Late last year, the Brewers Association issued a press release attempting to define what constituted “craft” beer. They juxtaposed “true” craft beers against those they consider “crafty”…a delightfully Colbertian turn-of-phrase that implies a craft beer in macro clothing (see Big Beer, Big Lies).
This press release unleashed a cavalcade of angry responses (some reasonable, some just your typical internet vitriol). And while it’s probably just a tempest in a teapot to most folks, for beer enthusiasts, the question of “What is Craft?” is actually vitally important.*
*While we don’t necessarily agree on the topic, one of my favorite angry responses was from Alehead fave, Beerbecue. If you haven’t checked out his beer blog, do so, he’s got a good one.
John Cochran, brewmaster at the Terrapin Beer Company in Athens, GA had one of the most sober and intelligent responses to the Brewers Association’s missive. It’s important to note that Cochran is a highly respected brewer who sold a minority stake of his company to Tenth and Blake, MillerCoors’ American craft beer wing. So it can’t be said that he’s unbiased, but to his credit, he makes that explicitly clear at the beginning of his response.
I found myself thinking more and more about the BA’s press release and responses like Mr. Cochran’s over the past few months. I’ve had friends and relatives ask me about Budweiser’s Platinum and Black Crown offerings as well as Big Beer’s more duplicitous attempts to make inroads into the craft marketplace with products like Coors’ Third Shift or Anheuser-Busch’s Rascal’s Wild Red.
As Kid Carboy noted in yesterday’s piece on the overwhelming growth of craft beer, the macros’ forays into this ever-expanding market are only going to increase over the years. With over 10% of the dollar volume of beer sales in the US, SABMiller, MolsonCoors and AB InBev can no longer laugh off craft’s threat. And while the importance of the US beer market may become less crucial as Big Beer begins divvying up chunks of Asia and South America like a huge, alcohol-soaked game of Risk, they can’t simply ignore America. After all, while they may be international companies now, Miller, Coors and Anheuser-Busch were all American inventions and they can’t simply cut their losses in their native land. Furthermore, even with increased demand in South America and Asia, the US is still the biggest beer-drinking nation on Earth. Beer is in our blood (literally for many of us) and we spend ungodly amounts of money on it. Even with dwindling market share, AB InBev, SABMiller and MolsonCoors will never ignore the American market. Their shareholders won’t let them. That means buying or investing in more craft breweries. It means releasing more and more “crafty” beers on an unsuspecting populace. It means trying to gain market share in any way possible including backing legislation that makes it more difficult for craft breweries to sell beer on-site or self-distribute. And, of course, it means marketing, marketing, marketing. That’s what they do best, after all.
For beer drinkers like myself, it means drawing a line in the sand and making the conscious decision to support certain breweries while ignoring others. The problem these days is that doing so is easier said than done…
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Let’s jump back to the Brewers Association’s press release again. I generally appreciate what the BA does. They do as good a job as any organization in letting us know about the incredible success of craft and the importance of the brewing industry to both local and national economic growth. But like many people, I thought the “craft” vs. “crafty” article did a disservice to the industry. Read the response of August Schell to see why. In a nutshell, August Schell is just like any other small craft brewery out there. The problem is that they’re a 150+ year-old brewery that is still using their original recipes from the 1800s. Those original recipes call for the addition of corn to the mash because their founder wanted to mimic the golden lagers of his homeland of Germany and using corn as an adjunct made that possible. The use of corn was never to make the beer cheaper or less flavorful. It was a conscious decision made generations ago to achieve a certain flavor profile. In fact, as August Schell notes, it would actually be CHEAPER for them to swap out the corn for barley malt these days, but they’re committed to brewing their traditional recipes. Since they use corn adjunct in their flagship beers, the BA had decided that they failed one of the three requirements for being a craft brewery. They’re small enough (under 6 million barrels) and they’re independent. But they’re not “traditional” since the majority of a brewery’s beers have to be of the all-malt persuasion to meet that definition according to the Brewer’s Association.
As you might imagine, August Schell was peeved (and rightly so) with being lumped in the same group as AB InBev and SABMiller. As John Cochran noted, the Brewers Association is simply a trade organization and it’s in their best interest to carefully define their clientele. Creating a working definition that includes their clients while excluding the competition (essentially just the macros and their subsidiaries) makes perfect sense. The problem is that as Big Beer begins blurring the lines between what constitutes craft and “crafty” beers (which, let’s be honest here, was inevitable from a “if you can’t beat ‘em, join ‘em” perspective), the BA’s definition feels a little arbitrary. For many beer drinkers, taste is all that matters. The companies behind the beer are meaningless for them. So while Goose Island may be wholly owned by AB InBev, if their King Henry or Bourbon County Stout are great beers (and they certainly are), who cares?
If you’re an Alehead regular, you know that I’m a bit of a hard-liner. I’ve received endless vitriol in our comments section for my stance, but I’m firmly committed to eschewing all beers from breweries who operate under principles that I think are bad for the industry as a whole. Taste is obviously important to me. I don’t buy shitty beer just because it’s locally brewed. But taste isn’t the ONLY factor I consider when I’m buying beer. The health and growth of the American brewing industry is important to me both as an Alehead and as an American. During a stagnant economic period, craft beer was one of the few sectors growing in leaps in bounds. Supporting that sector means growth, jobs and tax revenue. Yes, taste will always be the key factor when I make a beer purchase, but it’s still just one of many. I also want to make sure I support companies that are growing organically, that listen to their customers, and whose employees live by the famous (and occasionally hypocritical) informal Google motto “Don’t Be Evil”. It may be pollyanna-ish or even flat-out stupid (I’ve been called that and worse), but that’s my stance.
The problem is…that stance is getting trickier to navigate. The BA’s definition, as August Schell’s fate proves, is flawed. And as John Cochran notes, even a wholly-owned subsidiary of AB InBev like Goose Island still makes beers that most folks would clearly consider craft AND they’re being brewed by the same people in the same facilities as they were before the buy-out. What’s a stubbornly progressive Alehead to do?
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It was a hard decision, but I’m changing my personal ethos (a challenging and rather painful thing to do, but something we should all consider from time to time as we get older and wiser…or at least weaker and balder). From now on, I have a new rule in terms of which breweries I will support:
I will only purchase beers made by breweries that are NOT publicly traded or aligned with publicly traded companies.
It’s a very simple rule to follow. I will continue my personal boycott of all beers made by AB InBev, SABMiller and MolsonCoors as well as any company (like Goose Island or Terrapin) that are owned or partially owned by them. It also means eschewing Kona, Widmer Brothers and Redhook (the three breweries that make up the so-called “Craft Beer Alliance”). It means that I will no longer purchase beers brewed by Genesee, Dundee, Magic Hat, Pyramid and MacTarnahan’s (all part of the North American Breweries umbrella which was recently purchased by FIFCO, a massive, publicly-traded food and beverage conglomerate based out of Costa Rica). Finally, of course, it sadly means bidding fairly to Sam Adams…a brewery I honestly haven’t purchased a beer from in years, but still a former mainstay for Brother Barley when he was just a budding Alehead back in the mid-90s. It’s a bittersweet parting, but I have a feeling the company will survive the loss of this beer-drinker.
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Now, I don’t actually have anything against publicly-traded companies. This little diatribe might sound like I’m anti-Capitalist which isn’t true in the slightest. With proper regulation and oversight, I think our little economic system works pretty damn well. It’s just that…there are certain industries where it makes sense to go public. If you’re in an industry where you need huge sums of capital to get to the next level, I get it. Auto manufacturers need to be public. Major tech companies and pharmaceutical companies (for the most part). Giant retail chains and manufacturers…fine. But beer? As the past few years have proven, there’s capital out there for a savvy brewery owner. Ale factories like Lagunitas, Founders, New Belgium, Sierra Nevada and Oskar Blues have expanded over and over and over again without going public. It’s still a meteoric growth industry and, relatively speaking, the overhead to get started isn’t overwhelming. As long as you don’t plan on having a high-speed bottling line or fifty 100bbl fermenters right out of the gate, you should be OK. I certainly don’t look down on breweries that decide to go public. If they want to grab the brass ring and rake in investment capital, that’s their business. But once they’ve made that decision, they’re no longer just beholden to their employees and customers. Now they have shareholders to please and shareholders expect growth. Just look at how AB InBev operates these days. They really can’t get any bigger, so they continuously look for other major breweries to snap up. First AmBev bought Interbrew, then Anheuser-Busch, now they’re looking at Grupo Modelo, and next year when the MillerCoors joint venture runs out, I guarantee there will be some buyout discussions. AB InBev is like a shark…they can’t stop moving. They don’t have time to improve their products, so they simply unveil new products, new marketing, flashy ads, celebrity endorsements. They’re a marketing company that happens to make beer.
Look…I’ll freely admit that most of my purchases come from huge companies owned by stockholders. My car, my clothes, my computer, my phone…all purchased from corporations that you can own a piece of. But beer is different for me. I suspect a lot of people are like this with specific aspects of their consumerdom. I have a co-worker who refuses to buy Sony products for ethical reasons that are meaningless to me. I know many people that would never buy a Mercedes or BMW. There are folks who will ONLY buy Apple products and others who would NEVER buy Apple products. It’s a great, big world out there and we can only be passionate about so many things.
Me? I’m passionate about beer…specifically, American craft beer. You can say it’s hypocritical, naive, or ignorant (in fact, I’m sure many of you will), but that’s how I feel. It’s important to me on a deep and personal level to do my tiny, insignificant part in supporting craft beer in the best way I think I can. For me, that means buying beer from companies that aren’t beholden to Board members or stockholders or dividends or quarterly earning reports. It means supporting companies that, while certainly cognizant of the bottom line, are mostly focused on making the best beer possible for their customers. I don’t care if those breweries are massive operations like Sierra Nevada or New Belgium or a tiny nano-brewery I’ve never heard of. As long as they’re beholden to no one but their employees and their customers, I’ll give ‘em a shot. After that, it’s all about taste.
So I disagree with the Brewers Association to a point, but I also disagree with John Cochran (and others) to a point (man, I’m a disagreeable, guy). The Brewers Association’s definition of what constitutes craft became too bastardized when they kept adjusting the definition to keep Sam Adams in their stable. And their too-strict definition of what makes a brewery “traditional” does a disservice to the industry. On the flipside, Cochran believes (as he has every right to) that Goose Island, Terrapin and Blue Moon are all “craft” breweries because they’re all relatively small and focus on all-malt beverages. In my opinion, once you’re aligned with AB InBev or MillerCoors…even if it’s just a minority stake, you fall out of that definition. If even a penny of my purchase is going to one of those companies when I buy your beer, then, in my mind, I’m supporting those companies.
So I say we throw out the whole idea of “craft” vs. “crafty”. It’s too messy and frustrating. If you feel the way I do, consider looking at it anew. If the beer world has to be binary (and these days EVERYTHING has to be binary), then I’m putting all breweries into two camps: Publicly-Traded (or associated) and Private. And I’m only drinking the latter. You can still call it Craft vs. Big Beer if you want. But for me, Big Beer now includes Magic Hat and Sam Adams and Blue Moon and Terrapin and Kona. And Craft includes August Schell and any other privately-held brewery that produces an adjunct-lager if they damn well feel like it. I may not like their brews, but I’ll still consider them part of the burgeoning craft beer scene. After all, there are all stripes of beer drinkers out there and not everyone likes to end their day with a big glass of Imperial IPA or Barleywine. Everyone should be able to find a craft brewery that speaks to them. That’s the beauty of the beer renaissance we’re in today!*
*I know the first response from nay-sayers will be to claim that I’m the beer-drinking equivalent of a hipster who stops liking a band when they get too big. But the thing is, there are some HUGE privately-held breweries out there. There’s no reason to think that New Belgium, Sierra Nevada, Lagunitas, Bell’s or Deschutes can’t eventually get as big as Sam Adams without going public. I don’t care how big they get. As long as they are ultimately only beholden to their employees and customers, I will buy their beers. Oh, also their beer has to taste good. That’s important too.
That’s a lot to chew on, so I’m curious as to how Alehead Nation feels. Does my “Public vs. Private” delineation make more sense than the Brewer’s Association’s more vague “Small, Independent and Traditional” approach? Personally, I think two of those factors…“small” and “traditional” are meaningless. The “independent” part is all that matters to me and only as it pertains to a brewery that doesn’t have to kowtow to shareholders. As far as I’m concerned, you can be a brewery that makes rice-based lagers and produces 10 million barrels a year and STILL be craft if you’re privately held.* And if you make lousy beer…well, you won’t be around for long enough for me to worry about.*
*Of course, that scenario would never happen since said company would be snapped up by AB InBev in minutes.
How do you feel? Is taste all that matters to you? Do the operating principles of a brewer affect whether or not you buy their products? Is the “Public vs. Private” argument persuasive at all or just another pointless rant by yours truly? Like I said, for reasons I’m not even sure I can adequately express, this is important to me and this approach makes far more sense than what the Brewer’s Association has put forth. But, in a few years, I’m sure I’ll re-evaluate again. If you’ve got a better approach, convince me. I’m all beers.
ALEHEADS 
Not sure how I feel about this one. I haven’t been wowed by Sam Adams beer in a long time and the pact you make with shareholders when going public to chase growth can have some unpleasant implications, but overall they’ve been good citizens in the industry. From sharing hops with smaller brewers during shortages, supporting homebrewing through the Patriot competition, to brewing and distributing lesser known styles like Gose, etc. that must hurt their bottom line, Sam is one of those corporations that doesn’t act the part. Perhaps their stock price has suffered because of Jim Koch’s hardline vision for the company. When he is gone, I could see some of this behavior changing and me needing to reevaluate their place but for now, it seems strange to not buy there beer solely because of their public status, which they underwent during a very different financial climate. I bet if Koch was trying to grow now, he would have taken the Sierra Nevada/ New Belgium approach and kept control of the company.
The other thing with private companies is that it’s hard to know where the funding is coming from. I bet at this point companies like Tenth and Blake have silent partnerships/ financing deals with breweries you support. I mean, I don’t know how Founder’s, Bell’s, Victory etc. finance the incredible growth they are undergoing right now. Sure they’re private but the money is coming from somewhere. I could probably dig into it and find out, but at this point, I don’t really want to know. It all gets very tangled and sticky.
I guess I’m just not as principled as you, but if I have the choice to enjoy a can of Sam Lager to make a flight to Fort Lauderdale go faster, I’m buying one.
It’s tricky…and this was mostly an intellectual exercise to see if there was a better way to separate “craft” breweries from the amorphous “other”. I think many of us have a gut feeling about which breweries are in it strictly for profit and which ones still enjoy making beer. The problem is that even companies like AB InBev and SABMiller clearly have brewers and employees that only care about making the best product possible. Just because the parent corporation is solely focused on the bottom line doesn’t mean that there aren’t hundreds of employees under them that only care about making beer.
The Brewers Association’s equally hard-line stance is just as restrictive as mine, BUT I felt like it was much more arbitrary. This “Public vs. Private” concept is at least clear even if very few people will actually buy into it. I agree that Sam Adams is a unique case (although I’m surprised you’re arguing in favor of the BBC…you’re usually the voice against them). They’re clearly good citizens in the world of beer, but I do have a hard time mentally equating them with other craft outfits. They’re certainly a product of their times and, as you said, they went through a very different financial period than most newer breweries. Many of the “old school” breweries have gone through pretty dramatic changes of late. Redhook sold to CBA, Magic Hat to NAB, Anchor to the Griffin Group and Sam went public. Of course, there are many in the craft beer world that NEVER considered the Boston Beer Company part of craft because they were mostly a contract-brewed (at SABMiller no less!) marketing shell. And unlike other craft breweries, they have a big stake in “light” beer and in cider. That has no bearing on my definition of course…just pointing out how different the BBC is from the rest of the gang. I think it was telling that the Brewers Association kept changing their definition of what a “small” brewery was to keep the BBC in the loop. They obviously didn’t want to lose the massive numbers that Sam Adams brought to the table. Again, I think your points are valid…I just wanted to at least throw this concept out there to chew on.
You asked about Founders…they just got really lucky:
http://www.mlive.com/business/west-michigan/index.ssf/2012/10/founders_15-year_anniversary.html
To Slouch’s point, just because you’re private, does not mean you’re not beholden to various stakeholders. Private equity partners can force your hand and future business decisions just as much as a group of people holding stock certificates. Like Slouch though, I don’t want to look into where the money comes from for privately held breweries. Just as I don’t don’t want to know how Vinnie is able to sell his meatball marinara for $7.99 with prime real estate in downtown Boston, despite never having more than 2 of 20 tables full at any given time, I really don’t care to know where all the money is coming from to keep expanding breweries and vault over this 10% dollar share.
Get an SBA loan, talk to Johnny Tightlips or Fat Tony, raid mom’s piggy bank, get in bed with Goldman – Just get the money and make great beer for me. I don’t want craft brewers selling out to the macros either but it would be hypocritical of me to question any other route that they’re going through to get cash.
Speaking of raiding the family piggybank, Greg Koch recently admitted that Stone wouldn’t exist if his Dad didn’t cut a $500K check.
Well, of course. Every brewery has financial shareholders…whether it be friends, family or the local bank.
But private companies operate VERY differently than public companies even though they both have shareholders. Private companies don’t have to worry about getting quarterly dividends to their shareholders so they can focus more on long-term growth (again, juxtapose this with AB InBev which is forever chasing dividends by buying up competitors and laying off employees).
Private companies also generally don’t require shareholder approval for their operations or strategic decisions. Public companies are legally required to inform their shareholders about their operations, management, finances, etc.
So yes, both private and public companies are trying to please their shareholders, but those shareholders don’t really get much say in how the private company operates (hence why investing in a private company is MUCH riskier than investing in a public one). I agree that the lines between the two can be a bit indistinct, but in general, I believe that private breweries are better able to focus on long-term, organic growth and customer satisfaction. Publicly-held breweries, by their very nature, need to focus on the bottom line and dividends.
ALL breweries want to make money, of course. But I look at the way that AB InBev, MillerCoors and, to a lesser degree, the Boston Beer Company operate and I can’t help but think that making money is their primary reason for existing.
This is a really interesting take on the problem. It’s one that I’ve been thinking about a lot lately as a craft beer supporter and homebrewer. I don’t know that I can personally stick with your public/private argument, but it is a decent way of differentiating the two groups of brewers. The same issue brings to mind the argument regarding Rick Bayless here in Chicago, who is teaming up with Crown Imports to make a Mexican beer which he wants to distribute nationally. There was a bit of a firestorm after it was announced, considering the wide variety of excellent craft breweries available to partner with in Chicago.
In some ways I like the BA definition, though I’m not a huge fan of their third piece, i.e. traditional. It seems to me that that is far too open to interpretation. The nicest thing about your model is that it is easily definable and clear cut. To me I would go with something along the lines of BA, where it has to be small (and you can define that differently, but you can set a clear barrel per year limit) and it has to be independent. 10% seems like a pretty good standard (it’s also what is required in federal law for disclosures of ownership in law suits) to me. The traditional argument can just get too far afield though. I mean, can we really call Dogfish Head traditional? Would Sam Calagione even like being called that? He uses a lot of very funky, very much NON-traditional stuff in his beers, but he’s still craft.
Thanks, Basterd. I’ve been accused (and rightfully so) of writing these rants just to piss people off, but there’s always “something” that sparks them. Like you, I’ve been thinking quite a bit recently about why I support certain breweries and not others. With the market ever-expanding and big companies getting in bed with smaller ones, it’s getting harder and harder to navigate the tap handles at your local bar or shelves at your local package store.
What I kept coming back to is this idea that all of the breweries I’ve stopped purchasing beer from are publicly-traded or in bed with a publicly-traded company. So in a way, this post is just cherry-picking based on the way I purchase my beer.
I agree the “traditional” definition from BA is messy. I’m not sure how I feel about the “small” part. I think a true craft brewer can be huge if they stick to their roots and focus on making the best beer they can. But you may be right that at a certain point, a brewery gets too large to continue operating in the way that most beer enthusiasts want them too. I remember being in a bar in Asheville, NC when an Oskar Blues sales rep came in and started ordering the bartender to put OBs taps front and center and push competitor’s taps to the back. It was one of those “cold water in the face” moments of reality where you understand that craft is not just one big happy family. As competition continues getting fiercer, the environment will get nastier. That’s why it’s important to me to have a clear rationale for which breweries I support and which I don’t. This post just explains one possible option for those of us trying to sort it all out.
Somebody reads my blog…Aleheads, no less.
I admire your tenacity. I do think, however, that the craft beer market’s capacity for “organic” expansion in the manner of New Belgium, Sierra Nevada, et al., is probably diminishing. I think it’s going to be much harder for the newer guys to do this. I also think there are going to be more and more family succession issues with a number of breweries (I think this is coming with Bells). Who knows, maybe “big craft” will become a source of capital and alleviate this. How do you feel about Schlafly, who is owned by (going to be owned by) a private equity firm with no history in beer and a very clear obligation to its investors (who have no fidelity to beer or Schlafly as would shareholders in a more closely held firm)?
Nice post. And thanks for the shout. Viva Aleheads.
Private Equity firms will be all over craft beer in the coming years. Anchor and Schlafly were just the first salvos. It’s a big growth industry with reasonable buy-in costs and, as you said, a number of these established breweries will have succession issues in the coming years. Personally, I’m willing to give a private equity-funded brewery the benefit of the doubt until proven otherwise. In the Schlafly case, Sage Capital is a very small, local fund with only a handful of investments. And they’re leaving Tom Schlafly and Dan Kopman on as Chairman and CEO respectively. A good private equity firm looks at their investments for the long-haul. I think time will tell what Sage’s plans are. Hopefully the firm plans on keeping Schlafly in their portfolio, managing it well and aiming for steady, long-term growth. But they may also just be gunning for quick growth and an IPO. We shall see…
It’s actually a great question, Beerbecue. Currently, the Boston Beer Company is the only real publicly-traded brewery that’s not part of a larger conglomerate. Do you think private equity firms getting involved in the craft beer world are looking to take more breweries public to get a big pay-day (like they try to do in the tech world)? Or do you think it’s more about seeing the double-digit growth in the industry and wanting to get involved with that as a smart investment? If the latter, I don’t necessarily see the Schlafly deal as a bad thing. Sure, I would rather that Tom Schlafly’s kids and grandkids kept the business going through the generations, but that’s just not the way it always works. The Sage investment seems OK to me, but again, I fully grasp the argument that the difference between a private equity firm buy-out and a publicly-traded macro brewery buy-out isn’t that extreme.
Just in case, I’ll stop buying Schlafly’s beers. But that’s mostly because I can’t purchase them in Alabama.
For whatever reason, I’m always happy to see one less person drinking Genesee.
I kid. Kind of.
However, the one side of this that makes the decision to eschew macros is easy – there are so many options and they grow every day. I’m always up for trying something new (even if it isn’t my favorite style) when it comes from a local brewery. It’s just exciting to have those kinds of experiences.
Cheers to however you choose to drink, now or in the future!
Very well written and argued stance. I’m probably mostly in line with your stance. I do drift for interesting beers, especially imports which can be a bit murkier on who is involved in what manner. My main concern, with American craft, is the ethos of the brewery and the quality of the beer. I regularly drink Sierra Nevada and New Belgium because they make great beer and have a great company philosophy. Their size, organically derived, helps fuel their creativity and their good works. I think your opinion on this subject may get you less flack than the BA’s.
Schal!
As others have pointed out here, private companies do have shareholders that they have to answer to. In fact, that’s why Terrapin got in bed with Tenth and Blake to begin with – they either had to give their shareholders what they wanted or find a white knight. Private company shareholders often have dividend requirements, financial metric requirements and other controls over the companies that they invest in, so I don’t think that public vs. private is the right line for me, but far be it from me to tell anyone what the right line for them is.
My problem with the debate is that we have gotten away from what “craft” originally meant. The word is supposed to relate to the process and not the ingredients (as you point out) or the ownership. While I have found myself staying away from beer brewed by subsidiaries of “Mega Beer,” there is no doubt in my mind that many of those subsidiaries do brew “craft” beer. They do not run some automated process driven by cost and lowest common denominator taste, but instead the employees pay attention to the ingredients, the taste and, yes, their “craft.” It is insulting to the people that brew many of those beers to say that what they do is not a “craft.” I think that where the BA went wrong was in choosing how to label its membership. While it may mean something very specific to people in the industry, “micro-breweries” may have been a better label than “craft” as I don’t imagine it would have created quite the backlash. I’m not proposing “micro” just throwing it out there as an alternative.