California Common), and clearly evokes that style name.

To put it another way, I wonder if we’re all being played and the whole Dank application is a distraction, and Lion won’t mind if they lose it as long as “Common Lager” gets through.

Saigon and Pasteur Street

Pasteur Street

Could there be a better name for a brewery than Pasteur Street? It is both a reference to an iconic street in its city of origin and a nod to a scientist whose achievements included learning the secret of fermentation and saving millions of lives from his work on vaccination and pasteurisation.


The Pasteur Street Brewery’s “home” is a tiny tap room at 144 Pasteur St, in the heart of Saigon’s District 1. Or more accurately, the brewery’s home is two tiny tap rooms at 144 Pasteur St. Because the brewery runs two such venues on either side of a narrow alley meaning that both they have the same address. For a tourist struggling with google maps it’s quite confusing.

Both have the kind of tasteful and low-key fit-out that assures a first-timer that no-one wants to distract you from the beer. There’s plenty of information available about the beer, a simple but effective food menu and beer is available by the pint or in tasting trays. Again, all very promising.

But the telling thing is that when the beer does eventually arrive, there is no disappointment. A tasting tray made up of the items on page one of the beer list brought six beers of quality ranging from excellent to exceptionally good. There was a Passionfruit Wheat, a spiced saison called Spice Island, Jasmine IPA, Coffee Porter, Double IPA and the show-stopping Cyclo Stout. This last beer may be the still young brewery’s greatest achievement. As well as being rich, boozy, complex and utterly delicious, it’s a World Beer Cup Gold Medal winner.

The quality is sustained through a follow-up tasting tray of the beers on page 2 of the menu. There’s a Pomelo IPA that is packed with citrus rind flavours and two fruited Berliner Weisses – one pineapple and one watermelon – as well as a kolsch, witbier and a surprisingly complex Belgian pale ale.

The brewery aims to incorporate local ingredients into every beer that they make. That policy has been relaxed a little, particularly with some of the intense Imperial IPAs, but it’s still very evident. And in an era when hops and malt, along with brewing expertise, are traded in a global market, the attitude makes a lot of sense. Plus those fruited pale beers are perfect for Vietnam’s tropical regions.

The next day I took an uber to Pasteur Street’s main production facility which is in a kind of industrial estate 19km south and outside the city. Apparently it’s illegal to brew in the middle of Saigon. My uber receipt tells me that the trip took 58 minutes, implying an average speed of 20kmph, which is probably about par on Saigon’s congested streets.

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I get a guided tour from brewer Ryan, which consists mainly of trying beer straight from conditioning tanks, including a Dragonfruit Gose, which might be the reddest beer since a certain former Hashigo Zake manager’s beetroot IPA.

Until now, everything about Pasteur Street’s operations have seemed slick and well funded. So it was a surprise to find that the brewery have made do with a slightly cobbled set of brewing equipment, most or all of it sourced within Vietnam. It also turns out that with this brewery busy maintaining the brand’s diverse range, some of their most in-demand beers are produced at a separate contract facility.

There are more and larger tanks on the way, but with demand for Pasteur Street beer growing rapidly in Vietnam and in export markets, it’s clear that managing growth is going to be a challenge.

Back in Saigon’s District 1, there’s time for a quick pilgrimage to Maison Marou. Like Pasteur Street, Maison Marou is a young company. They’re “bean to bar” chocolatiers, with a combined café and factory that sells single origin chocolate bars while serving extravagant sweets and hot chocolates to tourists and affluent locals. Also on sale are bottles of Pasteur Street’s Cyclo Stout, which uses Maison Marou’s own chocolate, along with cinnamon and vanilla.

Maison Marou chocolate is imported into New Zealand. Find out more at www.marou.co.nz. 

Ballast Point at Hashigo Zake

Hashigo Zake has always had a distinct policy regarding beer selection. We don’t only want to stock beer that is very good; we want to offer products that are uncommon, innovative, made by small and independent brewers or that are in some other way under-appreciated or hard to find.  We’re consumers ourselves and we care about choice and oppose practices that eliminate choice. If a brewery uses anticompetitive practices then we don’t want anything to do with them. But also if a supplier is so dominant that their products are ubiquitous then they don’t need us and we’d rather give someone else a break (provided the alternatives are of high enough quality).

In late 2015 the news came through that one of our favourite breweries, San Diego’s Ballast Point, was being sold. And their new buyers – multinational liquor company Constellation Brands - were shelling out a remarkable $US1 billion. It came as a real bombshell for us at Hashigo Zake and Beer Without Borders, as we saw Ballast Point as a great example of a brewery that could grow and grow without needing to sell out.

For the sake of consistency with its expressed principles of avoiding the products of massive producers (or ones using anticompetitive practices, which wasn’t the case here), Hashigo Zake declined to keep stocking Ballast Point beer.

But as Ballast Point’s New Zealand distributor, Beer Without Borders had a duty to Ballast Point and their New Zealand customers to not suddenly halt any trade in their beer. Plus Ballast Point was BWB’s biggest brand, so it would have been reckless to BWB - and its staff, customers and other suppliers - to terminate the trade.

So for the last year and a half Beer Without Borders has continued to sell Ballast Point beer while Hashigo Zake hasn’t. It’s been somewhat confusing since the two companies have the same ownership.

We’ve found that with Hashigo Zake a Ballast-free zone, rather than take advantage of that vacuum, other Wellington bars have slowed down their own purchasing of Ballast Point beer. It is now rare to see BP beer on tap in Wellington. Causing very good beer to be lost to local consumers and reducing choice is definitely not what Hashigo Zake selection guidelines are for.

So in the interests of ensuring that Ballast Point’s very good products remain available in Wellington, Hashigo Zake is stepping back from its policy of the last year and a half, and will resume offering Ballast Point beer.

Treason

It was really encouraging to get this news today from the Australian site Brews News. The TLDR is that a Melbourne law firm is enlisting breweries that want to be part of a class action against Australia’s corporate brewers for breaching competition law by using tap contracts.

I’m in no position to tell whether the law firm, Adley Burstyner, have the ability to succeed, but even if they don’t it’s keeping the issue alive, while Australia’s ACCC take a long time with their investigation into the same practice.

Now, speaking as a legal lay person, the Australian Competition and Consumer Act 2010 and the New Zealand Commerce Act 1986 are probably intended to do the same thing. But it looks like the Australian law might have more to say about anti-competitive behaviour. I say that because Part 2, Section 27 of the NZ Act says only “No person shall enter into a contract or arrangement, or arrive at an understanding, containing a provision that has the purpose, or has or is likely to have the effect, of substantially lessening competition in a market.” Now the Australian Act says something similar about entering into a contract that is “likely to have the effect of substantially lessening competition”, but it also outlaws “exclusionary provisions”.

My lay opinion has always been that New Zealand tap contracts breach the spirit of the Commerce Act, but might stay within the letter of it, because it takes thousands of them to collectively “substantially lessen competition”, while it could be argued that one on its own can’t substantially lessen competition. But that clause about “exclusionary provisions” might give the Australian Act more teeth.

So it’s conceivable that the corporate brewers in Australia are destined to be forced to stop this practice and maybe pony up a lot in fines or compensation for having done it all this time. But at the same time the Commerce Commission in NZ have already seen fit to deem the practice legal. They have their version of competition law and we have ours, and that’s the prerogative of nation states. Or is it?

The Trans Pacific Partnership, and potentially other future free trade agreements, has a little bit to say about competition law. What I saw when I looked into it seemed pretty vague. It basically says that members should have some competition law to eliminate anti-competitive behaviour.

But what if producers and manufacturers in one country, hoping to export to another that they’re in FTA negotiations with, raise the stakes? It would be highly fanciful to think that Australia’s smaller brewers, fresh from a legal triumph over that country’s mega breweries, might get involved in FTA negotiations with New Zealand or other TPP nations over the competitiveness of their beer markets. But what about free trade negotiations with Europe?

Is it treason to hope that a foreign power will bully us into getting our anticompetitive house in order?

Be There. Be Herd.

To put the following rant in context, I'm looking forward to the Lions tour and at Hashigo Zake we're putting out the welcome mat for Lions supporters. And local supporters too of course. This is because we have faith that those following the tour are people we will enjoy having as patrons. This is in contrast to how we dealt with the Wellington Sevens when we felt compelled to close our doors for a couple of years because of the behaviour of patrons on the weekend of that event.

I got an email yesterday from a supplier of flags and similar promotional material. It was offering Lions tour bunting. I took a closer look assuming that the product would consist of team colours or logos. But no, the “Lions tour” bunting that they were offering consisted of pictures of people with their faces painted.

In fact what they’re offering is consistent with other messages and imagery I’ve seen surrounding the Lions tour. Here’s the image that takes up half of the screen when you go to http://www.nzlionsseries17.com/.

The upcoming Lions tour is part of one of Rugby’s most significant traditions. As a sporting contest and a spectator event it has certain qualities that even the world cup can’t match. And the games have been followed by operators of still and moving cameras for a century.

Meanwhile the era of professional rugby, synthetic rugby balls and fields with drainage have helped make the on-field action more spectacular and athletic than ever before.

So for a designer tasked with creating visual imagery to promote the tour, there are rich vaults of historic and contemporary imagery available to draw on. 

And yet for the Lions tour, someone’s genius idea is to paint a few faces and say “open wide”? It’s as if they’re going out of their way to exclude images of actual play in any promotion of the game. Contrast that with just about any big sporting event, such as the NBA Playoffs, where they're happy to make a collage of their most famous players in action shots to promote their playoffs.

I realise that there is a point to the choice of images made by the rugby union or their design agency, and it’s to make local supporters feel involved. And when prices for games are inflated as much as these have been, the vendors of tickets know that they need to provoke an emotional reaction from local supporters to persuade them to come.

But it isn’t just the Lions tour that does this. In the entire, pathetic history of the Wellington Sevens, I can’t recall ever seeing a poster, advertisement or banner that used an image of on-field action to promote the tournament. Instead the promoters concentrated on shots of spectators in costumes, more painted faces, and a shot of an Austin Powers impersonator.

In the case of the sevens, this insistence on telling spectators that they, and not events on the field, were the real story, was the seed of the event’s demise. When the Wellington Sevens began, the Hong Kong Sevens was (and still is) the ultimate such event. Without Hong Kong the whole Sevens circuit would never have happened. The event had legendary status then, for many reasons – the on-field spectacle, the exotic location and the party element. And in spite of the reputation, the party-goers somehow seemed to remain under control. (I base this on the one time I went, which was in 1997!)

From the start the Wellington event was promoted as a party. We New Zealanders are notorious for being - shall we say - slow to get excited. So while it’s unlikely that any advertisement ever mentioned alcohol, images of spectators dressed up, dancing, and yelling carried a code that didn’t need a lot of decrypting.

Year after year there would be a little hand-wringing about things getting out of hand, but every year the advertisements would go up depicting costumes, painted faces and revelry in the stands. The message was pretty clear. If you want to sit in your seat and take in the sporting action, this isn’t the event for you. But if you want to turn into an exhibitionist for a day, rock on up.

When the tide turned and there was consensus from the organisers, the city council and the police that the partying had to be curbed, the organisers were painted into a corner. The crowds who’d come to Wellington for some consequence-free partying got the message and stayed away. But spectators who might have wanted to go purely for the sport had been well and truly alienated, so there was no-one left to fill the yellow seats.

To cut a long story short, the sevens organisers got the patrons, and the consequences, that they asked for. So what kind of spectator is being encouraged to turn up to the Lions games? 

Negotiations

For a while now, some of us have been observing how alcohol licences are issued in Wellington, with a bit of concern for one particular aspect. And that is the practice of the Police telling applicants that they will oppose their applications unless they agree to certain conditions being written into the licences.

If and when Police object, the application goes to a hearing and everyone takes their chances with the District Licensing Committee. From what I've seen, the DLC overrules the objections of the Police (and the Medical Officer of Health) with surprising frequency. Nevertheless, for a lot of applicants the hearing and the time taken for it to happen are unpalatable, especially if they're applying for a new licence and any delay in the licence might delay their opening. (It's different if you're applying for a renewal.) So applicants tend to pay very close attention to any suggestions the Police have for avoiding a hearing.

Fortunately there’s an extremely useful website with the very exciting name of NZLII. It’s an archive of decisions by all kind of courts, tribunals and what have you. And it includes decisions by the Wellington District Licensing Committee and the outfit that has oversight over them, which is the New Zealand Alcohol Regulatory and Licensing Authority.

Now if you know the names of a few bars or bottle stores whose licence applications might have been contentious it’s pretty easy to study the outcomes of those decisions. For instance, here’s the news-worthy Siglo case, where Police tried to make Siglo accept a one-way door policy only to have the Licensing Committee rule against them.

Today I came across this one. It's from a hearing on Feb 7, 2017, with the decision dated March 2. The Police and the Medical Officer of Health appealed the renewal of an off-licence by the Wellington committee so it went to the national body to adjudicate. They not only rejected the appeal, they said something that strikes me as kind of extraordinary.

[79] Reporting agencies should be careful to avoid ‘negotiating’ conditions with an applicant in exchange for those agencies not opposing the application. Doing so risks creating the impression that they have used their statutory reporting function under s103 to achieve their own ends. While the interests of reporting agencies are undoubtedly of significant importance, and it is for that reason that they have been given a function under s103, the Authority would take a dim view if opposition turned on whether an applicant agreed with reporting agencies’ recommendations on conditions. The role of the Police and the Medical Officer of Health under s103 is clear. They are to inquire into the application and if they have any matters in opposition, to file with the DLC a report on those matters. The evaluative exercise under s131, and the imposition of conditions, is for the DLC alone and not for the Medical Officer of Health or the Police. It would be an improper use of their reporting role in s103 if that was used in a way that effectively usurped the DLC’s licensing function.

From what I know of these things, the behaviour that the New Zealand Alcohol Regulatory and Licensing Authority is saying should be avoided sounds an awful lot like the way Wellington licensing has been operating for the last two or three years. For example the 2015 decision regarding an off-licence application here incorporates extracts from a succession of emails that must pretty much fit the dictionary definition of a "negotiation". (Paragraphs 12-17, on pages 5 and 6.)

So if the New Zealand Alcohol Regulatory and Licensing Authority is saying that this kind of practice is against the intent of the 2012 Sale and Supply of Alcohol Act, but this practice has been routine for several years, what does it say about the licences that have been granted in this time? Do they need to all be reconsidered by the Wellington District Licensing Committee?

Getting more extreme, if a bar or liquor store felt coerced into accepting shorter trading hours, can they sue the Police for loss of income?

Incidentally - and for full disclosure - Hashigo Zake's two liquor licences (on- and off-premise) were renewed on March 2, with no conditions added. So if the Authority's comments have affected how these things are done in Wellington, we may have been an early beneficiary.

So Excised

A whole four years ago I tried to contribute to a discussion on the price of beer in New Zealand with this piece. As an aside in that I wondered whether it would be more fair for everyone if excise tax were charged at the point of sale rather than when alcoholic beverages enter the supply chain.

Four years later I’ve been thinking about that idea a bit more and it still seems really valid. Here’s why.

Excise tax on alcohol has an awful lot wrong with the way it’s applied. I’ll list a few here, but it’s the third one in particular that I’m gunning for:

• it discriminates blatantly. That is, excise is charged at different rates for different drinks. To the best of my knowledge there is no evidence that a millilitre of alcohol in a whisky is more dangerous than a millilitre of alcohol in a beer. Nor that a millilitre of alcohol in a beer is more dangerous than a millilitre of alcohol in a wine. But our excise rates are calculated as if that is the case. It seems obvious then that what our excise rules are doing is profiling the consumers of these different kinds of beverage and intentionally penalising one category of consumers more than another. If only someone’s choice of drink correlated with religion or sexuality – then the way we apply excise would breach the Human Rights Act. (In fact, if I could suggest that the preferential treatment given to wine drinkers has to do with wine’s biblical/Judaeo-Christian history, then maybe this is a form of religious discrimination. Any lawyers out there want to do some pro bono, human rights work?)
• It assumes that all alcohol entering the supply chain gets consumed. Brewers and other producers have to pay excise whether the beverages they make are consumed or not. If drinks sit on a shelf without being sold for so long that they have to be dumped, no-one gets an excise refund. If drinks are spilled, lost, broken or boiled off in a casserole the naughty tax is still paid. This is even though excise tax is supposed to be a brake on alcohol abuse. As far as I can tell the only way you get your excise refunded is if you export the goods or show that they were somehow tainted at the time of production. (Going off and becoming undrinkable doesn’t count.)
• Finally, as dscussed below, the financial burden of excise tax is multiplied in the supply chain. 

Now it’s easy for anyone to look up the rates that excise is charged at, look at the ABV and size of the drink in front of them, and work out, for example, that a 330ml bottle of 5% beer has had 47 cents of excise applied to it. But that would only tell half the story.

Let’s assume that that 330ml bottle of 5% ABV beer was sold by a brewery to a distributor for $3 (excluding GST) and by the distributor to a bar for $3.60 (excluding GST) and by the bar to a consumer for $10 (including GST). And yes, for the distributor and bar to stay in business, those are the kinds of margin they need to charge.

It’s common to assume that the amount of excise that the consumer has effectively paid is still 47 cents. But imagine if that excise hadn’t been applied back at the brewery. The brewery might have sold the beer to the distributor for $2.53. Assuming the distributor applies that same margin as before, they’d be selling it for $3.03. And assuming that the bar applies the same margin then they’d be selling it for $8.42. A whole $1.58 less. So has excise cost the consumer $0.47 or $1.58? I think the answer is $1.58. What has been passed onto the consumer is not only the cost of the excise, but the cost of everyone in the supply chain adding their percentage to it.

The supposed purpose of excise tax is to levy consumers of this dangerous product (some more than others) and collect the income and put it to good use. But if the effect of excise is to put a drink up by $1.58, yet only $0.47 is being collected in tax, something is going wrong.

What’s going wrong is that excise is supposed to be a levy on alcohol consumption, but it’s collected at the point of production (or for imported goods at the time of entry into New Zealand). And where is the extra money being charged to the consumer going? It’s going to whoever funds the purchases made by the companies in that supply chain. You might think that it’s the operators of those businesses. But it’s just as likely to be banks. I.e. excise tax inflates the cost of buying stock for distributors and retailers and they fund that purchasing from their working capital, which may be their investors’ money, or may be a bank’s money.

This makes it sound like this is a windfall for those parties funding this money-go-round. But in reality I think that they would prefer it if these goods were cheaper and the whole business didn’t have the added risk of paying all this tax in advance.

Now in the 2015/16 year, New Zealand collected $947M in alcohol excise tax. Most of this would have been purchased at off-licences rather an on-licences. I’m going to make a wild guess that 80% of alcohol is sold at off-licences.

Markups at bottle stores and super markets are much lower than in bars. By the time a bottle of some kind of alcohol is sold at an off-licence, it’s probably going for about 50% more than the producer sold it for. But bars and restaurants probably sell goods for 250% more than the producer sold it at.

Turning these percentages into dollars, I estimate that every year, excise tax gets inflated by $380M for alcohol sold through bottle stores and by $470M for alcohol sold through bars and restaurants. That’s $850M sucked out of the pockets of New Zealand consumers because that $947M of excise tax is levied at the point of production, not at the point of consumption.

The alternative then, is to levy excise tax at the point of retail sale. Even saying it sounds intrusive, but I think a little scrutiny shows it’s actually quite workable. It is the 21^st century after all and we have this thing called electronic point of sale software. We use one at Hashigo Zake called Vend. It knows everything we buy and everything we sell. I’m sure that its developers would be happy to add functionality – for a fee – that records the serving sizes and ABVs of all the products we bring in then tells us and Inland Revenue or Customs the excise payable on any and every sale. It’s only a fraction more demanding than calculating GST. It would mean that retailers would never pay excise, only collect it and forward it. And because they aren’t paying excise when buying stock there’s no need to add a margin to it.

There’s $850M to gain every year by doing it this way. That gain can be split. I.e. excise tax could be increased, perhaps by bringing the rates for wine into line with beer and cider, so the tax take goes up. But prices to consumers would fall at the same time. Outlets could pocket a share of the savings to fund the extra functionality needed in point of sale systems. I believe “win win” is the appropriate cliché.

Whole industries (brewing, distribution, hospitality) would be less risky. Consumers would save money.

But of course it won’t happen. I’ll try to second guess some of the reasons.

• Firstly the idea of making excise tax collection more efficient and passing on savings will appal the neo-prohibitionists. They want to punish us for liking a drink. It probably pleases them that an inefficient system needlessly adds cost.
• Secondly "it’s just not done this way". Customs collect excise, not Inland Revenue. How would it be policed? But these are insignificant issues. Every business is already a tax collector (GST, PAYE). For decades we've even been using the tax system to collect, of all things, student loan payments. Every vendor of alcohol already needs a licence and is monitored by city councils and police. The bottom line is that we can organise the collection of taxation any way that we, as a nation, see fit, and a change like this is no more challenging than raising the GST rate.

Now my $850M figure is a bit of a guess. And maybe for bars and bottle stores to pass on everything they save from buying excise-free stock is a little hopeful. Nevertheless I think my point about this and other absurdities in our excise taxation stands. And if we weren’t so ridiculously Victorian in our attitudes to alcohol we’d be fixing it.

Craft Beer, Industry and Insights

It's been a while since I wrote anything. So here is probably ten posts' worth of ranty text.

For the last couple of years, at this time of year, the ANZ bank has put out a report on the New Zealand craft brewing industry. I had a go at critiquing last year’s here. Last week in the lead-up to Beervana the bank released the third edition of this report. I haven’t been able to find any criticism of the report online, so it looks like I’m going to have to give it a crack again.

For context (and disclosure) the ANZ have loaned my business a lot of money and they could put us out of business at the stroke of a pen, so voicing dissent on their work may not be the smartest thing for me to do.

The gist of the report is that in New Zealand, the brewing of a category of beer called Craft continues to thrive, it has a big and rapidly growing chunk of the beer market and is rich with opportunities – including exporting - for plucky local startups.

All the optimism is pretty much based on two foundations:
- lots of hearsay from brewers about the export markets they’re selling into and
- the announcement that sales of craft beer have grown 35% and account for 15% of the market.

There’s a footnote attributing that growth figure to “Statistics NZ, industry sources, NZ Customs data, ANZ analysis”. (In last year’s paper a corresponding claim of growth was footnoted: “Sample represents approximately 15% of New Zealand’s off premise liquor sales. Sources: Statistics NZ, ANZ analysis Sources: Statistics NZ, news reports, ANZ analysis”.)

So this year the bank seems to have done away with sampling bottle store sales, which is probably a good thing because it would be disastrous to try and extrapolate results from one chain of stores or from one region of the country.

What about the other sources? Statistics NZ publish figures on what they call “Alcohol Available for Consumption” which pretty much reports on payments of excise by anyone putting alcohol into the New Zealand market. In other words, Customs collect data as they collect excise tax and Stats publish it. Then we’re left guessing about what “industry sources” and “ANZ analysis” might be. My guess is that Lion Nathan’s and DB’s annual reports reveal a little about their sales. But to the best of my knowledge no-one is gathering production reports from all the smaller breweries.

Now the NZ Customs/Statistics data reports only volumes of beer, stratified into bands of alcohol strength, for which excise has been applied. There are five bands - up to 1.150%, 1.151%–2.500%, 2.501%–4.350%, 4.351%–5.000% and more than 5.000%. This year’s release, which is of numbers from the 2015 calendar year, show that overall consumption has dropped but there has been a shift away from the middle bands (2.5% – 5%) towards those above and below (1.5% – 2% and 5% and over).

Customs and Statistics NZ don’t tell us anything about the breweries filling out the customs declarations on which these statistics are based. But it has become accepted practice to assume that breweries known as “craft” typically brew stronger beer and to then interpret the shift in volume to “more than 5%” as a sign that “craft” breweries are growing their market share.

Now this might not be as arbitrary and risky as it sounds. It’s pretty hard to find any mass-market bland lager that’s over 5%. Of course it would include a lot of beer made by those big breweries’ “crafty” subsidiaries. I’ll come back to that later.

But about these records of beer over 5% ABV that’s available in the market... Here’s a plot of that statistic over a few years:

source: Statistic NZ.

That's not the steadily rising trend we're supposed to see. I see two possible explanations here. Either
- the market for beer of this strength is only just recovering from a massive slump that seems to have gone unreported.
- OR these statistics are ropey as anything.
Any other interpretation?

Moving on then… the ANZ report asserted a couple of things:
- Something called “Craft” is 15% of the market and
- This thing called “Craft” has grown at 35% in the last year.

Now, according to Statistics and Customs, between 2014 and 2015 there was a 38% increase in beer stronger than 5% ABV available in the market. So I think this might account for a lot of that 35% growth figure. But there needs to be a little more to it, because the total beer market in New Zealand is, according to the same Statistics publication, 281 million litres, but this greater-than-5% stuff is only 18.7 million litres, which is 6.6% of the market. But if “Craft” is 15% of the market then it must be producing 42 million litres of beer. So 23.6 million litres of “Craft”’s output must come from less strong beer (as you’d expect) and it must have grown from 17.8 million litres the year before.

Now none of these numbers are outlandish, but to be credible you really have to accept a few givens. 15% growth for “Craft” is 11 million litres. To have produced an extra 11 million litres, the industry probably needs to have installed around 11 million litres of additional capacity. If you assume that on average (and this varies a lot) a batch of beer stays in a stainless steel fermenter or bright tank for two weeks, then that tank space can be used 26 times a year, so the industry must have added 423,000 litres of fermentation/conditioning space between 2014 and 2015. If tanks are, on average, 2000 litres (and again this varies a lot) that’s more than 200 such tanks added to our “Craft” breweries in that time. Again it’s a not outlandish figure and we know plenty of ParrotDogs and Liberties who were busy adding tanks in that time.

But 200 such tanks? And 42 millions litres of total annual production at a time when only a handful of our “Craft” breweries have passed the 1 million litres mark? And remember that plenty of our breweries and brewing companies are doing about 50,000 litres a year.

The explanation that ANZ literally couldn’t bring themselves to say is that they’re including the brands Mac’s, Monteith’s and Boundary Road, which are subsidiaries of corporate breweries, as well as recent acquisitions by those big breweries, such as Emerson’s and Founders. (The statistics pre-date the Panhead sale.)

Which is fine if you come out and say it. But for some reason the report’s author told the audience at the launch that they didn’t want to get into a definition of “Craft” and that they’d leave that to drinkers. Anyone else as dumb-struck by that as me?

Apart from the sheer academic negligence of refusing to offer a definition of the category that is the subject of the report, there’s a big problem. A lot of the report talks fairly vaguely about the challenges and opportunities that exist for “Craft” breweries. They talk about access to market, logistics, capital raising options and exit strategies. At one point the report uses the term “artisan producers”. Every word of text suggests that they’re talking about small and independent brewers. But every production statistic clearly includes the subsidiaries of the big breweries.

What else does the report talk about? There’s a lot about export. A lot of breweries boast that they’re exporting and apparently it adds up to 50 countries. From what I know of the importing operations in those destination countries, a lot of them are small businesses bringing over a pallet at a time. And it could be that if enough breweries each have small-time importers in a few dozen countries then those small orders will add up to a lot of value.

But I’m sceptical for a simple reason. New Zealand is just about the worst country in the world to export beer from. I say this because it costs more to produce beer here than in other places (for reasons such as lack of scale and high ingredient costs) and then because the cost of shipping beer to markets is high. (Remembering that unpasteurised beer generally needs to be shipped cold which puts a New Zealand brewer in competition with other agricultural industries for the use of refrigerated shipping.)

Shipping small orders to the curious in a few markets is one thing, but when the people like Tony Magee make it their mission to bring American beer to the world, and beer leaves American breweries at about half the price of ours, the ANZ needs to get specific about how we’re going to compete.

I can imagine a couple of possible answers to that. One is to brew in the market that is being “exported” to. Yeastie Boys and ParrotDog already do some of this. I know others have looked at it. Exactly what it does for New Zealand Craft Brewing, other than hopefully bring some profits home, isn’t clear.

Another answer is to assert that we will produce beer at the higher end of the market. There is a small but growing international market for beers that command wholesale prices of $20 a litre or more. And breweries like 8 Wired are indeed already exporting such beer. At these prices beer becomes economically a little more like wine, which, as we know, is such a lucrative business that it has never run into any crises that have resulted in bankruptcies or producers being sold to off-shore conglomerates whatsoever.

In fact, as an aside, can I suggest a really good way to develop an export market for beer? By distilling it. The resulting beverage trades at high prices, doesn’t go off and can be shipped without refrigeration.

But my biggest issue with the ANZ report is this. It has nothing to say about the two really big issues that small New Zealand brewers face.
1. their access to the on-premise market is still, for the most part, blocked and
2. very very few are making any money.

Maybe this is a good time to bring in the Oregon example. After all, the Oregon delegation that were here for Beervana were also at the ANZ report’s launch. Oregon is an economy with a similar population to New Zealand, a similar climate and with beer’s ingredients also produced locally. And their craft brewing industry began at about the same time as ours. And they’re producing 200 million litres of what might be categorised as “Craft”, with a third consumed in the state and the other two thirds exported. (I will concede that their export markets are far closer, which is a massive advantage.)

As people are probably tired of hearing from me, it’s all about access to market. In Oregon there are no obstacles stopping breweries from selling to bars and their craft breweries have 63% of the on-premise draught market. In New Zealand there are massive obstacles stopping breweries selling to bars and our craft breweries (if you exclude the big breweries’ subsidiaries) have about 2% of the on-premise draught market. It’s as if the ANZ are padding out the numbers with sales by the industrial breweries’ subsidiaries to compensate.

Here are some other issues that the industry, and people commenting on the industry, might want to consider:
- The (small and independent) brewing industry needs to decide whether it wants to pay for distribution. That means breweries finding some margin to share when there isn’t really enough to go around but also not going behind the backs of distributors the moment they develop a large customer.
- The current moral panic over alcohol hurts everyone. It interferes with good, responsible brewers and bars going about their business and adds costs at several stages in the supply chain.
- Brewers are still disadvantaged by excise rules compared to winemakers. The Brewers Guild correctly identified inequality over rules about storing wine. But then they forgot to mention the more egregious problem that wine is simply charged excise at a lower rate.

While plenty of industries grow with the help of government assistance, brewing is generally self-reliant. This should be a good thing, but when an industry is materially handicapped by regulation, tax and an anti-competitive business environment then it's expecting too much for it to thrive.

Almost forgot. Have a read of this. It's talking about a different market that's in a different phase of its development, but it rings pretty true.

one. billion. dollars.

We woke yesterday, November 17^th, to the news that the owners of Ballast Point Brewing were accepting a $US1b offer for their business. The buyer is to be Constellation Brands.

We’ve been importing the beer of Ballast Point since 2010, at first as Hashigo Zake and more recently under the banner of our own importing and distribution company, Beer Without Borders. Ballast Point has become BWB's best selling supplier. We attribute this to them getting all three things we need in an overseas brewer pretty much right – beer quality, being stylistically adventurous and having good branding and packaging.

On occasions like this the sellers deserve only our congratulations. They’ve generally earned their payday and in Ballast Point’s case it was massive. (To put it in perspective, they make one third as much beer as Lagunitas, whose brewery was also valued at $1b in a recent sale.)

But while we congratulate the sellers, we’re always uneasy when these transactions happen. In particular we generally worry about the methods and ethics of their new owners. We actually know very little about Constellation, although we’re learning a bit.

Back in 2012 the Emersons Brewery was sold to Lion Nathan. I have an enormous grievance with Lion Nathan. They, DB, Independent and a growing number of small breweries make payments to liquor outlets (generally bars) in return for not stocking other suppliers’ products. The damage to New Zealand’s brewing industry from this practice has been enormous and in spite of all the recent fuss made the industry is ten years behind where it should be. More to the point everyday consumers have been denied choice in bars for decades. I personally think that the practice is against the spirit and maybe even the letter of New Zealand competition law, although the Commerce Ministry disagrees.

So I had no reservation in turning my distaste for Lion Nathan into a policy that Hashigo Zake wouldn’t stock their beer and those of their subsidiaries. After all, once Emersons were bought, Lion Nathan’s distribution meant they suddenly had hundreds of additional, tied customers, and those more than made up for losing Hashigo Zake as an outlet. Meanwhile we could dedicate ourselves to stocking product from breweries who didn’t pay for play.

We at Hashigo Zake took some criticism for that stand and there are signs that some of those critics are looking at us now for any sign of a double standard following Ballast Point’s sale. No doubt they’ll find what they’re looking for, rightly or otherwise.

So at Hashigo Zake, where we launched Ballast Point in New Zealand and which is still one of very few Wellington bars prepared to put their insanely good beer on tap, we’ve got a month or two to consider what to do next. (The sale hasn’t been finalised and it will take a little longer before post-sale product is on the market in NZ.) This transaction has left us with a huge dilemma that we’re going to need all that time to grapple with.

Beer Without Borders, however, remains Ballast Point’s New Zealand importer/distributor. As such we have obligations to our supplier and to our customers that we have no choice but to honour, regardless of what we might think of the sale. End of story.

p.s. a big hat tip to Brian Watts of 8 Wired who just last Friday told me that Ballast Point’s planned IPO was merely a manoeuvre to elicit the kind of offer that Constellation made.

Beer Word of the Year

Beer Without Borders announces that the Beer Word of the Year is Sessionable. It beat “Crowdfunding” and “Crisp!” into second and third place respectively. And it must be considered a worthy winner given that “session” was also a candidate and that there was a lot of late voting for “Crisp!”, which has only recently become the descriptor of choice for serious beer writers, thanks to the efforts of Dylan Jauslin.

A countback shows that the first person to nominate “sessionable” as Beer Word of the Year was none other than New Zealand’s foremost prophet of trends in the world of beer – Stu McKinlay. Stu wins a romantic lunch with the owner of Beer Without Borders.

We’d like to acknowledge the help of Hadyn Green in organising the voting and to Public Address’s Word of the Year for the inspiration.

Random End of Year Rant

From our point of view as retailers and distributors of local and imported beer, there have been significant changes this year in what the people that we sell to have been buying.

A lot of this has to do with the rise of Liberty and Panhead. It’s convenient to bracket them because the ties and similarities between the two are strong. Mike Neilson and Joe Wood are long-standing friends and there’s no doubt that they've talked a lot as they've simultaneously developed brewing companies that are quickly becoming giants. And while they took very different approaches to getting into business, they've made a lot of similar moves in the last year or so. Specifically that means producing a lot of beer in styles that are popular right now and putting them out in six packs at very competitive prices. It has worked for them for a few reasons – obviously their packaging and pricing have made them popular – but first and foremost their quality has been consistently very good.

Of course it would be ridiculous to suggest that no-one has achieved this before, and a lot of these comments also apply to ParrotDog and others, but the rate that they've grown (Panhead in particular) and won over customers may well be unprecedented in New Zealand. (Plus we sell their beer and have watched it close up.)

So we have literally had wholesale customers say to us that they now sell less of everything except Liberty and Panhead. Without getting too empirical, there seem to be a lot more people taking home six packs of Oh Brother Pale Ale or Quickchange XPA where they might have taken a mixed bag of different beers a year ago. It’s as if the early adopters of the last five years are settling down with a few staples and experimenting less.

Another trend – not unrelated to this rise of Panhead and Liberty – is that when it comes to certain styles, particularly US style hop bombs, local brewers have all but eliminated the gap between local and imported product. There are still reasons for buying some of the imports. For instance there is still no local answer to Sculpin. Plus there are plenty of styles where the gap is still fairly wide between the local and imported product. There are still styles that are barely made or consumed here. And even though there have been some very good local sours available for several years, they’re only just catching on here and there is lots of ground to make up.

The greatest challenge confronting up and coming local brewers remains access to market and it’s as bad as ever. The number of untied taps in bars that are available for small and independent brewers to sell into is barely growing. Although there have been a few new bars open up or become free of their big brewery contracts, there simply aren't enough of them and many of the benefits are undone with their taps being individually contracted to the “if you can’t beat them join” breweries. (I.e. breweries that make a payment - or bribe - to bars in exchange for them never putting anyone else’s beer on one or two particular taps.)

This lack of progress is alarming. It seems that the lure of becoming a destination bar and winning the admiration (and cash) of a city’s beer geeks aren’t enough to convince operators that they should walk away from the embrace of DB/Tiger/Heineken, Lion/Kirin or Woodstock/Asahi. There are a few possible explanations, starting with the unavoidable fact that, in general, the hospitality industry is terminally petty, conservative and visionless. Another is that Lion Nathan’s strategy of buying up the competition (i.e. Emersons) to patch the gaping holes in its portfolio is working.

What it means is that, in New Zealand, the ratio of free taps to independent breweries is probably lower than ever.

With so few taps available (and with many of those being dominated by certain fast-growing juggernauts) new brewers quickly resort to bottling. Now it has long been the case that when a New Zealand consumer tries a new beer or brewery, they’re probably drinking at home, from a bottle. This in itself is absurd and tragic and a staggering indictment of our hospitality industry. But the fact is that certain supermarkets and specialist bottle stores have been the saviour of many new local breweries. But as mentioned above, a number of consumers have recently been settling for six packs of some well priced, reliable, hoppy pale ale over experimentation. So if you’re a new brewer and you've made a lot of good beer, but it isn't in a six pack with “Liberty” or “Panhead” on it and it isn’t selling for around $22 a six pack, then you’re probably finding it surprisingly difficult to sell.

In other words, 2014 has seen more breweries competing in a market that is a lot less open than we believed. A correction is coming. Making some good beer isn't enough any more. A new brewery either needs a killer beer or exceptional branding. (Or both. Or very deep pockets.)

Returning to that issue of tied taps… (and at the risk of boring people who've heard it all before) it looked as though New Zealand’s small and independent brewers were given an early Christmas present a few weeks ago with news that the Commerce Commission are investigating the practice of tap contracts. This was unexpected news. It follows a similar announcement from Australia’s equivalent body a few months ago.

Now speaking as a legal lay person, it strikes me that the merits of this investigation pivot on one point. New Zealand’s competition law says that companies can’t engage in practices that limit competition. A single tap contract doesn't quite do that. But hundreds or thousands of them do exactly that. So I wonder how far the Commerce Commission wants to get into a debate over the net effect of multiple commercial actions.

Also, the practice of tap contracts has dozens of equivalents throughout our economy. I'm thinking, for instance, of mobile phone contracts. A finding against tap contracts could call into question the legality of practices employed all over our economy. The consequences could be mind-boggling. I also suspect that, once companies got over their shock and adapted, there could be a magnificent boost to competitiveness, efficiency and transparency.

(I guess there’s also the issue of whether the need for competition is satisfied by a duopoly. I think the experience of beer consumers tells us that the answer is emphatically no.)

But back to tap contracts. Will the Commerce Commission be bothered really getting into this can of worms? Let’s imagine how their investigation might work. They’ll take into account statements such as the one in the DominionPost article from Tuatara, who, apparently, deplore the practice. Then they might talk to outlets who have tap contracts. They might ask who the tap contracts are with. Often the answer will be “Tuatara”. At this point I wouldn't be surprised if they decide there are better uses for their time.

So yes, I'm touching on the vexed issue of the distinction between what might be called “single tap” contracts and “whole bar” contracts. When big breweries sign “whole bar” contracts, they would say that all they’re doing is entering into an arrangement with a single bar and that there are other bars and consumers aren't affected. Likewise I’m sure that the smaller breweries who sign single tap contracts would say that it’s just one tap (or two or three) and there are other taps and consumers still have choice. The fact is that stitching up any kind of exclusivity has an effect. And those effects quickly compound. I see it when I go into a bar that has auctioned off most or all of its taps one at a time. I get less choice as a consumer and I see other brewers seething with frustration because they’re struggling to sell their beer.

So there is only one outcome that I want with respect to tap contracts, but I’m not holding my breath for it. And that is that pretty much that any donation of product or cash from a supplier to an outlet that leads to the outlet preferring that supplier’s product should be considered anti-competitive and illegal.

As for other trends this year (forgive me if trotting these out feels a bit tedious)…

Cans…. Yes they have lots of benefits, some of which are vastly overstated. And don’t mention the bauxite mines. We’ve only had a few canned beers on our books and they haven’t set the world alight. Having said that we’re about to launch Modern Times which we expect to do well, although that has more to do with the beer than the packaging.

“Session” beer… consumers and brewers have all been saying these are a great idea for years, and the long awaited pale hoppy ones finally seem to have gained momentum in the last twelve months. This probably has a lot less to do with the new blood alcohol level for drivers than is claimed and more to do with a long-standing wish for hop-lovers to be able to indulge themselves without getting smashed. Personally I think that hops taste nicer in a boozy beer and that saisons, sours and stouts are better bets for sessionability.

Rant over. Have a great 2015.

Cans and Bottles

Small and independent brewers in New Zealand, the US and other markets are suddenly embracing the aluminium can in a manner not completely unlike the way winemakers adopted screw caps a decade or so ago.

With wine it was pretty much all about quality. Corks were and are flawed. There may have been circumstances at play, such as improving consumer education about cork taint and maybe corks (or at least the ones being exported to the Pacific rim) were becoming less reliable. Or maybe winemakers were getting sloppy. But consumers received a clear benefit by the move to screw caps.

There were dissenters, and no doubt there still are a few. Most of that dissent was pretty flimsy and a lot of it came from the less fussy end of the market who cared more about the pop of the cork than the quality of the wine. On the other hand there were one or two reservations expressed about screw caps that had at least some scientific basis and those might still not be conclusively proven either way.

So now it's cans vs bottles. The arguments this time are a little different. There is a quality component to it, but that argument isn't nearly as one-sided as it was with screw caps. The main quality complaint with glass (light strike) simply doesn't matter if the product is handled correctly.

Broadly here they are:

• Cans are lighter so use less energy to freight.
• Cans are more easily recycled.
• It's impossible for cans to let in light.

Laid out like that, it seems like a slam dunk. So what are the dissenting arguments?

1. Bauxite mining (first stage of creating aluminium) is environmentally disastrous.
2. Cans are lined with a plastic that includes probably carcenogenic BPA.
3. Most aluminium cans that are collected for recycling in New Zealand are sent to Australia for recycling.

Oh, and there's the completely spurious “aesthetic” argument, which goes away as soon as a beer is poured into a glass, if not sooner.

What's needed is a thorough audit of environmental and financial costs for each option. Of course this is incredibly difficult. Some people in other geographies have had a crack (this article in Slate magazine seems a reasonable attempt) and have generally come to the conclusion that: (1) draft beer is best, (2) bottles are next best for sales to customers who are geographically close and (3) cans are better than bottles if long haul freight is involved.

What might be different in New Zealand? Well as a country with a lot of coastline you'd think that the raw ingredients for glass bottles must be pretty abundant. It looks as if most or all of our glass is created from sands collected from Parengarenga Harbour in Northland. From the lay person's point of view, it would appear that the raw material is just lying there waiting to be collected and is not in any danger of running out.

Meanwhile aluminium relies on bauxite from Australia. Here's what Lagunitas brewery have to say about bauxite mining. We bring bauxite to Tiwai Point and throw cheap electricity at it. Apparently the smelter pays one quarter what the rest of us do for their power. The Manapouri power station that generates electricity for Tiwai Point was one of the most controversial construction projects in New Zealand history on account of its impact on the environment. It seems the taxpayer also subsidises 90% of the smelter's carbon credits. When the smelter's operators threatened to close the whole operation down a few years ago, there was speculation that this would free up so much electricity generation that New Zealand would effectively be flooded with cheap electricity (although I'm told that there isn't enough capacity in our transmission network to bring that electricity to the North Island in the short term). In the end we used extra taxpayer money to persuade them to stay open until well after this year's election.

In other words, we seem to create aluminium in New Zealand as one giant, taxpayer funded work scheme with possibly huge environmental costs.

Then there's reuse and recycling. This is where aluminium should be the big winner. Except that we aren't quite as good at recycling aluminium as we are glass, but only by 48% compared to 50%. But it's the recycling process where aluminium is much better, using a fraction of the energy that went into production to be recycled. There seems to be one anomaly in the whole thing though – most of our used aluminium gets sent to Australia and recycling only contributes a tiny portion to the production at Tiwai Point.

What I don't understand here is why we went from reusing glass to recycling it. You would think that cleaning a bottle would use a fraction of the energy needed to crush or melt it then reconstitute one. Does the glass weaken over time? Did drinks producers insist on having unique bottles? Reuse lives on in the old fashioned flagon (a.k.a. growler), although that has been superceded partly by the more modest rigger, which has the same benefit of reuse.

But I really would like to know what stops us having a bottle collection network that drink makers source their bottles from. I suspect it comes down to quality, but maybe a bit of determination would solve that. It's good enough for home brewers after all. It would be interesting to see one of our local breweries experiment with crediting customers for returning bottles.

Finally there's the BPA thing. Getting into really tricky science here, so I'm not going to pretend to know what's best. Do New Zealand made cans even have the same lining as foreign ones? I know I'm not going to risk eating beer-can chicken any time soon.

There's a case for saying that the current fashion for the can needs a big injection of scepticism. Or maybe these reservations will go up in smoke in the light of some really good facts and figures. Comments welcome.

Single Bottle Nonsense

Four years after Geoff Palmer and the Law Commission set about dismantling the 1989 Sale of Liquor Act, the full horror of their agenda is finally dawning on those affected. I'm thinking in particular about the current storm on social networking over proposed bans on single bottle sales in certain cities.

Now it should be pointed out that the complaints might be a tiny bit misguided. What I believe these councils are proposing are that bans on single bottle sales be put in their set of discretionary conditions that they might then impose at will on individual licensees. So these aren't necessarily blanket bans. But I don't think that that nuance detracts from the stupidity of the measure.

Some beer drinkers are also taking the proposed bans personally since they don't seem to apply to wine. They would do well to note that in the Auckland case the council are actually talking about an exemption for "hand crafted beer", which is full of problems in its own right, but might be taken as a concession to beer lovers.

Now we in Wellington went through our own ordeal with the drafting of a Local Alcohol Policy last year. The first draft proposed much earlier closing times for bars and off-licences. The council's hearings into the matter were inundated with written and oral submissions and they watered the measures down a lot. In particular there was a plan to create a designated nightlife ghetto that would be entitled to later closing times. Some of us in the craft beer bar business were pretty riled about this and I made written and oral submissions, along with one or two others, pointing out the folly of this plan, with respect to the evolution of Wellington's nightlife and little things like messing with property values and rent. When the revised policy was released the council's press release said "The proposal to introduce entertainment precincts was not supported. We don’t want to stifle some of the niche character venues that might fall outside an arbitrary boundary, such as some of Wellington’s burgeoning craft beer bars." In other words, we influenced the outcome.

So for fuck's sake, stop whingeing on facebook and start talking to your local council!

Secondly... I forced myself to sit through submissions to the Wellington Council from local representatives of the respective associations of hospitality and supermarkets. It was ugly. A common theme from both of them was "alcohol abuse is their fault, not ours". It's a wonder that the council chose to overlook the pettiness of their finger pointing and accept the underlying message that arbitrarily shortening licensing hours is a daft way to try and change people's behaviour. So I was a little disappointed that the Brewers Guild indulged in a little finger pointing of their own by saying "regulators... should spend the energy enforcing retailer responsibility...".

In my experience the best way to talk councils out of these silly and arbitrary provisions is to draw attention to their flaws as regulations and the lack of understanding of the issue that's behind them. Maybe they were toying with me, but when I raised the subject of Paul Christoffel's thesis with the Wellington Council they seemed genuinely surprised and interested. (The thesis roundly debunks the availability theory that is behind the new Sale and Supply of Alcohol Act.) On the other hand, I expect that they sit through "it's not fair" complaints every day.

If I were an Aucklander, I would suggest to the Auckland council that this proposed discretionary condition is discriminatory:

licensee must not sell single units of mainstream beer, cider or RTDs in less than 445ml packaging. Boutique and handcrafted beer and cider are exempt from this provision.

To me, it's the rich tut-tutting the poor about their drinking.

And this one is basically a subsidy for the wine industry:

shots, shooters, high strength mixed drinks with more than 45mls is spirits/liqueur in one serve, beer with more than 6% ABV, and RTDs with more than 6%ABV must not be sold or supplied at the following times: within the last hour of closing for premises open till 1am or 2am; and within the last 2 hours before closing for premises open after 2am.

What are discriminatory social engineering and protection for wineries doing in a local alcohol policy?

So the gist of this rant is a plea. Please everyone stop wringing your hands about the single bottle sales thing. Instead, get your facts about the law and local alcohol policies straight along with all the other provisions of the disastrous Sale and Supply of Alcohol Act of 2012, not to mention Paul Christoffel's thesis, and make rational submissions to councils that debunk the nonsense that is going on here.

Twitterstorm Postscript

Very quickly... we're told that the somewhat controversial post that I put out earlier in the week has had unintended consequences in the form of (and I quote because I'm going by hints in tweets) "hassling", "harassing", "threats of violence", "putting them on a hit list". Oh and, incredibly, some kind of phone harassment.

Reactions like this are unequivocally rejected as legitimate support for the point I was trying to make. In fact they're the antithesis of the point I was trying to make and it beggars belief that this statement is even necessary. The whole post was a request (in vain) for an explanation. Not retribution.

Calling Out: Giovanni Tiso

Dear Giovanni Tiso,

I don’t believe we’ve met and if we did I remember nothing about it (sorry). But you’ve seen fit on at least two occasions to insult me, my staff, my fellow investors and our customers at Hashigo Zake on twitter. On both occasions it was a day or so before I realised which is just as well because I have been known to react impulsively to slurs like these. Instead a couple of people bothered to defend me and my business and I’m grateful to them.

But it’s becoming a pattern and I’m not blessed with the kind of tolerance and patience that it takes to ignore insults like these, so I thought it’s time I said something.

Now I know next to nothing about you, except what you’ve chosen to say about me and my staff and customers. So that’s all that this piece is about – your words about us.

So here we go. Back in December 2012 there was a conversation on twitter that went like this:

The conversation continued…

So… the gist of your complaint seems to be that my co-owners, staff and customers are pretentious gits who promote some kind of conformity while pretentiously pretending to be something else and harbouring people known as “hipsters”.

Now I generally need help with the hipster thing. I was out of New Zealand for a few years between 2005 and 2008, and it seemed that in my absence a new insult was invented. In the years since I haven’t been given or been able to deduce a definition. So Giovanni, why don’t you humour me and propose a robust definition of hipster? Because for now all I can tell is that it’s a word that says more about the lack of imagination and intellectual rigour of its user than its target.

And the conforming (or “confirming”?) thing. Hmm… maybe it’s time I told you a story about the origins of Hashigo Zake. 

You see I’m a big fan of beer - particularly (but not exclusively) interesting and imaginative interpretations of the beverage. Over a long period I became incredibly frustrated and disillusioned with bars in New Zealand that denied their consumers the chance to drink those versions of the beverage because the big breweries had a stranglehold on market access. To put it simply – they have, for decades, been paying incentives to the outlets NOT to serve the products of alternative suppliers. As well as being frustrated as a consumer I consider that a disgraceful and unethical business practice.

So the original and driving motivation for setting up Hashigo Zake was to create an outlet where alternatives to the products of those big bullying breweries could be served. And with some like-minded people we got started. Now my investors and I came from outside the hospitality industry. So we also felt motivated to question a lot of the practices of the hospitality industry that annoyed us. Practices such as spending large amounts on a gimmicky fit-out; drowning out the conversation of customers with thumping music; not being forthcoming with information such as drinks prices and glass sizes; recruiting staff with little product knowledge and paying them the minimum wage. We turned these frustrations into components of the total offering that was Hashigo Zake. We set up in a location that many critics thought was a graveyard. And I gave up a lucrative career to start a business that even our supporters thought was doomed.

So now… please explain… in what way are we guilty of conformity?

Your next accusation was snobbery:

So here we go… you don’t like our certificate. The “Certificate of Heineken-Free Status” that I whipped up in an hour or so one afternoon and put in a $2 frame by our door. Maybe I’m guilty of pride here but I am delighted with what our satirical certificate says. To us Heineken embodies everything that’s wrong with industrial brewing. It’s an unremarkable product whose manufacturer uses expensive marketing and sheer market power to coax apathetic consumers into buying. We want to send a signal to potential customers (and that product’s maker) that we have contempt for, in particular, their methods, and to some extent, their product.

If you don’t find it funny, good for you. I’m not a professional comedian. If you think it makes me/us snobs, that’s a big call, but for now let’s just put that down as name-calling and move on.

So what else did you have to say…

Now we’re getting a little firmer. You wanted to accuse us of charging $22 a drink. So can you clarify one thing here… did you really think we charge $22 a drink or was this hyperbole? Because, you know… one or two of the drinks on our long, long list will cost that much. Several percent of them. So maybe you meant this literally, in which case you’re just being selective to the point of being wilfully misleading. Or were you being hyperbolic? Because if you were, kindly put a zero on the end. There are impressionable people out there who could think this inane comment was somehow vaguely near reality.

But let’s talk about prices, value and what have you because it seems to be a recurring theme. Just yesterday you came up with this:

So here we go then – you think we’re expensive. You think our business model is to cash in on idiots who just want to buy the most expensive beer. Based on what exactly? Now of course I am going to deny this. 

Because it’s bullshit.

But there’s more going on here. We serve products that we like and that we think deserve to be offered to willing customers. And who’d have thought – those products cost more. And yes, having paid more for our raw goods we are failing to re-sell them at prices equal to those of more cheaply sourced goods. Step forward, Giovanni, and accept your Ig Nobel prize for Economics.

But here’s what really upsets me as a business person trying to make a living selling goods that are inherently more expensive than other similar (but arguably inferior) goods in the market. In order to remain competitive with the purveyors of those (arguably) inferior goods, we have to accept lower margins than other businesses do. I guess you don’t bother to look into the wholesale prices of the goods we sell before making your sweeping assertions. If we priced the beer we serve in accordance with the way a typical CBD bar does, then maybe your $22 quip might actually count for something.

So let me spell it out for you – a 200% markup on drinks is standard for an inner city bar in New Zealand. We mark ours up less. Often much less. Oh and we serve them in glasses that are larger than just about every other bar, but I guess you didn’t get that far with your research.

So Giovanni, how about you come clean? What is your problem? Do you just like calling people names? Do you have a problem with beer? Or the category of beer sometimes known as craft? Or do you just have a colossal inverted snobbery complex? Or is it something trivial like the name of our business or our décor (assuming you’ve ever set foot at Hashigo Zake)?

In the meantime, how about you stay away from the baseless, snide, cheap, derogatory chipping away at something that you just don’t happen to be into?

Dominic Kelly

Co-Owner

Hashigo Zake

Bringing Back The Fear

I recently applied to renew Hashigo Zake’s on licence. Although the Sale and Supply of Alcohol Act 2012 doesn’t come into effect until December 18, we have been in a transition phase and the application process takes into account certain provisions of the new act. So it included a “CPTED checklist” that we had never been required to fill in before. (To see it, scroll to page 8 here.) We have to answer yes or no to assertions such as:

• Area behind the bar is raised to improve visibility

• Premises is laid out so staff can monitor patrons at all times

• There are no obstructions within the bar causing blind spots

• CCTV is installed

• Patrons are aware of the CCTV system

(Fortunately for Hashigo Zake, at a recent briefing to the Wellington hospitality industry it was implied that the standards being tested for here wouldn’t be applied to renewal applications, just new applications.)

So what does this tell us about how authorities envisage licensed premises operating under the Sale and Supply of Liquor Act 2012? I was reminded of the panopticon, a design conceived in the 18th century for institutions such as prisons, asylums and day care facilities. The concept was of a design that ensured that all inmates could be observed from a single point and while the staff at that single point might only be looking in one direction at a time, the inmates had to assume that they were being watched at all time and would moderate their behaviour accordingly.

The idea that bars are going to be required to be laid out like an 18th century prison is chilling enough. It’s also dazzlingly stupid. In a busy bar, staff behind the bar don’t waste their time peering over the heads of customers to look for intoxicated customers, half of whom – statistically - will have their backs to the bar anyway. There’s a far more effective way. It’s called collecting glasses. At Hashigo Zake, like most bars, every corner of our premises is visited every five minutes or so by a member of staff. The fact that we have things called rooms, which it seems will be an automatic fail in the brave new world, doesn’t make the slightest bit of difference to our ability to monitor what is going on.

But early indications are that bar staff are expected to transition from dispensers of drinks, good service and advice to a kind of detention monitor. And bars will be required to resemble crèches.

So when and why did New Zealand become so afraid of alcohol and drinkers? Actually that’s the wrong question because the answer is the 19th century. When and why did our fear of alcohol come back with such ferocity?

Now that’s a complicated question. Maybe this will help: the Ministry of Justice just released the findings of a survey into the perceptions of crime among the public of New Zealand. It showed that people’s perception of rates of crime were completely at odds with reality. Official statistics show that crime is at a 33-year low but the majority of respondents were convinced it was rising. Someone (the media are deemed to be the culprits in this case) is exaggerating the problem and misleading the public.

Could there be a similar effect with alcohol abuse? That some party or parties, for whatever reason, are overstating New Zealand’s problems with alcohol abuse?

From Geoffrey Palmer’s Law Commission report of 2010 to the expert witnesses at the Wellington City Council’s hearings in 2013 into its own Local Alcohol Policy, New Zealand came about as close as it ever will to unanimous agreement on a topic – that something new and terrible called bingedrinkingculture has emerged and needs to be tackled. And our collective penance is the Sale and Supply of Alcohol Act 2012 and its upcoming, accompanying Local Alcohol Policies.

But what is the compelling evidence of said bingedrinkingculture that has made this new flood of measures necessary? Let’s see. Here’s a graph from within the aforementioned Law Commission report: 

It shows that alcohol consumption fell steadily from the late ‘70s until around 1999. That includes the year 1989, when that year’s Sale of Liquor Act rationalised and, generally, liberalised our liquor laws. The figures rose again in 1999, when we stopped prosecuting 18 and 19 year olds for purchasing alcohol. It’s hardly a surprise that removing the threat of prosecution for a chunk of the population led to a rise in consumption. Now this graph is obviously a little out of date, but we can tell from here that the trend since this graph was plotted has been downward.

In other words, nothing to see here. Consumption of alcohol over the last thirty to forty years has fallen. 

Perhaps there’s something more specific going on, other than just overall consumption. That is certainly the message we’ve been fed for years now :- the problem isn’t simply alcohol and the silent majority of responsible users, it’s the bingedrinkingculture. Somewhere, out there, some portion of our society is drinking alcohol by the binge-full, in ways that are new and disturbing and a crisis for all of us. And that portion of society is, specifically, the kids.

Take this report for example. There are few specific, measurable facts from Dr Paul Quigley of Wellington Hospital or Sergeant Andrew Kowalczyk about what makes the current bingedrinkingculture different. It’s the intent that’s different, apparently. Dr Quigley says “now, they intended to get smashed, to get wasted.” Sgt Kowalczyk says “where you used to sit around, and you’d drink over a jug of beer, and you’d talk about the races, now it’s like, especially the youth, ‘let’s get pissed as quick as possible’”. 

With all due respect to these sincere and knowledgeable people, but did they sleep through the last fifty years? How much collective amnesia do we have as a society? At secondary school in the 80s friends of mine would do exactly what Dr Quigley and Sgt Kowalczyk complain about with exactly the same bleak, nihilistic attitude. Then when we got to university we were mocked by our elders for being amateurs.

As far as I can tell, the only empirical measure that researchers have to quantify the elusive bingedrinkingculture among youth are surveys. That’s right – all we know about the drinking habits of our troubled youth is what they tell us. (“So, teen survey respondent, here’s your first question: How often do you and your mates get wasted?”) Unless and until the actual alcohol intake of the respondents is accurately recorded the absolute numbers coming out of the surveys are worthless. 

But I will accept that the trends over successive surveys (provided their methodologies are consistent) can tell us something. So what do they tell us? Well according to the Ministry of Health, between the 2005/6 survey and the 2011/12 survey, rates of “hazardous drinking” in New Zealand fell. But why should that be a surprise? We know from Statistics New Zealand that alcohol consumption in the same period dropped. So it is entirely consistent and predictable that so-called “hazardous drinking” should have dropped.

Parenthetically, is this a good time to question the Ministry’s use of the term “hazardous drinking”? It seems that teetotallers have a lower life expectancy than moderate drinkers of alcohol. D’oh, I’m sorry I got that wrong. Teetotallers have a lower life expectancy than moderate and heavy drinkers of alcohol. So while I’m sure that by “hazardous drinkers” they meant “heavy drinkers”, maybe they should consider inverting their terminology.

But to diminish the orthodoxy that bingedrinkingculture is here, it’s a problem and it’s a new problem is to overlook the elephant in the room:- Courtenay Place at 3am on a Saturday or Sunday morning. Yes it’s a vile time and place and it leaves me demoralised as it does just about anyone I know. It’s a symbol of the one fact that almost no-one can disagree on :- that a number of people in our society become very ugly when drunk.

Thirty years ago we definitely didn’t have whole precincts in our cities like Courtenay Place where drinking, yelling, staggering, snogging and vomiting went on well into the next morning. The bars weren’t generally open late enough and not that many people stayed in town after midnight. But if alcohol consumption has fallen over the same period, where have all these hordes of late night revellers come from and who was doing their share of alcohol consumption previously?

The answer, I suggest, is the suburbs. In fact it’s the only explanation that makes any sense, given that per capita alcohol consumption peaked in New Zealand in the late 70s, in the era of 10pm closing. Back then parties often started when the pub closed and depended on revellers arriving with multi-packs of beer or wine. And many would stay until they consumed the stash that they’d brought with them.

The Christchurch earthquake demonstrated what happens when our cities lose their nightlife. In the year or so immediately following the Christchurch earthquake complaints to the Christchurch City Council about noise from suburban parties soared. In the last year, as the city’s nightlife recovered they’ve fallen again.

New Zealanders do not lose their resourcefulness when someone hides the drinks. My father, coincidentally, recently told me how he and his friends planned for their annual Old Boys Ball in the 50s. It was generally held in the evening at an unlicensed cabaret. So during the afternoon patrons individually dropped in at the venue to leave a hip flask of something distilled in a locker, to access later. Then they’d take crates of beer to someone’s home and refresh themselves in advance. Pre-loading and side-loading:– anyone claiming that they’re a recent invention is delusional.

Hoarding alcohol is a rational response to restrictions on availability. And buying in bulk has the advantage of being a money saver. It’s also far more likely to lead to over-consumption. A patron at a bar generally buys a drink at a time, at a price that incorporates the bar’s costs, from a worker who risks conviction for selling a drink to someone who’s intoxicated. But someone who has taken a large volume of alcohol to a party and has left that drink at arm’s reach has no brake on their consumption and probably has an incentive to finish what they brought.

The earlier the bottle store or supermarket closes, the greater the lengths that a determined drinker will go to to make sure he or she doesn't run out later in the evening.

So as ugly as zones like Wellington’s Courtenay Place can be, are they doing New Zealand (and our suburbs) an enormous favour, by bringing our most determined party-goers into one precinct? There their drinking can be moderated and when the worst happens they’re more likely to be seen to, instead of being left unconscious at the bottom of a suburban garden.

Again – does it need to be repeated? The liberalisation of New Zealand’s liquor law in 1989 coincided with a reduction in consumption. In fact this effect has been repeated throughout New Zealand’s history and it has been documented. Not that anyone thought to take into account the findings of Paul Christoffel’s 2006 thesis, “Removing Temptation: New Zealand’s Alcohol Restrictions, 1881-2005”. The law commission report saw fit to quote from some of his historical background. But they never bothered to mention the core finding of his research, which was that the availability theory (greater availability of alcohol leading to greater consumption) is patently wrong. In fact the historian wasn’t consulted at all during the drafting and debate of the new Sale and Supply of Liquor Act.

I’ve only scratched the surface of the new act’s flaws. Here are a few more:

• Accompanying the act are new, much higher, fees for holders of liquor licences. Now remember that an enormous portion of the income that a licence holder derives from selling alcohol goes to the government in excise tax. But an intentionally punitive new fees regime has been imposed as well. Making the selling of alcohol uneconomic is a petty and stupid way of penalising the industry. Additional compliance costs are just going to make operators look for ways to take some of the risk back out of their business – probably by looking for deals with suppliers that hinge on increases in turnover.
• The cost of getting a duty manager’s certification for the purposes of the act are roughly doubling. At Hashigo Zake we consciously get as many of our staff as possible qualified as duty managers. It’s a good way to make sure everyone understands the law and our responsibilities. Now we’ve been given a financial disincentive for doing this.

• One of the measures of the new act is the outlawing of advertising of discounts of more than a certain percentage. However it was pointed out at a briefing recently that advertising such discounts with signs inside a bar or bottle store is legal. What's more there is nothing to stop a customer from taking a photo of such signage and posting it on the facebook page of the outlet. In other words, a much heralded component of the law comes with a built-in loophole.

In short, New Zealand’s new law looks like a blunder from conception to implementation. It’s based on a phony moral panic and incorporates a package of measures that are more likely to lead to irresponsible drinking practices. It seems to have been designed by people who are afraid of alcohol and want everyone else to be, regardless of whether that is healthy.