The Alchemist Of Anchor Steam
It is 6:15 a.m. as president and master brewer Fritz Maytag comes downstairs from his tiny apartment on top of the Anchor Brewing Co. building to check his Christmas ale. At 45, after 17 years of making, selling, living, and dreaming beer, the vision of his own brewery still enchants him. Office, brewhouse, quality control lab, and taproom, each opens on to the others, a vista of varnished oak walls and spotless glass partitions around the three giant burnished copper kettles: It is magic to him.
The spires of downtown San Francisco, a mile away, are bathed in Friday's pre-dawn darkness, but Anchor has been awake for an hour. The joy of the small businessman, Maytag tells friends, is in being the head of a chicken, not the tail of an elephant. His great-grandfather built Maytag Co.; Fritz built a brewery. It was Fritz's capital and imagination, his product development, package concept, market plan, and management strategy. It was his single-minded devotion that disproved the assumption that there was no place in the industry for the small brewer.
Measured by the numbers -- more than $3 million in sales with a volume of 28,500 barrels a year -- Anchor Brewing is but a tiny drop in the $30 billion, 177 million-barrel U.S. brewing oeean. Anchor produces less each year than the industry's two giants -- 40.3 million-barrel Miller Brewing Co. and 54.3 million-barrel Anheuser-Busch Cos. -- brew in a few hours.
But Anchor Steam is considered the beer of connoisseurs. It was the grand prize winner of New West magazine's 1977 taste test and was labeled the "Rolls Royce" of American beers by Joseph Owades, director of the Center for Brewing Studies, and "The Best Beer in America" by Quest magazine.
While the accomplishments were Maytag's, the burdens were his as well. For 10 years he fought to make the company profitable. With the business barely out of the red, an initially unfinanced multimilliondollar expansion pushed him harrowingly close to bankruptcy. Then came illness, the death of a son, the end of his marriage. He felt like a rubberband stretched too far; his natural resiliency nearly gave out. Today, high brown shoes scuffed, collar stays forgotten, he still looks less the middleaged scion of privilege that he is than a barefoot boy from the Midwest grown tall and rugged, ruddy from the outdoors. But the signs of age are visible. His brown hair is tinged with silver. Furrows cross his forehead. He laughs less than he did once, more often now in irony.
This year, he has told his full-time staff of 11 people, will be his sabbatical. He is going to step away from the business, assess his past, and plan a future. Today he could fly down to Los Angeles and see his horses, perhaps, or take the Dulci Bella, the little boat he keeps on a trailer beneath the brewhouse, out for a sail. He has told himself repeatedly that after 17 years he owes himself something more than an obsession with the business.
Nevertheless, this morning, like most, finds him at the brewery, coffee cup in hand, sleeves rolled up, watching through his thick rimless glasses as the plant goes to work. Although he knows he is not really needed -- his people can run the operation; he taught them himself -- he is still drawn there, captured by the promise of the packed cases rolling off the bottling line, the mystery of brewing, and his eagerness to check the Christmas ale.
The Christmas ale is his special favorite, brewed but once a year. He concocts the formula and designs the label. Last year's, he thought, was a failure -- too sweet, too easy for people to like. It sold like hot-cakes. This year's will be different, as bitter and rich as the ales of tradition. "I know I could sell more if I made the product less shocking," Maytag says, "but the idea is to surprise people."
Maytag has been surprising people since 1965, when he paid about $5,000 for the controlling interest and debt of a failing brewery. At the time, Anchor was brewing only 600 barrels a year for a mere 10 or 12 customers. But Maytag had a prescience of a market beyond a few nostalgic bar owners. Imported beers began selling in San Francisco well before they became significant nationally. He saw his contemporaries moving away from the light, bland, undistinguished froth that was becoming the national norm to buy European beers instead, both for the flavor and for the image of sophistication. He would brew for them cognoscenti and status-seekers alike. His beer would be rich and thick, heavily hopped and bitter, unique among American malts.
He decided not to use the standard approaches of selling a lot of beer at a small margin, taking advantage of economies of scale in production, and building brand loyalty with a massive advertising campaign. Instead, he would follow a family precept -- "make better, not more" -- selling a little handmade beer at a high price and letting its reputation spread by word of mouth.
Today Fritz Maytag has become, in the words of one small brewer, "the father of the microbrewery movement." Just as restless attorneys and tired corporate warriors dreamed of opening a restaurant in the '60s and of starting a winery in the '70s, many dream in the '80s of their own brewery. Like the microwineries that mushroomed up around the industry giants, selling traditional methods and the personal touch, microbreweries are springing up, all trying to follow the path that Maytag cleared (see box, page 38).
"Hey, what's the deal with this ale?" Maytag asks his general manager, Gordon MacDermott, peering into the fermenting room. Instead of the two batches he expected, there is only one at work in the shallow stainless steel pans, the yeast forming a rich cappuccino-like froth as it turns the sugar to alcohol.
"We lost one, Fritz," says MacDermott. Although both batches were brewed in exactly the same way, the breakdown of the malt enzymes from starch to sugar was incomplete in the second. "We'll have to brew again."
"Isn't that weird," Maytag marvels. "So whose paycheck gets docked for this?" His face is solemn for a moment, then he and MacDermott both break into grins. Maybe the ale could have been saved. They could have added an enzyme or two, or blended the two batches together, but everyone at Anchor knows Maytag's feelings about quality control. Regardless of the cost or the work involved, he thinks dumping an occasional batch is good for morale, a reminder that he won't compromise.
Brewing is an art, not a science, after all, more alchemy than chemistry, Maytag believes. "You don't make beer," he says. "You get everything together as best you can. Then you let the beer make itself." That is the magic.
The bottling line looks just as Maytag imagined it when he first began dreaming of the perfect brewery. To make it a pleasant place to work, he had it built against an east wall so the morning light could stream in. To please his own aesthetic sense, he designed the ease conveyor to run beneath the floor, neatly and without clutter, rather than hang over the bottlers' heads. He likes to stand and watch, to listen as the bottling line clanks and jars up to speed.
Watching makes him nostalgic. Current capacity is 275 bottles a minute 33,000 bottles a run. Before the new plant became operational in August 1979 Anchor could turn out only 70 bottles of beer a minute, as many as Maytag could pack in a case by hand. Even that was progress. When he first bought the brewery there were no bottles at all; Anchor sold only draft, and precious little of that.
The legend of young Fritz Maytag's purchase of the last of San Franciseo's 27 breweries of so-called steam beer (see box, page 35) has been lovingly retold by area and industry reporters for years. Stepping into a bar as a Stanford University under-graduate, so the tale goes, Maytag took a single sip and was hooked, an immediate "member of the small, loyal band of Anchor Steam devotees. " Years later, hearing the brewery was about to go under, be bought the company, determined to keep his favorite brand alive.
It is a story Maytag rarely corrects, but it is only a story. "I'd had the beer, and it wasn't that good," he admits. Actually, curiosity and a taste for history prompted a visit to the brewery. "It never occurred to me that I'd end up running a brewery." It had never occurred to him that he would end up in business at all. Although born Frederick Louis Maytag III in December 1937, first son of the family of home-appliance makers, he was never pressured to join his family's Iowa company. "The only pressure," he remembers, "was to do something." After prep school in the East he went west for college -- "primarily to escape the constant question, Are you the washing-machine guy?" -- graduating from Stanford University in 1959 with a degree in American literature. His father wanted him to enroll at Harvard Business School, "but I was pretty anti-Establishment then." Instead he studied Japanese, only to drop out in 1964.
"I was sort of drifting along," Maytag recalls, "the way you do when you get out of graduate school, looking for something to do. I loved the brewery; it was dusty and charming, and there was a mystery in the idea of brewing beer. Alcohol is the one socially accepted mind-altering substance. If you have a brewery you become the witch doctor, the alchemist, the magician You can make the stuff. They needed an angel, someone to come through with a tiny bit of money. I was just going to give a little advice and go away.
"But the brewery was a disaster. 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."
In 1969, four years after his initial investment, Maytag bought complete ownership. He rebuilt the ramshackle old brewery step by step, working from the inside out, investing money from his personal inheritance in the new and reconditioned equipment necessary to provide the consistent quality that could bring sales growth. At the same time he taught himself brewing, reading all the texts and talking with every brewer he could find.
"To make a profit I had to sell at a good price, and to get that price I had to have a good product," says Maytag. "I wasn't interested in hype. I wasn't interested in a con job. I had a vision of making a beer so good people would beat a path to our door. I wanted to make Anchor Steam the Platonic ideal of the perfect beer."
No U.S. beer was brewed to such exacting and costly, let alone philosophical, standards. Maytag used only the expensive two-row barley, as European brewers do, rather than the less flavorful six-row variety. And he used barley only, not such adjuncts as corn or rice, cheaper grains that replace 30% to 40% of the barley in most U.S. brews. Rather than pellets or extract, he used whole hops, one pound per barrel three or four times the industry average, and he used none of the 100 permissible additives and preservatives: no enzyme papain for clarity, propylene glycol alginate for a stable head, or caramel for color.
Rather than filter, he decided to centrifuge, as if he were handling a fine California white wine; rather than tunnel-pasteurize, cooking the beer at high heat for 15 minutes to kill harmful bacteria and running the risk of destroying flavor, he flash-pasteurized, using 15 seconds of heat, and bottling aseptically.
Maytag lived Anchor Steam, checking the barley when it arrived, supervising the brewing, working the bottling line, even going out to make deliveries until he threw out his back while balancing a keg. "I'm the president of Anchor Steam," he would say when he hit the road to sell, "and I'd like you to try my beer." He kept pouring in his own money, running the brewery at a loss for the first 10 years. "I was too nervous to raise my prices, until I realized I was paying people to drink my beer," Maytag says.
Although unwilling to sacrifice perfection in brewing to lower costs, he sacrificed perfection in packaging: He ordered his labels in volume from a large printing company instead of from the more expensive local printers, shifted from a four-pack to a six-pack, and changed from a perfect-seal to an open-bottom carton. Finally, he raised the price.
By 1975, after 10 years, he had pushed the company into the black. From the 600-barrel annual output when he began, the brewery was running at full capacity in 1977, selling 12,500 barrels to customers in 10 western states, Minnesota, and New Jersey.
Then, in pursuit of his dream of perfection, he nearly lost the business he had so lovingly built. Maytag had long wanted to build a new brewery, the perfect plant for his perfect product. With demand exceeding supply, he thought the time had come. "We needed the new brewery desperately," Maytag says, "so I made a conscious decision to risk everything."
He knew from experience that he would be unable to borrow money against the brewery -- given the consolidation in the industry, any small brewery would look like a bad risk. Instead he decided to pledge all of his personal assets, real estate, and stock. But before securing any financing at all, Maytag began designing and ordering equipment. When he began the new brewery project, the prime rate was 7 3/4% and the Maytag stock he held and planned to use as collateral -- he refuses to disclose the amount -- was at $32 a share. By the time he was able to get a bank loan for the project, however, his stock had dropped to 25 1/2, and the prime was up to 11 1/4 and heading toward 20%. By August 1979, when he finished his first brew at the new plant, both the company and the man were on the brink.
"I got so I couldn't pay my bills," says Maytag. "My cash flow had gone to hell. It was so bad that one day I got up, got dressed, went downstairs -- and then I just couldn't go to work. I just couldn't. I went back to bed instead."
Maytag had been living with constant strain. He had convinced a major San Francisco accountant that, even though his brewery was small, it was an interesting business. The two talked for hours, poring over countless projections that Maytag ran through his Apple computer. Awake or asleep, he was haunted by the specter of failure.
"Then one day I decided that going bankrupt could be fun, too," Maytag says. Bankruptcy didn't come. But realizing that he could learn as much from failure as from success freed him to live with the risk he had taken.
That first year the new brewery lost money, but sales climbed as the supply expanded, rescuing Maytag's cash flow. Anchor Steam reached the break-even point at about 18,000 barrels in 1978, 1,000 barrels ahead of projection. He says that he had planned so cautiously -- "thanks to my Midwestern conservatism" -- that, even with soaring interest rates, his expansion was able to succeed. By 1982, the company was selling 28,500 barrels in 20 different states.
But the struggle had taken its toll. The magician was beginning to fear that he was being swallowed up by his own creation.
Wunder Beer Gilt Edge Steam, Acme Brew: The polished enameled trays and signs hang from the walls of the Anchor taproom like legends of the fallen. Old Stock Regal Amber, Tahoe Beer, Butte Lager, Old Iroquois: icons from the golden age of the small brewer, before national brands became preeminent after World War II, before Philip Morris Inc.'s purchase of Miller Brewing Co. in 1969 shook up a sleepy industry and propelled it toward its final shakeout (see box).
Anchor Brewery doesn't advertise its brewery tours, lest they become just another stop on the Golden Gate -- Fisherman's Wharf-Chinatown circuit. But visitors who have made appointments come -- pilgrims, home brewers, industry mavens, and Anchor Steam buffs alike, seven this afternoon, marveling in the taproom over the antique brewing tools and the sepiatint photographs of mustachioed GermanAmerican brewers, watching the gleaming kettles through the panoramic window, the air redolent of hops.
Brewing "the perfect beer," Maytag knew from the start, was insufficient to build a company. Advertising was out of the question -- not only was it too expensive, but you couldn't sell consumers the idea of the little brewery on a San Francisco hill by flooding the media with money; the contradictions would be too great.
Image was the answer -- "an image to fit what was in the bottle," Maytag says -- with the brewery tour as one of the nonproduct marketing elements. After a lecture on the origin, history, and current quality of Anchor's beer, guests are walked through selected areas and then taken back to the taproom for questions. They leave enchanted, warmed by the aura of tradition and by two samples -- a glass of steam beer and a glass of porter, the company's dark brew -- laden with T-shirts and aprons, baseball hats, plaques, pins, and mirrors that display the company logo.
"You've got to be a con man in this business," Maytag says, "and I am." Everything about Anchor Steam is calculated to impress people with the bias he put into his product. Everything says old-fashioned, small, out-of-the-Establishment-mainstream.
Before designing a label for the bottles, for example, Maytag set his empty 12ounce bottle in a line with the imports, his competitors in price and status. They had glitter and foil, elegant lettering, and a wrap that suggested champagne. "I was born and raised in a business environment," he explains, "and I had an instinctive sense of marketing. I just knew ours had to look different."
Anchor's bottles would look "funky," like a poster from the last days of the San Francisco counterculture. The large, red, brand name across the top looked handlettered. Maytag emblazoned the legend, "Made in San Francisco since 1896," across the bottom, although he had no way of knowing what his beer had in common with its ancestor. He even added a wraparound neck label, carrying 150 words waxing rhapsodic about "an exceptional respect for the ancient art of brewing" and a beer "evolved over many decades and like no other."
The Anchor differenee extended beyond product and package, however. Maytag made extraordinary demands on distributors, insisting that, since his product was brewed without preservatives, it be refrigerated until purchased by the final consumer. There were no discounts. "Our beer is so good that we set our price, and that's it," Maytag told prospective customers, "and besides, we need the money to get across the bridge at night. "
"It's hard to own a small brewery," Maytag says today. "Just ask the man who has one." Maytag has no leverage with suppliers, although to his surprise his prestigious image and personal touch make people want his business. But the brewing industry, which he once thought of as a fellowship, has become a battle zone. "The Miller-Anheuser feud changed everything, " says Maytag. "It keeps applying more and more pressure to the small brewer, most of whom are particularly worried about getting and keeping distributors."
In theory the problem should be especially acute for the demanding Maytag, but Don Saccani, Maytag's master distributor for northern California, Nevada, and Alaska, thinks that even in what he calls "the final shakeout of the brewing industry," Anchor Steam will be attractive. "The import and super-premium market keeps growing," he says, "and everybody wants a piece of it. And Anchor Steam is an easy sell. People have heard about it or read about it, and you can sell the history. It is the finest U.S. beer made."
Maytag's management style is nearly as unusual as the image he projects for the product. "I always wanted to own a place where I'd like to work," Maytag says, and he runs Anchor like a family, with free discussion and shared responsibility -- although without profit-sharing. There are no supervisors and no foremen. The fulltime workers are salaried; those with experience make $27,000, slightly higher than union wages for brewers in California. Initially, tasks were rotated each week so everyone would feel part of the whole process. While size has brought some specialization, everyone is sent to both brewing and packaging courses. Turnover is minimal, and the working atmosphere is casual. Afternoons, Maytag may close the plant down and take everyone to a Giants game; nights, the brewery's rock band practices in the taproom.
"All the employees here feel that they've got the whole company on their shoulders," explains general manager MacDermott, 36. "That's the reason for our quality."
"We're all about the same age, and, since our jobs overlap, we're never separate," adds brewer Tim Morse, 34. "We help each other out. No one who comes to work here ever wants to leave."
No one, that is, except Fritz Maytag.
The signs of Maytag's sabbatical fill his office. A picture of his trainer behind one of the three trotters he has bought sits on the bookcase filled with works on brewing; a letter from Sebastiani Yineyards about crushing the grapes from his Napa Valley vineyard lies on top of the "Dear Fritz" thank-you letter from Dianne Feinstein, mayor of San Francisco. Maytag has bought a house on Corfu and is teaching himself Greek. The Athens newspapers lie, unread, next to his copy of The Wall Street Journal.
But Maytag is a man with obligations beyond his business, duties he will not shirk: He is board member and former chairman of Grinnell College, director and twice president of the Brewers Association of America, chairman of the board of his family's dairy company. Noblesse oblige. He can't turn his back on the civic, cultural, and charitable burdens the family name gave him.
Nor can Maytag ignore the debt he feels to the brewing industry. Other brewers, much larger than he, gave freely of time and advice when he was starting; he feels compelled to do the same for the would-be brewers who flock to see him.
Although Maytag would rather be sailing, at 2:30 p.m. he sits in his office, talking with a 36-year-old financial consultant with an itch to start a brewery. "No," the man admits, "I haven't studied anything about brewing yet." But he has a concept. "I thought you could help me short-circuit the learning time required."
"I've got a thick file of all the would-be brewers who come to see me," Maytag says with a laugh, tilting back his chair, putting a hand to his suspenders. "Most of the people who get into the small-brewer business don't have the money. They can't get investors, and believe you me it's hard to borrow a million dollars on your good name. A brewery of this quality will cost you something in the neighborhood of $150 a barrel."
"What's the optimum size?" his guest asks. "Fully capitalized, without flushing money down the toilet?"
"Do you have enough cash to do 10,000 barrels? That's a million and a half," says Maytag. Anchor Steam's capacity is 50,000 barrels.
"That depends on how long it will take me to break even."
"Years," Maytag says flatly. "At least three. And I often tell small brewers five, from when you introduce the product."
"Why so long?" The would-be brewer looks incredulous. "What's your product cost?" ?Maytag's expression turns frosty. Information on cost and profit is not for the public. Like his brewing formula, such details stay inside the company. "Look," he explains, "I've told my staff, 'It's wonderful that these microbreweries are springing up. But they bad-mouth us. They always say I couldn't have made it if I didn't have a lot of money. And now the day has come when we have to realize we can't give the store away.' "
"Okay," the guest agrees. "But bottom line: What do you think of my chances to make it go?"
"What's success?" Maytag asks.
"A good return on investment. What are the odds?"
"It worries me that you don't have any manufacturing or marketing experience. Of course, I didn't, either, butI had the time to learn."
"Well, 60-40?" the man asks, insistently. "50-50? 40-60?"
But Maytag is too polite to be blunt. Given the market ferment, there is probably room for one more small brewer, but he'll need more than a concept. "I'm a bad man to ask," he admits ruefully. "I always tell people I would be way ahead if I'd just put my money in stocks or the money market, at least in a purely financial sense."
"But Anchor Steam paved the way for all of us," the guest says.
"No," says Maytag. "The tide rose up to meet our boat. It was a nice little boat, but we were lucky, too."
It is time to relax. And Maytag has good news: The prime is down to 12%, and Maytag is up to 34 1/4. Damn, he tells himself. With news like that I deserve a sail.
Still, it is hard to pull away. There are decisions to make about storage tanks and malt choppers, wholesalers to call, and there is the final package design to approve for the Christmas ale.
A would-be retailer from Kansas City stomps in, resplendent in hand-tooled boots and a plaid shirt with pearly buttons. "I sure would like to carry your beer," he drawls. "I get considerable calls for it."
Maytag, however, has no more beer. Once again, demand exceeds supply. "Maybe next year," he says.
Maytag is the last one out of the brewery It is almost 6:15 before he can unhook his boat and roll it down to the water's edge. The Dulci Bella is a strange craft, made for the occasional sailor. Rather than an auxiliary motor it has oars, like the daysailers of 50 years ago. A mariner unable to master the mystery of time and tide can get home only on his own sweat.
Maytag sails his tiny boat out into the bay, entranced by the vision of the early evening lights on the San Francisco hills, a mug of Chivas Regal in hand and a Vivaldi concerto on his tape deck.
Anchor Steam, Maytag thinks, should continue to grow. He anticipated his customers, and the majors have followed him in a rush for super-premiums with brands like Schlitz's Erlanger, Coors's Herman Josef, or Pabst's Andekar. With a capacity of 50,000 barrels, and the capital costs of expanding to that level minimal, his goal to grow at 15% a year and become "a force in every major American market" seems within his grasp. He would like to be brewing an ale year round, too. And he would like to see the green trim on his building painted blue, the Anchor Steam color.
"I can 't imagine selling it," Maytag says. "I love it too much, and I've learned too much. But years ago I came home and said I knew what I wanted to be when I grew up. I want to be chairman of the board. I want Anchor Steam to go on forever, but it's time for something new for me."
The sun sinking behind the bridge turns Maytag's face golden, then disappears, leaving him in shadow. The wind dies; Dulci Bella sail flaps listlessly, then stills. The current has turned; he is drifting out to sea.
Feet firmly in place, back braced against the strain, Maytag puts his hands to the oars and begins, pulling against the tide, the long, slow row home.
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