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Tuesday, October 22, 2013

The Future is Now

I have been thinking a lot about cider lately.  When you approach one fermented beverage with the mental framework from another, you can be in for a surprise.  For example, in Britain, to be called "cider" a product must contain 35% apple juice.  Thirty-five percent!  Large brewing conglomerates like AB InBev have been excoriated as the worst kind of corporate criminals by "craft beer" fans, but they don't peddle a product that is only 35% beer.  Beer is beer.

Nevertheless, they do excoriate.  The Brewers Association has done a great job of promoting the notion of "crafty," the imposter beer made by breweries owned by the wrong entity.  Or even beer made by breweries only subtly tainted by a connection to the wrong company (see Brothers, Widmer).  It has been pretty easy to hold this line because most of the breweries in America are still owned by people south of 70 years old.  But soon, very soon, that will change.  And those elderly gents or their families will sell their breweries.  Behold the latest example:
As European interest in American craft beers begins to mirror the mania for them stateside, the Duvel Moortgat Brewery of Belgium on Thursday announced a deal to buy the Boulevard Brewing Company, a craft brewery in Kansas City, Mo.
Because this deal involves a small brewing conglomerate that makes a mere 700,000 barrels a year (less than Sierra Nevada, New Belgium, and Boston Beer) and involves small, groovy Belgian breweries like La Chouffe and Liefmans (as well as Ommegang), it's BA-kosher.
As defined by the Brewers Association, a craft brewer must produce no more than six million barrels a year (a lower limit was dropped when the Boston Beer Company, maker of Samuel Adams, exceeded it). Any ownership stake by a non-craft alcoholic beverage company must be less than 25 percent. Otherwise, a brewery cannot be a voting member of the association.
Whew, no InBev taint. 

Kosher.
But the writing should be on the wall.  In recent years we have seen Anchor and then Goose Island and now Boulevard transfer from family hands to those of others.  Each one is instructive of the challenges these 2500 American family breweries will face in the coming decades.  The Hall family decided to sell Goose Island to AB InBev--the kind of sale that has been popular in brewing for centuries.  Fritz Maytag sold Anchor to investors who have taken it forward as a private concern--unconnected to other brewing enterprises.  And now John McDonald has sold to a consortium of small Belgian breweries.  In each case you can see how the wishes of the founder may be more or less honored in the decades to come.

But the notion that these are anything other than breweries going through an inevitable and ancient churn--that Goose Island, because it is now owned by InBev, became "crafty" while Moortgat-owned Boulevard is straight "craft"--should be easy enough to spot as the fraud it is.  Or put it another way.  When you find someone calling something "beer" that only has 35% beer in it, let me know.  I'll help assemble the tar and feathers.  Otherwise, carry on.

4 comments:

Dann Cutter said...

If you can't beat 'em, Buy 'em.

We have seen from a tech standpoint that a very effective strategy for large technology companies (read Apple, Google, Microsoft) when out competed in an emerging technology is to buy out the smaller company and add it to their portfolio.

Not only should that work for beer, but it really solves a huge problem - how to innovate (taste) and distribute (size) for brewers. Do we need 400 different hoppy IPAs in the stores? No, its likely unsustainable over a long period - however, if large brewers can identify the 'best in class' and purchase them while continuing the provide the same product at an acceptable ROI, then we'll start to see 'craft' products become more mainstream. Will they still be craft? No more so than my Ethan Allen knockoff table is... but it still looks the same. If they retain the recipes it will be a win for beer drinkers.

And, consider that innovation and the market for the small brewer will still be strong, as they capture a market segment not necessarily in the segment as the Macro breweries, then we can still expect to find our more individualized and experimented options around.

For the small craft brew market to truly succeed a pathway is needed that all entrepreneurs seek - an exit strategy.

jfwellspdx said...

Personally, I could care less who owns Goose Island as long as the beer is good, made with quality ingredients, and the people that work there are treated well. I prefer some sustainable business practices as well.

Have been completely fed up with the BA and their bending over backwards to accommodate Boston Beer, yet excoriating Widmer for the macro investment in their company. Compare the beer line-up from the two and tell me which one is "craft" and which isn't.

SIxteen Tons said...

The Crafty thing is extremely convoluted. Gambrinus/Shiner etc is Crafty but Duvel/Ommegang etc is Craft? I like Duvel and the focus on quality but it is really splitting hairs in some cases. The adjuncts criteria is just as befuddling.

Neil Walker said...

I would add to this article that whilst the technical definition from a marketing viewpoint in the UK is to use 35% juice content, most traditional producers aim to use 100% for fermentation then adjust a little afterwards for flavour. i.e. add a touch of water.

There is even a charter which outlines the guidelines, written for the Cider Guild. In this the jucie content must be at least 85%. You can see it here: http://www.theolivers.org.uk/Guild_Charter.pdf

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