06 Jan 2013 @ 11:27 PM 

This is a very late entry into this debate, and there’s a good reason why: I’ve been having a hard time articulating to myself just why I think the debate has been so… well.. wrong. I tried recording a podcast about it, but I was just a rambling mess (more so than usual) and so I felt like the best way to approach this was through writing.

To cover the backstory: Back on December 13th, a few high ranking members of the BA wrote an article in the St. Louis Dispatch titled Craft or crafty? Consumers deserve to know the truth in which the authors attempt to call attention to the problem of “faux craft” beer being made by the large international conglomerate breweries, namely Anheuser Busch-InBev (ABI) and MillerCoors, henceforth to be referred to this in this article as The Duopoly (because that’s what they are). It was timed to coincide with a press release by the Brewers Association titled The Beer Drinker’s Right to Know, which seemed to be a response to this insane interview on Forbes/CNN titled Big beer’s response to craft: If you can’t beat ’em, join ’em which contains some crazypants quotes from the Executive Chairman of SABMiller like

“There’s a huge debate in the craft world about us, all big brewers, because we’re like the enemy. We’re the other guys. They think we’re stealing their authenticity. What we say is, “Let the consumer decide.” If we’re authentic enough for the consumer, that’s authentic enough for anyone.”

and

“I don’t think the craft movement in its current guise will continue to grow indefinitely. I don’t think it can. It’s not economic. Too many people won’t make any money. Too many of them will go out of business. And I think it will become less fashionable. These things are fashion to some extent.”

Though if I had to guess, what the BA was really responding to is this:

“We have our own craft brands. We also look selectively to acquire, or form partnerships with, or cozy up to people who have incubated good businesses. It’s difficult for big companies to incubate small brands. That, at its heart, is the dilemma. To start a small brand in a credible, consistent, sticking-to-it kind of way is hard for big companies. That’s what small entrepreneurs do best.”

because that is, in reality, the heart of the matter. By the by, that article was actually a followup article to one that came out back in November titled Big Beer dresses up in craft brewers’ clothing, which nobody seemed to take issue with.

Unfortunately, the BA press release and article was taken as an attack and was received with vitriol by some of the country’s smaller brewers that happened to land on this list of Domestic Non-Craft Brewers. They pissed some people off and, frankly, I don’t blame them for being pissed. At least one of those brewers – D.G. Yuengling & Sons – was welcomed warmly during the keynote address at the Craft Brewers Conference a couple of years ago in a we’ve-expanded-our-definition-so-you-can-be-craft-now moment. Throwing them under the bus on this chart is.. well.. kinda crazy. Until this chart, I didn’t realize that the BA didn’t consider them craft anymore.

I won’t summarize the response that the BA received from August Schell. I think it sums up the sentiment that was expressed out and around the internet quite well. You can read it here: August Schell’s response to Craft vs. Crafty on Facebook

Now, here’s my thought on the whole thing:

Faux-craft can be a threat, but not – I think – in the way that this concerted press release and chart make it out to be. It’s not because consumers might be confused into thinking that some shit Shocktop Wheat IPA is craft. It’s because consumers might not have the chance to have a choice in the matter.

One of the biggest warning shots that craft has had fired across its bow in the past 30 years was the AB-InBev purchase of Goose Island. There are a million and one reactions to that purchase and most of them are ridiculous because they’re either about whether or not the beer is going to suck now or whether or not it should still be counted as craft.

I’ll tell you: No, the beer will not suck. No, it is not craft. Done. Happy now?

The problem, I think, is a far more complicated one than it appears on the surface. Here’s why the Goose Island purchase is a threat:

Because Goose Island is good beer with a good reputation that people like and have heard of.

Why is that a problem? Because AB-InBev has a program that it runs with its distributors whereupon you can become an “aligned distributor”. That means that you purposefully exclude products not from the AB-InBev catalog from your sales. In return, you receive excellent lines of credit, better pricing on your products, and all kinds of interesting incentives that give you a competitive advantage in the market. Here’s a quote from the Wholesaler Family 2011 Consolidation Guide (lifted from The Washington Monthly: Last Call):

We ask all wholesalers to use the guide’s self assessment tool to objectively consider their capabilities and goals. Wholesalers who aspire to be an Anchor Wholesaler can identify any gaps they have in these qualities and build a plan to address them. Some wholesalers might remain committed to their current market, but realize further acquisitions are not right for their business. Others might decide now is the best time to consider whether a sale is in their best interest.

There are many aspects of an aligned wholesaler, and an explicit focus on our portfolio of brands is paramount. Those who are aligned with us only acquire brands that compete in segments underserved by our current portfolio and that bring incremental sales, not brands that have a negative impact on the A-B portfolio.

In a nutshell: our brands are your priority.

Okay, fine, you say. So craft doesn’t sign on with a Bud distributor. Big deal. Except that the country doesn’t have very many distributors with the same kind of reach and network that the two big houses do. To not sign on with those distributors – in most markets – is to put yourself at a significant competitive disadvantage. Unfortunately, to sign on with those distributors – in most markets – seems to now put yourself at a significant competitive disadvantage. Because now, when a bar says, “Hey – my customers keep asking me for a Pale Ale – can I get one of those?” The Bud guys can say, “Sure – Goose Island Honkers Pale Ale coming right up.”

Not that they wouldn’t say that anyway, but now they have incentive to push it harder. It doesn’t seem like much. Alone, it’s not.

Education is key

Part 2 of the problem is that there is awful – and by awful, I mean fucking TERRIBLE – education about beer in the bar and restaurant market. Here’s the thing I find the most embarrassing in restaurants: when they’ve put time into crafting the most beautiful wine list in the world, and the beer they offer is Heineken or Amstel Light or something because that’s imported fancy beer. There is a really large emphasis on wine education in culinary institutes, but unless a chef has a personal preference for beer it is basically ignored. This goes doubly when it comes to management and server training. So, unless you’ve gone out of your way to hire a huge beer geek at your restaurant to run your beer list, an IPA is an IPA and Honkers or Shocktop Wheat IPA or Leinenkugel Big Gig is just as good as Pliny the Younger. I mean.. hey – is it cheap? Then, cool, get it.

That’s why faux-craft is a threat: not because craft drinkers might be somehow duped into thinking that some other beer is a craft beer, but because new craft drinkers might never get the chance to have anything else. It’s not an awareness problem, it’s a market share problem. Nobody doing purchasing at Wal-Mart is going to be a big enough beer nerd to call out a distributor on pushing a faux craft instead of a craft, so nobody who shops at Wal-Mart gets to see anything else. Not a big deal, right? Except that that’s the single largest retail outlet in the country.

(Alternate argument says, “But those people are learning about craft and might eventually move onto other brands,” which is legitimate. My argument to that says, “People are lazy and if they can buy a six pack with the rest of their groceries, they will. It takes education and affluence to go to a beer-only store.)

The BA has posted articles about the need for more education in bars and restaurants before, but it didn’t receive the same kind of attention that last press release did. I guess it’s easy to write off Garret Oliver as an elitist jerk, which might be one of the single wrongest sentences I’ve ever written. He’s right.

The Definition of Craft is Misguided and Outdated

Part 3 of the problem is the definition of craft. The basis of the definition is written around tax guidelines – or worse, proposed tax guidelines written in legislation that hasn’t passed yet. If you’re anywhere near the craft industry at all, you’ve seen this definition before:

Small: Annual production of 6 million barrels of beer or less. Beer production is attributed to a brewer according to the rules of alternating proprietorships. Flavored malt beverages are not considered beer for purposes of this definition.

Independent: Less than 25% of the craft brewery is owned or controlled (or equivalent economic interest) by an alcoholic beverage industry member who is not themselves a craft brewer.

Traditional: A brewer who has either an all malt flagship (the beer which represents the greatest volume among that brewers brands) or has at least 50% of its volume in either all malt beers or in beers which use adjuncts to enhance rather than lighten flavor.

This summary might better explain what a craft brewer is: Not The Duopoly.

In the grand scheme of things, the definition here isn’t that bad. Small and Independent I can get behind (except for the definition of 6 million barrels as small – that is complete bullshit), what makes the definition wonky here is “Traditional”. Everything about this definition is about taxes and business size and that Traditional part of the definition means that you’re making a quality call in the middle of the definition.

I’ve thought about this a lot, and it goes against what I’ve said for years, but here’s what I think should be the definition of a craft brewer: A brewery that isn’t publicly traded on the stock market.

Because when you put quality into the definition of what a craft brewery is, you run into another problem.

Craft beer does not mean “good beer”

Part 4 of the problem is that people are confused about what is craft beer and what is good beer.

Craft beer does not mean good beer. There’s a lot of shitty craft beer out there. Sorry to say. Just because you’re small doesn’t mean you know what the hell you’re doing. It doesn’t mean you know how to build a recipe or package without an infection. It just means you’re small. If you want to say small breweries are craft breweries, then cool – that’s a craft brewery. But if you start making quality calls in the definition then there are a lot of breweries that are going to need to turn in their “craft” badge.

So what does that mean? It means that Utica Club and Yuengling and August Schell and Genessee and all that light beer with corn in it is probably craft. You might not like it, but you don’t stay open for 150 years because your beer is shitty, so deal with it. It also means that Sam Adams (SAM) isn’t, nor is the Craft Brew Alliance (BREW) or Mendocino (MENB), Sackets Harber Brewing Company (HBWO), Big Rock (BRBMF) or, of course The Duopoly (BUD, TAP) or any of the other international conglomerate breweries.

So, if I can sum all of this up: Craft vs. crafty. Is it an issue?

Yes, but not in the way it’s made out to be. Faux-craft is a problem because the big breweries control an unreasonable share of the market (80+%!) and, thus, have a stranglehold on the distribution system, meaning that they can control the flow of product in many markets. If they can give the mid-level suppliers – who are often poorly educated about the product they’re buying – an easy alternative to a higher priced product, regardless of how “cool” local is, they’ll control the market share and, thus, put small breweries out of business.

The BA’s position statement was, by all means, appropriate (somebody has to be a watchdog for the craft industry and call out the big guys, because craft brewers are so stupidly apologetic about The Duopoly). But, it is clouded by the fact that their own self-made definition of what craft is has a (recent!) history of changing to suit their priorities and contains a basically unenforceable criteria – quality – that they insist on enforcing based, it would appear to most outsiders, on beer color.

Drinkers are confused about what to do with this position statement because they’re being told that beer that they consider “good” (Goose Island, Ommegang, Magic Hat, Pyramid, Red Hook, Leinenkugel, etc.) is apparently “bad” because they falsely associate “craft” with “good”. In reality, those breweries are NOT craft, based on taxation definitions alone and it is not – and should not be – a measure of how good their beer is, merely whether or not they can join the Brewers Association.

Final word. Support your local brewery. If the big guys get their way, your local brewery will go away and the BA or anybody will be powerless to stop it because so many craft drinkers can’t be bothered to draw a line in the sand. The number of conversations that I have with craft beer drinkers that have an element of, “Yeah, but a Miller High Life on a hot day is awesome!” is astounding. No it’s not. It’s gross, just like it is on any other day. It’s not a good beer. (Oh, the apologetic craft brewer in me says, “But it’s a well made beer!” Sure. Your McDonalds hamburger is a well-made hamburger but it’s still a shitty goddamned hamburger.) You know what’s good on a hot day? A wit. A hefeweissen. A craft pilsner. A foreign extra stout. A really crisp IPA. I can keep going FOR HOURS about what beer is good on a hot day instead of a Miller High Life, and I will no longer compromise.

And you shouldn’t either. Here’s why you shouldn’t support faux-craft – and that includes everything from Blue Moon and Shock Top to (yes, I’m deeply sorry to say this) Goose Island and all the others: Because you’re feeding the machine that is working to remove choice from your life. The Duopoly is a consolidation machine that will, if given the chance, wipe out all competition possible.

Don’t let it.

Additional reading/listening just for fun:

The Street: 10 Craft Beers That Aren’t

Beer Advocate Thread: Craft vs. Crafty

Another definition of, well, not ‘craft’ beer

WUNC: The State of Things – Brewing Beer Battle

Last Call: Industry giants are threatening to swallow up America’s carefully regulated alcohol industry, and remake America in the image of booze-soaked Britain.

The Plot to Destroy America’s Beer

Random Thoughts from Littleton (about the Wholesaler Family 2011 Consolidation Guide)

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 27 May 2009 @ 11:34 AM 

I’ve been thinking about this a lot lately. There’s a problem in the definition. That’s clear. After all, it’s been discussed in other venues prior to this ad infinitum (and those three are just a small example), and now I feel the new to add to the noise. The thing is, I think we’re all running up against the same problem.
Beer!
The problem is the Brewers Association is right and wrong all at the same time. Lemme explain.

The Brewers Association has it right

See this Examiner post by Larry Johnson for a succinct re-hash of the definition without having to scroll through the BA‘s entire statistics and definitions page.

This definition of a craft brewery and craft beer here is based entirely on regulations set by the U.S. Government for taxation purposes. If breweries produce under 2 million barrels per year, they qualify for a small brewer tax break on their first 60,000 barrels. If you’re above that, you’re not a craft brewer. That’s it. The smaller breaks in between are built in for statistical purposes. Plain and simple, when you’re talking about market segments, you need to be able to compare apples to apples. New Belgium and their amazing expanding distribution network just doesn’t compare well vs. a startup brewpub (much less how Sam Adams compares with anybody else). They’re two entirely different segments in the same industry.

There’s only one part of their definition of a craft brewery that isn’t based on an economic restriction:

Traditional: A brewer who has either an all malt flagship (the beer which represents the greatest volume among that brewers brands) or has at least 50% of it’s volume in either all malt beers or in beers which use adjuncts to enhance rather than lighten flavor.

And it kinda reads like an economic restriction, doesn’t it?

I take this as their way of saying, in every way they possibly can, “NOT megabreweries.”

So, here’s the thing. The Brewers Association is, first and foremost, a trade organization. As a brewery owner, I want them focused on helping to keep the most rigorously regulated industry in the country (aside from probably tobacco) a sane enough environment for my small business to exist in. A startup brewpub can’t afford to hire a full time (team of) lobbyist(s) to look out for their interests in the same way that MillerCoors can, but they can get help from the BA when they’re looking at challenging a law that’s coming through the pipeline. What is beneficial to MillerCoors may not be beneficial to the startup brewpub, so you also need somebody to push back against the corporate behemoths who, let’s be frank, would probably rather not have any competitors, even minuscule ones.

The BA needs tools to be able to do this job, and accurate statistics is one of those tools, consistent standards is another. These definitions are what the BA needs in order to do what breweries need them to do, and the BA can be an invaluable ally to a small craft brewer.

They are really crappy definitions for the average consumer. The consumer cares about good beer.

The Brewers Association has it wrong

Here are a couple of breweries that I would guess that consumers think are considered craft breweries that are not, according to BA definitions:

  • Widmer
  • Goose Island
  • Mendocino Brewing Co.
  • Brewery Ommegang

Soon, Sam Adams will join that list. I would challenge anybody to tell me that any of those breweries don’t make great beer, regardless of percentages of ownership and/or how many barrels they manufacture per year.

The problem is that the BA also makes attempts at functioning as a consumer advocacy organization, most notably via the GABF. And why not? People who make great beer are fans of great beer. It makes sense to function as an organization that gets consumers in touch with great beer. But the definitions of what craft beer is for industrial purposes don’t necessarily work for consumers.

Consumers want to drink great beer, and while I’ve heard a lot of people say they don’t really care where something comes from, I think they do. Behind craft beer there are personalities, there is passion for the product that is being made. That translates down to the customer very easily in small businesses. It’s something that the megabreweries will never be able to harness because they’re too far removed from the consumer.

Here, the problem is: How do you define passion?

In this case it’s almost definitely via selection of ingredients and processes. But you can’t define it as “beer without corn” or “beer without rice.” There was a little bit of a kickback from a few brewers after the IAACB video who do use corn and rice in their beers, but do it in really interesting ways. A brewer in Kansas or Nebraska using a local good (corn – what else?), malted and roasted to make a corn stout? How is that not a craft beer?

It’s sticky when it gets to passion definition. More on this later.

Where the Disconnect Happens

Quick story: At the end of CBC09, I was blitzing through the Farewell Reception grabbing a quick bite to eat and a quick drink before I had to rush to board my plane and I ran into Charlie Papazian. He was strolling through the middle of the ballroom, tie off, collar undone. In his right hand he had a goblet full of beer. In his left hand, hanging casually at his side, he had an open bomber. He wasn’t talking to anybody, he was just walking around with this enormous grin on his face. I wish I could have gotten a picture of him. The only thing I could think was: “This must be what it’s like to have your dreams come true.”

Think about it – this guy, who happens to just love beer, put this all together. He’s not a stupendously successful brewery owner, he’s not a Wall Street investment guru, he’s not a real estate tycoon. He’s a writer, and a homebrewer, and he loves beer so much that he has spent his entire life facilitating this entire budding industry. He is the perfect beer evangelist. Every brewery owner and beer drinker should take the time to shake his hand and thank him for loving beer. (I did.)

But, this is the reason for the disconnect. What eventually became the BA was born out of a passion for beer, but it has become (and thank god) a business organization. When Charlie started everything in the 1970’s, the definition of craft beer was easy: “Not the megabreweries.” But you can’t use that as a definition to define your business organization. You need clear rules that define the segment(s), even if they backhandedly say, “Not the megabreweries.” The definition of a craft brewery as recognized by the BA is spot on. They need to be built around the tax restrictions.

However, governing the definition of product made with passion with a tax-based definition is sure to lead to resentment from the consumer when they’re favorite popular brewery makes a business decision and is no longer considered a craft beer. The consumer wants to support craft beer, but also wants to support their favorite brewery. How do they make that call? By ignoring the tax definitions.

Here’s what I’d like to see: Let the BA define a craft brewery, and let the drinker define a craft beer.

There are a number of different ways this can be done. There are already what amounts to enormous consumer organizations who are devoted to good beer. Use the existing communities to refine a decent definition and go. Maybe the BA creates a spinoff non-profit that handles the GABF and works on creating similar standardized festivals across the US promoting good beer, and they leave the government work and business side of things to the Brewers Association. Let the consumers be consumers. They don’t need to be complicit in business practices, you just want them educated about good beer, because then they’ll be much more likely to buy from craft breweries.

Overall, I think these are growing pains. I think the reason that the craft beer community is hashing this out over and over again is because the segment has been so successful. After all, when the 2 million barrel cap used as the definition of a craft brewer, did anybody reasonably expect Sam Adams to get there so quickly? I doubt it. It’s fantastic that they’re pushing this boundary and allowing us to continue to go through this painful revision process.

In conclusion, I’d like to put out my definition of a craft beer, as a beer drinker: Any well-made beer that was obviously made with passion. You can see it in the labels, the names, in the bottles, cans, or glassware, and in the ingredient selection.

If the beer has a personality all its own, it’s a craft beer. I suspect that there are at least a few drinkers out there who would join me in that.

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 20 May 2009 @ 1:30 PM 

At the risk of beating a dead horse, I – along with probably 5,000 other blogs – am looking at this morning’s Washington Post article about Sam Adams, Super Craft Brewer. (Super. Like the prefix meaning “bigger” not the comic book guy. Word geek; see?)
Samuel Adams
Quick summary: In 2008, Sam Adams produced 1.992 million barrels of beer, 8,000 barrels short of the point where they no longer fall under the definition of a craft brewer by the Brewers Association.

I don’t want to get into a “What is Craft Beer” discussion (right now). That’s been covered amply elsewhere. Instead, I wonder at which is better for the other 1,500-ish craft brewers in the country: Having Sam Adams count as a craft brewer or not?

Sam Adams is, without a doubt, the elephant in the room. The closest regional-size brewery to Sam Adams (Sierra Nevada) makes less than half the amount of beer. I haven’t received my fancy New Brewer with 2008 barrelage numbers, yet, but using just some fancy pants math on the numbers from the BA Statistics page and the numbers we’ve been given by the Washington post, I’m going to make the following estimates/assumptions:

2008 Domestic Craft Beer Sales: 8,493,765 barrels.
Sam Adams alone: 1,992,000 barrels.
Sierra Nevada alone: 700,000 barrels.
Remaining for the other 1,543 breweries in the U.S.: 5,801,765 barrels.
Avg. # of barrels/craft brewery (excluding Sam Adams and Sierra Nevada): 3760 (5801765/1543)

So, to recap: In order for Sam Adams to reach the 2 million barrel cap that means that it no longer qualifies as a craft brewery it must produce a little over twice as much as the average American Craft Brewery does every year in addition to the 1.992 million barrels it already produces.

I have a hard time seeing these as the same animal.

It’s really great to have the sheer size and corporate power of Sam Adams on the same side as all of these other craft brewers. It’s great to incorporate the growth numbers of Sam Adams into the craft brewing world (according to the WaPo article, Sam Adams enjoyed larger growth than the entire craft beer segment last year – gotta wonder how much that skewed the numbers at the CBC) for PR purposes about how great the segment is doing. It’s wonderful to have Sam Adams do wonderful things like the hop raffle during the hop shortage last year, but would they stop doing that if the BA said they didn’t fit a definition?

Sam Adams is so far and away different from its craft brewer brethren that it’s almost unfair to all of the others to call it a craft brewer. How much are statistics inflated because Sam Adams is being included in them? How much does Sam Adams gain from the definition, even? Either they or Yuengling now stands as the largest American-owned brewery (not sure without actual barrel/sales numbers). It seems like that should be distinction enough. What does it mean for Jim Koch if he’s no longer considered a craft brewer by the BA? Is it a drop in sales? I doubt it. And if it is, and they dip back below 2 million barrels, do they get to re-join the club?

Finally, to what benefit is it for the smaller craft brewers to have Sam Adams count in the same definition? They are even more difficult to compete with than BMC because they’re actually producing well-made comparable styles of beer. Sam Adams Boston Lager feels almost as ubiquitous as Bud, even though, yes, Sam Adams only makes something like 1% of the amount of beer Bud does. The difference is that someone who is likely to drink an IPA will probably not have a Bud, but they might have that Sam Adams.

I’d love to hear thoughts from others on this: Is it a big deal for Sam Adams to not be a defined as a craft brewer by the BA? Might it actually be a good thing for other brewers?

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Categories: Brewers Association, industry
Posted By: erik
Last Edit: 20 May 2009 @ 02 07 PM

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 15 Apr 2009 @ 9:04 AM 

Earlier this week, the Brewers Association released its list of Top 50 Breweries by Sales Volume for both Craft Breweries and otherwise. You’ll probably be a little surprised by some of the breweries that show up in the NON-Craft Brewer list. The BA definition of a Craft Brewer: “An American craft brewer is small, independent, and traditional.”

Well.. okay.. that’s a discussion for another time.

Today! We get a pretty chart.

Top 50 Craft Breweries by Sales Volume

I was interested to see what had changed over the past year, and the answer is: Not a lot. This is good news to me. It suggests a fairly stable market, especially in the face of a global economic crisis. There’s a belief, or at least repeated line in the media, that beer is recession proof and while I’m not necessarily convinced that that’s true, this would suggest that if there was a drop in barrels sold over the past year, at least consumers stopped buying beer everywhere at the same time. Not having total number of barrels available makes that kind of hard to tell right off the bat.

There are two lines highlighted up there that I think merit a little bit of attention.

The first is Kona Brewing Company, which was the single largest climber in the rankings. Again, since actual number of barrels is omitted from this information we don’t know just how much of an increase that is or if places 10 – 30 are within 1,000 barrels of each other or what. Given that I recently started seeing their Pipeline Porter on a regular basis here on the East Coast, my guess would be that they’re benefiting from a really good distribution agreement.

The second highlight is the only new entrant on the list, the St. Louis Brewing Company or what most of us know as Schlafly Beer. So kudos there.

It’d been even more interesting to see the changes over the past few years, especially in terms of geographic distribution, but I can’t seem to find these figures back past 2007. If anybody’s got info saved up to play with, let me know.

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Categories: industry, news
Posted By: erik
Last Edit: 15 Apr 2009 @ 09 04 AM

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