Industry News

Forecast for 2017: Craft Beer Turf Wars

The number of craft breweries continues to grow rapidly, while the growth of the craft sector is slowing. Which means something has to give.

Jason Notte of Marketwatch.com predicts that 2017 will be the year of the turf war; there will be less mergers-and-acquisitions activity and more competition among breweries to claim shelf space.

This could be the year that craft breweries lay off workers and make other cuts in an effort to trim costs. Industry leader Boston Beer Company has been hit hard by shrinking sales of Samuel Adams Boston Lager; the company’s shares have tumbled 50 percent from their 2015 high.

We’re also likely to see more breweries bring in private-equity firms. Already this year, Victory Brewing Company and Southern Tier Brewing Company have formed such partnerships with such firms.

And we’re likely to see smaller brewers focus on taproom traffic and food sales and avoid the battle to get their products on store shelves and on bar and restaurant menus.

Notte believes that Oskar Blues is the brewery to watch because it has been the craft sector’s trend-setter for years. The brewery was the first to can its beers and the first to build a second facility in the eastern United States. Two years ago, it kicked off the private-equity trend when it sold a majority interest to Fireman Capital. It then used some of that money to acquire craft breweries in Michigan, Florida, and Texas; the latter two states are considered underserved beer markets. Oskar Blues also borrowed from the big national brewers’ playbook. It rolled out more mainstream beers, sponsored sporting events, and put an emphasis on brand recognition.

Notte concludes, “Whether drinkers benefit from [this] turf war or become victims of it remains to be seen.”

The Friday Mash (Georgia Bulldogs Edition)

On this day in 1785, the University of Georgia opened its doors. UGA is the first state-chartered university in the United States, and is the birthplace of the American system of public higher education.

And now…The Mash!

We begin in Massachusetts, where the state’s top liquor regulator is “ready to put everything on the table” in an effort to modernize the liquor code. That includes lifting Draconian limits on the number of licenses a community can issue.

Craft beer—sort of—is on the shelves at Wal-Mart. Its brand name is Trouble, it’s apparently contract-brewed by Genesee Brewing, and it got panned by a panel of Washington Post staffers.

Jake Tuck of Eater magazine explains “beer poptimism”: a growing appreciation of beers that are “unassailably popular, widely accessible, and highly quaffable”. Yes, that means macro brews.

In Bishkek, the capital of Krygystan, two women have opened a craft brewery called Save the Ales. Much of the beer sold in that country consists of bland imports and watery local products.

A startup called Colorado Craft Distributors aims to serve “small but special” breweries looking to get their beer into liquor stores, bars, and restaurants along the state’s Front Range.

Brooklyn Brewery has made a beer using Saccharomyces carlsbergensis, the lager yeast isolated in 1883 by Emil Christian Hansen, a researcher at the Carlsberg Laboratory in Copenhagen.

Finally, actor Matt Damon, the co-founder of Water.org, has joined forces with the brewer of Stella Artois beer to bring clean water to people in developing countries. Every pint of Stella sold in Britain guarantees someone a month’s supply of water.

Pabst’s Unusual Business Model

Pabst Brewing Company has 2 percent of the American beer market, which puts it in a class with Boston Beer Company and D.G. Yuengling & Son. But under Eugene Kashper, Pabst’s busimess model is much different than that of Boston Beer and Yuengling.

Jason Notte of Forbes magazine, who recently interviewed Kashper, writes that Pabst’s CEO is “also digging into corners of the beer industry where the competition hadn’t tread and using its strengths in marketing, production and scale to take on the big brewers on a much smaller budget”.

Kashper told Notte that his portfolio was “kind of in a sweet spot between big beer and craft” because his legacy brands not only have a following, but also own a library of recipes for craft-like beers that he can sell for less than the going price of craft. Kashper’s success stories include Stroh’s Bohemian, Old Style Oktoberfest, and Rainier Mountain Ale, all of which have strong regional ties.

In addition, Pabst has entered into partnerships with craft and import brewers to enable it to penetrate those segments of the market. Those partnerships emphasize the strength of Pabst’s distribution and grassroots marketing, which Kashper hopes will give it a fighting chance against brewing giants Anheuser-Busch and MillerCoors.

The Friday Mash (Hail Fredonia Edition)

One hundred and ninety years ago today, Benjamin W. Edwards rode into Mexican-controlled Texas and declared himself ruler of the Republic of Fredonia. Edwards is not to be confused with Rufus T. Firefly.

And now….The Mash!

We begin in Germany, where the Bayern Munich football team treated Ingolstat’s players to sausages and beer. Ingolstat upset Leipzig, enabling Bayern to move into first place in the Bundesliga.

A former NASA biologist has developed a genetically engineered strain of yeast that makes beer glow under a black light. His “fluorescent yeast kit” contains genes from a jellyfish.

MobCraft Beer, a Milwaukee brewery that lets the public vote on new products, was was heavily criticized after “Date Grape” was one of the finalists. The brewery has apologized for the sexual assault reference.

Writer Jay Brooks tells the fascinating story of the Americas’ first Western-style brewery. It opened near Mexico City in 1544, with a team of brewers imported from Flanders.

Country music artist Sunny Sweeney’s song “One More Christmas Beer” celebrates family dysfunction. Sweeney says that the lyrics are inspired by actual events.

Next month, Chicago’s Field Museum will start serving PseudoSue, a pale ale brewed by the Toppling Goliath Brewing Company. The ale celebrates “Sue”, the museum’s beloved T-Rex skeleton.

Finally, Colorado’s craft brewers are engaged in soul-searching. This year, they’ve had to contend with Anheuser-Busch’s takeover of Breckenridge Brewing Company and a legislative battle over selling full-strength beer in grocery stores.

The Friday Mash (Mickey Mouse Edition)

On this day in 1928, The Walt Disney Corporation released the animated short “Steamboat Willie”, the first fully synchronized sound cartoon. It was directed by Walt Disney and Ub Iwerks. Disney considers this release to be Mickey’s birthday.

And now…The Mash!

We begin in England, where pub companies warn that the price of a pint is about to jump. Factors include inflation, higher costs of doing business, and the introduction of the living wage.

Game of Thrones actor Jason Momoa showed off his axe-throwing skills in an Instagram video. What makes his performance even more impressive is that he drank a beer immediately before he hit the bulls-eye.

FIFA, the world-wide governing body of soccer, is negotiating with officials of host country Qatar over whether beer will be served there during matches at the 2022 World Cup.

Effective January 1, 2019, Labatt will discontinue the 50-year-old tradition of issuing free beer for life to company retirees. The Canadian brewery is now owned by Anheuser-Busch InBev.

Travel blogger Emmanuel Marshall used Innis & Gunn IPA as currency to pay for transportation and lodging on his 5,000-mile trip from Scotland, the home of Innis & Gunn, to India.

Scientists at Rockefeller University have found that beer pong players expose themselves to numerous icky bacteria. The good news is that college-aged players have strong enough immune systems to cope with them.

Finally, the San Diego Union-Tribune named the five beers that put the city on the craft beer map: AleSmith Speedway Stout, Ballast Point Sculpin IPA, Green Flash Le Freak, Karl Strauss Red Trolley, and Stone Arrogant Bastard Ale.

The Friday Mash (Road Atlas Edition)

Ninety years ago today, the first numbering system for U.S. highways was approved. The 21 numbered highways in the initial group included U.S. 60, which ran from Chicago to Los Angeles; it was later renumbered and became the famous “Mother Road”, U.S. Route 66.

And now…The Mash!

We begin at the Samuel Adams brewery in Boston, where hundreds of fans lined up to buy bottles of limited-edition “Big Hapi” beer, brewed to honor now-retired Red Sox slugger David “Big Papi” Ortiz.

Beer aficionados reacted furiously to TV food and travel personality Anthony Bourdain’s comments likening the clientele at a San Francisco beer bar to the “(expletive deleted) Invasion of the Body Snatchers”.

A court in Stuttgart, Germany, ruled that breweries can’t use the word “bekömmlich”—“wholesome” in English—in their advertising because European Union regulations prohibit health claims in alcohol ads.

Dogfish Head Craft Brewery will start canning its beers later this month. Brewery CEO Sam Calagione is now convinced that canning technology can deliver a consistent, high-quality product.

The YouTube channel Celebrities in Golf Carts is trying to bridge the generation gap between Baby Boomers and Millennials with a new sport called Beer Pong Golf.

Dissatisfied with local distributors, Massachusetts’ Night Shift Brewing created its own distributorship. It’s offering breweries friendlier contracts, more personal attention, and deliveries of fresher beer.

Finally, in 1987, a Heineken retailer spread the untrue rumor that Mexican brewery workers urinated in containers of Corona Extra beer. That resulted in a lawsuit, and a public statement denying the rumor. Ten years later, Corona surpassed Heineken as America’s number-one imported beer.

The Friday Mash (Tool Time Edition)

On this day in 1960, Dr. Jane Goodall saw chimpanzees creating tools in a national park in Tanzania. It was the first time anyone had seen animals do that, and it exploded the long-standing belief that humans were the only species capable of tool-making.

And now…The Mash!

We begin in Norcia, Italy, where last week’s earthquake destroyed the historic Basilica of St. Benedict. Sixteen years ago, American monks acquired the basilica and set up a brewing operation to raise funds for its restoration.

Last year’s freakishly warm winter grabbed the attention of hops farmers in Washington State’s Yakima Valley. Fearing that global warming will bring on more such winters, they’re looking for ways to use less water growing the hops and less energy drying them.

An Israeli start-up called Glassify is selling beer glasses with an embedded microchip in the base. The chip can link to a smartphone app and send demographic information back to breweries, while offering consumers product promotions in return.

Texas authorities are looking for Achilles Salazar, a forklift operator who stole 719 twelve-packs of Dos Equis beer—$90,000 worth—from the distributor he worked for. A law-enforcement officer described the size of the heist as “most unusual”.

In Colorado, a driverless truck delivered a load of beer from Budweiser’s Fort Collins brewery to Colorado Springs. The truck was operated by Otto, a company owned by the ride-sharing company Uber.

Long Root Ale is the first beer to use kernza, the trade name for a type of wheat that originated in Asia. Because kernza is a perennial, it’s easier on the environment because farmers don’t have to plow up their land and re-plant the crop every year.

Finally, ten years after the Big Buck Brewery in Auburn Hills, Michigan, closed its doors, a local beer distributor bought the 50-foot-tall bottle that stood outside the establishment. It will be be transported to the distributor’s headquarters and repainted as a Bud Light bottle.

Craft Brewing’s Growing Pains

In the last couple of months, MarketWatch.com’s Jason Notte has seen disquieting trends in the craft beer industry:

  • Craft Brew Alliance’s Redhook brand announced layoffs at its Woodinville, Washington, brewery. The Woodinville plant is contract-brewing for Pabst Brewing Company, but the Pabst business accounts for only 30 percent of its capacity.
  • Stone Brewing Company, headed by fiercely independent CEO Greg Koch, admitted that it had received $90 million in private equity financing and would lend the Stone name to a hotel. It, too, is cutting jobs.
  • And homebrew supply retailer Northern Brewer has agreed to be acquired by than Anheuser-Busch InBev.
  • Notte doesn’t think these developments mean the craft beer bubble has burst. He writes:

    “If anything, it all begrudgingly recognizes that the players in all tiers of the beer industry have found themselves in the same predicament: Running a business in an environment where constant growth isn’t a given and where big decisions are often followed by unintended fallout.”

    The Friday Mash (Strait and Narrow Edition)

    On this day in 1520, Ferdinand Magellan discovered a navigable sea route separating South America and Tierra del Fuego. The treacherous body of water is now known as the Strait of Magellan.

    And now…The Mash!

    We begin in Columbus, Ohio, where Scotland-based BrewDog will have a brewery up and running late this winter. BrewDog is also raising capital by crowdfunding: you can buy shares for $47.50 each.

    It took him 16 tries, but reddit user “boomboomsaloon” finally succeeded in buying beer using a Blockbuster Video membership card as proof of age.

    “It’s like a death in the family”, said Revolution Brewing Founder Josh Deth after he recalled more than 10,000 barrels of beer that didn’t meet his brewery’s quality standards.

    Kirin Brewing Company, Japan’s second-largest brewery, will buy a 25-percent stake in Brooklyn Brewing Company. Kirin will introduce Brooklyn’s beers in Japan and distribute them in Brazil.

    Food blogger Kyle Marcoux aka The Vulgar Chef found a new way to pair beer and pizza. He made a koozie by rolling a square pizza base with pepperoni and mozzarella around a beer can.

    Engineers at University of Colorado have developed a process to make lithium-ion battery electrodes from the sugar-rich wastewater created in the beer-making process.

    Finally, beer writer Josh Bernstein says these six trends will be the talk of 2017: Marzen beers in the fall, the revival of Kolsch beers, juice-like IPAs, milk stouts, coffee beers, and fruited sour beers.

    The Friday Mash (Cubs Win! Edition)

    On this date in 1908, the Chicago Cubs last won the World Series. Managed by Frank Chance of “Tinker to Evers to Chance” fame, they beat the Detroit Tigers, 4 games to 1. Cubs fans are hoping their team can end their 108-year drought in this year’s playoffs.

    And now…The Mash!

    We begin in Detroit, where Ludwig’s beloved Lions will sell $3.50 beers during Sunday’s game against the L.A. Rams. The way the Lions are playing, fans need a few to get them through the game.

    D.G. Yuengling & Son is waging a last-ditch fight against the pending merger of Anheuser-Busch InBev and SABMiller. Yuengling argues that A-B is trying to keep it out of new markets.

    German scientists have found that beer causes less liver damage than hard liquor. The reason? Hops may inhibit the formation of reactive oxygen species, which can damage cells in the liver.

    Ken Pagan, the Toronto-area man accused of throwing a beer can at a player during a baseball game, better have his lawyer warming up. A Canadian attorney discusses Pagan’s legal problems.

    Two Copenhagen men have taken the idea of freeze-dried coffee and applied it to four of their craft beers. They’ve created instant versions of a coffee beer, a fruity IPA, a wild-yeast IPA, and a pilsner.

    After a church in Canyon, Texas, ran an anti-alcohol ad in the local paper, an establishment called the Imperial Taproom offered a discount to customers who brought in a copy of the ad.

    Finally, Fat Head’s Brewery had a very short reign as “Mid-Sized Brewing Company of the Year” at the Great American Beer Festival. Officials revoked the award after concluding that Fat Head’s, which has three locations, had been misclassified.

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