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Tuesday, October 30, 2007

Rise of the Faux Craft

Good beer is good beer, no matter where it's brewed, right? I hold this truth to be self-evident as a philosophical point; as an economic one, I'm less certain. The Wall Street Journal has a story about the rise of the "faux craft beers"--those beers like Blue Moon and Stone Mill that look crafty (Stone Mill's even organic) but which are owned and brewed by the big three.

They report that the fake micros are starting to become big business and represent the only bright spot for the national brands. Independent craft breweries grew at an impressive 16%, but faux crafts grew a shocking 45%--and are no longer a marginal player among good beers. Sales through August of this segment totalled $708 million, and 25% of that was macro craft.

So here's the rub: on the one hand, I think all beers should be judged on the tongue. But on the other, I recognize that the big three have no actual fidelity to my taste buds, and the more they muscle their way onto grocery shelves, they threaten the market for good beer. And the key here is that they do muscle their way in--with their size and influence, they have an unfair advantage:
The growth shows how the giants, although they can be lumbering, are able to leverage their huge advantages in staff size, marketing and distribution to quickly gain a foothold in emerging categories of the beer industry....

To spur interest, the companies have had representatives meet with bar owners to teach them how to talk up the brands' attributes. The companies also host tasting dinners at bars or restaurants, where they pair their beers with certain foods that bring out the flavor....

The big brewers' actions have also made Boulevard more cautious about expanding into new markets, which requires heavy investments in salespeople and advertising, Mr. Sullivan says. Now "it is much more difficult and costly when you go into a market," he says.

When a brewery decides to launch a beer in a local market, they have to find distribution, speak with retailers about shelf and tap space, and try to build a following that can support these new networks. For an independent, this is murder. Finding a distributor in most markets is next to impossible--either they already have deals with the bigs that eliminate competition (in Portland, Maletis is the exclusive distributor for A-B; Widmer and RedHook joined with St. Louis so it would have access to nationwide distribution), or they can't convince a distributor to bother with a small product. Retailers want to move product, so they are suspicious of untested new breweries. One way to get retail space is to offer discounts on pricing, but if you're a small brewery with razor-thin margins, you can't sustain that practice for any length of time.

For the big breweries, these networks are already established, so the market is wide open. They have additional advantage in being able to run a product as a loss leader for a long period of time. And of course, thanks to the economies of scale, they can actually produce the beer more cheaply to begin with, which means they generally beat local micros on price.

The upshot? Buy local. It's the best way to support the brewery around the corner and make sure you have the option to buy local in five years.


  1. yeah, a friend bought a sixer of pumpkin ale last year that "looked good" and "was cheap"...turned out it was a maicro (miacro?) owned by A-B.

  2. One day in an Albertson's here in the Tacoma area I counted 15 spaces in the cooler devoted to these fake micro's, not including Spanish Peaks, Sam Adams, or Pete's. Oh well market what's cheap!

  3. Fitz, that's grim news. It may be worse than I know.