Craft Beer: Big Enough To Fail

American brewers are ringing the tocsin again: Big Beer is on the march! Mainstream beer has taken some heavy hits on sales in the past eight years as regional and small brewers’ share of the market climbed to over 10%. True to the expected storyline, The Empire is striking back: more consolidation at the top to increase their monopoly power and cut costs; more pressure on wholesalers to drop other brands; more brewing of beers that are not light lagers; and the outright purchase of key regional brewers.

Should Craft Beer Nation tremble in fear? Before you answer, consider this: none of this is new. These are the same tactics Big Beer has been working for almost 20 years. More of the world’s brewing capacity is concentrated in the control of fewer companies. Anheuser-Busch’s “100% Share of Mind” program from 1998 was aimed at compelling A-B wholesalers to drop non-Bud family beers by leveraging discounts and supply of those Bud products. Coors has been brewing Blue Moon since 1995, about the same time Anheuser-Busch tried a series of beers in a wide variety — porter, pale ale, IPA, stout — and Miller tried the Miller Reserve line. And purchases of regional and small brewers date back to about the same time, when Miller bought Celis and Leinenkugel outright, along with a 50% interest in Shipyard (which was later bought back), and Anheuser-Busch bought a share of Redhook, Widmer, and Kona.

Gather round, boys, it's beer!

And none of it worked. As the big brewers arrayed these strategies against what was then a much smaller threat (craft beer had a little over 3% of the market, while imported light lagers like Corona and Heineken had well over 10% and were growing steadily), none of it worked. Though the rise of smaller breweries was slowed for a bit, there were also the factors of an overeager business climate, a lack of skilled brewers and packagers to make good quality beer, a lack of capital for facilities investment, and a young industry that was easily divided against themselves, the one tactic employed by Big Beer that was, arguably, effective (several lawsuits, egged on by Big Beer, pitted small brewers against one another).

Eventually the tactics proved to be wholly ineffective in the face of the rich variety of craft beers. Sales exploded and 100% Share of Mind was forgotten as wholesalers scrambled to defy A-B and scoop up profits, and while Blue Moon joined in the growth, it was hardly a category killer. Almost every bar in American serves non-mainstream beer — to the point where “mainstream” is less useful a term to define beers — and the “pull” of consumers for these beers have brought them into markets large and small. It would seem that these alternative beers have won.

But the alarm is being sounded again, as the Mega-Merger looms: ABInBev swallowing SABMiller. ABIB threatens more wholesaler pressure, and is angling to outright buy major wholesalers, making control complete (still think you want to see the break-up of the three tier system?). Goose Island cranks out more new beers, Shock Top and Blue Moon develop more varieties. Purchase of regional brewers is accelerating: Elysian, Four Peaks, Lagunitas, Firestone-Walker, Breckenridge, Ballast Point, and we’re told by the true believers that these breweries are “craft” no longer, though the beers haven’t changed.

Now the warning is that true craft beers will be throttled, denied a chance at the market because of the coercive power of the mega-megabrewer, lost in the forest of “crafty” big brewer-made beers, denied sales of raw materials.

Is concern warranted? Surprise! In a switch of how I used to think, I now believe there is a real threat, but not because of these developments. The alternative brewers' beers are still wanted, and the market will find them, if new wholesalers have to be created to move them, or state laws changed to provide them a path. The continued mad success and technological innovation of Goose Island’s Bourbon County shows that “craft” or not, beers continue to be made well by the same breweries, so they're probably not going to dilute or pollute the craft “brand.”

What’s the issue then? Size. Small brewers are finally big enough to fail.

When these brewers were still truly “micro,” big beer couldn't figure out what to do...because the numbers were too small. There wasn't a critical mass, there wasn't a brewery big enough to buy that was willing to be bought, their own beers couldn't catch enough drinkers to ignite, there just weren't enough barrels of this new kind of beer being sold for it to be worth them making it. It's actually kind of funny that they couldn't figure that out.

But now the numbers have reached the point where the big brewers can reach out and buy established regional brewers who have a real chunk of the market. As more and more brewers hit 50,000 barrels of annual sales, they become attractive to the big brewers, who don't have to create a local brand; they can just whip out their checkbook and become the largest local brand. Because no matter how much sales of light lager have declined, they're still HUGE, and that means these guys can bring an avalanche of cash to bear.

Craft beer has become big enough to be interesting, big enough to buy, big enough that it has enough fans who don't really know who owns it, big enough that the market share justifies the cash. We're going to see more of these, and if MolsonCoors is smart, they'll get in the act, and maybe Heineken should consider more purchases.

What happens then? Maybe the mass of customers loses faith in craft beer, when they learn that many of the familiar names are no longer independent. Maybe the word gets out and people are outraged and stop buying the bought brands; but do they buy independent beers, or do they buy wine, or whiskey? Maybe brewers like Sierra Nevada, and Boston Beer, and Yuengling, and Deschutes refuse to sell; hell, maybe the Department of Justice wakes up and says “No!” to some of these mergers as monopolistic. Maybe there are enough new breweries – over 4,000 now – that choices can still be made by the informed consumer, and more consumers get informed, and everything's okay.

Maybe, maybe, maybe...but definitely this: no one knows. This is market dynamite.

What should you do? Decide what's important to you. Decide what you want your local market to look like. Decide if you'd rather have a steady, fresh supply of a few brands, or a dicey choice of small local guys who may or may not make what you want, which is going to depend on what your local guys are like. It's your call.

Me? I'm always in favor of drinking beer that tastes good. If big market beer tastes good, I'm going to buy it, and drink it. But even so, 4 times out of 5, I'm drinking something local and independent. 

That's a lesson I learned 30 years ago when I was staying at a friend's house in Utica, New York and the nightly news said the local AHL franchise had given an exclusive beer contract to A-B. In Utica. Where Matt's was still clinging to life, where guys still punched in to make local beer. Bullshit to that, much-younger-me said, and we went out to the bar around the corner and drank local all night long.

Make your choice. Just remember how we got to where we are, and what we had to go through to get there. It's just beer, but...it's beer.


*I know I said I was going to do a post on Canadian whisky, but...I put that off for a while and gave you this instead. The Canadian piece is coming, but it's going to be a while.

The Week, plus the STAG Rating Scheme

Here we go...

A look ahead to what's coming this week. Tomorrow, January 4th, is my first full workday back as a freelancer, and I promised myself that on that first full day I would hop in the car and go do what I used to do a LOT when I first started writing: go take the tour at Yuengling. But since I'm working, too, I'm going up with All About Beer editor John Holl (and my old friend Scott Fasnacht), and I'm going to write about the trip, and the 'then and now' aspect of it all, as the first installment of my new web column for AAB. I'll let you know when it's up. Meantime, I'll probably throw up a few pictures and comments here, just for fun...since I doubt that's all we're going to do.

Tuesday I'm going to keep up with the beer then-and-now thing with a report on my visit to Selin's Grove Brewing on December 21st, their 19th anniversary. What changed and what didn't was delicious, and so was the Solstice Dubbel. If I have it finished, I may also drop my thoughts on the new challenge to "craft" beer: I think it's big enough to fail.

Next? I'm going to be doing regular tasting here on STAG for the first time. I'm going to commit to doing at least one whiskey/spirits review every Wednesday, and at least one beer review every Friday...until I decide it's not what I want to do. But I'll be at this for a while, and I'd like to explain my "system." I used to "recommend" or "not recommend" drinks, I've worked with the Whisky Advocate ratings scale, I've done the 5-star thing, and I've struggled with Untappd's 5-star with quarterly gradations system.

I'm not going to do any of that here. Instead, I'm going back to a system I made up in the dark days after 9/11, at a time when we desperately needed something to laugh about. A small number of my friends will recognize the term "GOOD or SHITE?", a snarly response to someone who trashed a friend's thoughtful tasting notes about Marston's Double Drop (remember that, Peter?). 'Who needs all those fancy tasting notes anyway,' I shouted, 'is the beer GOOD, or is it SHITE?' It evolved a bit, into a four-grade system: F****** Shite, Shite, Good, and F****** Good. We had some fun and then moved on, but every now and then...I thought about it, and considered actually using it. But, you know...swearing. Some of you are probably uncomfortable with this much.

I now believe its time has come, with one important addition. I'll be grading the reviews on this scale (the illustrations are provided to give you an idea of just how bad or good things are):

Crap

Few to no redeeming qualities. Notably flawed in concept or in execution. Examples: Cave Creek Chili Beer (undrinkably spicy and one-dimensional), Ten High bourbon (too young, too hot, too thin).

Flawed 

Not undrinkable, but with at least one serious flaw that should keep you from drinking again. Examples: most light beers (no flavor), Brenne (just too sweet).

Okay

Drinkable, even tasty, won't pour it out; but not something I'm going to look for. So standard as to be overlooked. Examples: Yuengling Lager (I drink it if it's the choice, but...), Johnny Walker Red (okay mixer, but...) Note: this is a change from "Yawn," which I eventually realized sounded too judgmental for drinks that I was essentially grading at C+ to B. I'll be changing the reviews to reflect this.

Good

A definite cut above, a small grin when spotted, yes please. Examples: Penn Kaiser Pils (zesty and well-made), Wild Turkey Rare Breed (overproof in such a proper way)

Stellar 

Conversation stopper/starter. Easiest choice on the menu. Examples: Great Lakes Edmund Fitzgerald Porter (archetypal stuff), Redbreast (the standard 12 YO; such as dreams are made of)






It's a bell-curve, like many things, so don't expect too many Crap or Stellar grades, and most are likely to fall in the middle three...probably fewer Flawed, because those don't tend to be the ones I grab anyway. "Yawn" is, I think, the addition that makes the system work. Good...just not good enough to go looking for it.

I'll be accepting samples and buying off the shelf/bar, but I won't double-review; Whisky Advocate gets first dibs on all craft whiskeys, for example, and if I review them there, I won't be doing them here.  Some reviews will be long, some will be brutally short; some will just be tasting notes, some will be more. We'll have some fun, and I'll be as honest and objective as I can.

Thursday? I'm thinking about something on Canadian whisky. I've learned a LOT about Canadian in the past three years, and I've got some thoughts I want to pass along. Don't assume you know what there is to know about Canadian.

Let's see...next Saturday? I have nothing planned. Let's see what happens.

Goose Island to be Acquired by AB InBev

Just got this. Goose Island has agreed to be acquired by AB InBev. Important points: John Hall stays on as CEO (no word of Greg Hall's status - update: it's been announced that Greg will be stepping down as brewmaster); this is a 100% acquisition; the two Goose Island brewpubs are NOT part of the deal; ABIB will invest in a brewery expansion immediately; and wholesalers will not be affected. Read on:

GOOSE ISLAND SELECTS CURRENT PARTNER ANHEUSER-BUSCH FOR GROWTH STRATEGY

Chicago Small Brewer, Craft Brewers Alliance to Sell Stakes in Goose Island;

Expansion of Chicago Brewery Planned

CHICAGO (March 28, 2011) – Chicago-based Goose Island, one of the nation’s most‑respected and fastest-growing small brewers with sales concentrated throughout the Midwest, today announced it had agreed to be acquired by Anheuser‑Busch, its current distribution partner, in a move that will bring additional capital into Goose Island’s operations to meet growing consumer demand for its brands and deepen its Chicago and Midwest distribution.

Goose Island’s legal name is Fulton Street Brewery LLC (FSB).  Anheuser-Busch reached an agreement to purchase the majority (58 percent) equity stake in FSB from its founders and investors, held in Goose Holdings Inc. (GHI), for $22.5 million.  Craft Brewers Alliance Inc. (CBA), an independent, publicly traded brewer based in Portland, Ore., that operates Widmer Brothers, Redhook and Kona breweries, owns the remaining 42 percent of FSB and reached an agreement in principle to sell its stake in FSB to Anheuser-Busch for $16.3 million in cash.  Anheuser‑Busch holds a minority stake (32.25 percent) in CBA.

Goose Island sold approximately 127,000 barrels of Honkers Ale, 312 Urban Wheat Ale, Matilda and other brands in 2010.  To help meet immediate demand, an additional $1.3 million will be invested to increase Goose Island’s Chicago Fulton Street brewery’s production as early as this summer.

“Demand for our beers has grown beyond our capacity to serve our wholesale partners, retailers, and beer lovers,” said Goose Island founder and president John Hall, who will continue as Goose Island chief executive officer.  “This partnership between our extraordinary artisanal brewing team and one of the best brewers in the world in Anheuser-Busch will bring resources to brew more beer here in Chicago to reach more beer drinkers, while continuing our development of new beer styles.  This agreement helps us achieve our goals with an ideal partner who helped fuel our growth, appreciates our products and supports their success.”

Hall will continue to be responsible for Goose Island beer production and the expansion of Goose Island’s Chicago brewery, where production will continue and its business will still be based.

“The new structure will preserve the qualities that make Goose Island’s beers unique, strictly maintain our recipes and brewing processes,” Hall said.  “We had several options, but we decided to go with Anheuser‑Busch because it was the best.  The transaction is good for our stakeholders, employees and customers.”

Anheuser-Busch has distributed Goose Island brands since 2006 as part of an agreement with Widmer Brothers Brewing Co. of Portland, Ore., a co-founder of CBA, that provides Goose Island access to the network of independent wholesalers that distribute Anheuser-Busch beers.  Anheuser‑Busch also provides logistical support to all Anheuser‑Busch wholesalers distributing Goose Island and CBA beers as part of that agreement. 

Wholesalers currently servicing retailers with Goose Island beers will continue to do so with no disruption in service.

“These critically acclaimed beers are the hometown pride of Chicagoans,” said Dave Peacock, president of Anheuser-Busch, Inc.  “We are very committed to expanding in the high‑end beer segment, and this deal expands our portfolio of brands with high-quality, regional beers.  As we share ideas and bring our different strengths and experiences together, we can accelerate the growth of these brands.” 

Anheuser-Busch’s purchase of FSB is subject to customary closing conditions, including obtaining required regulatory approvals.  The transaction is expected to close in the second quarter of 2011.

The two Goose Island brew pubs are not part of the deal, but will continue in operation, offering consumers an opportunity to sample Goose Island’s award-winning specialty beers and food selections.

As part of CBA’s agreement to sell its 42 percent block in FSB to Anheuser-Busch, in addition to cash, Anheuser-Busch will provide enhanced retail selling support for CBA brands, will reduce distribution fees payable by CBA to Anheuser‑Busch and will provide CBA additional flexibility with respect to future acquisitions and divestitures.

So...if you're a diehard craft beer type, and you love Goose Island...do you keep drinking it? Or do you immediately stop, and start bitching about how it doesn't taste the same anymore? Or do you just...wait and see and try to stay impartial?

Full Sail Session Black Lager

You folks know I love the session beers, mm-hmm. So when Full Sail put out word that they were making a Dark version of their successful Session Lager, I got in touch and asked 'em for a sample. They sent three 11 oz. stubbies, and I'm getting into them tonight.

Lemme tell you a little story first, about why Full Sail decided to brew Session Lager -- about as "macro" a beer as you'll find from a "micro" -- in the first place. Got this from Jamie Emmerson at Full Sail (from an article I did for American Brewer).

“We had some guys working on the house,” Jamie recalled, “and Friday afternoon we brought some Full Sail out for them. But they said ‘No thanks, no thanks.’ Then we see them a few weeks later, and they’re drinking Tecate. So it’s not that they’re cheap. We asked them, ‘Why not Full Sail,’ and they tell us that it’s too heavy, it’s too bitter.

“So I said to Irene,” he said, as the light went on, “we could make a craft lager that could go up against those beers, and it’s the thing to put in that bottle. We worked up a pre-Prohibition pilsner. It’s 5.1% ABV, mostly pale malt, a little bit of wheat, 20 IBU. That took a lot to get dialed in. It was a fine line on how dry the beer had to finish. If you think Heineken is dry, but Corona is sweet, that’s a fine line. It’s all attenuation and mashing.”

Best of all, it’s working. “The response has been great,” he said. “My dad, an old school beer drinker, says it’s just good beer. If you enjoy micro, there’s enough flavor and character; if you don’t, you’re not put off by the color or flavor. The Germans have a saying that the first beer calls for the third. That’s what this beer is about.”

Yeah, it is. A little on the large side for my session beer definition -- 4.5% and under, and this is 5.4% (or 5.3...accounts vary) -- but definitely drink-o-matic. The dark malt actually gives it a slightly tart/burnt edge that cleans it up, a little smoke/roast thing, but not much. With the stubby bottle -- 11 oz., weird, but that's the old Olympia size -- it reminds me of Yuengling Porter.

Great little bottle, I miss steinies. I'd drink quite a few of these. I'm really curious to find out what market they land in. Will local-homer macro-lovers drink a dark beer with this much flavor? Time will tell. I'm going to have another, myself.

Budweiser American Ale (and Michelob Pale Ale): first notes

The long-awaited Budweiser American Ale is finally in my glass, after some of the same delivery problems Uncle Jack had (with the weird result that I didn't get the first shipment, but then got two more instead of one; it's okay, I'm sharing).

How about it? It’s bright and clear, it’s a deep ruddy amber, the foam is creamy and light parchment-colored. I smell sweet fresh malt, some caramel, and piney hop. The flavor has all that, in fact, it delivers on the aroma in an almost one-to-one ratio, although the caramel masks the hops to a degree. The ale is not overly full in the mouth, somewhat on the light side, but that’s not really a surprise; A-B was surely intending this as a drinking beer, not a sipper. The biggest surprise for me here is the finish: it’s relatively long, and bitter.

Passing it around here at Tucquan (I wrote this while rusticating on the Susquehanna again, no trip to Conestoga this time) gets some interesting reactions. "Oh, that’s good. I could drink that!" (from Cathy, who’s pretty demanding on beer, but does like a nice pale ale) "That doesn’t taste like beer, that tastes like rye bread!" (my mother, who’s currently drinking a Reading (which, bless her, she insists on calling "Old Reading"), so I’ll take that as a positive), and "It’s not that hoppy" (Uncle Don, who’s drinking Coors Light, but has had many a craft and import with me).

Don’s right, it’s not that hoppy…but for something with "Budweiser" on the label, it’s plenty hoppy. More importantly, for a pale ale, it’s fine, easily as hoppy as SNPA. Actually, turns out it's not...quite. It's about 28 IBU, SNPA is about 32-34. I'd call that ballpark, though.

Interesting to note two things. One, the cap is a pry-off, not a twist-off. A-B has noted that the craft market doesn’t trust twist-off caps. Two, the label is damned near unreadable on that dark red-ochre background. Intentional? Or a rare screw-up?

I had a bottle of Michelob Pale Ale sent to me last week as well, so I decided to do a side-by side. It was revealing.

Not sure, but I think this is another tweak on this beer, which has been around in one form or another, in varying markets, since the mid-1990s. It’s quite a bit lighter that the Bud Ale, more a reddish gold. The nose is restrained (i.e., there ain’t much), mostly a light piney Cascades aroma. It’s fairly creamy with malt, the hop comes through with a brittle edge, and it finishes up quite clean, with a lingering bitterness.

Side-by side? Clearly two different beers. The Bud’s caramel malt gives it a much heavier mouthfeel than the Michelob’s pale malt, while the hoppy edge of the Mich makes it cleaner, crisper. And no, I cannot believe I’m writing those words: "Bud’s caramel malt…much heavier mouthfeel…hoppy edge of the Mich…"

The question for both these beers remains the same as it has for over ten years. Can a beer that is brewed in a "craft" profile, but labeled with a mainstream brand…ever sell? Who’s going to buy it? Bud drinkers? To be blunt: not effin’ likely. Craft drinkers? Maybe, but most of them will not want to buy a beer from A-B (or InBev, for that matter). Sorry, guys, but for the majority of serious craft drinkers, who makes the beer is as important (or more so) as what the beer tastes like. Crossover drinkers? Maybe. If we could ever get a solid number on just how many people who regularly drink Blue Moon know it’s a MolsonCoors product…I could give you a better answer.