Craft Beer’s Elephants in the Room

On Saturday, I spent a sunshiny early spring evening at Devil’s Backbone. Conveniently situated for Wintergreen vacationers willing to come down the mountain, the brewery’s Basecamp Brewpub on the “Brew Ridge Trail” bustled this weekend with a multigenerational crowd of beer lovers. I ordered a flight and was smitten with their new Ginger Brut ale, sadly not yet available in bottles.

If the Basecamp gives any hint that Devil’s Backbone is owned by Anheuser-Busch, I didn’t see it. Budweiser’s parent company bought Virginia’s largest brewery in 2016, prompting a brief DOJ investigation and bitter disappointment from some in the commonwealth’s small-scale beer community.

The acquisition was one of many in the beer giant’s strategy in recent years to buy up successful local breweries, as Dave Infante explains in a riveting essay on the growing number of macro-owned microbrews:

In July 2008, when InBev acquired Anheuser-Busch to become ABI, craft beer sales totaled less than 5 percent of the U.S. beer market. But then (as now) craft beer was one of the few segments still growing. So once the dust had settled on the merger, ABI sized up craft beer’s significance in the increasingly fragmented U.S. beer market and decided something needed to be done….

Only this time, instead of doubling down on what it was bad at — creating authentic craft brands — ABI leaned into what it was good at: being a giant corporation. “InBev has always operated by acquisition,” said Maureen Ogle, beer historian and author of 2007’s Ambitious Brew. “So that’s what they did.”

The rest of Chicago’s Goose Island went first, in 2011. Then Blue Point, a Long Island brewery, in 2014. Between 2014 and 2017, ABI went on a shopping spree, buying up eight more craft breweries: 10 Barrel, Elysian (Seattle, Washington), Golden Road (Los Angeles, California), Four Peaks (Tempe, Arizona), Breckenridge (Colorado), Devils Backbone (Roseland, Virginia), Karbach (Houston, Texas), and Wicked Weed (Asheville, North Carolina). The craft beer community erupted with scorn at each successive purchase, labeling the craft brewers sellouts, scabs, and traitors to the movement. Jim Koch, founder of the Boston Beer Company (makers of Samuel Adams) and an elder statesman of the craft brewing industry, took to calling them “captive craft” brands.

With capital, sourcing, distribution, and other logistical support beyond most small brewers’ wildest dreams, a “partnership” with the likes of ABI can look like an otherwise unattainable opportunity to share your passion with a larger population. And Infante’s reporting suggests that, so far, the experience of being acquired has been largely positive, not only for brewers but for consumers of craft beer:

[While the buy-ups have] created anguish and anger within the industry, average drinkers might not even care. And that’s where ABI’s timing appears to be acute. When [former ABI exec] Tim Schoen took his Pacific-Northwest reconnoiter in the ’90s, craft beer was all “hopheads and hippies,” said Schoen, who today is the founder and CEO of Brew Hub, a contract-brewing company based in Lakeland, Florida. Craft beer was a subculture, a niche back then. “Well, fast forward,” he said. “There’s a lawyer, there’s an accountant, there’s a janitor drinking craft beer.”

That growing appeal with mainstream American drinkers proved to be a double-edged sword for craft brewers. It brought legitimacy, stature, and financial success for many of them. But it also brought a wave of drinkers more interested in good beer than the anti-corporate ideology from whence it came. On the way from cultural battle flag to mainstream beer category, craft beer became more popular, but less special — and that made it vulnerable.

Devil’s Backbone co-founder Steve Crandall said that, even if it meant he had to resign from the board of the Brewers’ Association of America (the trade group for small, independent brewers), the sale was an “amazingly brilliant” move. “They have the greatest interest in not affecting our DNA,” he said. “They’re giving us a tremendous amount of autonomy.”

And that’s the key. For microbrewers feeling unsettled or worse by the sell-outs, the concern is largely for the sense of identity and community inherent in being a small business with a niche market. As local newspapers across the country can attest, when business decisions are primarily driven by the short-term interests of a parent company’s shareholders, it threatens not only the relationships between a local business and its patrons but the sustainability of an industry as a whole. Consumers may not care right now who technically owns their favorite local brewery, but it could stop being their favorite if the brand loses its local talent and takes on a corporate marketing vibe.

For now, independent and “captive” crafts that grew up together may be able to maintain harmonious relationships. But the vastly uneven influence on distributors could be a key wedge issue. A company like ABI often has the “hand” in distributor relationships and may own them outright where state laws permit that. The largest independent craft breweries may be able to afford to play hardball for control over their distribution partners, as Bell’s Beer from Michigan is doing right now by stopping all new shipments to Virginia. After its Richmond distributor was bought out by the nation’s largest, Bell’s said it should have gotten the opportunity to vet any new buyer seeking the right to distribute its beers. (Looks like Maryland and D.C. are going to be selling me a lot more Oberon than they usually do this summer.) But for most microbreweries looking for that kind of power, their best bet is to join forces against the Goliaths – or sell out.

Categories: Food, News

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