Newsletter March 2013

2012 saw many changes at Bayhawk most of them very good.

After 15 years of being dependent upon a keg leasing company for our cooperage, we have acquired 4300 Bayhawk kegs. They were manufactured for us by the Schafer Company in Neunkirchen, Germany. Unfortunately, no US company is manufacturing stainless steel kegs presently. We could have purchased Chinese kegs at a lower cost, but I have never been happy with the quality of brewing equipment manufactured in China. We believe that having our own kegs will add to the strength of our brand, keeping us from being at the mercy of larger companies that manipulate the craft market, and in the long term help us keep our pricing competitive.

Bayhawk began selling bottled products in Arizona with limited success. In 2013, we hope to add a more affective force to bolster both our draft and bottle sales. Presently, our Porter, Imperial Brown, and California Pale Ale in 22oz bottles are available from Lake Havasu City to Douglas, Arizona. This is in addition to the numerous draft accounts we have in the greater Phoenix and Tucson areas.

At the end of 2012, Bayhawk added Rick Salmon to its sales force. Rick has spent most of his adult life in the beers business. We were lucky to get him from Heineken USA where he was a district sales manager for Northern California. He has been handling sales for us in the same area, and making our distributors crazy with his polite ‘in your face’ style of making things happen. Yes, they do happen. Bayhawk bottled beer can now be purchased at the Cost Plus World Markets throughout California. Cost Plus has actually approved the sale in 9 states, but we will limit ourselves to the 5 Western States where people enjoy our draft. Unfortunately for our friends in the Pacific Northwest particularly our stockholders, the distributor we employ to service our draft for the Claim Jumpers and Original Road House Restaurants, will not handle the delivery of our bottles to BevMo’s, World Markets, Whole Foods Markets, and Total Wines in Washington and Oregon. The fact that our distributor will not support Bayhawk name brand products distressing in so much as our distributor makes a gross profit of more than $40 per keg on Bayhawk Private Label Products while we lose money supporting our customers in the region. Rick has made it his mission to find distributors that will work with us in an equitable manner. While most Microbrewed beer sells in the Pacific Northwest for more than $140 per keg, Bayhawk sells for between $109 and $113 per 13.2 gal keg. The unmitigated greed of the Middleman never ceases to amaze me (Of course, this is my opinion. I’m sure they see it differently). In spite of the many obstacles Rick has encountered, he is doing a great job.

My general outlook for the craft industry is still one of skepticism. As I’ve stated in the past, the industry can sustain only so many duplication of the same style or steroid versions of those styles. This has become apparent as three of the marketing companies that contracted with Bayhawk to supply beer went out of business last year. This accounted for a loss of approximately 875 barrels of production versus 2011. Two of three contracts specialized in “Over the Top” west coast style beers, clones of other moderately successful big marketing budget beers. We brew them, but we don’t guarantee that someone can sell them. Personally, we still believe that a flavorful craft beer that the average person can drink with family while out to dinner will be the beer that sustains the Microbrew industry. We’re sure in the coming months, we will see demise of many more of these companies. Their market is limited to the Gastro-pub clientele that is looking for the flavor of the month or hour. Companies that have to invent new recipes every month to make a sale will not last long in our business or any other.

Now that I’ve given you my thoughts on the state of the industry and what I believe is wrong, I’ve decided to join the ranks of those I’ve criticized. Bayhawk Ales will be introducing its version of IPA in the spring. It’s going to be what I would describe as an “Over the Top,” West Coast India Pale Ale, 8.5% alcohol and over 100 IBU’s. Some might disagree, this is over the top, but I feel that we have taken it to limits of balance without being wasteful. There have been requests by our customers and distributors for Bayhawk to sell this beer for years. We have sold it on a limited basis to some our friends that own brew pubs and a few of local retail outlets, but realistically, most people have only been able to enjoy this beer in the Bayhawk office. I have never believed that IPA fits the Bayhawk customer base, the family restaurant. I have been proved correct on more than one occasion by witnessing our high volume customers pull IPA’s from their draft selection and replace them with our CPA (California Pale Ale) as it is more drinkable for their customers. Initially, we hope to have this beer available in 22oz bottles throughout California and Arizona. Did I mention that I am join the ranks of those I criticize? Not only will I be placing my name to the bottle, but my picture will appear on the label. The beer will be Zappa brews Nelson IPA. I think you’re going to like it. If you don’t like it, then I’ve been correct all of these years. The average beer drinker, whom we always brewed to please, doesn’t like IPA. Brewing IPAs and Belgians is a true sign the brewery cannot consistently make good beer.

Drink Well My Friends,

Karl Zappa Managing Director Bayhawk Ales