Thinning the Herd: The Upside of Big Beer Buyouts

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I know that there are good reasons to be deeply concerned about the effects of Big Beer getting into the game of buying out craft breweries.  Ownership confusion, pricing effects, tap and shelf space, and all the rest are real...but I still can't help but think that we're overlooking at least one big benefit and one significant advantage.

Bear with me here.

The Benefit: Rationalizing the Market

In some markets, you only have a few real craft breweries.  For the most part, though, these aren't the places that see buyouts.  Now, that doesn't mean that Goose Island being available everywhere can't choke out a small production brewery in a place with a nascent craft beer scene - I'll concede that risk.

I mention it only because it's in the crowded beer markets that this can be a good thing for we craft beer enthusiasts.  How so?

Let's say you have ten breweries in your metro area.  Each is only getting 1/10th of your beer money.  Now let's imagine one of your breweries takes a buyout.  What's the effect?

Well, if you think, "oh well, don't care," then the action has no real impact on the other local breweries - you're still spreading your cash around in the same way (each gets 10%).  But if you're in the "Never ABI" camp, then you're never going to patronize that bought-out brewery again, which means that the other local breweries are about to see an increase in their sales (each gets 11.1%), thanks to you and those like you.

So, in this case, in terms of the local economic impact, it's either neutral or positive with respect to the spending of what we might call the "core" and "aware" segment of the local beer drinking community.  ["But that's not enough to keep a brewery going!!!," I can already hear you saying - I'll get back to that, I promise.]

A corollary benefit is that it simplifies the market a bit.  As it is now, my metro beer market is so crowded I need to take a special "tour" every May to the local breweries I haven't had the chance to visit yet.  Now, that might not be true everywhere, but it certainly is in craft-heavy markets.  One bought out means one more I don't need to consider buying, which means I can try out something new.

The Advantage: Beating Big Beer

The strongest objection to this "benefit" is that it's ignoring the idea that most people aren't craft beer geeks like me/us.  Believe me, I'm aware of it.  Someone recently told me they don't like Dunkelweizen because it "finishes so hoppy."  I don't expect most people to be intimate with beer styles, the merits of canning v. bottling, or the differences in strains of Brett (why would they???  It's a waste of time and brainpower!).  And I also know that most aren't going to be paying attention to who owns whom, so when they're at a restaurant or their local beer shop, they're going to buy based on something other than local, independent ownership (or not).

Doesn't matter.  Because the way to beat big beer is to keep things small and local and brewing in-house.  And that brewery actually can be kept going by a combination of beer geeks and local sentiment.

I live just over the river from Phoenixville, PA.  Now, you may not know it, but Phoenixville ranks 10th in the United States for breweries per capita.  How does a place with about 50K people in a 5-mile radius support ten breweries?  Easy - they're all relatively small.  

You can't outcompete Big Beer as a massive production brewery.  You might not even be able to do it as a small production brewery.  But you can do so at street-level.  These breweries in P-ville compete, but only in the same general way that restaurants on the same busy main street compete with each other.  Then there's the fact that brewpubs yield a higher return on their beer products than production breweries do (no packaging, shipping, etc. and a captive population).  And since they're not sustaining a massive brewing and distribution infrastructure to do it, they're not as susceptible to the kinds of pressure and market distortions that the big breweries can bring to bear.

Big beer can choke off access to ingredients and supplies, buy off competitors, lobby for advantages in distribution rules, and more.  But they can't do much about a local, 3-barrel, 75-cover brewpub.

The Right Outcome

I also have to say that I think a trend towards smaller breweries in general (and brewpubs in particular) is exactly what we should want in our beer world.  It means that you get a high level of product diversity and fresher beer.  It should mean better beer, because market pressures will thin out the herd of a larger collection of smaller breweries in a way that they probably won't for 2-3 medium-sized local breweries.  Brewpubs often do, also, bootstrap small production operations off of their on-premises sale profits.  Hell, it probably even has sustainable economic benefits - more small breweries mean more hiring in what is already a labor-intensive sector, compared to larger automated craft breweries.  

The masses will never be sold on buying Saison and Bock and even IPA (the most popular craft beer style is still pretty polarizing among non-craft beer people).  And craft breweries that try to outcompete Big Beer on lite lager have a massive uphill battle, undoing decades of brand loyalty, to say nothing of the maybe-monopolistic tactics of those breweries.  

Let's stick with what we might call the "Phoenixville Model." 

Keep it simple.

JJW

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