Good Beer Hunting

Critical Drinking

Critical Drinking — Pros, Not Cons: Making Independence Matter

Several notable craft beer personalities have expressed the hope that the explosively negative sentiment toward the Wicked Weed transaction might cause AB InBev to re-consider acquiring other breweries in the future. That maybe it would cow fellow breweries into “not selling out.” According to this line of thought, fewer acquisitions of strong, mid-sized breweries by Megabrewers will improve the odds of independent breweries’ success over the long term.

Doug Dayhoff is the President of Upland Brewing Company.

“In spite of ourselves
We’ll end up sittin’ on a rainbow.
Against all odds,
Honey, we’re the big door prize.
We’re gonna spite our noses
Right off of our faces.
There won’t be nothin’ but big ol’ hearts
Dancin’ in our eyes.”
—John Prine, “In Spite of Ourselves”

But I’m afraid that way of thinking is not only inaccurate but also misleads the energies and missions of the remaining independent breweries—not to mention, most importantly, the consumers who want to support us.  There’s nothing more that ABI (and MC, Constellation, etc) would like to see than all of us putting our energies into anti-Megabrew activism and rhetoric.

A few reasons why I believe this:

  • While people love the David vs. Goliath narrative, that narrative ends with David winning. They want their long-shot horse to win, not to fall apart in the third turn. But here’s the thing: we know we are never going to bring the Megabrewers to their knees. As romantic and passionate as this narrative may be, it’s not sustainable.
  • Over time, the anti-/activist sentiment starts to sound like weakness and whining, and consumers prefer winners. We need to show them the wins and price that are worth their investment in us.  
  • The chink in Megabrew’s armor is not that they’re well-armed and overly powerful. It’s that their corporate mission has nothing to do with trying to make the world a better place in which to live. They’re not innovators in beer diversity and choice, and they don’t consider it a goal to leave the world a more dynamic, interesting place for the next generation. This is important to remember.

Real talk: in the short term, it’s helpful to remind consumers of the David vs. Goliath narrative. But the big meal lies in that third element.

I base my thinking on the excellent article by Creature Comforts’ Chris Herron. He points out that ABI has $25 billion worth of brand equity/goodwill on its balance sheet. I won’t delve into any accounting or finance theories, but I assure you that this statistic accurately measures the degree to which consumers have voted with their pocketbooks in favor of parading horses and funny frog commercials. In the clear light of day, that’s an awfully shaky basis for that much brand value. In fact, it’s an indictment of the corporate values and competence of their competition since the 1980s when I was coming of age. Alas, all the corporate breweries’ beers and values are similar, whether wrapped in an American flag, a Mexican beach, or a EuroLatin bon vivant.

Meanwhile, ABI has billions of dollars in annual revenue which they can use to defend that asset, and they will, because that asset is the core of their economic existence (just like brand equity is the core of independent brewers’ existence). Don’t expect ABI to stop throwing hundreds of millions around just because their acquired companies might not sell as much beer to a minority of industry insiders. Likewise, money that would affect my family for generations is simply a rounding error on their balance sheet. Which means you shouldn’t expect an acquisition target to say, “no thank you,” nor should you begrudge an entrepreneur when she sells out.

But to those of us who are deeply, unequivocally invested in our small- to mid-sized breweries for the long haul, ABI’s $25B goodwill (not to mention that of the other megabrewers) is the bullseye at which we should aim. 

“Willie Sutton, why do you rob banks?”
“Because that’s where all the money is.”
Where the Money Was: The Memoirs of a Bank Robber

Over the long haul, independent breweries should make the narrative about differentiated beers and a better world instead of wasting our resources railing against bigger, stronger competitors. Our mission is attractive in a philosophical sense, but it also has demonstrable, practical benefits in consumers’ lives. Large corporate breweries historically strive for economic efficiency above any other goals, which tends toward sameness of the lowest common denominator. But humans, at least the ones that we and many other craft brewers want to attract, desire meaning beyond efficiency. And Americans, especially, crave freedom of expression and the pursuit of happiness, which to some extent requires a sense of independence. As soon as a degree of independence is sacrificed, we naturally expect expression to be sacrificed as well. 

In pursuit of profits, Upland does some of the same things that Megabrew does: we try to drive volume and look for ways to make the business more efficient every day.  But we do some things that they do not, like make meaningful investments in our communities with anemic financial returns.

One example: for Upland’s latest brewpub, one of our investors brought to the management team a difficult renovation of a 140-year-old building, that had set more or less vacant for decades, in a city where little craft beer had been or will be sold. We partnered to take on that risk while knowing it would be a low rate of financial return because of the team’s commitment to taking on challenges and making our communities better places. The real return we got from that investment was pride in our town and a catalyst to a better community for our customers that will take years to pay off. We get to see those changes every single day, in the smallest of ways. and that personal connection is what makes it seem worthwhile. Projects like these are what fuel our passion as both brewers and community members.

With that kind of community connection, and a clear expression of our value, how could a Megabrew ever compete? The trick is not to talk about why independence matters, but to express it. Express it in your innovation, your connection to the local economy, the real estate you buy and develop, the other businesses you support—earn the vote of the consumer through demonstrable evidence. Then, and only then, talk to them about the value of independence. Because at that point, what’s in the glass will count 10-fold.

Don’t dwell on transactions where Megabrew throws their money around. Instead, notice that they feel compelled to try to play the game on our terms. Business is a game won by offense, not defense. You can’t win this game when revenues are declining.  Some of the proposed rollups in our business are predicated on the idea of creating a coalition of independent breweries (Duvel, Oskar Blues, etc.). Those may be the best opportunities both to achieve some economic scale and make brewers better partners for distributors while preserving their individual character and independence. But regardless of how things continue to evolve, let’s be happy warriors in this game—consumers will react more that tone.

If Hunter S. Thompson were around today, drinking too much and chatting with his old pal Ralph Steadman about his latest Flying Dog illustration, I imagine him yelling, “We’ve got the bastards on the run!”

Against all odds, we’re the big door prize.

Words by Doug Dayhoff
Graphics by Michael Kiser