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Bigger isn’t better: The philosophical currency of craft beer

8 Comments

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Big beer companies appear to be coming for our beloved craft breweries.

In the United States we’ve seen big brewers buy up Pyramid, Magic Hat, Anchor Steam, Kona, Goose Island, Blue Point Brewery Co, 10 Barrel Brewing, and Elysian. Much closer to home, through Labatt, we’ve just seen AB InBev make what will almost certainly be the first of at least a couple moves into the Canadian “craft” market by buying up Toronto’s Mill Street Brewery.

And while our instincts may be to arm ourselves and barricade the doors of our favourite local brewpub–or worse, take to greasy laptops in our collective mothers’ basements in order to fill the internet with cries of “sell out,”–we really probably shouldn’t panic. Because whatever big beer’s designs might be, I don’t think they’re going to work.

Clearly big breweries have recognized the value of craft beer. The Brewers Association last year reported that craft beer accounted for 11 per cent of beer produced in the US in 2014, a number that, while impressive in and of itself, is also shocking given that it represents 18 per cent more craft beer production than the previous year. In Canada too, we’ve seen a 70 per cent increase in the number of licensed, small-scale brewery operations in the last five years.  A Financial Post article/infographic of last year even posits that breweries under the 100hL threshold enjoyed a 10 per cent market share in 2015. For big brewery executives reading financial papers as they take a break from grinding up interns to feed to their Scottish work horses, these are figures that are hard to ignore. And so, perhaps predictably, they’ve done what big breweries have done for nearly a century, and have swooped in to buy up some of these increasingly valuable assets.

The irony of course is that, the minute a “craft” brewery is purchased by a huge, industrial-lager-churning macrobrewery, it ceases to be a valuable asset because it loses precisely what it made it valuable in the first place. That is to say, the value of craft beer–the secret to its growing market share–likely lies within its inherent smallness.

I’ll explain.

More than simply interesting-tasting beer, craft beer offers a sort of philosophical opposition to macro-beer. One needn’t look far (see: this blog) to see that craft beer nerds often align themselves with craft brands not just because they tend to make more interesting beer, but also out of a sense of loyalty to an ideal. Craft beer appeals to people who choose to see the world as a struggle between big corporations and hard-working, “authentic,” or smaller businesses. Craft beer thus has a built-in narrative of “us vs them,” “David vs Goliath”–it is the crafty “other” option for any consumers who care at all about who makes their beer, where it comes from, and what goes into it.  Craft beer then has something I’ll call “philosophical currency.”

Highly intangible, philosophical currency trumps logic. Many people will forgo the cheaper version of something or will sidestep the more convenient option out of a sense of loyalty to the philosophy (be it real or just perceived) behind their favourite products. In the case of beer, fans of craft beer will skip the far more cost effective 2-4s of beer in favour of $13+ bottles of specialty beers and they’ll often walk past their local liquor store to buy their beer directly from the folks who make it a block or two further up the road. The value of philosophical currency thus defies many of the marketing principles that big beer executives likely recite each night before they seal their cryogenic champers and/or have had tattooed on their chests since business school.

And so when big beer tries to cash in on those sexy and growing craft-beer market-share numbers that they read about, their efforts are fatally flawed by design. Big beer can’t truthfully co-opt craft beer’s philosophical currency because the very act of buying a craft brewery (or inventing a pseudo-craft beer) confounds the very narrative that makes craft beer valuable: “It’s small. It’s local. It’s quirky. It’s people just like us making beer in the community.” Yes, virtually all the working definitions of “craft” are vague, but if you can trace the hierarchy of your business up to a place where Carlos Brito sits–presumably atop a purple panther that subsists on the dreams of entrepreneurs–few consumers will be willing to agree that you are still a craft brewery.

And so big beer’s efforts to capitalize on craft beer’s growing popularity will fail.

Despite what Labatt’s Shock Top marketing team might think, consumers actually aren’t that easily duped. When your target market seeks authenticity and independence, it’s virtually impossible to fake it and a craft brewery that is now owned by a huge, profit-driven conglomerate will by definition lose its philosophical currency.

With no more philosophical currency behind these brands, they’ll soon lose the thing that made them valuable. And when AB InBev or Molson-Coors, or whomever–who are nothing if not shrewdly aware of the value of things–sees that the craft brands they’ve purchased are being devalued, it’s a pretty safe bet they’ll change strategies and, eventually, these “buy outs” will become a thing of the past.

So we needn’t be scared of them. We actually ought to be scared about what they’re going to try next.

Author: Ben

http://www.bensbeerblog.com

8 thoughts on “Bigger isn’t better: The philosophical currency of craft beer

  1. Another concise and well written blog. Thank you.

  2. So to follow your logic, if everyone that drinks Budweiser all switched to Muskoka Detour, then you would hate Muskoka and feel sorry for Anheuser Bush? Where do brewers like Steam Whistle fall on your David/Goliath continuum? Would they be considered David on steroids? How about Sam Adams? Where can they possibly fit into your philosophy?

  3. I will never feel sorry for Anheuser Bush, just the people who purchase it.

  4. While the filthy conglomerates will continue to buy up independent brewers, they’re only able to go after ones that have large enough scale for it to be worth it to their bottom line. They aren’t going to go after the guys on the corner because it adds nothing to their numbers. Them going after places like Bellwoods, Neustadt or Collective Arts would be like Lipton going after lemonade stands. AB Inbev does almost $50 billion dollars in sales each year. I doubt any of the aforementioned craft brewers do more than $5 million a year. Is it worth the risk and trouble to go after the little guys to add .01% to your bottom line? That said it’s open season on Steamwhistle, Moosehead, Sam Adams and basically anyone with a national presence or grows to that size.

    • This is true, but the “Big Beer” guys do have the option of scaling-up production of a small craft brewers they purchase. To my recollection, Granville Island wasn’t that big when they got taken over.

      Of course, the other side of this coin is the risk that customers who buy craft because it’s local – as Ben describes – will be turned off by this move; negating some of the impact.

  5. Hmm. Do you think that the conglomerates are going after the “illusion of choice”? If the beer brands can keep their shelf space and market share by showing “X + 100” brands available to the customer rather than just “X” then the consumer can say “wow, I have a lot of choice”. Just look at the food industry and you will see how something like 6 corporations control many of the recognizable food brands that we ingest. The travel websites deals are essentially owned by two companies and everyone else is just under one those umbrellas.

    Another thing that I have learned about fandom (for anything) is that it has its limits as well. I enjoy great craft beer, but have friends who just don’t care. If a Molson promo is on, they will drink the Molson. I remember in my carfandom days and would lament how the Europeans would get “this model” or “that model” and “why is Toyota selling so many boring cars…oh the humanity!”.

    Will be interesting to see for sure. Maybe have a Ben’s Beer Blog App so when look something up we can see if it IS a craft brew and your inner thoughts on that brew!

  6. Who bought Anchor Steam?? The wiki page doesn’t mention anything. I was quite enjoying it, hopefully I haven’t been paying Anheuser all this time. 🙂

    • Sorry, the way I’ve phrased this purchase above is slightly incorrect. First, it’s Anchor Brewing, not Anchor Steam, Second, they weren’t actually bought by big beer, they were bought by The Griffin Group in 2010. The Griffin Group is “an investment and consulting company focused on beverage alcohol brands,” most notably they are responsible for the Skyy Vodka brand. Anchor Brewing is now Anchor Brewers & Distillers, LLC.

      So not Anheuser Busch, but still now corporately owned.

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