Note: This story appears in issue #2 of Paste Quarterly, which is shipping now, and can be found at select bookstores/record shops. You can purchase it here, along with its accompanying vinyl sampler.
The second great craft beer honeymoon is over. The oft-cited “bubble” may not have burst just yet, but we’re now living in a time of omens and portents. The industry as a whole has entered a period that will be described as “challenging” by the optimistic and “dangerous” by the pragmatic, with major regional craft breweries posting losses for the first time in a decade. And at least part of the cause can be traced back to the bottomless coffers of “Big Beer,” and especially Anheuser-Busch InBev.
In recent years, the tone of this story has largely revolved around brewery acquisitions. Both AB InBev and MillerCoors have made the acquisition of larger, regional craft breweries a priority. After AB InBev’s purchase of Chicago-based Goose Island started the domino cascade in 2011, they’ve since acquired the likes of Wicked Weed, Four Peaks Brewing Co., Devil’s Backbone Brewing Co., Elysian Brewing Co. and Golden Road Brewing Co., among others. MillerCoors owns Terrapin Beer Co., Saint Archer Brewing Co. and Revolver Brewing Co. And that’s not even including the “crafty” brands brewed by both corporations, such as Blue Moon and Shock Top, which are carefully calculated to put forth an artificial veneer of “craft” and hide the product’s true source. Indeed, it’s never been harder than it is right now to pick up a beer off the shelf at a package store and know whether or not it’s coming from an independent brewery, which was certainly part of the rationale in mind when the Colorado-based Brewers Association, the craft beer industry’s not-for-profit trade organization, unveiled its “independent craft beer seal” last month.
But brewery acquisitions are only the tip of the iceberg, because AB InBev’s goals have evolved. With the U.S. market share of Budweiser and Bud Light continuing to decline, and AB InBev posting its first decline in core earnings since 2004 this March, the goal is no longer to “destroy craft.” Rather, these savvy corporations want to co-opt every potentially profitable aspect of the industry, and control the conversation of what the term “craft beer” constitutes. It’s become a war not just of sales, but of ideas and marketing language.
“They’re not just purchasing breweries; they’re purchasing ways to influence as well,” says Dr. Bart Watson, Chief Economist of the previously mentioned Brewers Association. “That appears to be a conscious strategy on their part, because when the lines are blurred, they have a tremendous advantage. The differentiation that small and independent breweries have created, AB is working to erode.”
Those methods of buying influence include the fall 2016 purchase of Northern Brewer, one of the country’s biggest homebrew supply websites. The same “disruptive growth” arm of AB InBev, known as ZX Ventures, is also a partner in a beer blog from Conde Nast and Pitchfork, called October. Craft beer blogging, funded by Anheuser? Clearly no conflict of interest there! Believe it or not, the company wasn’t even content to stop there—they’ve also directly bankrolled a second beer blog called The Beer Necessities, which publishes such vital content as “The Six Beers That Made Wicked Weed Famous ,” on a website run by The High End, who are, I might remind you, the new owners of Wicked Weed. The founder’s last name, by the way, is literally “Hack,” which couldn’t possibly be any more apropos. It’s the equivalent of Paste purchasing a brewery and then immediately devoting a new section of the site to writing about what a great brewery it is. It’s an obvious and indefensible conflict of interest, targeted not at changing the minds of craft beer geeks but at challenging the importance of ownership in the minds of the “average beer drinker” by positioning it as a non-issue.
“The conversation about craft brewing has long been controlled by small and indie brewers,” says Watson, commenting on the ideological war that is unfolding. “And now Anheuser wants in. I don’t know their strategy, so this is speculation on my part, but if you look at their public statements it seems like they’ve been trying to put focus on the liquid in the glass rather than the company that makes it.”
That’s certainly a sound strategy, if your company has a bad reputation among craft beer drinkers. As more breweries are acquired, and even your homebrewing hobby is ultimately funneling money toward AB InBev’s bottom line, it becomes that much harder for the average drinker to support craft, even if they explicitly intend to do so. You can only expect a small percentage of drinkers to care so much that they’re actively performing market research in the beer aisle with their smart phone. By making such research a necessity, AB InBev is winning the battle of obfuscation.
But the worst may be still to come. One area of the craft beer industry that AB InBev hasn’t encroached on in a significant way is the supply chain itself, but it’s certainly not outside the realm of possibility. Antitrust law might provide some small protection, but the immediate effects and shortages created by a corporation like AB InBev purchasing a handful of major hops or malt producers could be devastating—far more significant than the fuss kicked up in May when AB InBev was heckled by craft breweries who would no longer have access to South African hop varietals. And the more craft breweries they purchase, the more attractive these options will no doubt become. When asked about the potential of Big Beer targeting raw materials manufacturers in the future, Watson said there may be legal hurdles to overcome.
“Small brewers are a large chunk of the hop market, so there would certainly be some challenges there,” says Watson. “I think we’ll see Big Beer exerting influence on all parts of the resource chain in the future … there are certainly rumors of more purchases in that vein coming. Although if they bought a share of a big malt company like Briess, we could possibly see Department of Justice involvement.”
Contacted for comment, AB InBev representative Felipe Szpigel, president of the company’s “craft division” The High End, denied AB InBev was looking into hop farm acquisitions outside of Idaho, where they operate the largest single farm in the country at Elk Mountain. He also noted that a “significant amount” of the hops grown on those farms are available for commercial purchase by non-ABI breweries.
If you’re a craft brewer, though, that’s small consolation. Small and independent brewers will soon be facing greater challenges than ever in getting their product to market, and in navigating distribution channels choked with brands owned by the likes of AB InBev, who are able to put an inordinate amount of pressure on both distributors and package stores to carry the likes of Golden Road or Elysian instead of independent brands. The pitfall has gone from “find customers interested in craft beer” to “get your beer past the hurdles to reach those customers.”
So the next time you hit the beer aisle, you might want to bring your smart phone after all.