San Diego County has a large beer industry, there are currently more than 110 active breweries. Along with high numbers, San Diego has earned a reputation as a leader in the craft beer industry. Many would rank it as the top craft beer city/region in the United States – whether it is the top dog or in the top five isn’t especially important. It’s a leader however you measure – top ranked beers, top ranked breweries, number of breweries, or gallons produced annually.
In response to loss of market share, the big brewers have adopted a strategy of purchasing craft beer brands to get a share of the sales and production growth.
As craft beer has exploded it has increasingly come at the expense of the “big brewers” – InBev and MillerCoors. In 2014 craft breweries saw production growth of 18% while beer overall saw an increase of only .5%. Read between the lines and that means that the “Big 2″ are losing market share while smaller craft brewers are experiencing a decade of double digit annual growth. Many places in the U.S. have embraced craft beer as a marketing tool and part of civic identity – San Diego, Fort Collins, Grand Rapids, and Portland would certainly fall into this category along with many others.
In response to loss of market share, the big brewers have adopted a strategy of purchasing craft beer brands to get a share of the sales and production growth. With enormous assets and resources why don’t the big brewers simply establish new craft beer breweries in markets with potential? Most likely because craft beer brands are typically tied to local markets and seen as the “little guy” or underdog that embraces the community and builds a loyal band of followers. It’s hard for InBev to sell beer as an underdog.
So does it matter if a brewery is owned by a person in your neighborhood or a large corporation like InBev? For many it does.
So InBev and MillerCoors come to town and write a check with a bunch of zeroes, hope someone takes the offer, and then do their best to make sure that as few people as possible know that a big brewery now owns the “little guy”. Craft breweries purchased by “Big Beer” have included Goose Island of Chicago (2011 for $39 million), 10 Barrel of Bend, Oregon (2014 for undisclosed amount), Elysian in Seattle (2015 for undisclosed amount), and many others. Redhook, Widmer, and Kona breweries are owned by Craft Brew Alliance – a publicly traded company with substantial share (more than 30%) owned by InBev.
So does it matter if a brewery is owned by a person in your neighborhood or a large corporation like InBev? For many it does. In San Diego the economic impact of the craft beer industry was estimated at $600 million in 2014 and growing at a substantial rate. This number might be sustained if a brewer (or a few brewers) were sold but the profits earned would be sent to the corporate shareholders, not to the pockets of local owners. There would almost certainly be a reduction in headcount for administrative positions like marketing and sales and possibly in the brewhouse as well, if production is moved to larger, more efficient facilities.
Do consumers care? If the beer is good, the beer is good. In Chicago it does not seem that Goose Island selling to InBev has had a negative impact. Their annual release of the acclaimed Bourbon County Stout is a huge event. Does it matter if the beer is brewed in Chicago, and Fort Collins, and Portsmouth? Perhaps not.
San Diego has earned a reputation for being a leader in the craft beer world. … if the quality of the [mass produced] beer is reduced to drive sales and is affiliated with San Diego it could damage the overall reputation for quality currently enjoyed by the industry here.
And there are enormous advantages to the brand. With the increased assets of a large corporation, craft breweries that are sold can afford to buy end caps in Whole Foods (where I’ve found Goose Island prominently displayed here in San Diego). This success can be multiplied through scale even if the brewer that created iconic beers like Bourbon County has since left to be a cidermaker in Michigan. (The head brewer for Elysian left soon after the sale of that company as well.)
San Diego has earned a reputation for being a leader in the craft beer world. From Stone’s early role in super hop-heavy beers, which has become the signature calling card for San Diego and inspired it’s own style: San Diego IPA or San Diego Pale Ale. Ballast Point has brought hot pepper beers to the mainstream and constantly is experimenting with herbs, citrus, and other flavors. White Labs is located here in town and allows brewers to access top-quality yeast strains, and new experimental strains as well.
The recent rise of craft beer, craft coffee, and other artisan offerings is a welcome breath of fresh air and a reminder that quality and locality matters.
The current rumor is that Saint Archer is being sold to MillerCoors. This would be the first San Diego craft brewery to be sold to “Big Beer”. (There have been other sales like the recent acquisition of Alpine by Green Flash.) Losing one brewery out of 110 isn’t a large percentage. The bigger risk is that utilizing bigger assets the San Diego brand will be eroded. If Saint Archer, or any brewery, is sold what will happen when that brewery buys premium space in grocery stores? If the label says “San Diego beer” and is next to Stone, Green Flash, and Modern Times will a person in Texas or Wisconsin know which is owned by San Diegans and which is owned by a faceless corporation? Maybe they won’t care. Worse yet, if the quality of the beer is reduced to drive sales and is affiliated with San Diego it could damage the overall reputation for quality currently enjoyed by the industry here. Whether Saint Archer is actually selling or not, a sale is likely to occur in the near future given the trend of purchases by the large brewers and the reputation of San Diego beer.
InBev and MillerCoors are welcome to create craft beer. They’re welcome to buy craft breweries. But doing so in an intentionally misleading way is wrong.
For me, the ownership of our breweries matters. When friends and family, or strangers, visit us in San Diego I love highlighting unique experiences that are rooted here. Local hiking trails, coffee shops, breweries, restaurants, etc. When I travel it’s the same – there is enjoyment derived simply from the fact that what you are partaking of is part of the place where you are. The fast food nation America became in the 20th century of universal sameness erased much of the uniqueness of our country and our experiences. The recent rise of craft beer, craft coffee, and other artisan offerings is a welcome breath of fresh air and a reminder that quality and locality matters. Is it pretentious? Sometimes, maybe most of the time. Does that make it bad? Absolutely not.
My hope is that if a brewery is sold to “Big Beer” there will be a penalty to be paid. Local consumers will choose to support breweries based, owned, and operated here. Hopefully the San Diego Craft Brewer’s Guild will not allow a member that is not included in the definition of craft beer.
InBev and MillerCoors are welcome to create craft beer. They’re welcome to buy craft breweries. But doing so in an intentionally misleading way is wrong. If drinkers want to buy a McPorter or a McIPA they can choose to do so. I’ll be sticking with a Stone Enjoy By or Modern Times Black House. I hope you’ll join me for a round to celebrate the great place we live in. Cheers.
John P. Anderson
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What I’ve never understood is why a local product, be it craft beer or coffee, must inevitably cost more than one from out of town. Call it the Avocado Law, by which we’re told that land costs are high, water costs are high, living costs are higher, wages are higher and so on, and on to the argument that small companies don’t enjoy the economy of scale that large companies do. Is that all there is to it?
How ’bout… we live in a port city, and the grain beer is made of needn’t be transported far. How ’bout… there’s lots of competition in this home of craft beer, so wouldn’t that tend to bring prices down? And are the wages our craft beer heroes are paying so high they force the price of a six-pack of San Diego beer higher by a buck or two or more?
And so… I say this is another Start Up Rip Off living off the notion of exceptionalism . I’ll continue to buy my Full Sail Pale Ale at TJ’s for about $7 and send my money off to Oregon. I’ll even get a Mission St. now and then and send it to San Francisco where the living costs are so low…
The breweries here are not really competing against each other. Quite the opposite.
That’s the trend in American marketing. Small startups with something to offer sell out to large corporations for offers too good to refuse. The only consideration seems to be money. As you rightly surmise, John, profits are then shipped off to corporate headquarters wherever they might be instead of staying in the local community.
KPBS’ s King Of The Craft was prett interesting. http://video.kpbs.org/program/kings-craft/
St. Archer is/was crap anyway, as far as sophisticated beer goes – most reviews I’ve seen have referred to it almost as a “stepping stone” from fizzy yellow macro-brew to real beer…seems like it’d almost fit as a fake microbrew right along with Blue Moon, which I believe was actually started by MillerCoors as an Astroturfed craft product in the first place.
I won’t say I’ve seen the Goose Island quality decline, though I’ve had my suspicions about it being offered on sale for like $13/12er at Vons for a while. If the big boys can come in and brew quality product on a scale that allows them to drop prices like that, I’m not complaining too much. I didn’t hear about the sale, but I did find it odd when it started creeping onto big grocer shelves after I’d only caught the brand a couple times since visiting Chicago some years back…
Goose island lost a lot of accounts after purchase
Fall Brewing is probably my favorite tasting room to hang out in and their beer is most excellent. Jinx Remover is a black lager you cant go wrong with. Plus the place is very punk rock oriented which just sweetens the deal. A lot of local musicians hang out there.
As a guy who actually works in the beer industry, I wonder to myself if the author actually knows anything about what he is writing about or if he is simply drunkenly meandering through content to hit a word limit.
For example, one of the main things that the author suggests is a benefit of “big beer” is categorically illegal and not done. I’d go deeper, but I figure the author might become motivated to do some fact checking for himself. Should he bother to do so, he may discover that nothing that Goose Island brews is made in “Portsmouth”. Further, I don’t understand how the success of Blue Moon and Redds are explained within the idea that the craft strategy of major brewers is to simply just buy up local breweries.
I’d also be fascinated to know why the author thinks anybody would buy “San Diego beer”. There’s ton of great beer made in San Diego (Stone, Mission, Ballast Point, etc.) but I’ve never heard of anybody (outside of San Diego) buying these beers because they were brewed in San Diego. Instead the rest of us across the country just buy the beer because it’s great beer. If the author’s hypothesis that people only care about the geographical location their beer was brewed, we should be able to see a massive fall off in Stone sales once they start brewing in Virginia. Will we? Of course not because the idea is nonsense.
mwa423, Thanks for reading and the comment though I’m not sure why you feel the need to be insulting.
Goose Island has been brewed in Portsmouth, NH and there are many articles regarding their decision to move some brewing operations there. Here’s one from 2011. I do not know if they currently brew Goose Island beer in that location.
In regard to your other points, it seems that we have a difference in opinion on some of the other portions of this piece. I’ll leave those differences and hope you have a good weekend.
I’m being insulting because you’re posting things that are factually wrong or make no sense. You just posted a link saying that Goose Island is being produced where it isn’t to back up your incorrect point. It’s brewed in Baldwinsville, New York and hasn’t been brewed at the Redhook brewery in Portsmouth for almost half a decade.
I also find it odd that you consider illegal practices to be a “difference of opinion”. I hope you have a good weekend, if you have some free time, perhaps you could read up on alcohol sales laws before your next article!
Alternatively, call up Whole Foods and see how much they’re selling beer shelf space for. That would be a real expose!
You could just point out his errors, but you didn’t. If you think you can correct people or change things by being insulting, I suggest you consider a career in Republican politics. Chris Christie’s looking for writers, I hear.
Still grumpy after all these beers.
The article notes both the Baldwinsville location and Portsmouth. In my article I mention Fort Collins and Portsmouth in addition to Chicago simply to ask if where Goose Island is brewed matters, not to highlight the exact location of every brewing location they utilize.
In regard to my comment regarding end caps I took that from articles like this one in Bon Appetit. “The end caps are sold to different manufacturers, and the fact that they’re there has nothing to do with being on sale,” Underhill says. “It means that someone has paid for the privilege of being there—the end caps are shortcuts for someone to buy off of so they don’t have to physically walk down the aisle.”
http://www.bonappetit.com/test-kitchen/how-to/article/supermarket-psychology
It sounds like there are different rules that apply to alcohol sales and I apologize if that specific example is incorrect, I’ll look into it and adjust the language if I am incorrect. The larger point is bigger resources can be an advantage for a small brewery being bought. That would also include larger distribution network, bigger marketing budget, and larger sales team in the field.
Being insulting is not required to address a mistake. I do appreciate your input and helping to educate me and other readers.
The illegal practice is common in the industry. It’s just done in different ways. Store owners get merchandise, free tickets to games/concerts, script, and hella good deals for better shelf and advertising space. As someone who grew up in the grocery biz that stuff is common. The big beer industry is a shady business.
Hey, name and shame the people involved in illegal sales practices! I deplore illegal beer sales tactics. Oh, but remember anything that’s false is something called libel! So, just make sure you’re telling the truth…
It’s a bit silly for you to say you work in the beer industry and then to call Blue Moon and Redds “craft beer”. Doesn’t lend you too much credibility.
Yeah, gee, silly for me to ignore the segment definition of iri, Nielsen, etc. But hey genius, what do you define craft as, under a production limit? Made with some fluid definition of quality that only applies only to you? Sorry, just because I don’t enjoy blue moon doesn’t mean I get to redefine beer segments based on my own biases. Proof that I actually deal with beer professionally and you’re a troll with nothing to add to the conversation.
Tdssd is probably referring to the Brewer’s Association definition. Is there a reason you are name calling and insulting people on this article? It’s not polite nor pleasant.
https://www.brewersassociation.org/brewers-association/craft-brewer-definition/
Yep, we’ll find it odd that the Brewers association definition changes based on the production of Sam Adams. It’s a relatively disingenuous definition. But, beyond that, I have insulted people here only if the point they make is based in a point which is pedantic or wrong. Gee, sorry if I’m offended by an article or comment that implies what I do for a living involves illegal practices. But, every point I’ve addressed negatively doesn’t add to the conversation.
So, somehow incorrect accusations and rude comments about big beer aren’t welcome here, but facts and industry best practices aren’t needed here. Glad we’re on the same page.
But, let me put it in your language. You’re posing a balance sheet where debits and credits are off. Sorry I’ve been mean when pointing that out.
I grew up believing that you don’t insult someone unless are ready to get punched in the face. Obviously, the internet has largely eliminated that issue. The best reason left for not insulting people is that if you actually have valid opinions and knowledge it is diminished by the fact that people think you are a jerk. So consider that when you are trying to educate people and make a point.
Blue Moon and Redds are both whole-owned division of Coors (MillerCoors.) By the definitions of Craft, they are not, since they are [not]”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.” https://www.brewersassociation.org/statistics/craft-brewer-defined/
Whether or not they are good is up to the individual consumer.
By the same definitions, Goose Island is not craft, neither is Blue Point, Elysian, 10 Barrel or any of the other formerly craft breweries bought in recent years by AB-Inbev or MillerCoors.
I think his point is people these days support their local breweries. People here in San Diego DO make a point to buy SD beers. People in Portland do the same for Portland beers, and so on and so forth.
I worked in the “beer industry” at one time. But it didn’t last long since I was lousy at bagging and collecting shopping carts.
Yikes, these comments have gone downhill fast in a way that’s entirely uncharacteristic of SDFP regulars! Lots of kudos to John for remaining civil when a troll whose only apparent raison d’etre is to diminish the quality of conversation…
I agree Dave. I sent Mwa432 to sit in the corner early this morning, changed my mind after a convo with JPA. Friday night another editor decided there was no reasoning with the guy. We’ve sent word to the Christ Christie and Donald Trump campaigns about this guy’s talents. Maybe he’ll consider a career change, but I’m doubtful. He’s still got the forum at the Beer Advocate (from whence he comes) to spew stale brew at people…
I was just about to say, Boys, stop arguing and writing to this guy and now you have! He was rude from the beginning and didn’t quit. San Diegans value the local craft beers a lot, and why not? Contributes to our local character!