Written by Stephen Wishnia for Alternet
In a country where one out of every four beers sold is a Bud Light, and more than 80 percent of all beer sold comes from two giant corporations, indie brewing is showing promising signs of growth and staying power.
A few of the many beers from Stone Brewing
Independent craft brewers have established a significant niche over the last generation. Since 1980, the number of commercial breweries has risen from less than 100 to about 1,600, including brewpubs. Independent craft brewers now account for about 7 percent of U.S. beer sales, and the Boston Beer Co. (Samuel Adams) is now the leading American-owned brewer.
This situation might inspire the corporate majors to colonize the indies, as they did in the music business of the 1990s and more recently, with the corporate acquisition of several leading health-food brands and body-care products such as Burt’s Bees lip balm and Tom’s of Maine toothpaste. Yet so far, that doesn’t seem to have happened. The majors have created a few brands aimed at the craft-beer market, most notably MillerCoors’ Blue Moon, and Anheuser-Busch owns part of four of the top 20 craft-beer brands, according to store-sales figures for the year ending June 13 from SymphonyIRI Group, a Chicago-based market-research firm. Beyond that, however, they have not made many inroads–or tried that hard, say several professional observers.
Two multinational behemoths dominate the $100-billion-a-year American beer market. The Belgian company InBev acquired Anheuser-Busch in 2008, and with it, the half of U.S. beer sales claimed by Budweiser and Busch. Another 30 percent belongs to the amalgamation of South African Brewing, MillerCoors, and Canada’s Molson.
These two “have certainly carved away some of the craft-beer market,” notes Maureen Ogle, author of Ambitious Brew: The Story of American Beer. On the other hand, she says, they haven’t come close to dominating it.
Indie Beer’s Comeback
The emergence of craft brewing rescued the diversity of American brewing from the nadir it reached around 1980, when the nation had barely 80 breweries–fewer than it had in 1810, when the population was a scant 6 million people, and they mainly drank hard cider and slave-trade rum.
What is craft brewing? The Brewers Association, a nonprofit trade group of more than 1,000 independent brewers, sets the following standards. A craft brewery uses the traditional ingredients of malt, hops, yeast, and water. It adds other ingredients only to enhance the flavor–instead of lightening it, as the majors do with “adjuncts” of corn and rice. It produces less than 2 million barrels a year (about 660 million bottles). And such brewers must also “have distinctive, individualistic approaches” and “maintain integrity by what they brew and their general independence.” Specifically, that means a brewery cannot qualify as “craft” if more than 25 percent is owned or controlled by “an alcoholic beverage industry member who is not themselves a craft brewer.”
Craft brewers “do it for the love of beer,” says Brewers Association spokesperson Julia Herz, “and they’re fortunate enough to do it in a time when the culture appreciates what they’re doing.” Almost 50,000 people attend the annual Great American Beer Festival, she adds, and the market is growing. According to the Brewers Association, overall beer sales dropped 2.2 percent in 2009, but craft beer sales rose 7.2 percent by volume and 10.3 percent by dollars. Some brewers have failed, but others have taken their place. The Brewers Association says there are now almost 1,000 brewpubs in the U.S., more than 500 microbreweries, and 68 regional craft breweries.
Boston Beer is threatening to reach the 2-million-barrel limit–but during a serious hops shortage in 2007, the company sold part of its stash at cost to other craft brewers, forgoing a profit to help its fellow indies, says Herz.
How Big Beer Was Born in the USA
The rebirth of craft brewing in the 1970s went against more than a century of trends in the American beer market.
American brewing as we know it began with the wave of German immigration after the failed revolution of 1848. Among the arrivals were Joseph Schlitz, Frederick Pabst and Frederick Miller, who settled in Milwaukee, and Adolphus Busch, who moved to St. Louis.
The German immigrants enjoyed success replicating the beer culture of their homeland. However, they soon found that Americans preferred a lighter beer than the traditional German brew. They wanted a thirst-quenching, quick-buzz beverage, instead of sitting in a beer garden nursing a glass of thick, dark “liquid bread” lager. Adolphus Busch discovered the solution: In Bohemia, where barley was expensive, brewers lightened their beer by adding corn or rice to the mash.
These new lighter lagers took longer to go sour, so they could be shipped more successfully, and advances in bottling technology and transportation enabled brewers to expand out of local markets. This pushed out hundreds of brewers that couldn’t compete in quality or marketing. Even before Prohibition went into effect in 1920, the number of American brewers had fallen by more than half, to around 1,500.
The Prohibition era hammered the beer industry. Only about 750 of the nation’s brewers reopened after beer was relegalized in 1933. These survivors had to contend with the Depression, World War II, and the rise of television, which gave a major advantage to beer-makers that could afford national advertising.
“Local breweries were on the way out, not because their beer was not as good as the giants but because they could not compete with them in terms of advertising dollars spent on national television,” David Halberstam wrote in his book October 1964. Budweiser reached number one in 1955, two years after Anheuser-Busch owner Gussie Busch bought the St. Louis Cardinals. Busch knew beer better than he knew baseball, Halberstam noted, but he understood that increased advertising “was the means with which he could crush the competition.”
An unforeseen side effect, according to Halberstam, was accelerating the integration of major-league baseball. Busch was surprised to discover that the Cardinals had no black players. “How can it be the great American game if blacks can’t play?” he asked the team’s staff. “Hell, we sell beer to everyone.” Under him, the Cardinals, who in 1947 had threatened to strike rather than play against Jackie Robinson, desegregated well before the New York Yankees, the Philadelphia Phillies, and the Boston Red Sox (who waited until 1959).
The nationalization of the beer market enabled Budweiser and Miller to eclipse local beers like Schaefer and Rheingold in New York, Miami’s Regal, Jax in New Orleans, and New England’s Narragansett, which sponsored Red Sox games on the radio with the slogan “Hi, neighbor, have a ‘Gansett.” (Narragansett was revived in 2005.)
As television, the most potent mass-advertising vehicle the nation had ever seen, became near-universal in the 1950s, almost half the nation’s breweries closed. The number declined from 400 in 1950 to 230 in 1961. By 1983, only 80 were left, and six corporations–Anheuser-Busch, Miller, G. Heileman, Stroh, Coors, and Pabst–controlled 92 percent of U.S. beer production. (Coors was unavailable east of the Mississippi until 1981, but it capitalized on that mystique.)
Who Wants to Drink Mega Suds?
Massiveness has a marketing downside, though. It evokes images of beer stored in a giant industrial silo, chemically treated so it will ferment faster and not go sour while being trucked all over the country, and designed to be watery so more cans can be sold to young men whose self-perceived penis size hangs on the number they can pound down. In contrast, “microbrewery” calls up the image of a beermeister, a mustachioed maven with a nose for the finest of malt and hops, sniffing around the vats and tasting every batch to tweak the smallest details.
A young Fritz Maytag
That confluence of ideology and taste fed the microbrewing and underground homebrewing movement of the 1970s. Washing-machine heir Fritz Maytag bought an old brewery in San Francisco and launched Anchor Steam. Sierra Nevada followed a few years later.
The New Albion brewery, another Northern California post-hippie enterprise, was short-lived but influential.
The legalization of homebrewing in 1978, ending a hangover from Prohibition, meant that hops geeks could openly show off their handiwork–and some were inspired to turn pro.
Their main problem, says Herz, was market access. State regulations enacted after Repeal established a “three-tier” system. This required a distributor to act as middleman, so breweries, wineries, and distilleries would not hold power over retailers. A 2005 Supreme Court decision legalized direct sales to consumers by out-of-state brands and set off a spate of lawsuits challenging those state laws. However, distributors still control the wholesale market, and many work only with Anheuser-Busch or MillerCoors. It can be hard for new brands with no sales track record to get distributors to pick them up, Herz says.
The number of craft brewers exploded in the 1990s, but the market, in theory, still leaves them highly vulnerable. If the major brewers could create brands that combined the credibility of microbrew with corporate marketing and distribution muscle, they could crush the independents.
The obvious parallel, one feared by many in the craft-beer world, is to the corporate cannibalizing of the indies in the 1990s music business. In the 1980s, a network of underground clubs and indie record labels emerged in both rock and hip-hop, catering to audiences that rejected boring corporate schlock. By the early ’90s, these acts were bubbling up to the Top 100, and the major labels moved in. Nirvana jumped from Seattle indie Sub Pop to Geffen in 1991 and quickly scored a number-one album. Green Day, a band nurtured in the nonprofit punk clubs of Berkeley, sold 4 million copies of their major-label debut in 1994. This cherry-picking kept the underground circuit from growing to the point where more than a very few of its artists could make a living.
That didn’t happen in the beer world. The majors made some moves, but didn’t push to conquer the indies. “It’s kind of surprising to me that they’ve been pretty slow to respond,” says Adam Nason, who runs the Boston-based Beersage Web site. “They’re taking baby steps.”
Miller bought the well-respected Wisconsin brewer Jacob Leinenkugel in 1988. Anheuser-Busch bought a share of Seattle’s Redhook Ale Brewery in 1994, and has distributed it since then. In 1995, Coors launched the Blue Moon “handcrafted” brand. In 1999, Miller acquired the Oregon brewer Henry Weinhard’s, which the Weinhard family had sold to Pabst in 1979.
Current Anheuser-Busch craft brands include Red Bridge, Skipjack Amber, Wild Blue, and the only-in-Texas ZiegenBock. It also has a piece of the Craft Brewers Alliance, which comprises Widmer, Redhook, Goose Island, and Kona, all of which made the top 20 craft brands, according to the SymphonyIRI Group figures.
MillerCoors also owns Killian’s Irish Red. Coors is introducing Batch 19, which it’s promoting via Facebook and Twitter, and Colorado Native Lager, produced using local ingredients by its AC Golden Brewing subsidiary. Yet the top three craft beers in the last year, according SymphonyIRI, were Samuel Adams, Sierra Nevada, and New Belgium, all solidly independent. All three enjoyed double-digit sales increases, with New Belgium’s up by more than one-third over the previous year.
“It’s definitely rocking right now,” says Nason. “Brewers are taking more risks, and consumers are being more open to flavorful beers. People are really into their hops.”
With an established network of specialized distributors and an audience of loyal drinkers, craft brewers are in a good position, says Maureen Ogle. People who consider themselves beer aficionados, she says, “Will know that Blue Moon is made by MillerCoors.”
The Beer Revolution Won’t Be Bought Out
One way the majors might move in is by buying established microbreweries. The first generation of craft brewers is beginning to retire–Fritz Maytag, now 72, is selling Anchor Steam–but that is not likely to lead to corporate domination.
“I haven’t heard of anyone selling out to the bigger companies,” says Nason.
The ideal strategy for the majors, says Peter V.K. Reid, publisher of the trade magazine Modern Brewery Age, would be a turnkey takeover, to acquire a craft brewer with a well-recognized brand name, such as Samuel Adams or Sierra Nevada–“but they’re not for sale.”
The craft market may be too small for the behemoths to bother. “Why would they be threatened by a piddly-ass 7 percent share?” Ogle asks. If the “big giants wanted to muscle these guys out of business,” she says, they could have done it 20 years ago.
InBev, which paid $52 billion for Anheuser-Busch, owns more than 130 brand names, from Absolut Cut in Sweden to Zhujiang in China. Its empire includes Andes and Quilmes in Argentina; Antarctica and Brahma in Brazil; Bass and Tennent’s in Britain; Stella Artois in Belgium; Kirin in Japan; and Beck’s, Spaten, and St. Pauli Girl in Germany. SAB/MillerCoors has more than 125 brands, including Pironi in Italy and Britain’s Carling, along with beers in China, the Czech Republic, Honduras, Colombia, Ecuador, Peru, Kenya, Zimbabwe, Mozambique, and South Africa.
“The way they make their money is by brewing mass quantities of Bud Light,” says Reid. The Busch family, he believes, was interested in microbrewing–“they were very committed to the craft of beer”–but Craft Beer Alliance staffers have told him their relationship with the company has “evaporated” since the InBev takeover.
To the majors, craft beer may be of high quality, command top prices, and have growing sales, but it’s ultimately just one more niche market, along with cheap, potent malt liquor; “retro” brands such as Rolling Rock (acquired by Anheuser-Busch in 2006) and the hipster favorite Pabst Blue Ribbon (owned by G. Heileman, but brewed under contract by MillerCoors); and, notes Reid, the “subpremium” budget beers that have gained during the recession.
Connoisseurs may joke that light beer is like making love on the beach, “because it’s fucking close to water,” but it represents more than half the U.S. market and four of the five top-selling brands. Like a two-liter bottle of diet soda, this probably says something about Americans’ distinctive proclivities for both gluttonous consumption and body-image puritanism. On the other hand, craft beer so far seems somewhat immune to corporate takeover, between its drinkers’ loyalty and the relatively small size of its market. Its rise is one of the few bits of good news to come out of the nexus of economics and culture in the last generation.
Steven Wishnia is a New York-based journalist and musician. The author of Exit 25 Utopia and The Cannabis Companion, he has won two New York City Independent Press Association awards for his coverage of housing issues.