A couple of years ago, I spent several days at our state legislature, calling on representatives to ask them to support a change in the alcohol laws that would expand the range of craft beers available. A senior senator graciously gave me some of his time, despite the fact that he was unlikely to support the legislation: his constituency was largely made up of fundamentalist Christians who disapproved of alcohol. What’s more, his district was dry.
But we talked about the upcoming vote, and the possible effects of the bill on beer sales. Before I left, he asked ‘These craft beers you’re talking about’what are they, 30% of the market?’
I tried not to laugh, and admitted that craft beer sales amounted to about one-tenth of that at the time, around 3% of the American beer market.
The senator was polite enough not to ask the obvious questions: ‘3%? Is that all? What’s the fuss about?’
Indeed, American craft beer is a success story that is full of contradictions. Our craft brewers are resurrecting discarded brewing traditions, yet they are restlessly innovative. They work to improve the image of beer as the culinary peer of wine, but take pride in beer’s basically democratic nature. And the tiny output of craft brewers’ 4% of the beer market by volume last year, about 6% by sales’has inspired imitation by big brewers who, as Jim Koch of Boston Beer puts it, ‘spill more beer than I produce.’
American craft beer has an influence on our beer culture that is wildly out of proportion to its role in the market. Based on that senator’s misconception, I’ll venture to put a number on it: craft beer has about 10 times the impact, and attracts 10 times the attention that its presence on our shelves would suggest.
Part of the attention stems from the impressive growth craft beer has enjoyed this decade. While mainstream beer has been more or less stagnant for several years, the craft beer segment grew by 7.2% in 2004, 9% in 2005, 11.7% in 2006, and 12% in 2007 (as tracked by the Brewers Association, Boulder, CO). However, as the economy stalled, growth in the segment fell in 2008 to 5.8% by volume (being more expensive, it accounted for about 10% of beer dollars).
So, while the past year was one when the press continued to lavish attention on the craft sector’The New Yorker devoted thousands of words to a breathless profile of the tirelessly creative Sam Calagione of Dogfish Head Craft Brewery, and the Wall Street Journal recently reported that a surprising number of entrepreneurs are launching small breweries’it’s worth asking whether that 10-times multiplier will keep working its magic. Will consumers continue to fuel the growth of this segment in hard economic times?
Keep Craft Distinctive
For its loyal fans, one enduring quality of craft beer is that it is not mass-produced beer. Where the craft industry starts to resemble mega-beer, brewers must proceed cautiously.
In the broader beer industry, global consolidation has been the biggest news of the past few years, with Miller joining South African Breweries, Coors linking with Molson, Miller and Coors merging in the United States, and the acquisition of iconic Anheuser-Busch by Inbev, itself a marriage of the Belgian Interbrew company and Brazilian AmBev. In a sense, it’s a story more about corporate mergers than it is about crafting beer.
At the opposite end of the scale, the craft brewing story is about beer, not corporations. The appeal’and the reason consumers have been willing to pay more for craft’is the lure of a locally based, hand-made, high-quality product. So a craft brewer that begins to grow, extend its reach or merge with others is in danger of alienating its core supporters.
New Belgium Brewing Co. has navigated those waters skillfully. The Colorado company built its reputation on Fat Tire, a Belgian-style amber ale, with a distribution limited to nine western states, and a cult status outside the area unmatched by any beer since smuggling cases of Coors was the subject of ‘Smokey and the Bandit.’
In recent years, distribution has spread to include the western half of the country, and a selection of brands reached three East Coast states this year. The first beers to appear in the new markets are three that appeal to the widest audience: Fat Tire, Mothership Wit wheat beer, and 1554, a Belgian black ale. The strong, aged or deliberately soured beers that frequently win awards for the brewery are pitched at a minority of drinkers, and have less distribution for now.
Stone Brewing from San Diego takes a bigger risk in expanding. Its outspoken president, Greg Koch, has been highly critical of breweries that ‘export water’ at great expense, both financial and environmental. Yet his own beers are now distributed in 30 states, from Alaska to Florida, an expansion he defends’with some justice’on the basis that the Stone brews are unique, whereas the beers he’s criticized are nearly interchangeable and offer drinkers nothing new. Certainly, consumers have jumped at the opportunity to buy Stone’s intensely bitter Arrogant Bastard Ale as soon as it has debuted in new markets.
Other mature craft companies have mirrored the actions of the big brewing companies, merging in the interest of economies of scale and production, and to meet demands in new markets. Two of the country’s biggest craft companies, Magic Hat Brewing Co. in Vermont and Washington-based Pyramid Breweries recently joined forces in a purchase that should make both breweries’ portfolios available on both coasts.
Last year also saw the merger of Widmer Brothers and Redhook Breweries, two large, pioneering West Coast-based breweries. Both companies had already drawn the ire of beer connoisseurs through their partnerships with Anheuser-Busch, but they also gained access to A-B’s matchless distribution network.
Award-winning Elysian Brewing Co. of Seattle took a novel approach and formed a brewing collaboration with New Belgium Brewing Co. whereby each company brews its own beers at the other’s brewery. Elysian had already expanded distribution to remote markets on the East Coast, and the collaboration with the much-larger Colorado brewery should allow Elysian to reach many more eager fans.
Like the producers of artisanal cheeses and baked goods, craft brewers are aware of the contradictions inherent in a nationally-available product that touts the values of being locally made. Retailers can earn a certain cachet by stocking the latest, hottest craft beers from afar, but they can never go wrong supporting a brewery that is truly local.
Envelope-pushing brewing experiments are another area of differentiation from the big lager breweries. However, most craft brewers tread a thin line between the creative impulse that gives the sector its vitality and stirs media interest (but produces beers appreciated by only a small audience) and more centrist approaches to reaching a wider group of drinkers. No matter how attention-getting the mad-scientist beers, a craft brewery’s flagship beer is generally much more conservative and approachable’and a little more similar to mainstream beer.
Several craft brewers have released easier-drinking beers recently, either in the ‘session beer’ category (lower alcohol beers that can be consumed in greater quantities) or lower calorie beers. Since the whole craft beer movement has been propelled by the search for more and more (fill in the adjective) flavorful, alcoholic, bitter, or eccentric beers, a brew that promises less is a hard sell. But a few breweries have managed to convey that less is more, and they might actually be in step with the tastes of more drinkers.
A few of the new session beers have used the term in their names, such as Session Premium Lager from Full Sail in Oregon or Harpoon’s Brown Session Ale. And among the best-selling lower-calorie beers are the new Slim Chance from Redhook and Sam Adams Light, both of which deliver craft flavor, just a little less of it.
Yes, They Can
Brooklyn Brewing Co. is known for elegant, beautifully balanced beers that shun the sensational antics of ‘extreme brewers.’ But Brooklyn is one of the best known of a group of breweries to take the extreme step of putting its flagship beer, Brooklyn Lager, in cans. This mundane packaging is daring for craft breweries precisely because of its association with inexpensive, mass-marketed lagers. But a growing number of craft breweries have decided to confront and overcome the anti-can prejudice.
The first microbrewery to do so was the (then) small Oskar Blues Brewing Co. in Colorado, which canned an outstanding pale ale in 2002, then followed it with a strong Scottish ale, a double IPA an Imperial stout and’less unconventionally’a traditional pils. The brewery demonstrated that specialty beer could be marketed in a can, and the drinking public was willing set aside old biases in favor of buying a wider variety of beer styles in a convenient package.
Today, over 40 American breweries have joined the micro-canning experiment, from Maui Brewing Co. in Hawaii to Sly Fox in Pennsylvania. Cans are light-proof (protecting beer quality), light-weight and recyclable. And consumers welcome the chance to enjoy specialty beer where glass bottles would be verboten or too heavy: beaches, golf courses, concert venues or camping.
Perceptions of Value
Even with changes in distribution, style choices and packaging, the central appeal of craft beer is the promise of fresh, full-flavored beer in both traditional and innovative styles. Craft beer can build on the historic brewing heritages of Europe, or challenge the very definition we give to ‘beer.’
Craft beer has attracted converts from the ranks of standard beer drinkers, echoing the phenomenon of ‘trading up’ that observers of consumer behavior have charted in recent years. In foodstuffs, as well as other beverage alcohol categories, much of the growth has been at the high end, with the so-called ‘premiumization’ of consumables from chocolates to vodka.
Now, however, as even consumers who are economically secure are growing cautious in their spending, and there is talk of ‘trading down.’ And yet, craft beer continues to outpace other alcohol beverages in its growth.
It seems possible that consumers of other beverages are seeing high-end beer as a better value than a less expensive wine or spirit. After all, some of the very finest beers cost less than $10 for a six-pack.
At the high end, brewers continue to stress quality. Increasingly, specialty beers ‘ in particular, the top beers of a given brewery’s range ‘ are released in 22-ounce or wine- sized 750 ml bottles, underscoring a message of refinement. Couple this with the appeal of limited availability, and brewers of exclusive beers such as Deschutes’ The Abyss or Foothills Brewing’s Sexual Chocolate see their seasonal specialties sell out almost before the bottles can leave the brewery. Going one step further, the American breweries that specialize in Belgian-style beers, such as Brewery Ommegang or Allagash of Maine, add a cork-and-wire closure for a presentation that is appropriate to fine food.
In keeping with the consumer mood, within the craft beer world, brewpubs’basically, restaurants with small breweries attached’are seeing a slowdown typical of other restaurant categories. The Brewers Association reports that, ‘in non-brewing restaurants, there has been a shift from wine, primarily, and spirits to a small degree, to craft brewed beer, particularly draught beer.’
Microbreweries that produce beer for distribution in bottles and cans are seeing the bulk of the craft beer growth, as diners turn away from eating out, and look for ways to take a quality product home with them. Both on- and off-premise retailers are finding ways to promote beer as the affordable luxury in difficult times.
As the craft beer movement wraps up its third decade, specialty beer brands are here to stay. Consumers can pick up a six-pack of Sierra Nevada Pale Ale, one of the earliest and still one of the finest brands, in gas station coolers. Most bars and restaurants offer a couple of beers that are out of the lager mainstream’and some concentrate entirely on the diverse array of flavorful domestic and imported brands.
The craft niche is mature enough to expand, merge and seek more middle-of-the-road converts by offering some slightly more mainstream choices. But that will never be its strength. If craft brewers are to keep their growth figures ahead of the rest of the pack, and climb back to the double-digit growth of past years, their appeal’that magical 10-times multiplier’relies on a public image that is both innovative and traditional, and deliberately that of the ‘little guy.’