http://management.fortune.cnn.com/20...-craft-brewers
Big, global breweries have taken notice of the red-hot craft beer movement. In response, they have begun to buy and replicate their way into the movement. Some craft brewers have cried foul.
By Denis Wilson
FORTUNE -- Perhaps you've ordered a beer at a restaurant recently. Maybe you even perused the craft beer list, looking for something different. If you're like me, your decision was based on something other than price -- otherwise you could've ordered a Coors Light or Budweiser for two or three bucks less.
So what was it? Was it the possibility of finding a unique, even superior flavor? Or was your decision based on the idea that a craft beer is one that's made by a small, independently owned brewery and not by the same makers of Coors or Bud?
If it was the latter, you may want to find out who's really making your beer before your next round.
Big, global breweries have taken notice of the craft beer movement -- mostly because that's where actual growth exists in the otherwise stagnant beer industry. In 2011, craft brewing saw growth of 13% by volume while overall U.S. beer sales were down an estimated 1.3% by volume. And even though craft beer still accounts for less than 6% of all beer sales, anyone remotely connected to the business knows it will play a big part in the industry's future. Craft beer delivers higher profit margins, it attracts consumer spending, sought-after clientele for bars and restaurants, and many people are passionate about craft beer, similar to the same way people are passionate about wine.
Everybody wants in. And so the macro-breweries have launched beers that approximate the craft taste profile (the popular Coors brand, Blue Moon), purchased stakes in some craft breweries (southeastern Terrapin Beer Company by MillerCoors), and snatched up others entirely (such as the recent acquisition of Goose Island Brewing by Anheuser-Busch).
What's noteworthy about these forays into the craft segment is the way these brands are purposely distanced from their Big Beer parents. You won't find the Coors name on a bottle of Blue Moon. Rather, you see the name Blue Moon Brewing Company. The same goes for a bottle of Anheuser-Busch's Shock Top. To distance their craft products from their billion-dollar household brands, the big brewers have gone so far as to create separate divisions to house their specialty brands: MillerCoors has created Tenth & Blake Beer Company while Anheuser Busch (BUD) has the Green Valley Brewery.
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In many industries, this wouldn't raise an eyebrow. But craft beer is defined as much by its underdog culture and at-times contentious relationship to the greater beer market as its actual products. Some craft brewers and drinkers see these beers as imitators, donning a craft beer costume -- bold label designs and quirky names -- in an attempt to deceive customers.
"The large brewers have been using a variety of tactics to basically try to capitalize on some of the mystique and success in the marketplace that craft brewers are having," argues Paul Gatza, director of the Brewer's Association, a national trade group for independent brewers. "That these labels don't proudly say Anheuser-Busch or MillerCoors on them is to some degree a chancy proposition. To some beer drinkers out there, they won't care. To others, they will care and probably won't feel so good if they feel like they were duped by the large brewers."
On craft beer forums and blogs, the debate rages on. Consumers in general have grown increasingly concerned with who makes the products they buy and how products are made. More and more, our purchases have come to feel like endorsements of a company's practices.
"There are two types of consumers," says Anat Baron, the director of the documentary Beer Wars, which explores the battle between micro- and macro-breweries. "Consumers who shop by price and just don't care who makes the stuff that they buy, and other consumers, which are a minority, but I think a growing minority, that actually care about who makes what they buy."
Obfuscating the parent company behind a beer denies a drinker the right to exercise that choice. However, Tom Cardella, the CEO of Tenth and Blake, doesn't see the issue this way. In addition to the Blue Moon brand, Tenth and Blake houses Jacob Leinenkugel Brewing Company, Crispin Cider, as well as imports such as Peroni and Pilsner Urquell. "There's a lot of chatter about it within the industry but, at the end of the day, I really don't think it's a big issue. These businesses are marketed differently, they're targeted differently against consumer segments within the marketplace."
To Greg Koch, CEO and co-founder of Stone Brewing Company in Escondido, Calif., it's a cut and dry matter of how much American consumers value truth over deception. "It's my personal philosophy that the truth should be easy to understand and require no special knowledge," says Koch. That similar practices occur with other products, like "artisanal" cheese or "natural bread," doesn't justify it, says Koch. "They're basically co-opting imagery that's not consistent with reality. That's where, as a consumer, I get ticked off."
As a craft brewer, Koch is especially miffed: "Craft brewers are creative. We don't follow trends -- we create them. We specifically went against the mass-homogenized, corporatized business model…. When that very empire, the multinational conglomerate, starts giving the impression to unsuspecting consumers that they're a part of our world, of course that's offensive.
In response to those that say that it doesn't matter who makes a beer, Koch says: "Did the Milli Vanilli scandal matter? Why were people outraged? The music that people had enjoyed didn't change when it was discovered that an unknown singer was doing the singing. But people made clear that the truth is important and they don't like being duped."
Will the real craft beer please stand up?
Craft beer has several definitions. The Brewers Association stipulates that craft breweries be small(annual production of fewer than 6 million barrels), independent(less than 25% owned by an alcoholic beverage industry member who is not themselves a craft brewer) and traditional(devotes a decent portion of its product selection to all-malt beverages).
Though you can't taste a beer company's size or ownership structure, some see these qualities as essential distinctions. "I think there is a big difference between the beer that comes from a craft brewery and the beer that comes from a large brewery but is marketed to appear to be craft," says Sam Calagione, founder and president of Dogfish Head Craft Brewery, in Milton, Del. "The challenges that true independent, small, emerging craft breweries face to make their beer and get it to the consumer are so different from the challenges that international conglomerate brewers face, particularly when it comes to access to market and access to ingredients."
The largest craft brewery (using the Brewer Association criteria) is The Boston Beer Company, maker of Samuel Adams, which shipped 2.5 million barrels in 2011. That accounts for slightly less than 1% of the U.S. beer market. By comparison, the big breweries are, in fact, very big: In 2011, Anheuser-Busch shipped 98.8 million barrels, a market share of 47.7%. Meanwhile, MillerCoors (a joint venture between Molson Coors (TAP) and SABMiller PLC) had a share of 28.4%. Meanwhile, in 2011 the average craft brewery shipped 5,911 barrels while the median barrel count was just 550 barrels.
Dogfish Head brewery in Milton, Delaware
Cardella of Tenth and Blake says he does not fixate on industry definitions. "We kind of look at allowing the consumer to define what he considers craft beer. As we look at our businesses, craft generally refers to beers that basically provide a little bit more flavor intensity and a little bit more distinctiveness in regards to experimentation and styles."
Online, you'll find many people vowing to never drink a given beer again after discovering it's a MillerCoors or an Anheuser-Busch product. But others mock those folks for what they perceive as knee-jerk vilification of the "big bad corporation." In particular, the acquisition of Goose Island in 2011 by Anheuser-Busch seemed to ruffle a lot of feathers, especially since Chicago's noted hometown brew will increasingly be brewed outside the Windy City.
Yet Anheuser-Busch sees it as a win-win for the brewery and the drinker. "We were very impressed over the years with the amazing reputation of the Goose Island brand," says Paul Chibe, Anheuser-Busch's vice president of marketing. "And that brand was built upon extraordinary beer with amazing innovation. And what we've been is an enabler. So as Goose Island has needed capacity, we've given them the capacity. The thing that people can be confident in is that the Goose Island brewers are still the ones leading the brewery."
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