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Tuesday, June 17, 2014

When Craft Beer Becomes a Commodity

Last month, the folks at BridgePort Brewing launched their 30-year anniversary by highlighting a very specific part of their history--the brewery-defining flagship IPA.  The version of history offered by the brewery wasn't so much a way of celebrating the past as hawking beers in the present, though.  So last week, I celebrated a shadow anniversary with three of the brewers who helped build the BridgePort: founder and long-time master brewer Karl Ockert and early brewers Ron Gansberg, now brewing tart ales at Cascade, and Matt Sage, currently of Indie Hops.  (John Foyston, Pete Dunlop, and Morgan Miller were in attendance as well.)  It was in one sense just a way of having a few writers get the rest of the story, and understanding the richness of those thirty years.

But excavating the past often leads people to start thinking about time in bigger chunks and in turn to pondering what lessons it holds for the future.  At the moment, brewery openings are exploding and established breweries are growing at astronomical rates. Matt, Karl, and Ron had all lived through a similar period in the 1990s, when investors rushed into the market to capitalize on a fad.  A lot of poorly-conceived and poorly-made beer flooded the market and put the growth of craft beer on a decade-long plateau.  The question arose: are we seeing a repeat? 

There were a few jokes, and then Karl said he felt like one of the big changes was that beer styles were done.  "People brew to flavor, not style."  He added, "sessionability is coming back; beers will be brighter and lighter." Morgan Miller, who most recently worked for Ninkasi and has been involved in the beer business for decades, suggested that there would be more regional styles.  Ron agreed, and added that beer would start to reflect local climate more--the beer in Arizona and Florida would diverge from the beer in Oregon.

Then things started to get interesting.  Karl pointed out that as competition increased, consumers "were going to get more cost sensitive."  He observed how we're starting to see tiers develop, with some craft breweries like Portland/Pyramid carving out a niche with less expensive beer.  And as more breweries expanded nationwide and started opening regional plants, craft brewing was starting to look a lot more like non-craft brewing.  Then Ron said something I've been thinking about a lot lately:
"We're going to see a blurring of the specialty beers and commodity beers.  Where we try to hold the line on specialty, the big guys are going to try to drive that to commodity."
For centuries it's been possible to make beer in large quantities.  The "mass" was a lot smaller than it is today, but breweries in Bremen and Hamburg figured out how to make in in quantities large enough for international shipping in the 1200s.  The industrial revolution allowed for truly massive breweries in the late 18th century, and the notion of a "commodity beer" has been with us since.

A commodity is a mass-produced item that is interchangeable with others of its type: agricultural and mining products are typical examples.  Smith farm potatoes do not compete with Jones farm potatoes in the market: they're all potatoes and priced alike.  In commodities, sellers compete mainly or exclusively on price, not brand or quality.  Beer is one of those products that has a commodity dimension and a craft dimension, and the two oscillate in prominance.  The dominance of the commodity beers of the 1970s, for example, sparked the craft revolution.

It goes both ways.  If the over-commodification of beer can spark a craft revival, it can go in reverse, too.  Beer is a simple pleasure and historically has been hugely sensitive to price.  There will always be a large number of consumers who want a decent beer--any decent beer--so long as the price is right.  When Karl brought up tiers, he was pointing out how price and quality shape markets.  And here's the thing we are going to soon have to come to terms with: there's no reason craft beer is immune from commodification.  In fact, it's already happening.  The rise of witbier is real-world example: Blue Moon is the single biggest ale brand in the US, and along with Shock Top, has pushed witbier pretty close to the commodity line.

There's no reason to think this couldn't happen with other styles, too.  IPAs, so long the symbol of craft beer's rebellious image, is a perfect style for commidification.  It's strong enough that it would travel and last well, and could be easily replicated in different plants.  Eventually--probably soon--we'll see mass-market IPAs.  When Anheuser-Busch and MillerCoors have their own mass-market IPA labels, what will happen to Stone, New Belgium, and Ninkasi?  The pendulum has long swung back and forth between the extremes of bland commodity beer and expensive, small-batch artisanal beer.  There is no reason to think American craft brewing has stopped the process.

To bring things full circle, the whole BridgePort incident is in a way a metaphor for this future.  A once-unique, local brewery has been stripped of all character except that which will serve to sell a certain type of beer.  In making BridgePort all about hops, Gambrinus has taken a (certainly inadvertent) step toward commodification.


By chance, I was invited to try a sampling of some of the "crafty" beers of MillerCoors last week--a different kind of preview of the coming beer attractions.  That experience was also laden with interesting discoveries, and  I'll describe what I found there tomorrow.


  1. I know there's a BlueMoon IPA and wouldn't be surprised if there is or will soon be a ShockTop IPA, but I'll be stunned if the world ever sees a Bud IPA or Miller Genuine IPA...which of course, in turn, would lead to a Miller Lite IPA, Bud Light Lime IPA, Bud Clamato IPA, etc... But it won't happen. Look at what an failure (#epicfail as it were) Budweiser American Ale was. Bud drinkers are petrified of the word "ale." They don't think of Blue Moon as an ale (which it is) but as a "witbier" which has the word "beer" right in it. "No more bitter beer face" still resonates with them and they could give two plops about a beer being "triple hops." But more than anything... BUD IPA would open the floodgates. Right now they're losing market share in trickles. A flavorful, hoppy beer would lead 'em astray en masse. They'll leave that to the Goose Islands and Terrapins and whoever they buy next.

    As for consumers returning to cost-driven purchases, I absolutely confess that here in Europe, where IPAs are hard to come by (especially non Belgiany-IPAs...) I've had more Grolsch in the last 8 months than previously in my entire life. I can buy five 500ml swing-tops for the price of one 12-oz this-or-that artisan ale that's maybe so-so. And when the full-flavored bokbiers come back, it won't even be an issue since the AB-IB owned Jan Hertog bock is as good as any of the craft ones at a fraction of the price. For this, I'm glad to see most of the big American craft breweries finally doing 6-pks instead of just 22s.

  2. Fred Eckhardt once said the problem with Anheuser-Busch is they "can't be bothered to make good beer." That attitude has changed, thanks to the success of craft beer. The big guys are getting interested in making better beer...or acquiring it. You see that with Blue Moon, Shock Top, Goose Island, etc.

    As much as they might like to commodify IPA, I think that's a tough assignment. They could create something vaguely hoppy and spend a bundle to market it. But we know good IPAs don't travel or age well. And there is, as Brian says, the problem of alienating their core. Factory-brewed IPAs are a risky business.

    What the big guys could do, as we discussed last week, is simply buy up so many hops that craft brewers would have to adjust their approach to hoppy beers. There's already a hops shortage due to the popularity of hoppy styles. This is a strategy that makes sense for big beer, with its deep pockets and declining market share.

    The one thing we know for sure is that big beer isn't just sitting around watching their numbers fall. They are thinking seriously about how to do something about it.

  3. MillerCoors had an "Entry Level IPA" in the form of Henry Weinhard's IPA several years ago. It never took off. I'm not sure if the still make it or not.

  4. Brian and anon,

    You are correct that there are several ways to mis-market an IPA. Doing it under labels already branded as witbier is a great example. (I know both companies want to expand the brand, but they've been far too successful in creating a clear brand in the first place.)

    But that's not what I'm worried about. The first step is not going to be the large breweries' entry into the IPA market. It will be the slow devaluing of IPA by the thousands of smaller breweries already making it. There's already a war among national craft breweries (Boston Beer, Sierra Nevada, New Belgium, CBA) and aspirants who want to become national or become better established nationally (Deschutes, Stone, Lagunitas, etc.). This will inevitably drive costs down. Nationalizing these brands will further erode the cachet of "local craft" brewing--a process that follows inevitably from going national. What will emerge will be a tier of national craft brands to which people have a weaker loyalty and which will be cheaper than the most expensive tier of local specialty beers.

    And then the national brands have a market to exploit. They now have many tools to do it, as well. They can create new brands, ala Blue Moon, for different types of beer. Or they can buy established brands like Goose Island--a beer that is quickly becoming a national brand and which uses the efficiencies of a large brewery to lower production costs (the biggest sellers among the Goose beers are brewed at the AB plants in New York and Colorado). Or, more likely, they'll probably do both.

    All of this is going to change the landscape of brewing. While there will certainly be good beer available, and exceptional IPAs that exceed the quality of commodified national brands, there will also be a growing market for cheaper, mass market styles we now think of as the total province of craft breweries.

  5. Isn't Sierra Nevada PA commodity beer? It's in every grocery store next to big beer, priced not that far off, well liked but seldom dreamed of, made a guy a healthy millionaire and launched hundreds of moderate copycats?

    Alan (on the iPad which makes me log in like this)

  6. I just watched this with Fritz Maytag discussing beer almost becoming commodity with Michael Jackson
    after reading your entry.

  7. Sierra Nevada Pale Ale, possibly the best pale ale in America, is in effect a commodity beer and shows the possibility that a high-quality product can be widely available and premium (as Budweiser was viewed in its earlier period, or draft Michelob). It isn't spoken of as much today in idyllic terms because we take it for granted and so many other beers are available of its type, but in truth it is one of the best out there and maybe the best (the draft is extremely good when consumed fresh, too). However, it comes from a pioneering craft brewery.

    Will big industrial brewers do something similar? I don't think so. It's not because they "can't", but because of a factor not mentioned yet in this discussion: pasteurization. I am convinced that pasteurized beer will never be as good as unpasteurized (which SNPA is of course, indeed it has some residual yeast sediment). Flash-pasteurized is better than tunnel-, hence the success of Anchor's beers. But that success is kind of limited when you measure it against more newly established breweries who have gone "national". I believe Anchor would do better if the beer wasn't pasteurized. I can't imagine an industrial producer mass-producing an IPA that wasn't pasteurized. I remember very well Ballantine IPA in the 1990's and much as it was still an icon, I felt I could detect a tell-tale caramelization from pasteurization. It was never as good as the up and coming pales and IPAs.

    Could the industrials switch to non-pasteurized? I guess they could, a la Coors which uses sterile filtration, but the degree of filtration necessary to render the beers chemically inert would likely make the product relatively bland as compared to the competition. I am thinking mainly of bottled and canned beer here.

    We can't rule anything out, but these factors, combined with the tendency of large companies to make something that appeals to all comers (blandify), makes me doubt whether a volume-production, high-quality IPA will issue from the pre-craft industrials. Certainly they might make something that will appeal to a lot of people and take sales away from the declining B/M/C franchise - and from craft brewing itself - but they are not likely to make anything that would approach the quality of SNPA, say, IMO. Blue Moon is decent enough and has done yeoman duty to spread the word about good beer, but to my taste doesn't have the "live"quality I associate with a wit beer and I'd think any mass-production IPA would be similar. Even if Blue Moon is not pasteurized (I don't know), it isn't a commodity wit in my view...


  8. As for buying based on price, I do that all the time with canned beer (which I like to take along when golfing -- don't tell the courses!). I go to Trader Joe's, see that they have several different sixers of IPAs, usually Goodlife, Worthy, Caldera, and Oakshire. Most are $8.99, but one might be $8.49. The beers have differences, but I like them all. So I save 50 cents and buy the cheapest.

  9. As was pointed out elsewhere, commodity beer extends past ABI and Miller-Coors. Define commodity beer. Multi point production? Lagunitas, Widmer, Sierra Nevada. Big corporate ownership? Widmer, Red Hook, Kona, Bridgeport, Pyramid, Portland Brewing, Sam Adams etc. I could go on, but I think I made my point. Commodity craft is here, and it is not just made by the big two

  10. Business acquisitions of craft breweries is here to stay. A brand is a commodity and, as long as craft beer is trending, we'll continue to see craft beers becoming as such.

    The American-Made Guide to Life