Can Beer All Just Get Along?
This past April, Anheuser-Busch InBev acquired the small Virginia craft brewery Devils Backbone. To many in the beer community, it signaled that 2016 might continue the trend of 2015 in which the largest beer company in America bought out four formerly independent brewers – Elysian, Golden Road, Four Peaks and Breckenridge – more than it had in any previous year. It also once again opened the door to continue the ongoing “big beer” versus “craft beer” debate.
When a craft brewery joins the ranks of AB InBev, it gets filed under the business’s The High End division – a group that also includes Goose Island, Blue Point, 10 Barrel and Virtue Cider. Conversely, these newly acquired brands are no longer represented by the Brewers Association, a trade association dedicated to promoting the interests of small and independent American craft brewers.
For many in the beer world, these two entities represent opposite sides of the industry. Some diehard craft beer advocates refuse to drink products by any brewer that doesn’t fit their ethos; meanwhile, people who have grown up on Bud Light wonder why all those beer snobs can be so damn stodgy when it comes to simply enjoying a pint.
So what really are the differences between how The High End and the brewers represented by the Brewers Association see what’s happening in the crowded beer market today? To try to get to the bottom of this question, I reached out to Felipe Szpigel, the current president of The High End and a decade-plus industry vet who has worked with AB InBev all over the world, and to Rob Tod, founder and owner of the acclaimed Allagash Brewing Company as well as the current chair of the Brewers Association Board.
Though I didn’t sit the two men together in the same room, I informed each one that I’d be asking them four nearly identical questions to try and understand why AB InBev is acquiring smaller brewers and how the small brewers feel about it. I’m presenting their answers back-to-back to hopefully provide the most accurate point-counterpoint on how these two very different sides see what’s happening in the beer world today.
Felipe, The High End has acquired a number of new craft breweries over the past two years. What's driving that increase?
FS: First, we want our products to play in the right moments and experiences for consumers as beer has a place at the table with food and more sophisticated occasions. It’s more versatile than wine or liquor. Second, buying relatively small brands and growing them is not a new idea – you see it in other industries – Ben & Jerry’s ice cream and Burt’s Bees personal care products are great and relevant examples (EDITOR’S NOTE: Unilever purchased Ben & Jerry’s in 2000, Clorox purchased Burt’s Bees in 2008). Like those brands, we partnered with dreamers who invested in their beers, built an unbelievable company culture and wanted to do something bigger. But our high end business growth does not rely solely on acquisitions; organic growth is a major priority for us too. For example, taking 10 Barrel’s Joe IPA or Cucumber Crush and putting it into our systems allows for faster, nimbler growth than 10 Barrel would have been able to do on their own.
Rob, as a representative for independent breweries and as an independent brewery yourself, what do you think is behind that increase?
RT: For years, the big breweries seemed to disregard the work that the “Small and Independent” brewers were doing. Maybe it was their relatively small market share [these smaller breweries had]? Maybe [big breweries] assumed that the trend toward innovation and flavor – which has undoubtedly been driven by the small and indie brewers – was just going to be a passing fad. But recently, I think it has become more than obvious that independent beers and breweries are here to stay. The innovation, jobs, community impact, et cetera that these Small and Indie brewers are contributing are truly resonating with the beer lover. The “big breweries” have finally taken notice and they see acquisitions as an easy route to being a player in the “category.” To be honest, I can’t blame them for doing what they are doing right now… I’d be buying small brewers right now if I were them.
But these acquisitions have gotten some negative reactions in the craft beer world. Why do you think some craft brewers have such a negative perception of larger brewers like AB InBev?
RT: I’ll answer that question by saying “Small and Independent” absolutely means something to the beer lover. Go to almost any community now, and you’ll see enthusiastic beer lovers flocking toward one of the over 4,400 craft breweries in the US. I do it myself: When I stop by Allagash on a weekend I usually follow my work visit by swinging by Foundation, Bissell Brothers or Austin Street breweries right down the road to have a beer and experience craft beer as a customer. I love it. And the fact that they are independent is what makes the experience so special to me as a beer drinker. I just think a lot of beer lovers feel an emotional loss when a small, indie brewer gets swallowed up by one of the big guys. It’s not just about the beer… it’s about who makes the beer.
Felipe, why do you think some brewers have a negative perception of larger brewers like AB InBev?
FS: Most likely, it’s because they don’t know us or understand what we stand for. Also, there is heightened angst in the marketplace as the number of competitors within the beer industry has rapidly grown. Many times, the easiest thing to do is to find someone to blame.
We’re brewers and beer lovers too and want to support the beer community just as much as the next brewery does. Like our craft partners, we are a beer-positive organization. Being positive about beer means we celebrate passionate brewers, brew great beer, and provide unforgettable experiences for beer drinkers. It’s about supporting the beer community who help advance our category, which we’ve done for centuries. We are focused on what’s in the glass and will continue to work with our craft partners to help them tell their stories.
So what changes for a brewery once they choose to team up with AB InBev?
FS: [We think] Craft is about variety, creativity and authenticity. None of those attributes change when a brewer partners with us. What does change is the resources we’re able to provide in terms of the decades of brewing experience, access to ingredients and offering more flexibility to innovate by doing things like adding equipment in home breweries and moving high demand beers, like Goose IPA and Goose Four Star Pils to larger A-B breweries to free up capacity. Our global network also allows for fascinating collaborations. Recently, Tonya Cornett from 10 Barrel and Kevin Watson from Elysian went over to Belle-Vue in Belgium to make a strawberry lambic with their team.
Rob, what do you see as being the changes for a brewery once they choose to leave the independent ranks of the Brewers Association team up with AB InBev?
RT: A business owner needs to do what they think is best for their business. If someone decides to sell to one of the big guys, I don’t judge, and the BA doesn’t judge. In fact, the BA welcomes brewers who have transitioned out of the Small and Independent definition to stay on board as Associate Members… and many breweries have done just that. But I will add that something does indeed change after a sale to a non-BA defined “Craft Brewer.” The newly acquired brewer now has access to raw materials, economies of scale, distribution, lobbying presence in DC, et cetera, that the Small and Independent Brewer does not have. There is a fundamental shift.
So where do you see the relationship between independent craft breweries and larger breweries headed?
RT: I’m glad you chose the word “Independent” when you posed that question… that’s one of the 3 pillars of the BA’s Craft Brewer Definition (Small, Traditional and Independent). And given this climate of acquisition, it seems today that the “Independent” pillar of the BA’s definition is the one that’s resonating the most.
That being said, I actually see brewers of all sizes working together much more than they have in recent years. One prime example is the work that the entire industry has done on becoming aligned on the Craft Beverage Modernization and Tax Reform Act. It’s an initiative that both reduces the administrative burden on small breweries, and reduces the excise tax burden on both small and large breweries. And I’ll add that this industry alignment has gone a long way toward garnering a tremendous amount of bipartisan support among lawmakers in DC.
The BA defines what a Craft Brewery is so it can define who it goes to bat for to promote and protect. But that definition sure does not preclude everyone in the industry from working together on causes that are in the collective interest to advance.
Felipe, as a large brewing company, where do you see the relationship between independent craft breweries and larger breweries headed?
FS: I deeply respect both the Brewers Association and anyone who is trying to build their own business. As a trade organization, they need to fight for what they believe is right for their members. However, what I miss with the Brewers Association is a willingness to work together as a beer industry in our collective battle with wine and spirits. All of us make our living in the beer industry and, I hope, love drinking great beer. With that, only together through innovation, passion and providing the best experiences can we combat the losses our category has experienced to wine and spirits.
We know the passion and skill that go into creating great products, and together, as an industry, we’re crafting new offerings – flavor combinations, specialty releases and unique beer and food focused experiences. We all want to continue moving the needle with an eye on quality, safety, diversity, and premiumization. That’s how we can push beer forward. As consumer tastes develop, the opportunity for beer to expand in the hearts and minds of consumers will increase.