Anchor Brewing Company
Anchor Brewing Company
Sales: $10 million (2000 est.)
NAIC: 312120 Breweries
Anchor Brewing Company has been making unique, traditional beer in San Francisco, California, since the 1860s. Priding itself on its commitment to small-scale production, the company sells about 110,000 barrels a year of its seven brews, distributing them nationwide and exporting them to pubs and retail outlets in Sweden, France, Italy, England, Australia, Japan, and Hong Kong. Along with its flagship beer, Anchor Steam, the company’s beers and ales include Anchor Porter, Anchor Small Beer, Anchor Wheat, Liberty Ale, Old Foghorn, and Our Special Ale—a seasonal holiday brew that changes each year. In addition, Anchor also operates a small distillery on its premises, manufacturing limited quantities of Old Potrero whiskey and Junipero gin.
Early Roots: 1860s–1960s
In the mid-1860s, Ernst Baruth and Otto Schinkel began selling beer to a handful of local restaurant and bar owners from a brewing facility in San Francisco, California, on Pacific Avenue between Larkin and Hyde Streets. Named Anchor Brewing in 1896, the brewery sold only steam beer—Anchor Steam—available on tap and made using a higher temperature brewing process developed during the Gold Rush.
“Steam” beer probably described the unique brewing method used by early Gold Rush brewers. Because of the city’s climate, brewers were able to avoid using costly ice; the hot liquid produced during the brewing process cooled rapidly when placed in shallow brewing vessels, with steam rising in the open air as the liquid cooled. There was also a burst of steam whenever a keg of the highly carbonated brew was tapped. Equally possible, “Steam was a nickname that meant any primitive beer, not something made in a particular way …,” according to Fritz Maytag, the man who bought the company in 1965, in a July 30, 2000 Boston Herald article. Although popular with local customers, it was often poorly made with an unreliable, quirky taste.
For the first 100 years of its history, Anchor Brewing was purchased and resold several times. However, its owners changed little except its location. Joe Allen, an employee, purchased Anchor after Prohibition and then sold it to Laurence Steese in 1958, who moved the company to Eighth Street between Bryant and Brannan Streets. But Anchor never turned much of a profit, and by 1965 the company was going bankrupt. Just as the brewery was about to close its doors permanently, the 26-year-old Fritz Maytag stepped in and gave Steese $5,000 to keep Anchor open, buying a 51 percent interest in the company. In a January 1983 article in Inc., Maytag described the reason for his investment: “I was sort of drifting along, the way you do when you get out of graduate school, looking for something to do. … [Anchor] needed an angel, someone to come through with a tiny bit of money. [My intention was] to give a little advice and go away.” Before he stepped in, the company was in such desperate financial condition that “[Anchor was] selling the old wooden beer kegs on the sidewalk for 50 cents …,”according to Maytag in a March 1999 article in the San Francisco Chronicle.
Fritz Maytag, born Frederick Louis Maytag III—the first son of the family home-appliance makers whose enterprises include The Maytag Company and Maytag Blue Cheese—had the financial resources that Anchor needed. However, he had no skill in brewing. He had attended prep school in the East and then Stanford University in 1959 where he graduated with a degree in American literature. By 1964, he had dropped out of Stanford’s graduate program in Japanese. Shortly after he made his investment in 1965, Maytag left for Chile to start a wine export business.
When Maytag returned to San Francisco in 1969, he found the company near bankruptcy again. “The brewery was a disaster,” he said in a January 1983 Inc. article. “The equipment was antiquated. The quality of the beer was inconsistent. And some of the bad beer was getting into the trade and making a poor sales situation worse. I finally decided that I had either to get out or get into the business all the way and try to make it a going concern.” At this point, Maytag bought out his partners. When he took over, Anchor was producing about 600 barrels (each holding 31 gallons) of beer a year. The company had one employee and no up-to-date machinery or refrigeration. As the new brew master and president, Maytag decided that his mission would be to save Anchor, restore traditional brewing methods, and preserve the art of classical brewing.
A New Owner and a New Tradition: 1969–74
Maytag’s first goal was to increase sales by improving the quality of his product. After reading voraciously and seeking advice from brew masters in this country and in Europe, Maytag came to the conclusion that his only ingredients would be barley, hops, yeast, and water. Furthermore, he insisted that his beer would be made only with expensive two-row barley malt (rather than the less flavorful six-row variety) and would not include any adjuncts, such as corn or rice—cheaper grains that replace 30 to 40 percent of the barley in most U.S. brews. Rather than using pellets or extract, he used whole hops in the proportion of one pound per barrel—three or four times the industry average. He also refused to add any of 100 permissible additives and preservatives, such as enzyme papain for clarity, propylene glycol for a stable head, or caramel to darken the color.
To brew his beer, Maytag brought in ultra-modern equipment to supplement the brewery’s traditional machinery, which included an antique malt-crushing mill. He implemented strict methods of processing, including a costly, time-consuming fermentation process practiced by few large commercial breweries called krausening —a German technique used to develop natural carbonation that produces a creamier, richer, long-lasting head and finer bubbles. In krausening, beer is placed in a closed aging tank after fermentation and newly fermenting beer is blended with the already fermenting beer. Once brewed, instead of filtering the beer, Maytag processed it with centrifu-gation. He avoided tunnel pasteurizing—a method of cooking the beer at high heat for 15 minutes to kill harmful bacteria—because the process risked destroying the flavor. Instead, he flash-pasteurized, using 15 seconds of heat and aseptic bottling. Maytag trademarked this unique process of brewing, making Anchor Brewing the sole extant brewer of “steam” beer. His new version of Anchor Steam beer was distinctive, rich, thick, bitter, and heavily hopped, somewhere between an ale and a lager. Unique among American beers, Brewers Digest described Anchor Steam as “a beer for connoisseurs and suds lovers alike.”
Marketing and Company Expansion: 1975–95
However, brewing “the perfect beer” was insufficient grounds on which to build a company; so Maytag began a strategy to market his product that was unlike anything previously tried in the industry. Following a family precept to “make better, not more,” he decided to sell a small amount of his handmade beer at a high price and let its reputation spread by word of mouth.
To enhance the nostalgic image of quality and create a mystique around Anchor Steam, Maytag began a brewery tour. He also used hand-painted delivery trucks and old-fashioned labels with a legend that read “Made in San Francisco since 1896” across the bottom. Four-packs instead of six-packs in an open-bottomed carton lowered costs as well as distinguished the beer from its competitors.
By 1975, ten years after his initial investment, Maytag was not only making a profit, but his company had achieved a level of notoriety. Anchor Steam beer was winning recognition and prizes and was considered a beer for connoisseurs. In 1977, it was the grand prizewinner of New West magazine’s taste test, called the “Best Beer in America” by Quest magazine, and was labeled the “Rolls Royce” of U.S. beers by Joseph Owades, director of the Center for Brewing Studies. With this kind of popularity, the brewery reached the height of its production power at 12,500 barrels—a staggering increase from the mere 600 barrels that were produced annually in 1965. This same year, sales passed the $1 million mark. Running at full capacity, Anchor was selling to customers in Minnesota, New Jersey, and ten western states. With demand exceeding supply, Maytag decided to build a new brewery to accommodate his expanding business.
To fund the company’s expansion, Maytag pledged all of his personal assets, real estate, and stock, stretching both his and his company’s funds to the limit. In August 1979, when the former Chase and Sanborn coffee plant on Mariposa Street was finally converted into a brewery, bankruptcy threatened. To make matters worse, the first year the new facility was open, it lost money. However, because the new facility allowed Anchor to expand its supply, soon its sales began to climb and the company reached profitability.
Our brewers employ no modern short-cuts and each brew is virtually handmade with an all-malt mash, in our handmade copper brewhouse; a veritable museum of the simple, traditional brewhouses of old. While we strive to practice the art of classical brewing, we employ state-of-the-art methods to ensure that our products are clean and clear, pure and fresh. Every bottle and keg of our precious beer is kept under refrigeration at the brewery, and at the warehouse of your local distributor. We know of no brewery in the world that matches our efforts to combine traditional, natural brewing methods with the most careful and modern methods of sanitation, finishing, packaging and transporting.
Growth continued, and by 1982 the company was selling 28,500 barrels in 20 different states. In 1983, Anchor had more than $3 million in sales. Although these sales did not amount to much in the $30 billion, 177 million-barrel U.S. brewing industry, competing on a grand scale was never Maytag’s intention. Anchor produced less each year than the industry’s two giants—40.3 million-barrel Miller Brewing Company and 54.3 million barrel Anheuser-Busch Company—produced in a few hours. In keeping with Maytag’s goal of modest growth, by 1985 the company had 14 full-time employees. By 1988, Anchor brewed about 44,000 barrels annually with sales of $5.3 million.
In 1990, Anchor sold 68,000 barrels—up 16 percent from the 58,500 barrels it sold in 1989. At the beginning of 1991, a new federal beer tax took effect and helped to boost Anchor’s sales further. Companies that produced more than two million barrels per year saw their tax doubled to $18 per barrel. However, breweries such as Anchor that produced less than this amount were exempt from paying the increased tax on their first 60,000 barrels. Because Anchor’s production was only 8,000 over this limit, the tax helped to narrow the price gap between Anchor’s product and its competition’s. By 1995, Anchor was producing 100,000 barrels of Anchor Steam, Liberty Ale, a porter, a barley wine, and a wheat beer (which the company believed to be the first of its kind produced in the United States after Prohibition). The company began exporting its products to pubs and retail outlets in Sweden, France, Italy, England, Australia, and some to Japan and Hong Kong. In 1998, its sales were $10 million.
Pioneering an Industry: The Rise of the Microbrewery
As Anchor grew, the brewing industry gradually began to change. Maytag and several other brewers nationwide whose brews were richer and fuller-bodied following traditional brewing techniques had a huge influence on the beer industry. In a January 29,1991 San Francisco Chronicle article, David Edgar, assistant director of the Institute of Brewing Studies, a division of the Association of Brewers, said: “Anchor started it all. It’s the granddaddy of the microbreweries.”
Although he refused to diversify his beers, Maytag was interested in exploring other traditional beverages, and in 1993, he opened a small distillery in the back of the Potrero Hill brewery. There, he began limited production of a traditional U.S. rye whiskey that dated back to George Washington’s day—Old Potrero, the only single-malt rye being produced in the United States in the 1990s. Because whiskey is distilled beer, Maytag regarded Old Potrero as a natural progression of brewing. Old Potrero is pot-distilled from 100 percent rye malt. In the same distillery, Anchor also began to distill a minuscule amount of a premium gin called Junipero.
Maytag’s commitment to remaining small caused him to eschew the trend set by many microbreweries, that of focusing on heavily diversifying their products. Anchor prided itself on being slow to change and insisted on only producing seven brews, including a wheat beer and a limited edition holiday brew, launched in 1975, that varied from year to year—Our Special Ale. Maytag’s philosophy was the result of his desire to keep his company a hands-on operation. In an August 30, 1990 article in the Los Angeles Times, he stated: “The idea isn’t to grow big. It’s to make good beer consistently.” By 2000, Anchor had leveled off its production to 110,000 barrels per year. It sold its beers in 49 states, Japan, and Europe.
Boston Beer Company; The Gambrinus Company; Redhook Ale Brewery, Inc.
- Anchor Brewing gets its name.
- Fritz Maytag saves Anchor from bankruptcy.
- Maytag buys out his partners and becomes president.
- Previously only sold in kegs, Anchor Steam beer is now bottled.
- Anchor turns a profit and begins producing other beers.
- Anchor begins limited production of Old Potrero rye whiskey and Junípero gin.
- The company sells 110,000 barrels of beer in 49 states, Japan, and Europe.
Berger, Dan, “Anchor Steam: The Giant of Micro-Breweries,” Los Angeles Times, August 30, 1990, p. 42.
Berling-Manuel, Lynn, “Anchor Finds Smooth Sailing Without Advertising,” Advertising Age, January 31, 1985, p. 27.
Blair, Ian, “Is There Strength in Diversity: Although Their Ranks Have Dwindled, America’s Small Regional Brewers May Be on the Brink of a Renaissance,” Beverage World, October 1985, p. 26.
Gumpert, David E., “The Joys of Keeping the Company Small,” Harvard Business Review, July/August 1986, p. 6.
Hartman, Curtis, “The Alchemist of Anchor Steam,” Inc., January 1983, p. 31.
Higgins, Kevin T., “Boutique Breweries: Passing Fad or Viable Competitors to Imports?,” Marketing News, October 25, 1985, p. 10.
McNicol, Tom, “Anchor Aweigh, Full Steam Ahead,” Los Angeles Times Magazine, March 10, 1996, p. 22.
Romel, Lund, “Technology Coexists with Old-Fashioned Philosophy,” Modern Office Procedures, December 1981, p. 74.
Shaw, Jan, “Maytag Hops for a Different Brew,” San Francisco Business Times, September 26, 1988, p. 1.
Tarpey, John P., and Jonathan B. Levine, “Small-Time Brewers Are Putting the Kick Back into Beer,” Business Week, January 20,1986, p. 90.