Your favorite craft beer might not be "craft beer" (anymore at least) – Box Brew Kits

Your favorite craft beer might not be "craft beer" (anymore at least)

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We’re well on our way to more than 5,000 breweries in the United States, virtually all of which are classified as craft breweries. And yet, major brands—the Anheuser-Busch InBevs, SABMillers, and Molsons of the world—hold just under 90% of the overall beer market share.

craft beer definedIn 2015, it was reported that there were about 2 brewery openings per day. At the same time, acquisitions by “big beer” are at an all-time high. In an effort to offset any decline in market share, major brands are adding smaller ones to their portfolios—through acquisitions. This is resulting in some interesting discussions around what is and what isn’t a craft brewery.

How do you define a craft brewery?

The Brewers Association has a specific definition of what actually constitutes a craft brewery—a definition that has received lots of attention in recent years due to the many acquisitions of independent brewers by larger ones. As they detail on their site, “An American craft brewer is small, independent and traditional.”

Straight from the horse’s mouth, here’s what that means:

Small: Annual production of 6 million barrels of beer or less (approximately 3 percent of U.S. annual sales). Beer production is attributed to the rules of alternating proprietorships.
Independent: Less than 25 percent of the craft brewery is owned or controlled (or equivalent economic interest) by an alcoholic beverage industry member that is not itself a craft brewer.
Traditional: A brewer that has a majority of its total beverage alcohol volume in beers whose flavor derives from traditional or innovative brewing ingredients and their fermentation. Flavored malt beverages (FMBs) are not considered beers.

So, what does this all mean for some of your favorite beers? Well, depending on whether or not they meet the Brewers Association’s set of guidelines, they might not technically be craft beers anymore.

Brewers that no longer meet the craft beer guidelines:

Founders: It’s hard to believe the company that creates the highly coveted Kentucky Breakfast Stout, or KBS (among many other well-regarded brews) no longer classifies as a craft brewer. After selling a 30% stake to Mahou San Miguel, a Spanish brewing company, Founders has been hitting the shelves at alarmingly fast rates across the country since 2014. It didn’t take long for the Brewers Association to note that it no longer belongs in the craft brewer category.

Redhook: This well-known brewer most definitely constituted as a craft brewery back in the 1980s, when it started. But it’s since joined the Craft Beer Alliance Inc. back in 2008, a brewing company comprised of Redhook, Widmer, Kona, Omission, Square Mile Cider, and KCCO. The company produces more than 1 million barrels of beer per year, and as of January 2013, Anheuser-Busch InBev held a 32.2% stake.

Ballast Point: Did you ever think Ballast Point and its delicious Grapefruit Sculpin would end up in the same investment portfolio as Modelo, Pacifico and Corona? Us either. And yet, in December 2015, Constellation announced a $1 billion acquisition of Ballast Point.

Goose Island: No shocker here, Goose Island got bought by Anheuser-Busch InBev for $38.8 million back in 2011. Interestingly, brewmaster Greg Hall stepped down with the acquisition, only to later sell a different brewing company to AB InBev.

Other breweries now excluded from or on their way out of the craft beer category include: Saint Archer Brewing Company, Golden Road Brewing Company, Elysian Brewing Company, Lagunitas Brewing Company, Breckenridge Brewery, and Four Peaks Brewing.

Side Story: It’s also interesting to note the Joseph James Brewery no longer being considered in the craft beer category. You may not have heard of Joseph James Brewery, but we have. In fact, not all that long ago, the brewery was scooped up by big beer, and shortly after we received a cease and desist letter from their (new) lawyers for our use of the name HopBox (whole story here). Around the same time, the brewery founder was ousted by the new owners. And also, incidentally but worth mentioning, at that time the brewery seemed to have stopped its tradition of donating a small percentage of its sales to autism research in honor of a family member. You can see today there’s no mention of autism on their website.

“Why Should I Care if My Favorite Craft Beer Is Owned by In-Bev?”

“...It still tastes the same, doesn’t it?”

Depending on how into or in tune with the beer scene you are, you may or may not have seen the opposing views on this topic. Some people could care less, while other craft beer lovers, homebrewers, and craft beer professionals are seriously up in arms about it.

Some argue that acquisitions by big beer will lead to lesser quality ingredients, new "quality" standards, and eventually nothing-to-tweet-good-things-about beers. While it's really tough to say if the product is effected at all, the perception of the brand is just ruined for most of these die-hard beer geeks.

Dogfish Head founder Sam Calagione had something to say about this:

I get it that a number of the patriarchs of craft brewing are getting to retirement and trying to figure out how to transition out of brewing. So I'd never shit on somebody's decision to sell out. I do think the world's largest breweries are disingenuous in their intentions moving into the craft beer world. They’ll buy a once-independent brewery — not naming names — and suddenly its IPA's kegs are on the street for half as much as a true indie craft beer. It really shows they're using these once-craft brands as pawns in their game to knock the true indie breweries off the board.

In another Men’s Journal article, Stone Brewing co-founder Greg Koch chimed into the conversation:

For fans of renowned breweries such as Goose Island (now owned by A-B InBev) and Ballast Point (bought by Constellation), buyouts mean wider availability of their favorite beers at festivals, sporting events, and grocery stores. But Greg Koch, co-founder of Stone Brewing, sees things differently. "The average consumer might look at Big Beer acquisitions of craft brands as providing more access and providing choice to consumers," says Koch. "But the reality is that the exact opposite is the stated and desired goal of the big companies. They are in business to control and to maximize their profit and their share price." As proof of the big player's strategy to acquire and shrink, Koch cites the fact that America’s 4,131 breweries as of 1873 had consolidated into 42 by 1979.

They’re not the only vocal ones in the community either.

Cashing In, Selling Out, or Both?

As you can imagine, many brewery owners and brewmasters struggle with the notion of “selling out” to big beer. But let’s not forget there may be some justifiable reasons to “sell out” that aren’t that obvious from the get-go.

For one, there are scenarios where the founder may be aging toward retirement, and there’s no clear line of succession.

Two, well, just follow the money. Ballast Point got acquired for $1 billion.

And three (as a follow on to two), many brewers happen to also be business savvy and have grand entrepreneurial aspirations. Not every exchange of money by big beer is necessarily a complete purchase of a craft brewery. There are some instances where AB-InBev might buy a percentage, and in exchange the brewery gets more resources and access to new distribution channels. The thing is, selling a stake in their company is typically what kicks them out of the craft beer category.

Closing Thoughts

It’s interesting to grow this close connection to a craft brewery, only to have its status changed as a result of an acquisition overnight. One day you’re supporting a local business, and then the next day you may buy that same six pack, but your money will show up in the sales figures of a company that’s stock is traded on the New York Stock Exchange.

Not many people would have thought a brewery buy-out would be a way to get rich, much like the tech startup world. Although acquisition has a long history of being a vessel of growth for small businesses, though, it’s also where some small businesses go to die. This is no doubt a double-edged sword, and a difficult decision for brewers to make.

If you love craft beer for the fact that it’s local, artisanal, and unique, then you might want to stay up to date on the latest acquisition news. You never know when your favorite brewer could receive an offer it can’t refuse.

April 01, 2016 by Michael Langone
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