Big Beer’s Buying Binge: An Insider’s Perspective on the Craft Beer Industry
Originally published in the August 2016 issue of Beer Paper LA.
If you can’t beat ‘em, buy ‘em. That’s the strategy “Big Beer” has been taking to continue to play in the craft beer industry.
Will it work? It depends on whether or not you (the beer drinkers) know or care.
Craft beer has grown dramatically over the last few years. What began as an anomaly 35 years ago right here in California has now become mainstream. All through the 1980s, many called craft beer a “fad.” But craft beer kept on growing. In the ‘90s, some felt certain it would begin to shrink and fade away with a new generation of beer drinkers moving on to something new. But craft beer kept on growing. Others thought for sure the great recession of 2007-09 would be the demise of high-end beer. But craft beer kept on growing. Craft brewers have revolutionized beer in America and around the world, and corporate brewers got caught with their brewer’s boots down.
Throughout the wild run of popularity that craft beer has enjoyed over the years, large global brewers with names like Anheuser-Busch InBev, SABMiller, Constellation and others have dabbled in craft beer with little success. In the early ‘90s, AB (before being bought by InBev) tried a Sierra Nevada Pale Ale knockoff called Pacific Ridge Pale Ale. The label looked just like Sierra Nevada’s Pale Ale, right down to the green color scheme and even had the distinctive cascade hop flavor. The label had no mention that it was made by Anehuser-Busch. With AB’s powerful access to market and a $4.99 shelf price, we thought it might put a still-young Sierra Nevada Brewing Company out of business. Pacific Ridge was a flop.
After that, AB tried putting its identity on high-end brands such as Budweiser American Ale and Budweiser Brew Masters’ Private Reserve. Both have been discontinued. MillerCoors dabbled in the craft look-a-like category with a beer called Colorado Native, also with little luck. More recently, faux-craft brands like Shocktop (ABInBev) and Blue Moon (MillerCoors) have been marginally successful.
So what’s a large, global brewer to do when local craft brewers across the country begin to capture the imagination and the wallets of beer drinkers from coast to coast?
Consolidation is nothing new to the beer industry. Breweries have been buying breweries for generations. But the modern day Goliath-buying-David trend is different.
With the gradual decline of light, low flavor lagers, Big Beer had to find a way to maintain relevance and growth in the market. Their buying spree started when ABInBev bought Goose Island Brewing, a popular Chicago-based, family-owned brewery in 2011. This is where AB first experimented with their new “take-over formula” in major markets across the country: buy a craft brewery, keep the brewery and tasting room open so it retains its “craft-feel,” leave any mention of new ownership off the brand, take one or two of the top selling core brands and brew them at an AB brewery for large-scale efficiency and roll out national distribution through the existing AB distribution network. ABInBev now owns eight craft breweries across the country and MillerCoors, a little slower off the blocks, owns one outright and a majority share in a second.
Will this buying spree continue? Probably.
Should it matter to you? It should if you enjoy walking into your local grocery store or restaurant and having the chance to try a large variety of flavorful, local beers.
Leading up to Prohibition, large brewers were able to dominate the market by controlling what beer was sold where. Brewers could have partial or full ownership in retail establishments, creating a “tied house” system because the retail location was “tied” to selling only the beers made by the brewer which had ownership in the establishment. This limited consumer choice dramatically.
Post-prohibition and the 21st Amendment, strict laws were implemented that banned the “tied-house” system, eliminating a market where a few large ownership groups could control all beer sales. Unlike before Prohibition, brewing companies could no longer own any part of a retail establishment or provide any kind of inducement to retailers as an incentive to carry their brands. These “equal access laws” still exist today and have allowed for the craft brewing industry to gain traction and succeed in competition with huge, global beer companies. The alcohol beverage industry’s equal access laws do not allow manufacturers to “pay-to-play,” meaning they can’t pay retailers for tap handle placement or shelf space. Without these important laws, large brewers would be able to out-spend small, craft brewers, eliminating the great choices we have on the shelf today. Equal access laws are mini-anti-trust protections that allow small businesses to compete in a highly competitive industry and marketplace.
Over the last few decades, Big Beer have tried their hand at chipping away the equal access laws, hoping to eliminate the protection craft brewers have to grow and sell their beers.
What should you do about it? Know who brews your beer and know who owns your local brewery. Oh, and support the community by doing what you do best: drinking craft beer at the California Craft Beer Summit!
At the Summit, craft beer lovers have the opportunity to truly experience the world of craft beer, from an interactive exposition hall focused on the ingredients of beer and the processes involved in brewing, to advanced tasting classes for beer lovers, pairing classes for beer chefs and homebrewing classes for new and advanced homebrewers. Plus the whole event ends in the LARGEST California craft beer festival, with more than 160 California breweries pouring their best beers, some hard-to-find and hard-to-get options and a few special releases. This is your chance to be involved in the community, meet your favorite brewer, talk to HR managers about starting a career in the industry and so much more.
This isn’t a corporate brewer trade show, this is David Walker pouring Firestone Walker’s PIVO for you. This is Natalie and Vinnie Cilurzo pouring a special release sour beer for you. This is Chris Cramer pouring a Karl Strauss beer for you. This is where our industry shines.
Tom McCormick is the executive director of the California Craft Brewers Association, the nonprofit trade association representing all of California’s craft breweries. Tom has worked in the beer industry since 1982 and has been a key advocate for the craft beer industry since its early years.