“It’s not personal, Sonny. It’s strictly business.”
– Michael Corleone, The Godfather
The big news in craft beer these days is all about acquisitions. AB InBev acquired Goose Island in 2011 and followed that up with 10 Barrel, Blue Point, Elysian, Breckenridge, Devil’s Backbone, and Golden Road.
AB InBev also controls about 120+ other brands globally. Founders, Lagunitas, Terrapin, and Ballast Point recently sold a majority share of their breweries to other major corporate breweries.
This raises two important questions that are being debated throughout breweries and tap rooms everywhere:
- What does all this consolidation mean for the future of craft beer?
- Should a conscientious craft beer supporter continue to buy formerly craft brands after they’re acquired by one of the big guys?
I’m sure many of you are asking, “Why should I care about all this? Grapefruit Sculpin is the best beer I’ve ever had! I don’t want to give that up.” Grapefruit Sculpin is phenomenal, I can’t argue with that.
As the current trend of acquisitions continues, including AB InBev merging with SAB-Miller to create the brewing equivalent of The Empire, we’re going to find more and more scenes like this photo below at the Nationals Park, home of the Washington Nationals Major League Baseball team:
(HINT: In the lower photo, check out the tap furthest to the right to uncover the one owner.)
Major brewing corporations are acquiring craft brands to present the “Illusion of Choice” to beer consumers. They can provide a wide variety of brands to their wholesalers, who in turn offer one-stop-shopping at a lower cost to bars, restaurants and venues. How many retailers really care enough about craft beer to pass up easy and cheap when it all looks just as good?
Why don’t the major corporations just brew their own “Kraft Killerz”? Why are they acquiring craft brands to expand their reach?
Do you remember Budweiser American Ale? For whatever reason, they just can’t seem to figure out how to create tasty beer on their own.
There’s also the marketing matter of brand association. Just like no one wants to buy a luxury version of a Toyota Camry, they’ll buy a Lexus ES 350, which is essentially the same as a Camry with more options.
To combat the meteoric rise of craft beer, Globobrewers can’t just create their own craft brands. They have to attack craft brewers by assimilating brands like the Borg, so they came up with this playbook, which I think is loosely based on Monty Python’s Wooden Rabbit.
- Buy a majority share of a craft brewery that has shown tremendous growth in the past 24-36 months and wants to expand rapidly or cash in.
- Rapidly scale up production of the craft brewery’s core brands.
- Push out the core brands to far reaching regions using the behemoth’s established distribution network. (For example, we suddenly now get Elysian Space Dust in South Carolina.)
- Price the beer well below other craft beer, thus undercutting local and regional craft breweries. (See: Goose Island IPA)
- Leave the part about being majority-owned by AB InBev, SAB-Miller, Constellation, etc. off the labels so as to not drum up any suspicions among unsuspecting customers.
Just like milk at the CVS, these newly acquired craft brands are loss leaders, designed to eat up more taps in bars, more shelf space in stores, and price the competition out of existence.
The reason that we should all care is that diversity and innovation are what led to the craft beer boom that started in the late oughts. Diversity in nature has countless benefits. The same can be said for language and culture. And beer.
Big beer, whose empire is built on light lager, can’t innovate on their own, so they seek to grow through acquisition. Growth through acquisition alone is not a sustainable business model.
By supporting independent breweries, you are supporting the innovators that fuel the creativity on the front lines of craft beer. You are creating jobs and putting money back in local communities throughout the country.
The Brewer’s Association defines a craft brewery as:
- Small: Annual production of six million barrels of beer or less (approximately three percent of U.S. annual sales). Beer production is attributed to the rules of alternating proprietorships.
- Independent: Less than 25 percent of the craft brewery is owned or controlled (or equivalent economic interest) by a beverage alcohol industry member that is not itself a craft brewer.
Traditional: A brewer that has a majority of its total beverage alcohol volume in beers whose flavor derives from traditional or innovative brewing ingredients and their fermentation. Flavored malt beverages (FMBs) are not considered beers.
In particular, supporting your own local breweries not only puts your money back into your community, when you visit their tasting rooms, you receive the added benefit of getting the freshest, best tasting beer you possibly could directly from the source.
Ultimately, the responsibility to meet the challenge of the big breweries lies with the indie brewers. Our beer has to be of the highest quality, consistently. I wouldn’t expect anyone to pay more for a beer that doesn’t taste good, no matter who made it.
I encourage you to stay informed of the changing craft beer landscape, and that when all other things are equal, choose local and independent.
This is what the liquor and spirits industry have been dealing with for years. The big light lager brands are not cutting it anymore. Part of me says it’s capitalism, but I’m not sure this is the best for this particular industry. Acquisition should lead to better innovation and efficiencies, and I suspect this is not going to happen. But I also think the stage is set for the smaller brewers like Fireforge to have a niche market, which the big players will not bother with much.
I’m not a real picky beer drinker and even I can tell the difference between a watered down Bud and a good craft beer. As my son told me when I took him out to have his “first” (yea right) ceremonial beer with Dad on his 21st birthday; “Dad, order a real beer will you? Apparently, Coors Lite didn’t meet his standards…..and it no longer meets mine.
Good luck on your continued adventure in Greenville.
Keith, thanks for your comment. I agree, I’m all for a free market, capitalist system. I don’t blame the craft guys for selling, and it’s the right strategy for the big guys to try and acquire the small guys. It just seems that over and over, the mega-brewers display that they just don’t get what makes craft beer so popular. They’re trying to buy the soul that they don’t have internally.
On a macro level, they may be able to compete and gain traction on shelves at big retailers and box chains. However, as history has shown over and over, guerrilla tactics can be very effective against large forces. All of us small, independent brewers have to hold down the neighborhoods, and that’s where Fireforge wants to play! Cheers!