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26 May 2017

The Beer Goddess: Beer Conglomerates Continue to Purchase Renowned Craft Breweries—So What Does It All Mean?

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During Coachella, I tasted a lot of delicious craft beer, both in the Craft Beer Barn and at the Rare Beer Bar, the latter headed by Jimmy Han, owner of Los Angeles’ Beer Belly. One of my favorite discoveries: Wicked Weed Marina, a blonde sour ale that is aged in wine barrels—with more than one pound per gallon of peaches and apricots.

Just days later came the announcement that Anheuser-Busch InBev had bought the Asheville, N.C.-based Wicked Weed. It became the latest of 20-plus former craft breweries that are now owned by corporate brewers. I say “former,” because the Brewers Association defines a craft brewer as small, independent and traditional—with less than 25 percent ownership by a non-craft brewer.

What does this all mean? I spoke to Julia Herz, the Brewers Association’s Craft Beer Program director, and Mitch Steele, the former brewmaster of Stone Brewing who is now the founder, brewmaster and COO of New Realm Brewing, coming soon to Atlanta.

There are a lot of feelings on both sides as far as craft breweries “selling out.” What are your thoughts?

JH: … It’s not happening in mass, right? Ninety nine percent of the 5,300-plus breweries are still independent and small. But as the purchases continue to happen … the Department of Justice issued a consent degree over (AB InBev’s) purchases in 2015 and 2016—Devil’s Backbone being a key one, which was approved, with some changes made, by the DOJ. … The more that the large, global brewers become a one-stop shop for brands and beer styles, the harder it is to make the marketplace fair, and for beer lovers to really get the choices that many beer-lovers desire.

MS: I think it’s really dangerous what’s going on right now, honestly. The problem is that the majority of the beer-drinking public doesn’t know or doesn’t care about the business practices of large brewers, and how it impacts small brewers. … When a brewery is buying tap space, which is technically illegal, small breweries can’t. Most small breweries won’t do it because they don’t want to do something that’s against the law, and they can’t afford to play that game, either. … When somebody who’s kind of a casual craft-beer fan walks into a bar, and sees all these beers that are “craft,” yet they’re all brewed at Anheuser-Busch, most of the time, (customers are) not going to register it’s not a small, independent brewer. When these brewers can potentially come in and sell a keg of beer for 50 to 60 percent of what a small craft brewer can, it really is damaging the ability of the craft brewers to sell their beer.

Were you surprised by the Wicked Weed buyout?

JH: … (In some respects), I am not surprised, because they (AB InBev) continue to make regional purchases in key beer markets of the country: Four Peaks in Arizona, Blue Point in New York, Los Angeles for Golden Road. These are very geographically, strategically made procurements. … Also, (as of now, the Wicked Weed) deal has not gone through. It’s an announcement from AB InBev that they are moving to make a partnership and bringing Wicked Weed into their brand portfolio. It’s still subject to review.

MS: Well, that surprised me. I’d go so far as to say that it shocked me. I thought they were in it for the long haul. I know (co-owners) Luke and Walt (Dickinson) pretty well, and I’ve brewed with them before, and we’ve hung out a lot. … I know Luke and Walt are part owners, but I don’t know what percentage they own. I know they had some big-time investors in that brewery, and it could have been mostly their decision, but who knows? But, yeah, it shocked me and disappointed me. Some of these are not a big surprise: You hear through the grapevine that some of these newer breweries are building themselves to sell … and they’re just trying to get their business to a point to where they’re attractive to a large brewer. … You know, when somebody comes and offers you a ridiculous amount of money, who’s to say you’re wrong for taking that and setting up your family for generations? You can’t really fault it. I just wish it didn’t happen.

Do you sympathize with any of these craft breweries after they explain themselves on social media? They say: “We had to do this because of distribution. The beer will stay the same.”

MS: Yeah. I worked with Budweiser for 14 years. This was back in the 1990s. People looked at Budweiser as the evil empire, but I dealt with the reaction from craft brewers all the time: “It’s lousy beer.” I’d get on my soap box and say, “Ya know, you may not like it, but don’t ever talk negative about the quality, because the people who brew this beer are as passionate about it as you are about yours.” But it’s a different company now. I certainly understand the backlash. I can relate to it because I dealt with it for a long time myself. … I think it’s a very uncomfortable feeling for most of them, because the craft-brewing business is so built on community and comradery. Now, all of sudden, you’re not in the club anymore. That’s a hard thing to swallow, especially when you’ve got so many friends in the business. … People who don’t have ownership in the brewery, and have no say in it—they’re just kind of there when it happens. Those are the people who I feel really bad for, because they had no say.

Do distribution laws and better access have anything to do with why they are selling?

MS: The whole access-to-ingredients thing, I think, is a little bit overplayed. If you’re a growing craft brewer, there are enough suppliers out there. If you work it hard enough, you can get what you need, with a few exceptions. For example, Galaxy hops—nobody can get Galaxy hops right now. Can a big brewer go in and get Galaxy hops? I don’t know if they can. … I think really the big advantage for a small brewer joining forces with a big brewer is the access to the technical resources, so they can understand what’s happening in the brewing process—be it really complex lab equipment or whatever. And then distribution access is huge. … Those are the things that really matter.

JH: Yes. As soon as you sell, you get instant access to things that those 99 percent of the 5,300 breweries don’t have. You get into a system in the network for better economies of scale, for purchasing raw materials and ingredients. You get instant distribution that cannot be matched. … The number of distributors over time continues to wane. Even though we have 5,300-plus breweries today, there are only 1,000-plus active distributors, and 500-plus of those are controlled by AB InBev. MillerCoors has several hundred as well. Distributors are amazing partners to beer, but it’s a matter of priority. How do they decide what they’re going to sell? When you’re an AB house … their first priority is likely those AB brands.

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