Tuesday, October 30, 2007

a Trojan horse threatens craft beer

A good friend, fairly cognizant of craft beer news, recently expressed his surprise that a local brewpub was indeed an operating brewpub, producing its beer on-site.

That under-the radar surprise is the curse and beauty of small, local breweries.

I do a lot of tastings, dinners, festivals, and in-store demonstrations. At these I'm often asked, why haven't we seen your beer before?

I explain that I (and a few others) are the brewery's advertising budget! Our brewery (and many others like us) can't afford to pay for flashy 2-story high adverts in the ballparks, or discount our beers for massive displays in stores with accompanying discounts, or run constant radio/print/television ads.

The craft beer industry does indeed produce a lot of beer. But on both a total basis and an individual brewery basis, that output is small compared to that of the mainstream breweries. Even Sam Adams, Sierra Nevada, and New Belgium rank small in comparison.

When I began in the business, the local aspect was an attraction as powerful as the beer itself.

But in the late 1990s there was a wholesale failure of many brewpubs. Ill-prepared operators failed to recognize that brewpubs were restaurants first, breweries second. That failure left a bad taste, literally, for erstwhile customers.

Now, with the second great growth curve of craft breweries and small brewery imports, many of our newer customers have little loyalty to the local aspect, or at least, while acknowledging it, place it low in importance.

If the beer tastes good, why should we care if it were brewed by a craft brewery or a large corporation, they ask.

The co-opting of craft beer by the large breweries is capitalism at its rawest. If you can't beat em: buy em, faux-imitate them, undersell them. And then close them!

It has happened before. Of the thousands of breweries open before Prohibition, and the re-opening thereafter, there are now only two or three remaining in the US.

I'm concerned that in ignoring flavor, craftmanship, and locals supporting locals,that in buying for price only, that in forgetting that freshness is the flavor trump of local beer, we good beer drinkers are in peril of repeating history's cycle.

Most craft breweries are local - think of us as the craft 'small-carbon-footprint' breweries. And the industry as a whole is reaching new heights: 11% growth this year.

But the industry and its enjoyers need to be aware of the Trojan horse lying just in front of their brewhouses. The big brewers are creating beers with the appearance of being craft beers, with little of the character, but at lower prices. Many bar owners are stocking these faux-crafts.

To Trump Small Brewers, Beer Makers Get Crafty
By David Kesmodel
October 26, 2007; Page B1
Wall Street Journal

For years, makers of small-batch "craft" beers have been chipping away at the market share of America's three beer giants. Now, the big brewers are craftily playing the same game, and winning back much of the momentum.

Through the first eight months of this year, retail sales of craft beers made by those companies or their affiliates grew at nearly three times the rate of independent craft brews, according to market-research firm Nielsen Co.

The major brewers generally avoid using the parent company's name on the labels for their craft beers. Sales of craft beers affiliated with the big three brewers in grocery, drug, convenience and major-market liquor stores surged 45% to $177 million through Aug. 25 against year-earlier levels, excluding sales at Wal-Mart Stores Inc., Nielsen found. (Wal-Mart doesn't supply sales data to Nielsen or any other data-tracking firm.) Sales of independent craft brands rose 16% to $531 million.

The growth rates of the big brewers are helped by the fact that they are starting from a smaller sales base. Still, the jump shows how much influence they have over beer consumption. In the U.S., beer generally must be sold through distributors, and the big brewers have far larger distribution networks than independent brewers do. If a mass-market brewer wants to add a new brew to its lineup, it can more easily attract an audience for it.
Some independent craft brewers say their growth rates are slowing because of the distribution power of the large brewers.

[But here's a more sanguine opinion.]
Some craft brewers say the giants' move into the category is a good thing because they're bringing new legions of craft drinkers into the fold. Even if the independent brewers' market share falls, they may enjoy higher sales and profits as the category grows. "Go Blue Moon," says Greg Owsley, chief brand officer at Colorado's New Belgium Brewing Co., the maker of Fat Tire Amber Ale, a leading craft beer.

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