In 2007 we released our Alaskan IPA as a year-round product, and we couldn’t have planned a more fitting celebration for our 21st birthday. Named by Dan Wandel, senior vice president of Information Resources, Inc. (IRI), as “one of the hottest new craft brands of 2007,” Alaskan IPA was the top-selling new craft beer in chain stores three months after its March release in Alaska, Idaho, Montana, Oregon, Washington and Wyoming. 

We attribute Alaskan IPA’s success in a very crowded style category to its uniquely Alaskan imagery, taste and 1% donation to improve the quality of our ocean shores. The package sporting cool colors and a surfer riding the ice-cold waves of Yakutat, Alaska, in the shadow of Mount Saint Elias, are catching the eyes of consumers. The citrus aroma, medium body and crisp hop finish of the beer itself are catching the taste of consumers. Finally, the idea of “making a difference one beer at a time” with Alaskan IPA, which is donating 1% of all proceeds to clean up and protect the ocean and coastlines, is catching the hearts of consumers.

We call the 1% initiative the Coastal CODE (Clean Oceans Depend on Everyone). The CODE has already awarded four grants totaling more than $20,000 since its launch in August.

In addition to making a difference with groups such as the Marine Conservation Alliance and SOLV, the Coastal CODE is making a difference with media coverage. We have received extensive coverage of Alaskan Brewing Co., Alaskan IPA and the Coastal CODE in industry and mainstream newspapers, magazines, TV, radio, web sites and blogs. With even more donations and more events planned in the new year, we hope to grow coverage in 2008. This is a prime opportunity we would like to share with our distributor and retail partners.

Another heavy medal year for Alaskan
We think the key to our success is value, and one of the greatest values we offer our distributor partners and consumers is world-class beers. 2007 proved to be another award-winning year for Alaskan Brewing Co., with five different Alaskan beers winning a total of 13 awards from regional, national and international beer festivals.

The biggest winner this year was Alaskan Smoked Porter, which won five awards, including a bronze medal in the Smoked Beer category at the European Beer Star awards, a silver for the Smoke-Flavored Beer category and a bronze for the 2004 vintage in the Aged Beer category at the Great American Beer Festival. The news of these latest awards was timely for the November release of the 2007 vintage, helping to drive excitement and sales.

Other winners this year were Alaskan Amber, Alaskan Stout, Alaskan Raspberry Wheat and Alaskan Barley Wine. The gold medal win of the 2004 vintage of Alaskan Barley Wine at the Toronado Barley Wine Festival helped drive the decision to bottle this specialty brew for the first time. In January 2008, Alaskan Barley Wine will be available in 22-ounce bottles in Alaska, Washington and Oregon.

Alaskan Brewing also won two awards for its business practices, one from the Alaska Cabaret, Hotel, Restaurant and Retailer’s Association and one from the Alaska Department of Labor for our plant safety practices.

Meeting rising costs with care and innovation
On the one hand, it’s hard to miss the Cinderella stories about how sales of craft beer are dominating the beer category, boasting double-digit growth. On the other hand, it’s hard not to miss the sky-is-falling stories about the hops shortage and rising costs.

The hops shortage is very serious, with a 500% increase in the spot market in the past year, but it is far from the only challenge. The rising cost of malt, which jumped 80% over last year, as well as other raw materials and fuel, will also challenge us in coming years. As craft brewers, these rising costs hit us disproportionately harder, because we use more hops and malt per barrel than mainstream commercial breweries and we don’t enjoy their economies of scale.

We will not alter our recipes or our 2008 brewing schedule, despite these challenges. We have long-term hop and malt contracts that should help us weather this crisis, but we are watching our inventories very closely. In addition, we will try to mitigate some of these cost increases with innovation and improved operational efficiencies. For example, we will be the first craft brewery in the nation to use a mash filter press, which will lower our use of water and fuel, reduce our waste, and increase our hop and malt utilization by 5%.

No efficiencies can change the tough realities though. We will raise our prices in early 2008. Our decision was driven by the staggering cost increases. We believe that we can weather these price increases by working closely with the industry groups such as the Brewers Association to continue to get the word out about the cost pressures facing the industry. We believe that those stories coupled with the great beer and great works of Alaskan will highlight the value of the Alaskan brand and continue to drive sales.

Before we look too far ahead, we want to give thanks for 2007, in which we have celebrated 21 years in business, a product launch that exceeded our expectations and solid sales growth. Thank you, because we couldn’t have done it without you. We wish you and yours a safe and joyous holiday season. Cheers!