Craft beer has become hugely popular across the US. It’s grown from a miniscule segment of the market to a $22 billion industry. It’s also the fastest-growing alcohol segment in the world. While Big Beer sees mounting losses, craft beer sees growth and success. If you think that breeds discontent, you’re right. Big Beer isn’t standing idly by while newcomers erode the customer base.
Instead, companies like AB-InBev, MillerCoors and the rest are making a grab for profitability, and they’re doing it by buying up small craft breweries around the country. Of course, if you’ve paid any attention to happenings in the market the past few years, this isn’t really news. However, things are accelerating. They’re escalating. And, Big Beer has some new tricks up their collective sleeve to use in an attempt to squeeze the little guy out, possibly for good.
Buyouts You Might Not Know About
Let’s kick things off with a quick look at some of the most recent buyouts and mergers that you may or may not be aware of. We’ll only touch on the most recent of these, as there’s a slew if you dig back more than a year or so. So, who’s no longer “craft”? Which breweries took the easy way out and let themselves be bought?
Founders: One of the most popular craft brewers in the country, Founders is no longer 100% independently owned. The company sold a 30% stake to Mahou San Migel. Now, that does not mean that they’ve “sold out” completely, but it does mean that they’re taking Big Beer’s money. Ultimately, it’s a gray area since the buyer does not have a controlling interest in the brewery. With that being said, the Brewers Association did kick Founders out.
Elysian: Yes, you’ve probably heard about this one. It raised quite the stink. AB-InBev bought the Seattle-based brewery outright.
Golden Road: This one might have passed you buy. AB-InBev bought out the LA-based Golden Road Brewing Company. Golden Road is now completely owned by AB-InBev, which is a lucrative position for the beer giant considering Golden Road’s position within Los Angeles.
Saint Archer: MillerCoors is in on the craft brewery buy up, too. They bought Saint Archer at about the same time AB-InBev was investing in Golden Road.
Ballast Point: Here’s another shocking buyout that took craft beer lovers by surprise. Constellation Brands, the owner of Corona, now owns Ballast Point, the brewer of the immensely popular Grapefruit Sculpin.
Lagunitas: Here’s another partial buyout that can still be classified as selling out. Lagunitas sold 50% of the brewery to Heineken. Founder Tony Magee calls this a partnership, and without a controlling interest for Heineken, we can sort of see that. It still smacks of selling out, though.
Breckenridge: The Colorado giant and extremely popular brewer sale to AB-InBev took everyone by surprise. With that being said, the sale only included the Breckenridge facilities in Breckenridge and Littleton. AB did not buy any of the company’s other portfolio inclusions (of which there are quite a few).
Four Peaks: Based in Tempe, Arizona, Four Peaks was a craft brewery growing in popularity. Now, they’re owned by AB-InBev and are no longer part of the Brewers Association.
Other Dirty Tricks
Think that the only thing Big Beer is doing to recapture the market and rebuild their stranglehold on the beer industry it buying out craft breweries? Think again. They have quite a few dirty trucks up their sleeve. One of the most notorious was talked about by Mother Jones and The Wall Street Journal back in December 2015, although the news seems slow to reach many people.
Essentially, AB-InBev wants to “encourage” distributors to keep craft beers out of grocery stores. AB is offering rebates to distributors, up to $1.5 million, if they’ll make AB brands 98% of their sales. That’s a lot of money, and what distributor is really going to turn their nose up at that much free cash?
According to The Wall Street Journal, “The world’s largest brewer last month introduced a new incentive program that could offer some independent distributors in the US annual reimbursements of as much as $1.5 million if 98% of the beers they sell are AB-InBev brands. Distributors whose sales volumes are 95% made up of AB-InBev brands would be eligible to have the brewer cover as much as half of their contractual marketing support for those brands.”
That’s downright dirty, and it might not even be legal. The jury is still out on that.
There’s another tactic that AB-InBev is using to regain some of their lost foothold – masquerading as craft beer. For example, in San Diego, 10 Barrel Brewing is trying to open an establishment. The problem? 10 Barrel isn’t really craft. They’re owned and operated by AB-InBev. That’s got the local craft breweries in an uproar, and many craft beer lovers in the city are also up in arms. If successful, InBev could actually pretend to be a craft brewery, and those new to the craft scene could easily be taken in, spending time and money in a location that only fills the coffers of Big Beer and does nothing to grow local breweries. In addition, there’s the possibility that millions spent on a new location would effectively raise property values enough that small businesses would be forced out.
Kevin Hopkins, president of the San Diego Brewers Guild, told Fortune magazine, “It’s not just what the definition of craft is, it’s what impact does that have on the passion of independently owned businesses? If large companies can throw around millions, how are smaller companies going to be able to move in? What they’re doing is putting a local flavor and feel to something that has been done in a factor.”
All of these actions are signs of fear – Big Beer is worried, and for good reason. Only time will tell if beer drinkers can help their local breweries flourish, though. What’s your take on all this? Is a brewery 50% owned by Big Beer still “craft”?