The Business of Beer

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I’ve been enjoying craft beer as a hobby the last five or so years, regularly trying new beers and visiting breweries when I travel as they are something that is distinctively local – and open after business  hours.  Most beers taste so similar that I can’t tell them apart, but I can state whether I’d want to try one again (rare) or opt for one that I had not yet sampled.  It’s like a collection that doesn’t take any room, and there’s an app (Untappd) to help me inventory and rate what I’ve tried. 

The pursuit is on for the next “most favorite” beer, but the change in the industry is not lost on me.  According to the Brewers Association, there are 5,234 craft breweries as of 2016, a 16.6% increase from the prior year – and consider there were ~50 craft breweries in 1990.  Of the statistics below, an interesting one is that craft beer accounts for 12.3% of beer volume.  Elsewhere, Anheuser Busch InBev and SAB Miller, the two global conglomerates of pedestrian beer offerings, have seen their market share decline by 7%.  I might think that number should be higher, but it makes sense.  Package stores sell cases of Bud and similar for fairly cheap, and there are people I know who hammer away through case after case – low alcohol content and low cost allow that.  But in tap space in restaurants, Big Beer has less and less presence.  In grocery stores, craft breweries have claimed maybe 15% of the shelf space.  And business at the brewery is big, as evidenced locally by the changes in State laws that allow breweries to sell their own beer directly to the consumer beginning in September.  

2016_BA_growth-infographic

So, when Elysian, Terrapin, or Wicked Weed are purchased by Big Beer, I hadn’t really thought about it much.  I like capitalism.  It’s American that someone can build a business and a brand, then cash in on their efforts.  In the case of a brewery, selling the business allows the owners to generally run the brewery as they had, find opportunities for more efficiency, and gain wider distribution and marketing.  But, among the consumer concerns/trends that have emerged since Wal-Mart and Amazon began dominating the retail world, buying “local”  or “Independent” beer sticks with me, even if it costs a little more and is difficult to reliably find.  Quality is the main factor in this, and of the companies purchased so far by Big Beer, only several of their beers compete for my taste buds.  I’d rather support the little guy financially – the breweries who sold out already made their profit.    

The reaction to the recent acquisition of Wicked Weed was quick and derisive.  They’re in Asheville, which invites a sort of hipster appeal just on demographics, plus their beers are really good.  They earned their fans, the same ones who are now tweeting their retreat.  Wicked Weed was immediately cast out as a voting member of the North Carolina Brewer’s Association, whose members are defined by a certain amount of barrels produced which, obviously, InBev exceeds handsomely.  Several breweries who were collaborating with Wicked Weed for special brews canceled their work, craft beer stores and bars are dropping Wicked Weed product, and a beer festival that Wicked Weed was planning to host was forced to cancel when about half of the attending breweries from around the nation cancelled their participation.  There are reasons for that which are fairly interesting – pride in independence among brewers and their supporters as well as questions of business ethics in a transactional world where if you’re not growing, you’re declining.  In short, the fears of “the small guy” is that Big Beer wants to destroy the craft beer market.  That makes sense.   Big Beer plays to win.  To support that argument, here are a couple articles for those with an interest:

Why Bud or Miller buys craft breweries – It’s not (just) a “if you can’t beat them, join them” proposition.  A very interesting read regarding the billion$ in brand value.

The Devil made me do it – The owner of Wicked Weed said they had “always been limited by access to raw materials. [We make] really hop-forward beers, using upwards of four pounds of hops per barrel.  And those are hard to get your hands on , and that’s why they’re great and why they’ve won medals.  So for us, having hops no longer being a limited factor of growth is exciting for us.”  It helps them and protects their business and employees.  For everyone else?  Try the link.

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