Counterpoint: Craft Beer Isn’t Dying

Jim Koch, the founder of Boston Beer Company, warned last month that industry consolidation had put craft beer on the endangered list.

John Hall, the founder of Goose Island Brewery, begs to differ. He predicts a bright future for craft as a whole because it is so diverse, innovative, and in-sync with customers. Hall cites self-distribution (which is legal in many states), and state laws allowing breweries to serve pints, as two factors that change the equation for small breweries.

Hall also explains why Goose Island agreed to be taken over by Anheuser-Busch. One alternative was contract brewing, as Boston Beer has done for many years. Another was to take the company public; however, he didn’t like the idea of having to report every quarter to Wall Street. That left A-B.

Of the A-B deal, Hall said, “Like all big business decisions, it was risky being one of the first craft brewers to partner with a big brewer. But we preferred to partner with brewers who understood the beer business. Through our partnership with Anheuser-Busch, Goose Island was able to do what Boston Beer did, reach consumers nationwide while retaining the quality and integrity of our beer, and our brand.”

The Friday Mash (Old School Edition)

On this day in 1364, Jagiellonian University was established in Krakow, Poland; and on this day in 1551, the National University of San Marcos, the oldest in the Americas, was established in Lima, Peru.

And now…The Mash!

We begin in Rochester, New York, where Genesee Brewing Company, which is undergoing a $49 million expansion, plans to transport 12 fermentation tanks via the Erie Canal. The tanks are too big to transport by highway or by rail.

It’s baseball season, and CraftBeer.com would like to introduce you to seven beers brewed especially for minor-league teams. Enjoy them with your peanuts and Cracker Jack.

Think you can’t sing? Organizers of the Twin Cities Beer Choir want to convince you otherwise. You buy the beer, and the Choir provide you with sheet music and plenty of friends.

An Indiana gas station owner found a clever loophole to the state’s ban on selling cold beer at convenience stores. He instal

Why Is A-B Buying Craft Breweries?

hris Herron, the CEO of Creature Comforts Brewing Company, has an explanation for why Anheuser-Busch is acquiring craft breweries.

Herron, who worked in finance in the beverage industry, starts by explaining that goodwill—the value of a brand above its physical assets—makes up more than 50 percent of A-B’s assets, $136.5 billion to be exact. However, if A-B’s flagship brands, Budweiser and Bud Light, continue to lose market share, A-B will have to take an “impairment charge” to reflect the brands’ loss of value. That charge would amount to tens of billions of dollars, which would clobber the company’s stock price.

Impairment charges are looming because A-B positioned Bud and Bud Light as “premium” brands, which commanded a higher price and were perceived as superior to competing brands. However, with the growth of the craft beer sector, Bud and Bud Light are no longer considered “premium”. Nor can A-B restore those brands to premium status by raising prices, because doing so would cause them to lose even more market share, this time to Miller and Coors.

Back to the craft brewery acquisitions. Herron believes that A-B bought them for two reasons. The first is to capture some of craft beer’s growth and, at the same time, slow it down. The acquisitions help capture growth; meanwhile, A-B’s sheer size allows gives it an advantage over independent craft breweries. It can use its buying power to secure raw materials, push its craft brands through its distribution network, and spend heavily to market those brands. A-B’s second objective is to regain the goodwill associated with the Bud and Bud Light brands. Aggressive competition by A-B’s craft breweries will force independent craft brewers to cut prices; that, in turn, would narrow the price gap between craft and A-B’s brands, and diminish the perception that those brands are no longer premium.

Herron sums up A-B’s strategy:

The impairment charges AB InBev could face are worth billions more than any craft brand they have purchased, and those purchases would be a small price to pay to save a legacy brand. These craft brands, whether they realize it or not, may just be pawns in the AB InBev game of chess. AB InBev is not a collaborator, they are a competitor, and a damn smart one. If one of these craft brands they buy is a successful long-term brand, great, but more important to AB InBev, is the vital role they play in the short-term of ensuring that their premium brands retain long-term value.

The Friday Mash (Carnegie Hall Edition)

On this day in 1891, Music Hall in New York City—later known as Carnegie Hall—staged its grand opening and first public performance. The guest conductor that day was none other than Peter Ilyich Tchaikovsky.

And now (cue up the music)…The Mash!

We begin in Bozeman, Montana, where Amy Henkle’s Happy Dog Beer Company is brewing “beers” for dogs. They don’t contain alcohol or hops; instead they’re a supplement to be poured on top of regular dog food.

Thirty-five years ago, Knoxville hosted a World’s Fair. Several city residents have teamed up to brew a beer celebrating the fair. It will be available through October, when the fair closed.

Sacramento Bee correspondent Blair Anthony Robertson wonders why new breweries price their beer at world-class levels. High prices result in disappointed customers and ruins the brewery’s goodwill.

If you hold bottled beer by its base, you’re holding it wrong. You should hold it by the neck to prevent the beer from getting warm—just as you should hold a wine glass by the stem.

When a Finnish brewery released a 100-pack of its beer, rival brewery Nokian Panimo one-upped it with a 1,000-pack of Kaiseri beer. To buy one, you need 2,160 euros ($2,350)—and a truck.

Researchers in the UK have found that beer is a more effective pain reliever than generic Tylenol. Having three or four beers—resulting in a BAC of .08—reduces pain by up to 25 percent.

Finally, today is Cinco de Mayo. The Chicago Tribune’s Josh Noel prepared for it by drinking Mexican beers in an effort to find out why they’ve become so popular. The answer is a “complex mix of demographics, marketing, history and nostalgia”.

Trendy Beers: A Bad Business Decision?

Boston Beer Company’s slumping sales have been a topic of conversation in the craft beer community. Author Jeff Alworth blames the company’s propensity to chase trends. Alworth explains:

Boston Beer has made a series of decisions that may have resulted in short-term profits–spinning off alcoholic apple juice, tea, and seltzer divisions–but they enhanced the sense that this was a big company as bland and personality-free as Kellogg’s or Proctor and Gamble. No one could ever fault Sam Adams for failing to release new beers, but the ever-multiplying new lines of random beer types (IPAs, barrel-aged beers, nitro cans) has created a brewery with no there there.

Trend-chasing isn’t limited to Boston Beer. Breweries across the country are scrambling to bring out their versions of grapefruit IPAs, golden ales, and New England IPAs. If the past is any indication—remember the wheat beers of the 1990s?—today’s fad beers stay trendy very long.

According to Alworth, breweries that specialize in trendy beers fail to establish a connection with their customers. That connection is more important with beer than with other consumer products. He cites four examples—Sierra Nevada, Hill Farmstead, Schlenkerla, and Genesee—each of which has a distinct “personality”. Those personalities are built in collaboration with their drinkers, who expect the beer will embody that personality.

The Friday Mash (Emerald City Edition)

Fifty-five years ago today, the Century 21 Exhibition aka the Seattle World’s Fair opened. It was the first World’s Fair in America since World War II. Surviving structures from the fair include The Space Needle, the Seattle Monrail, and Seattle Center.

And now…The Mash!

We begin in Boston, where Daradee Murphy unveiled a novel strategy for tackling the Boston Marathon’s infamous “Heartbreak Hill”: beer instead of water as her hydration drink of choice.

Once a hot trend, black IPA lost its mojo last year. However, Bryan Roth of All About Beer magazine says that the style is down but not out: several breweries are rolling out new versions.

Sierra Nevada Brewing Company has announced the dates and cities for Beer Camp on Tour 2017. This year Beer Camp collaborative series will feature six domestic and six overseas craft breweries.

Five years ago, a startling archaeological discovery in modern-day Turkey provided evidence that it was beer, not agriculture, that led human beings to abandon their hunter-gatherer ways and begin living in communities.

Vijay Mallya, India’s “King of Good Times”, is under arrest in England. Mallya, who inherited United Breweries of Kingfisher beer fame, faces fraud and money-laundering charges in his home country.

The former head of a global recruitment firm says it’s time to get rid of the “beer test” for new hires: it leads to poor hiring decisions, discriminates against non-drinkers, and makes the workplace less diverse.

Finally, women’s advocacy group FemCollective is sponsoring an all-female beer festival in Fort Lauderdale, Florida. FemAle will highlight female beer experts and brewers from across the country, and men as well as women are welcome to attend.

Jim Koch Sounds the Alarm

Boston Beer Company jump-started America’s craft beer movement and made its founder, Jim Koch, a billionaire. But in a recent op-ed in the New York Times, Koch warns craft’s run might be coming to an end.

Koch calls industry consolidation the number-one culprit. In 2008, federal antitrust regulators not only approved the MillerCoors joint venture, but they also gave the green light to InBev’s acquisition of Anheuser-Busch. That left two brewing giants in control of 90 percent of America’s domestic beer protection. Making matters worse, the federal government allowed the big brewers to buy craft breweries—and then fail to disclose that they were the new owners.

Those mega-mergers resulted in higher beer prices and pink slips for American workers, as well as consolidation among distributors. Today, in most markets, more than 90 percent of all beer is controlled by distributors who depend on either A-B InBev or MillerCoors for most of their volume. Those distributors have considerable power regarding promotion, shelf space, and marketing support for the brands they handle—and they have an incentive to give preferential treatment to craft brands the big brewers now own.

According to Koch, the key to saving American craft beer is stricter antitrust enforcement. He names China and South Africa as countries whose regulators imposed strict conditions on big brewery mergers to protect their domestic economies.

The Friday Mash (“Long Live the King” Edition)

On this day in 1603, James VI of Scotland becomes James I of England and Ireland upon the death of Queen Elizabeth I. The kingdoms of Scotland and England remained sovereign states, with their own parliaments, but both were ruled by James in personal union.

And now….The Mash!

We begin in Vancouver where last week, the Railtown Pub advertised its St. Patrick’s Day celebration with a Guinness glass filled to the brim and literally losing its head. That caught the attention of the Irish Independent newspaper, which called the pour “sacrilegious”.

Now that the Chicago White Sox’s partnership with MillerCoors has expired, the ballclub has formed a new partnership with Constellation Brands, which will open “Casa Modelo” at the ballpark.

While on spring break in The Bahamas, a frat boy used the teeth of a beached shark to puncture a beer can so he could “shotgun” it. His video of the stunt prompted a swift—and angry—backlash on social media.

Portland, Oregon, is about to get a beer bar devoted to session beers. Its name, naturally enough, is Sessionable. The bar will pour 30 beers, all with ABVs ranging from 2.5 to 5 percent.

Neil Patrick Harris, who the spokesperson for Heineken beer, says that he has a Heineken Light tap in his bar at home. He adds that unlimited beer at home “is as awesome as it sounds”.

According to a recent survey, one out of four beer drinkers said they would switch to marijuana if it became legal in their state. If they do switch, brewers will suffer $2 billion per year in lost sales.

Finally, MLive.com asked eight brewery owners in the Grand Rapids, Michigan, area whether the craft beer industry is in a bubble. They don’t think so, but some admit that the market is getting tougher for new entries.

The Friday Mash (“Sell High” Edition)

On this day in 2000, the Nasdaq Composite stock market index peaked at 5132.52, thanks to investors who bid up dot.com shares to astronomically high prices. Those who didn’t take profits got a nasty surprise: the Nasdaq fell by more than 50 percent by year’s end.

And now….The Mash!

Fittingly, we begin on Wall Street, where big breweries’ stocks haven’t been doing well. According to SeekingAlpha.com, the only company whose shares are trading near their 52-week high is Kirin Holdings Company.

Congress is considering a bill that would cut taxes for small brewers. The bill’s supporters contend that lower taxes would enable breweries to expand production, add jobs, and attract more visitors.

Session IPA is popular, but opinions vary as to its definition. Draft magazine has published a scale which shows how much these IPAs vary in alcoholic strength and, especially, perceived bitterness.

A few years ago, Emily Hengstebeck and her friends partied together at beer festivals. Now employed by a brewery, she found herself on the other side of the table. She describes what it’s like.

More than 7,000 CraftBeer.com readers filled out a survey asking them what was their state’s favorite beer bar, and why they liked it. Without further ado, here are the winners in each state.

It’s still “Miller Time” in Chicago. According to BevSpot, Miller has a more than 8-percent market share in the Windy City, more than twice the brand’s market share nationwide.

Finally, a Virginia brewery will release a beer honoring Secretariat, the 1973 Triple Crown winner, at a birthday celebration this month. The horse was nicknamed “Big Red”; the beer is an imperial red India pale ale.

How Many of These Beers Have You Enjoyed?

Last month, Food & Wine magazine asked 21 members of the craft beer community to rank the most important craft beers of all time. Josh Noel of the Chicago Tribune decided to follow up with his own top 25.

What makes a beer important? Noel elaborates:

To me, the definition is simple: It’s one that either changed consumer tastes or how breweries approach making beer. Some of the beers below have influenced both drinkers and brewers. Others hew more in one direction than the other. Others find their power in the brand or the package even more than the beer.

Noel agrees with much of the Food & Wine list, but also take several exceptions. You might, too.

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