Depending on who you ask, craft beer—a still-growing segment of the larger beer industry—has never had it so good or been so vulnerable.
There are more breweries operating now than ever before in our country’s history. And there are perpetually thousands more on the way that have already obtained licenses with intent to open in the next year. Two years ago at the Craft Brewers Conference in Philadelphia that notion produced a literal groan in the audience of established brewers. These days, it’s all but numb. Because even as some claim we’re hitting the wall, a larger and larger wave still crests behind.
The Brewers Association shyly toasted to 6% growth last year (a clear slowdown), even as its largest members graduated out as a result of their ownership, size, or portfolio make-up breaking their vows. They took their significant barrels and dollars with them.
For those larger brewers still in the club by one technicality or another, there are serious market forces at work that serve to undermine their success and invade their former optimism—an optimism that the smallest members of the industry tend to still feel. And they’re looking to fortify their position for the contraction that seems imminent.
Larger players such as MolsonCoors, Constellation, AB InBev, and other foreign conglomerates such as Sapporo, Kirin, Duvel, Heineken, and San Miguel, and private-equity companies like those behind SweetWater, Dogfish Head, Oskar Blues, and many others—even those as small and coveted as The Bruery—are hoping to be well-positioned in what amounts to a segment of the industry where they can get the highest margins for the lowest volumes. Because as the beer category shrinks against wine and spirits, and consumer trends show less drinking happening overall, the volumes that contributed to former growth patterns is unlikely to return.
As a result of these pressures, and some existential angst, the craft sector is facing some fracturing and reorganizing of its priorities. The Brewers Association, which is the most vocal, populated, and influential tribe amongst brewers, is sometimes a unifying voice for craft. “The association is an organization of brewers, for brewers and by brewers,” and boasts more than 4,000 members. (Good Beer Hunting is an individual member.)
In the recent boom years, the story of the BA has mostly focused on its growth, celebrating the sizable bites it’s taken out of corporate beer’s market share. As growth slowed and smaller brewers were starting up at an alarming pace, the message switched to a demand for quality, lest anyone “fuck it up,” as Paul Gatza so eloquently put it. But now that their largest brewers are exiting through acquisition and becoming competitors to their growth, and that wave of tiny brewers continues to poke at the plump, vulnerable middle of the organization, an interesting behavior is occurring. Despite the unprecedented size and diversity of the craft sector in 2017, the BA decided to do what it’s always done: double down on the arbitrary definition of its membership and market the intrinsic value of “independent.”
Who’s in, who’s out. Who’s real, who’s fake. Who possesses qualities that are inherently good, and who’s aping those characteristics for commercial gain. This has always been a thread, even as the terminology evolved from microbreweries, to craft breweries, to the now-hopefully-more-defensible term “indie breweries.”
The BA is desperate for the consumer to align with its view despite the increasing complexity and caveats of the terminology. Where it was once the goal to get drinkers to love “craft,” a malleable and therefore useful term for consumer adoption toward all sorts of new and exciting beers, the goal now seems to be to slice up that 12% market share gained in the last 30 years into ever-more specific and arbitrary lines, and to then ask the consumer to be wary of whatever lies on one side of 25% ownership vs. the other. Drink craft. Well, not that craft. This craft. Technically, that’s not craft. Or at least it’s not indie. But it’s still great beer. But it’s not certified. But they do have a lot of private equity. But it’s still craft. No, Anchor isn’t craft anymore. Those guys are making too much cider now, so their beer isn’t technically craft anymore.
The Brewers Association, despite conventional wisdom, is not just a trade group. It’s a marketing organization. Their stated purpose is: “to promote and protect American craft brewers, their beers and the community of brewing enthusiasts.”
Seems straightforward enough. But it’s that last part, protecting enthusiasts, that creates dissonance in the purpose beyond what a trade group typically tasks itself with accomplishing. What are they protecting us from? And why would a trade group looking to sell us one kind of product use its self-appointed role and an arbitrary definition to protect us from being sold someone else’s product? A consumer group the BA is not. It’s not the consumers’ best interest they have at heart, though many of their goals certainly align with consumers’ best interests. Their interests are their own.
The Brewers Association itself establishes the criteria by which a brewer is determined to be craft or not. At least as far as marketing groups go. Data companies who track the sales trends of craft beer, like IRI, use a more broad definition—basically whatever American retailers and consumers think “craft” is. Meaning, not import, mass domestic, premium, etc. So when you hear stats touting the growth (or lack thereof) in craft, the BA will use its own subset of data to project, accurately, the health of its membership. Whereas most of the members of that group, if they’re interested in sales trends relative to the consumer, will use IRI. One measures the growth of a consumer segment that’s still vigorously healthy. One measures the growth of an ideological subset.
It’s critical for the BA to segment these numbers because some of that growth represents defensibility, and some of it represents a threat. And based on the BA’s arbitrary definition, a brewer now either contributes to the protection of the consumer or its…demise, I guess. Small, independent, and traditional are the three measures that determine shirts or skins here, all of which have changed over time to different degrees. “Small” moved from two million barrels to six million, which meant Boston Beer Company got to stick around for awhile longer. “Independent” includes an exception for breweries with less than 25% ownership from a non-craft brewer, which means Brooklyn gets to hang on, and all that private equity ownership is acceptable, protecting scores of breweries looking to liquidate but still remain craft. “Traditional,” until 2013, protected us from beers that used corn or rice. (Ironically, these ingredients had been used for hundreds of years before the BA even existed.) That distinction meant that Yuengling and others were suddenly part of the craft club despite having brewed the same beer and maintained their family ownership since 1829.
This is not to say that the arbitrary lines being drawn aren’t helpful to the BA and its members. As BA board member and Allagash founder Rob Tod stated in our recent podcast episode, they can be seen as reasonable constraints in defining a trade group’s members and purpose. If you’re spending money on lobbying, you need to know who you’re lobbying for, after all. And opening a door for Yuengling on one side while Lagunitas exits out the other at least helps maintain a consolidated power.
But in its other purpose, which is marketing to consumers, using intrinsic values like “traditional,” “independent,” and “small” to imply that any of those characteristics produce a better product for the drinker—moving the goal posts, as it were—is both confusing and irritating. As a result, the BA has become inconsistent and hair-splitting to the point of losing relevance altogether as a marketing organization.
That’s not to say the BA is weak—far from it. Its coffers are more full than ever—$18.7 million in reserves as of their 2016 Stewardship reporting. That money was culled from a mix of membership dues, massive festival revenues, sponsorships, and products it sells such as books, classes, and supplies. It also has more members than ever before, more consumers that self-identify as “craft drinkers,” and it even seems to have the Department of Justice on its side for regulatory concerns, at least in jest. We’ve yet to see material effect of that pressure despite the BA’s valuable efforts.
But judging by the group's activities in 2017, it would seem to be just as vulnerable and misaligned with its various target audiences as ever before.
GABF is the largest single revenue generator for the Brewers Association every year. Brewers, fans, and salespeople from tertiary companies all descend on Denver annually to celebrate, demonstrate, and compete with their goods.
Each year, some of the most visible, and heavily-sponsored sections of the festival went to the companies who could afford them, namely, AB InBev, MillerCoors, and their subsidiaries such as Leinenkugels, Goose Island, and others. These explicitly sponsored end-caps in the festival went for tens of thousands of dollars a pop. And while there was always a bit of dissonance on the part of craft beer hardliners upon seeing these breweries so prominently displayed at what amounts to a competitive trade group’s annual event, it was in line with the association’s somewhat-inconsistent goal to be inclusive and generate revenues, even if that meant counting those dollars from the likes of ABI on one hand while publicly giving them the finger (often fairly, to be clear) with the other. And if consumer interest has any bearing, the lines were predictably long. And that must have been an irritating sight to those brewers nearby who felt their wares were inherently better based on their size or ownership structures.
This year, however, as the Brewers Association ramped up its anti-corporate rhetoric, it also chose to bar non-BA-defined craft brewers from buying those sponsorships, and reduced their ability to appear at the festival in general. This is the first year in the company's history that Goose Island will not be pouring.
That decision is a step toward consistency, perhaps, albeit one made possible by the financial security provided by the organization’s prior inconsistencies.
However, the BA is still accepting associate membership dues from these companies, listing them on their website, and maintaining financial support from their participation, even as they publicly decry the other effects those companies supposedly have on their members. So while they may have washed their hands of the optically-challenging sponsorships at GABF, they’ve yet to work up the courage necessary to bite the hands that feed them.
As the Brewers Association further specifies who’s in and who’s out, they’ve informally opted for the aforementioned change, once again, from “craft brewer” to “independent brewer” through the use of a certification symbol that can be placed upon the packaging of a brewer who meets the criteria.
As a trade group, this still-arbitrary move to “independent” becomes somewhat more objective in definition, focusing on a single aspect of ownership which constitutes that more more than 25% of a brewer is owned by another brewer who is not themselves a certified independent brewer. To a consumer, that definition is hardly more helpful, and maybe more damaging to the more general loyalty to “craft” in the long-run. No longer are we asking a consumer to think of themselves as a “craft beer drinker” based on the beers they prefer. Instead, they must focus on the technicalities of an ownership structure, in some cases down to less than 1% on one side of the line or the other.
Survey after survey shows that people who self-identify as craft drinkers have already aligned with the interests of craft brewers, claiming that “small” and “local” put a protective fence around their choices. But for the rest of the American drinking public who enjoys a craft beer, their interests are personal, driven by flavor, aroma, and convenience—they’re not aligned with an industry trade group with its own axes to grind. And if drinking a Wicked Weed IPA is considered a sellout move while the Brooklyn Lager they might enjoy is considered “independent” because of a 1% equity stake not taken by Kirin in a major acquisition, and therefore has a sticker on it proving it’s “certified,” then we’re asking general consumers to fight some serious insider battles on behalf of millionaires, and that’s an incredible amount of bullshit to put in the streets.
Stop calling it “indie beer” and start calling it “well, actually it’s technically a craft brewer because…” and then watch them grab a bottle of bourbon, Beaujolais or, god forbid, a Banquet—regardless, they’re on their way to a much better party.
All within a month of the above dissociations, the BA also lost a major member due to the organization’s updated marketing and licensing agreements, which now include clauses specifying obscene, racist, and sexist labeling rules. It’s a clear, explicit statement of dissociation whereby no brewer is allowed to use the BA’s logo or other symbols—GABF awards, for example—in its marketing of its product, regardless of whether it won the award or not, if that branding is determined to be offensive, racist, sexist, etc.
Flying Dog, the brewery in question, is a long-standing advocate of free speech. It’s engaged in battles, which it has won, for the right to freely market brands like its Raging Bitch Belgian IPA. In Michigan, not only was the brewery granted the right to market Raging Bitch, but it also won lost sales as a result of the unfair restriction, resulting in a hefty penalty settlement from the state. It’s Flying Dog’s stance that if the federal government approves it, the BA should have no further opinion on the matter, and certainly not one that’s more restrictive over its members’ activities.
The BA, however, is not doing anything to prevent the marketing of those products. It’s simply choosing not to associate through the use of its own branding, going so far as to refuse to announce or show the offending name at the award ceremony. For proponents of a more inclusive industry which has long been accused of having an ignorant-white-boy problem, and specifically of having product labels devoted to the dehumanization of women and people of other races and stations in life, this was a welcome position for the BA to take. For others, both of the Flying Dog and the “Snowflake!”-shouting variety, this was heresy and a violation of first amendment rights. (Yes, we know: it’s objectively not a violation of the first amendment.)
This policy has yet to play out in practice, but the 2017 GABF award ceremony goes down this morning. While Flying Dog isn’t waiting around to find out (it left the BA unceremoniously, even though none of its labels were considered objectionable), it’ll be fascinating to see what happens as anecdotal instances of this policy are enforced upon other brewers, and if that further dissociates members.
In recent months, Jester King, a tiny brewery in Austin, Texas, has taken on a sort of bellwether role amongst a new generation of craft brewers. After the Wicked Weed sale to ABI, Jester King’s public letter of dissociation from Walt and Luke Dickinson and their new corporate partners, published just prior to Wicked Weed’s invitational festival became the stake in the sand for the niche club of wild and spontaneous brewers. It was so effective, it essentially took down the festival in a single move.
Soon after, the Brewers Association launched it’s indie beer campaign, and Jester King weighed in again, sending another shot across the bow, but this time aimed at the BA. It cited the less-than-desirable aesthetics of the independence seal as a reason it wouldn’t put it on its packaging. But it also took the opportunity to weigh in on the arbitrary definition of “independent.”
In a blog post, Jester King wrote: “If we were setting the criteria to use the seal, we’d make 100% independence a requirement. As it stands, a brewery only needs to be over 75% independent to qualify. We personally find it odd that a brewery could be just under a quarter owned by a multi-national conglomerate and still be considered ‘independent.’”
They went on to say that “we’d count majority ownership by private equity firms as disqualifying. We have no insider knowledge, and are far from well-versed in the field of venture capital, but it’s our understanding that it’s only a matter of time until VC firms flip their brewery holdings for a profit. What bothers us is a VC firm using independent cred to build up value in a brewery before selling it to a multinational.”
As the BA struggles to hold the line on its arbitrary definitions of “craft” and “independent,” it now finds itself being pulled in different directions by different generations of brewers—some of whom were there to define it in the first place. And some who are looking for a more pure ideology whereby the nuance of the past is irrelevant. It’s a no-win situation. And now we see these younger brewers forming their own organizations in an effort to pursue their own agendas outside of the BA’s purview.
As was revealed recently, Boston Beer runs the risk of breaking yet another limit in the BA’s craft definition and being pushed out onto the open sea. The crime? They might make less beer than they do cider, FMBs, and other alcoholic products. If they cross that line, according to the BA’s own rules, Boston Beer, the makers of Samuel Adams, which, alongside breweries like Sierra Nevada, helped begin the current age, will graduate into that growing field of highly successful brewers who now apparently constitute a threat to the BA’s members rather than its defense.
Why anyone would want to have to explain to a drinker why Sam Adams or Anchor Steam or Lagunitas IPA is definitely not craft beer is beyond me. But the BA has cornered themselves with their own weapon. They either stick by the arbitrary definition and continue to lose their most successful members, or they expand it once again to accommodate and protect their most influential members to the chagrin of some their more ideological, smaller members.
So, why does any of this matter?
I’d argue that weaponizing the word “craft” or “independent” against macro brewers is now a weapon turning on the warriors wielding it. Here’s a prime example.
The battle has gone so far as to confuse the shit out of publications like Forbes, who recently wrote an article about Rodenbach, a brewery based in Belgium since 1821, which makes a famous Flemish sour beer that is now owned by Palm Breweries, a conglomerate that also owns the likes of Boon. In that piece, the premise was that Rodenbach is in danger of losing its “craft” status. But here’s the thing: the BA’s definition of “craft” has zero relevance to breweries outside the U.S. It certainly has no say in their status. And it’s certainly in no position to weigh in on an operation’s legitimacy that’s generations more established. Sure, Forbes produced the ultimate idiocy, but its entire point of view is built on the BA’s legacy.
And then there's those survey results, often touted as an indicator that "independence" is aligned with the consumer. But the survey the BA published in their June 2016 poll conducted by Nielsen (that’s behind a paywall on the Brewers Association website) shows that flavor (99%), freshness (95%), aroma (78%), ingredients (75%), and bitterness (68%) were the top-five most important attributes among participants for making a craft beer purchase. Not independence. And no amount of inception from a trade organization is going to be effective beyond the already-convinced consumer that got you to 12% market share. The other 88%, the mainstream, tends to be a lot more resilient with their priorities.
The BA has created a deep market confusion that is no longer aligned with the intended consumer, but only with themselves. And it's going to hurt the potential of the craft segment.
If the BA is satisfied with 12% market share and now wants to defend and dissociate from others in that niche, it’s their prerogative. But I don’t think they are. I think 2017’s series of dissociations is instead driven by near-sighted fears over the coming contraction in the market and increasing pressures from its members above and below. But the move in that situation isn’t to kowtow to the wishes of individual pockets of membership who are motivated by their own individual concerns, or to make a show of closing the door on one kind of corporate brewery while the others sit on your board. The move is to increase the size of the tent, broaden the platform, and create a space where differing points of view can operate without feeling oppositional to the core mission of advocating for “craft.” And certainly don't let those small fissures, which are inevitable in a trade group this large, become your public-facing reason-for-being and try to get the consumer to play along.
For fuck's sake, please leave the drinker out of it. Win them over with your ideas, your beers, and your exemplary impact in their communities. And focus the BA on legislation—federal and state—as paramount to everything, evolve the three tier system, and continue to fight emerging monopolies. The BA is by far a more impactful trade group than it is a consumer advocacy organization.
Strengthen the party. Fight for the agenda. Influence the narrative. Grow this damn thing. But don’t gerrymander the vote.