Wednesday, December 23, 2015

"If you can't beat them, buy them," craft brewery acquisitions, and ranting against a pet peeve

The super mega global guys over at ABInBev, owners of Budweiser and a jillion other huge, bland beer brands, have bought another craft brewery. This time, it's the folks at Breckenridge Brewery.

This is the latest in a series of acquisitions and partnerships by the major breweries, who are scooping up or getting partial ownership of craft breweries like Ballast Point, Lagunitas, and most notoriously, Goose Island (which has actually proved to be excellent for the brand despite legions clamoring for a boycott). It seems two weeks can't go by without hearing that another craft brewery has been acquired by one of the big boys.

Unsurprisingly, this news did not sit well with people in the craft community. As happens with any one of these acquisitions, message boards and discussion forums were on fire. Breckenridge has never really been seen as one of the elite craft breweries—they're solid, but you're not going to trade away your soul for one—but the response when InBev buys another brewery is never positive. It's often seen as something just short of the end of the world. Such was the case with this news.

As expected, one of the most common refrains when the news came out was, "If you can't beat them, buy them."

And that makes me want to beat my head against a wall.

I've been drinking craft for so long (since the mid 1990s), and so many of the people around do the same (almost everyone in my circle of friends), it would be easy to assume that everyone has long since converted to craft beer and that the big brewers are running scared. The wider craft beer community certainly seems to think so.

But despite the perception we get in our insular little world, nothing could be further from the truth.

The fact of the matter is, despite craft beer's EXPLOSIVE growth in recent years, they are still a pimple on the ass of the big brewers. An annoying pimple the big brewers would like to pop, perhaps, but a pimple nonetheless.

Sorry, cheerleaders. I've been shouted down before for pointing this out, but the numbers don't lie. The fact that you and your friends all drink good beer doesn't mean jack. Craft beer isn't beating the big boys. It actually isn't even close. As a brand, Bud remains dominant to the point of absurdity. Bud Light alone sells SIX TIMES as much as every single craft beer combined.

Read that again. You can take every single craft beer brewed by every single craft brewer in America, put them all together, and you'd still only amount to 1/6 of what Bud Light alone sells. Throw in the core Budweiser and the two sell eight times as much as all the craft beer in America combined.

Total Domestic Beer Sales, courtesy of The Atlantic. For context, all of craft combined sold 55 million cases.

And that doesn't even begin to touch Busch Light, Coors Light, Coors, Miller, Miller Lite, and so on.

So yeah, the whole idea of "if you can't beat them, buy them" is ridiculous. Craft beer is getting beaten. Trounced, actually. The only "craft" beer to even sniff at those levels is Yuengling, and they do it by producing a beer that is just a macro lager dressed up in craft scene-acceptable packaging.

Yes yes yes, craft is growing super fast while the big boys are stagnant, and that is not an insignificant fact nor is it one lost on the big brewers, but the big guys have such a gigantic lead that it would take decades to even up the score.

Don't expect to see it happen any time soon. Also keep in mind that the mega enthusiasm of those new to craft beer is often overwhelmingly huge, but that enthusiasm often fades with time; people grow older, they fall into old standbys or spend their money differently, and before they realize what has happened they go from trying a few hundred different beers a year to a handful.

Craft beer is a concern to the big brewers, yes, but we in the craft community often overstate the case to a tremendous degree. The big brewers are not running scared from that excellent little craft brewery you like.

You know what the real threat to the big brewers is? It's not craft breweries, it's spirits and wine.

Americans are actually drinking less beer than they used to—around 8 million barrels less than in 2008, according to Gatza. Meanwhile, wine consumption has grown steadily since the early 1990s and spirits are making huge strides in the booze industry (especially flavored spirits).

In fact, story after story after story after story after story after story after story and even studies conducted for the craft beer industry show that beer has been losing ground to wine and spirits for some time now.

Experts in the industry say “Never before has the battle for share of glass been so intense.”
Makes us look juvenile and obnoxious
Craft beer is growing, but beer overall is not—and that's bad for the entire beer industry, not just for the big boys.

The fact is, the growth of craft beer is good for the big brewers, or is at least neutral, because it means people are at least still drinking beer. People moving away from beer to spirits and wine means the entire beer market shrinks, which in turn means beer makers have to convince people to come back to beer if they want their business. That's bad.

If people just switch from one beer brand to another, however, that's better. Then at least you're fighting for an audience that already drinks beer. That means they still have a chance at capturing their dollars in one way or another. The big brewers would rather have people in front of a row of tap handles, no matter what those tap handles are, than in front of a row of wine bottles.

If people switch to wine or spirits, on the other hand, that's a customer they can no longer reach as easily. (This is exactly why you see so many of those beer cocktails on the market. You may wonder who buys them, but the fact is they sell like CRAZY. Folks like Bud want to at least keep people attached to their brand as they migrate away from beer.)

So yeah, of course the big brewers would like to see growth instead of being stagnant—that goes without saying for any business—but buying up craft breweries has only a small amount to do with that. Breweries like Breckenridge produce as much beer in a year as Budweiser spills in a day. These acquisitions aren't offering big gains to their bottom line. They're not turning around the company's fortunes. They would literally have to buy 100 Breckenridges for Breckenridge to slide into the top 10 beer brands despite Breckenridge being one of the top 50 craft brewers in America.

(Insanely, it would take over 1,000 of these breweries to match Bud Light. There are not 1,000 breweries of this size in America. There aren't even 60 of them.)

Rather, these acquisitions are about diversifying in a market that increasingly demands diversity. It's about having something to offer bars and restaurants other than Bud and Bud Light. It's about becoming a little more flexible in the face of a market that demands it. It's about not being tied to just one thing. And it's about planting some seeds for the future.

Buying an interest in these craft breweries doesn't mean they're being beaten in the marketplace. They're not. The numbers are beyond dispute. Despite all our hardcore proselyting for craft beer—I've been annoying my friends with that shit for 20 years now—the big brewers like Bud still dominate the market to a crushing extent.

So yeah, no. "If you can't beat then, buy them" is a stupid phrase that completely ignores the actual landscape of beer in America in lieu of the one we in our insular little craft world like to image, and it drives me up a wall.

Though perhaps it's not nearly as stupid as wasting this much time on an insignificant pet peeve.

Please shoot me.

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