CNN - Don't Let Big Brewers Win Beer Wars

Discussion in 'Beer News' started by pitweasel, Dec 13, 2012.

  1. pitweasel

    pitweasel Advocate (550) New York Jun 11, 2007 Interesting opinion piece with some pretty sad numbers and information about distribution systems, ownership, etc.

    One line that caught me by surprise..."Both members of the duopoly have wholly owned brands like...Goose Island that are presented as craft brands." Yeah, I know GI is owned by AB-InBev. But to think of Bourbon County Stout as a beer that's "presented" as a craft beer just strikes me in an odd way. I realize "craft" is technically defined by the number of barrels a given brewery sells each year (right?), and if I understand GI's history correctly, their flagship beers seem to have been created by a smaller micro brewery. And if that's the case, I'll still view the brews as craft based on their origin, not their current production means. I may be wrong on the beginnings of Goose Island though, so feel free to set me straight if I'm way off here.

    Any other thoughts on the article? First time I'd seen "silver and blue" or "red" used to designate distributers.
  2. jesskidden

    jesskidden Champion (835) New Jersey Aug 10, 2005 Subscriber

    Author Steve Hindy (ex-owner, still president of Brooklyn Brewery) is also on the Board of Directors of the Brewers Association, so he's going to use their definition of a "craft beer". Besides yearly barrelage ("under 6m bbl"), the B.A. also says that a "Craft Brewer" must be "Traditional" and "Independent". Once Goose Island came under AB's ownership umbrella (back when Widmer first bought into GI), the Brewers Association stopped considering GI a craft brewery and their beers were no longer "craft".

    The B.A. site used to include a phrase something to the effect of "...craft beer can only come from a craft brewer..." (i.e, even those beers that fit the definition once, are no longer "craft" once ownership changes, even if the recipe doesn't).

    Never heard that, but don't know GI's history very well. Perhaps a reference to GI's actual corporation name being "Fulton Street Brewing Co. LLC"?
  3. otispdriftwood

    otispdriftwood Advocate (570) Colorado Dec 9, 2011 Verified

    As long as there are craft beer drinkers, there will be craft beer. If the big brewers are at all successful in curtailing the wide distribution of craft beers, then I imagine craft beer drinkers will be forced to drink locally. I don't imagine Sam Adams or Sierra Nevada would have much of a problem but it's the medium sized brewers who will. This is perhaps a reason why some of the breweries that have chosen to not expand and limit their distribution have done so. The local nanobreweries who just sell from the brewery or the immediate local area will be ok. There will be craft beer even if BMC take over 99% of the market - you just won't have the selection. And personally, there's nothing BMC can do to make me drink their beer. I'd rather switch to liquor.
  4. pitweasel

    pitweasel Advocate (550) New York Jun 11, 2007

    Ah, but this is exactly what concerns me.

    Locally, my options are somewhat limited and a touch on the pricey side. There's nothing that I'd consider "great" that I can get in bottles at a fair price ($7-8 a bomber, ouch), and the reasonably priced offerings aren't much above "okay". So in a theoretical scenario where craft brewing gets knocked back down to a local-only level due to the economics of distribution, my options become:

    1) Suck it up and pay more for beer that I'm really not wild about.
    2) Pay less for beer that I don't actually want to drink (i.e. Bud, Coors, etc).
    3) Buy the beer I do enjoy at a high price - but much, much less of it.

    Now for me, the first two are fairly obvious non-options. Leaving the third - buy less. And if an entire town of drinkers feels the same, then it becomes harder for a craft brewery to exist at even the smallest scale.
  5. otispdriftwood

    otispdriftwood Advocate (570) Colorado Dec 9, 2011 Verified

    By where you are located, I guess it depends on what you call "locally".
  6. I sometimes get pasted for by cynicism of the expression "craft beer" but this situation may arise.
    A superb brewery recognised as the best in the country is bought up by say InBev.No changes are made, the brewery runs totally independently and beer quality is unaltered.But it ceases to be a craft brewery and presumably the beer is no longer craft beer.
  7. youbrewidrink

    youbrewidrink Advocate (720) Vermont Apr 9, 2009 Verified

    If local craft brewers make good beer, I don't see a problem. It's like any local product, I personally don't mind paying a premium to support a local business.

    If large craft brewers grow to the point that they have huge distribution issues, why should I fight their distribution battles, they are the ones making the money off it.

    I'm happy trading my great local craft beer with BA's offering up their local craft beers.
  8. pitweasel

    pitweasel Advocate (550) New York Jun 11, 2007

    Well, if a brewery can't get distribution and their beers can only be sold at the brewery, to me "locally" would mean something within about a half hour drive. My current city (which I haven't even been in for four months) is an hour from Victory, for example. Storm King? Delicious beer. Would I drive two hours round trip to get it? Absolutely not.

    Spring House sells some great stuff, and they're about 25 minutes away. I'd buy it more, except last I knew, they bottled a very limited number of their offerings. And when they do put their good limited run stuff in bombers, it ended up being something like $9 each - way too much for my budget, unfortunately. And growlers? Not for me; yes, I really am that much of a lightweight.
  9. frazbri

    frazbri Advocate (695) Ohio Oct 29, 2003

    "Given this, I am baffled by the state of the U.S. brewing industry. How did we ever get to a situation where two companies control 80%? And how can we allow them to control more?"

    And this is the heart of the matter not the craft/crafty noise. ABInbev is starting to assert control over it's distributors in a manner that should concern us all. Unfortunately, most of us won't notice until our favorite brewer's wares disappear from the shelves due to changes in the distribution network.
    Kuemmelbrau, SammyJaxxxx and JediMatt like this.
  10. ...and it may be even more subtle than that. Less start-ups, slower expansion, etc.
    SammyJaxxxx likes this.
  11. otispdriftwood

    otispdriftwood Advocate (570) Colorado Dec 9, 2011 Verified

    Lightweight? Are you referring to 64 oz. growlers? If so, I'm a lightweight as well. I go for 32 oz. And as far as locally, mine starts at an hour's drive and would go to 2 hours if it's worth it. How about Troeg's in Hershey?
  12. steveh

    steveh Champion (895) Illinois Oct 8, 2003

    If you mean when they were first formulated, they were brewed at their pub at 1800 N. Clybourn in Chicago. It was the popularity of the pub that spawned the micro on Fulton St. and bottling production -- and ultimately, the likes of the specialty beers such as Bourbon County Stout.
  13. Brew33

    Brew33 Advocate (680) Ohio Oct 24, 2007 Verified

    I don't even know why I read this stuff anymore..... The same tired ass arguments and accusations over and over and over again.
    VonZipper, albertq17 and steveh like this.
  14. epk

    epk Savant (360) New Jersey Jun 10, 2008 Verified

    Yes, this is the point. Not quality or types of beers or who likes to drink what. Considering they are both international conglomerates, how do US antitrust laws apply? I can make an educated guess that their team of lawyers makes sure they aren't caught up in such matters.

    This is actually a thread where posts from our law advocates are applicable.
  15. jesskidden

    jesskidden Champion (835) New Jersey Aug 10, 2005 Subscriber

    The DoJ made InBev sell off the rights of the Labatt brand and made the new owner (NAB) commit to finding another brewer for the brand other than ABInBev, as a condition of that merger. Currently, the purchase of 50% of Grupo Modelo they don't already own is under review of the DoJ, even after ABInBev had announced that they would sell the US rights to the brand (as well as the other half of the import company) to Crown. There some speculation that ABInBev might have to do more - sell some of their minor US brands (Michelob - Busch- but who's got the money to buy them?) or even some US or Mexican breweries (ditto).

    The DoJ did allow SABMiller and MolsonCoors to merge their US subsidiaries into one company, MillerCoors - mostly because it was seen as the last chance for giving AB in the US some competition. Miller had shot to #2 in the '70's (thanks to parent Philip Morris' money) but had been pretty stagnant as far as market share by the late 80's, as AB continued to grow and take most of the share as Pabst, Heileman and Stroh died in the '90s.

    But, in general, the history of anti-trust regulations in the US brewing didn't really slow down the oligopolization of the industry which resulted in that 90% of the beer brewed here is from two companies. Indeed, there are some who feel that some of the anti-trust moves actually contributed to it.

    In particular, a DoJ ruling back in the late '50's when A-B bought the small American Brewing Co. of Miami, Fl. A-B itself, though again the #1 brewery in the US (after a few years of Schlitz at the top again), had under 10% of the US market but was larger in the local FL market. AB had to sell the brands (Regal) and the brewery (bought by National) and was prohibited from buying other brands or breweries without pre-approval from the DoJ.

    This had the opposite effect that desired, in retrospect, because what it meant is that AB then grew by building it's own brands and building nice new modern, efficient, automated greenfield breweries while their major national competition of the era (Schlitz, Falstaff, Carling... and later companies like International, Heileman, Associated, Stroh) grew by buying old, urban inefficient labor-intensive breweries and often also continuing to brew the local/regional brands rather than creating strong national ones. Slowly, AB pulled away from the pack, with their superior efficiencies and other advantages.

    Going back and looking at the last half of the twentieth century at some of anti-trust decisions for other mergers, they're almost laughable now in what little effect they had. Pabst had to sell off Blatz after buying them in the late '50's, Schlitz got into legal trouble buying Burgermeister and Lucky Lager (General Brewing) in California (as well as Lucky's parent, Labatt) in the mid-60's.

    In the '80's, the DoJ didn't allow a proposed Heileman-Schlitz (#3 at the time) merger instead allowing Stroh to buy Schlitz yet allowed Heileman to buy Pabst (#3), keep their hottest brands (Henry Weinhard, Lone Star) and a couple of their breweries in regions of the US where Heileman was weak (OR, TX, GA) and then spun-off a "new" Pabst- so weak that it was gobbled up a few years later by the Paul Kalmanovitz's S&P (Falstaff, General, Pearl).
  16. djaeon

    djaeon Champion (755) California Oct 2, 2006

    There's a 4th option. Brew your own. If you're in a place where that's legal.
    Kuemmelbrau likes this.
  17. epk

    epk Savant (360) New Jersey Jun 10, 2008 Verified

    Thank you for that Jess. Always a wealth of information. So in other words, left in the DoJ's hands, we're all doomed. :p
  18. I'm with those who say there will always be craft breweries where there is demand.

    It seems to me if the macros did pressure their distributors into dropping craft beers, there'd be a lot of demand for a distributor of craft beers. I don't have a PhD in economics or anything, but it seems to me that what we have here is a simply supply and demand problem: obviously craft breweries want and need more distributors...that demand isn't being met now let alone if AB pressures their distributors into dropping other brands. So what we should really be worried about isn't AB's power over the current distributors that built their biz on AB's products, we should be thinking about what is stopping new distributors from getting into the market. I honestly don't have the answer to that, yet.
  19. epk

    epk Savant (360) New Jersey Jun 10, 2008 Verified

    Seriously though, at what point does a multi-billion dollar corporation decide they have enough? Maybe I just can't understand from this side of the looking glass. Maybe they need to start donating more to the public they get drunk.
  20. It is legal in 48 States. The 2 where it is not legal are Mississippi and Alabama.
  21. epk

    epk Savant (360) New Jersey Jun 10, 2008 Verified

    I wouldn't be surprised if that was also something to do with the big boys...

    On a lighter note, I met the owner of Konrad (AB distributor in NJ) and some of his staff at a Unibroue tasting once. Nice people, and though he gave me a spiel about why AB makes decent beers (which I guess you would except), I could also see that he had an appreciation for craft - which his company does quite a bit of distributing of in the area. Considering the growing demand and inventory that local stores/bars have of good craft beer, I find it hard to believe he would be swayed away from carrying what he can.
  22. I'd believe that. But from studying and writing about regulations for the last 5+ years I've learned that the only way big companies can "cheat" the system is because of the system itself. So, I'm always looking for a way to improve the system rather than just stopping one bad actor.
  23. pitweasel

    pitweasel Advocate (550) New York Jun 11, 2007

    Or if you're home more than two months of the year, and don't get called to leave for weeks at a time on a day's notice :/
  24. Danielbt

    Danielbt Savant (380) Texas May 4, 2012

    What, unintended consequences from government meddling? Unthinkable!
  25. rlcoffey

    rlcoffey Advocate (515) Kentucky Apr 20, 2004

    You not only keep reading it, you comment too. Weird.
  26. InBev and SAB Miller could really care less about taking over an entire breweries full line up mostly they are concerned with the value of the breweries name and a few brands and any unique processes. Example GooseIsland has an established reputation, beers like 312 and honkers easy to mass produce and get wide distribution, GI's niche in the market is its barrel program.

    So now you have a classic staple beer like 312 thats approachable to pretty much all beer drinkers. Also a top of the line high end product.

    Its also more noticeable at craft beer festivals in many cases Bud or Miller wanted and could afford to be a big sponsor and would have their large station and most people walked by and kind of chuckled and the only people that stopped by were those who were not big beer fans that just came for fun. Now Ive seen alot more sponsored by GI.

    What I hope doesnt happen in large amounts is that up and coming breweries with large expansion potential all through out the country start getting pretty big offers that are hard to ignore, and InBev starts saying hey look we really would like to buy you and have your beer distributed in every state, but we are looking at similar breweries and if your not interested we can go to the next name on are list. This just would start to increase the grey area between the two markets.

    Its a really tough situation to be in I imagine being up and coming in the industry and having a large offer. As much as we would like to say I wouldnt sell out. If you are not fully established name in the industry with 10 years or more of proven success its enticing. If I worked for the BMC it would be any easy pitch to make. Hey you know that beer you started brewing in your garage that all your friends loved and the one that you turned into a bussiness so more people could try it. I dont want to change the recipe one bit but I want to every person in every state the opportunity to try it. Who knows we might be able to send it to countries around the world. If you want you can still run the brewery and we will pay you a bunch to do so or we want you to be a special consultant for us and help develop more beers