CVIndependent

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Last updateTue, 18 Sep 2018 1pm

It’s not easy to know exactly where your money is going when you buy something. Some large corporations take great care to intentionally obscure this knowledge, at least when looking at products superficially. You might despise a certain large conglomerate, and vow to boycott it … only to later find out that the paper towels you bought are made by a company that is wholly owned by that same conglomerate.

For decades in the craft-beer world, we didn’t have this problem: If you liked the beer you were drinking, you could find out who made it by looking at the label—and that was that. Well, the craft-beer market steadily grew … until the bigger boys in the industry could no longer stand by and watch its massive market share erode.

The plan was simple: Buy up craft breweries around the country.  

“What’s wrong with that?” you might ask. Not a single thing … at least not from a business and legal perspective. Lagunitas Brewing Company, the renowned brewer in Petaluma, sold half of the company to Heineken in 2015, and then sold the remaining half in 2017—yet the beer’s quality remains just as good as ever, and consumer costs have gone down. What could be wrong with that?

The short answer: Plenty. As for the longer answer, we’ll come back to this later, because now I have to try to make a relatively dry concept somewhat interesting: the three-tier system for alcohol in the U.S. At least it has an interesting origin, in the shadows of the Prohibition era and the Roaring ‘20s. In that decade, saloons popped up to serve the sinfully thirsty public, and many of them were “tied houses,” meaning an alcoholic-beverage supplier would pay a saloon to exclusively carry their products. Upon Prohibition’s merciful appeal, federal and state legislators saw the problem with this and sought to institute a system to protect the consumer from tied houses, encouraging free-market activity. Thus, the three-tier system was born: Breweries (or alcoholic-beverage makers more generally) would sell their products to consumers through a distributor that acts as a middle man.  

Benefits and drawbacks to this system have popped up in the ensuing years. One the biggest benefits is to smaller breweries: They have the possibility of getting their beer into other markets relatively easily, thanks to a distributor’s expanded network. This could allow a brewery to gain fans in places it previously might have never been known.

There is a dark side: AB InBev and Molson Coors have become the equivalent to The Empire in the Star Wars movies when it comes to craft beer. AB InBev is the massive multinational conglomerate and parent company to all of the Anheuser Busch and SABMiller beers, as well as many other brands. (Yes, that nasty yellow stuff is owned by foreign corporations. Don’t ever be fooled by the ridiculous beer commercials pasting American flags on everything.) Molson Coors is at least half-American, and I think you can guess which half. The company’s M.O. seems to be combining marketing and packaging efforts, as well as streamlining processes within the company. This allows them to produce the exact same product, no matter where you’ll find it in the world. It’s a feat of engineering, really, and something to be admired for what it is worth (and it’s worth billions for them), but what about the … uh ... taste?

Now we come to “branches”: Large breweries own distribution affiliates in select markets. While legal, it is plain to see the problem with this setup: These distribution affiliates can strong-arm local businesses into essentially becoming tied houses. “Oh, you’d like to carry (fill in the blank) brewery’s beers? They’re not in our portfolio, I’m afraid. And if you do carry them, we’ll pull all of (our popular but bland) brewery’s beers. If you want craft beer, though, you’re in luck! We have some in our portfolio. So what if we stomped on the quality of their beers in an attempt to make them more cheaply and more efficiently (with the exception of Lagunitas/Heineken … for now)?”

These conglomerates count on your ignorance of the origins of the beer you’re drinking. This isn’t anything to be ashamed of, by the way: Beer aisles are an absolute labyrinth, and nobody should be expected to stand around Googling who owns what. However … did you know that Los Angeles’ Golden Road Brewing is owned by AB InBev? Don’t be surprised; AB InBev owns at least 400 beer brands.

This mess inevitably spreads to the shelves. It’s why you might see packages of varying sizes and shapes of Budweiser, Bud Light, Coors, Miller Lite, etc. More shelf space equals more eyes on brands, which equals more sales. It has a distinct, anti-free-market whiff about it, doesn’t it? It’s also why these conglomerates spend ungodly sums of money on commercials that either dazzle you with visual stimuli, distract you with humor, or talk about all of its beer’s attributes without mentioning a single taste descriptor: “Hey, this beer is cold-filtered, crisp and golden? Those are my favorite flavors!”

At this point, a craft-beer fan needs to make up his or her mind. You don’t need my permission to spend your hard-earned dollars on any brand over another—but if you’d like to continue to see craft beer thrive, and become more interesting and exciting with each new beer released, join me in moving away from the products by the breweries that have sold out to Big Beer, and instead support the absolute glut of breweries that have not done so. The Brewers Association recently created the Independent Craft Brewers Seal, which qualified breweries can apply to their labels. (Note, however, that the seal is not yet being used industry-wide, so if a beer does not have the seal, it doesn’t necessarily mean it’s being produced by a brewery owned by one of the large conglomerates.)

Since we’re in Southern California, I’ll mention a couple of breweries that have sold out.

AB InBev owns Golden Road Brewing and 10 Barrel Brewing. The latter is out of Oregon, but opened a large restaurant and taproom in downtown San Diego—something that was a topic of great contention in a county with 150-plus breweries. If you’re in San Diego and find your way to 10 Barrel, you’ve really overlooked some amazing, independent brewers within a stone’s throw (no pun intended).

Constellation Brands owns San Diego’s Ballast Point Brewing. This buyout was a big deal in the industry when it occurred in 2015 due to the $1 billion price tag. At least Constellation is an American company; it also owns Corona, Modelo, Pacifico and many other brands. However, there are so many true craft breweries within a very short distance of any Ballast Point location where you could have a good or better time.

Go forth; stay vigilant; and drink wisely!

Brett Newton is a certified cicerone (like a sommelier for beer) and homebrewer who has mostly lived in the Coachella Valley since 1988. He currently works at the Coachella Valley Brewing Co. taproom in Thousand Palms. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

Published in Beer

During Coachella, I tasted a lot of delicious craft beer, both in the Craft Beer Barn and at the Rare Beer Bar, the latter headed by Jimmy Han, owner of Los Angeles’ Beer Belly. One of my favorite discoveries: Wicked Weed Marina, a blonde sour ale that is aged in wine barrels—with more than one pound per gallon of peaches and apricots.

Just days later came the announcement that Anheuser-Busch InBev had bought the Asheville, N.C.-based Wicked Weed. It became the latest of 20-plus former craft breweries that are now owned by corporate brewers. I say “former,” because the Brewers Association defines a craft brewer as small, independent and traditional—with less than 25 percent ownership by a non-craft brewer.

What does this all mean? I spoke to Julia Herz, the Brewers Association’s Craft Beer Program director, and Mitch Steele, the former brewmaster of Stone Brewing who is now the founder, brewmaster and COO of New Realm Brewing, coming soon to Atlanta.

There are a lot of feelings on both sides as far as craft breweries “selling out.” What are your thoughts?

JH: … It’s not happening in mass, right? Ninety nine percent of the 5,300-plus breweries are still independent and small. But as the purchases continue to happen … the Department of Justice issued a consent degree over (AB InBev’s) purchases in 2015 and 2016—Devil’s Backbone being a key one, which was approved, with some changes made, by the DOJ. … The more that the large, global brewers become a one-stop shop for brands and beer styles, the harder it is to make the marketplace fair, and for beer lovers to really get the choices that many beer-lovers desire.

MS: I think it’s really dangerous what’s going on right now, honestly. The problem is that the majority of the beer-drinking public doesn’t know or doesn’t care about the business practices of large brewers, and how it impacts small brewers. … When a brewery is buying tap space, which is technically illegal, small breweries can’t. Most small breweries won’t do it because they don’t want to do something that’s against the law, and they can’t afford to play that game, either. … When somebody who’s kind of a casual craft-beer fan walks into a bar, and sees all these beers that are “craft,” yet they’re all brewed at Anheuser-Busch, most of the time, (customers are) not going to register it’s not a small, independent brewer. When these brewers can potentially come in and sell a keg of beer for 50 to 60 percent of what a small craft brewer can, it really is damaging the ability of the craft brewers to sell their beer.

Were you surprised by the Wicked Weed buyout?

JH: … (In some respects), I am not surprised, because they (AB InBev) continue to make regional purchases in key beer markets of the country: Four Peaks in Arizona, Blue Point in New York, Los Angeles for Golden Road. These are very geographically, strategically made procurements. … Also, (as of now, the Wicked Weed) deal has not gone through. It’s an announcement from AB InBev that they are moving to make a partnership and bringing Wicked Weed into their brand portfolio. It’s still subject to review.

MS: Well, that surprised me. I’d go so far as to say that it shocked me. I thought they were in it for the long haul. I know (co-owners) Luke and Walt (Dickinson) pretty well, and I’ve brewed with them before, and we’ve hung out a lot. … I know Luke and Walt are part owners, but I don’t know what percentage they own. I know they had some big-time investors in that brewery, and it could have been mostly their decision, but who knows? But, yeah, it shocked me and disappointed me. Some of these are not a big surprise: You hear through the grapevine that some of these newer breweries are building themselves to sell … and they’re just trying to get their business to a point to where they’re attractive to a large brewer. … You know, when somebody comes and offers you a ridiculous amount of money, who’s to say you’re wrong for taking that and setting up your family for generations? You can’t really fault it. I just wish it didn’t happen.

Do you sympathize with any of these craft breweries after they explain themselves on social media? They say: “We had to do this because of distribution. The beer will stay the same.”

MS: Yeah. I worked with Budweiser for 14 years. This was back in the 1990s. People looked at Budweiser as the evil empire, but I dealt with the reaction from craft brewers all the time: “It’s lousy beer.” I’d get on my soap box and say, “Ya know, you may not like it, but don’t ever talk negative about the quality, because the people who brew this beer are as passionate about it as you are about yours.” But it’s a different company now. I certainly understand the backlash. I can relate to it because I dealt with it for a long time myself. … I think it’s a very uncomfortable feeling for most of them, because the craft-brewing business is so built on community and comradery. Now, all of sudden, you’re not in the club anymore. That’s a hard thing to swallow, especially when you’ve got so many friends in the business. … People who don’t have ownership in the brewery, and have no say in it—they’re just kind of there when it happens. Those are the people who I feel really bad for, because they had no say.

Do distribution laws and better access have anything to do with why they are selling?

MS: The whole access-to-ingredients thing, I think, is a little bit overplayed. If you’re a growing craft brewer, there are enough suppliers out there. If you work it hard enough, you can get what you need, with a few exceptions. For example, Galaxy hops—nobody can get Galaxy hops right now. Can a big brewer go in and get Galaxy hops? I don’t know if they can. … I think really the big advantage for a small brewer joining forces with a big brewer is the access to the technical resources, so they can understand what’s happening in the brewing process—be it really complex lab equipment or whatever. And then distribution access is huge. … Those are the things that really matter.

JH: Yes. As soon as you sell, you get instant access to things that those 99 percent of the 5,300 breweries don’t have. You get into a system in the network for better economies of scale, for purchasing raw materials and ingredients. You get instant distribution that cannot be matched. … The number of distributors over time continues to wane. Even though we have 5,300-plus breweries today, there are only 1,000-plus active distributors, and 500-plus of those are controlled by AB InBev. MillerCoors has several hundred as well. Distributors are amazing partners to beer, but it’s a matter of priority. How do they decide what they’re going to sell? When you’re an AB house … their first priority is likely those AB brands.

Published in Beer