Backlash
The big-beer ownership behind these brands has led some independent
brewers and their supporters to deride them as “stealth beers”
or “pseudo crafts.”
Jim Koch, president and founder of Boston Beer, the nation’s largest
craft brewery (and a company that is derided on occasion as having
gotten too big itself ), argues that the definition of a craft brewery is small,
independent and authentic, meaning it can’t produce more than 2 million
barrels, and can’t be owned by a larger brewer.
But Coors’ Hehir argues this definition ignores the care and steps
a brewer takes in brewing his or her beer.
“It’s carefully-crafted, it’s a complex recipe and it takes a lot of time
to brew,” Hehir said of Blue Moon.
Whatever words get used to paint the picture, it’s clear the brewing
landscape is changing.
Mark Selner, beer buyer for Surdyk’s Wine and Cheese Shop in the
Twin Cities, sees the end result of that every day.
Even though Surdyk’s is just a few short miles from the University
of Minnesota’s campus, an increasing portion of the store’s beer sales
are driven by craft or specialty beers. Selner, who started at the store in
1973, said there were maybe a few dozen beers in the early days, mostly
old regional favorites like Augsberger. Today, Selner estimates the store
carries close to 300 different kinds of beer, largely to accommodate
the never-ending search to try something new.
“People are into the unusual. Highest this, most that; the beer with
the sharpest hops, the most alcohol,” he said.
And small liquor stores aren’t the only ones taking notice. Greg Maurer,
executive vice president for the Heidelberg Distributing Co., points
to large grocers and discount clubs such as Pittsburgh’s Giant Eagle Supermarkets
that are restocking their coolers in states that allow beer and
wines sales to reflect a more diverse offering.
“If nothing else it is a statement they are making that they are willing
to service their customers’ needs and wants,” Maurer said.
Building a bigger ring
Brewers and wholesalers often point
to one of two factors to explain the recent
surge in craft brews and imports. One is
a growing wealth of upper-middle class professionals
who often work hard and spend
even harder. The other is the so-called
identity factor. With more disposable income,
consumers are looking for brands or
products that set them apart, that communicate
their likes and dislikes, their social
status. Maurer sees both factors at play.
“It’s that high-discretionary-income, young consumer. They’re doing
it partly for the identity factor, partly because of high income, and partly
because of flavor. It becomes ‘Who am I?’ and ‘Can I define who I am
by what I drink?’” Maurer said.
Convenience stores and other off-premise retailers can benefit greatly
from this kind of soul-searching. While a six-pack of 12 oz. Budweiser
or Miller bottles may cost retailers $4 and retail for $5.49 plus deposits,
the same six-pack of Sam Adams or Flying Dog may cost $5.25 and sell
for anywhere from $7 to $7.50. That’s roughly the same profit as import
beers, and is at least 16 percent better profit than most mass domestics.
“It’s a good volume and it’s a really good ring, so it’s a high margin item
that moves pretty well,” Harrison said.
Like many, Coors’ Hehir sees Starbucks as an example worth emulating.
While Starbucks redefined coffee as a luxury item at $5 per cup, it has also
created a luxury lifestyle: customers who stop in for a latte often leave with
a cookie, a compact disc, or a book. Beer drinkers who spend more per
bottle also will make impulse buys, something that retailers appreciate.
“I think people let the situation guide them. Sometimes it’s a craft
brew. If they are mowing the lawn and just want something that’s easy-todrink
and refreshing, it might be a Coors. The ideal is for them to
walk out with both,” Hehir said.
Loud footsteps
In 1990, Jim Koch predicted “better beers,” crafts and imports, would
account for 20 to 30 percent of domestic beer sales and craft beers would
account for “at least a third of that” by 2010.
With three years to go craft brewing still has a way to go, but it has
pushed its head above the 5 percent mark for the first time.
“To me great beer is a great beverage,” Koch said in January. “I think
people are thirsty for quality, flavor, variety and authenticity in their beverages
and that is where I think the growth is.”
But there’s something different in this craft boom than the one Koch
rose to prominence in during the1990s. For one thing, he said, the
brewers are a lot more professional.
“In some ways crafts grew so fast in the beginning of the 1990s that I just
think there was an adjustment to a more modest growth spurt,” he said.
While specialty and craft brewers may be the toast of the town now,
they have reason to be looking over their shoulder, said Maureen Ogle,
author of Ambitious Brew: The Story of American Beer.
Ogle notes that for all their growth, craft brews still account for only
6 percent of the nation’s beer. The other 94 percent comes from Big
Brewers. Anheuser-Busch alone accounts for half the beer sold in the
U.S. Budweiser, 18 percent.
The reason big brewers seemed to fail during the first craft revolution
during the nineties was partly because they didn’t take it seriously,
Ogle said. Brewers like Anheuser-Busch seemed to think they could
find any pre-Prohibition beer recipe, slap an old-timey label on it and it
would sell regardless of what it tasted like.
Fifteen years later, Ogle thinks they’ve smartened up. Gone is the
haphazard approach to brands; back is massive influx of investment that
characterized the post-World War II era, when brewers like Anheuser-
Busch, Coors and Miller survived a sustained drop in beer consumption
by adding capacity, exploiting every possible niche or fad imaginable and
innovating until the Baby Boom reached legal drinking age.
Ogle sees gluten-free beers, like Budweiser’s RedBridge, as an example
of the sound, long-term investment big brewers are making.
“They are just getting a lot smarter,”
Ogle said.
Consolidation is also helping reinvigorate
the brewing industry, Ogle said. South
African Breweries 2002 purchase of the
Miller Brewing Co. from Philip Morris
started that company on a track to rediscovering
its brewing roots. Successes like the
company’s chocolate lager show, in a limited
way, how much the Milwaukee brewing
company is refocusing itself on beer. So
does A-B’s regional beer program.
If major brewers were to get organized, independent brewers and retailers
would have plenty of reason to be worried. With their vast distribution
networks, big brewers can exert tremendous control over retailers and the
beer they stock, even pulling their major brands if a retailer isn’t cooperating.
That, combined with acquisition and advertising budgets that would
make most European countries quaver, mean things could get a lot nastier
before they improve.
“Anheuser-Busch and Miller could be way more aggressive exploiting
their marketing advantage and throwing their advertising dollars around. I
think a lot of those small brewers are going to go away,” Ogle said.
Like any small business, independent craft breweries also face questions
about succession. Many of the nation’s craft brewing pioneers are
graying. Grossman, Koch, and Anchor Steam’s Fritz Maytag are all nearing
retirement age.
How long can craft brewing’s growth last? Like Koch and other craft
brewers, Ogle can’t say for certain, but she doesn’t see beer drinker’s
thirst for the unusual drying up any time soon.
“Now, kids are used to going into the grocery store and seeing 35 different
kinds of beer from 34 different brewers. I don’t see that going away.
I think there is always going to be a segment, a small segment of the
market that always gravitates to choice, just like they want 500 channels
on cable,” she said.
What might change, though, is that the big brewers seem to be pretty
interested in making some off-beat programs of their own.