Goodwill brewing
May 9, 2017 5:05 AM Subscribe
Brewer Chris Herron on goodwill, impairment charges, and why AB InBev is buying a lot of craft breweries.
This also makes me think I should invest in hops futures.
posted by empath at 5:40 AM on May 9, 2017 [1 favorite]
posted by empath at 5:40 AM on May 9, 2017 [1 favorite]
That's fascinating - I knew that a brand like Bud was 'valuable' in an abstract sense, but I never considered how that showed up on a balance sheet and how it could be such a strong negative if some of that value goes away.
posted by ftm at 5:52 AM on May 9, 2017
posted by ftm at 5:52 AM on May 9, 2017
Every time someone says "let the market decide," remember that companies play these games. The Best won't win, because the establishment will screw them over.
posted by MrGuilt at 5:54 AM on May 9, 2017 [5 favorites]
posted by MrGuilt at 5:54 AM on May 9, 2017 [5 favorites]
Super interesting article. I never thought about the tactic of lowering the consumer cost of craft beer as a way of shoring up "premium" megabrands. I do try to take notice of when a craft brewer "sells out" and the idea that their brand is devalued in my eyes rings true.
For the small brewer themselves, I can see how the devil's deal offer from the large corporation is super tempting. It provides immediate stability for the brewery, but also helps the brewer down the road. If they don't like the Big Corp way, they can strike out on their own with 1) more experience 2) more contacts 3) a proven track record of increasing in value to lure investors.
(Also - Metafilter Beer Thread Challenge: I dare this thread not to become the same old referendum on IPAs.)
posted by robocop is bleeding at 5:56 AM on May 9, 2017 [4 favorites]
For the small brewer themselves, I can see how the devil's deal offer from the large corporation is super tempting. It provides immediate stability for the brewery, but also helps the brewer down the road. If they don't like the Big Corp way, they can strike out on their own with 1) more experience 2) more contacts 3) a proven track record of increasing in value to lure investors.
(Also - Metafilter Beer Thread Challenge: I dare this thread not to become the same old referendum on IPAs.)
posted by robocop is bleeding at 5:56 AM on May 9, 2017 [4 favorites]
Mod note: A couple deleted. Let's not with the jokey(?)-trolling complaining about IPAs, just because someone asked that we not repeat that fight yet again. And let's not repeat that fight yet again.
posted by taz (staff) at 6:54 AM on May 9, 2017 [7 favorites]
posted by taz (staff) at 6:54 AM on May 9, 2017 [7 favorites]
This from my increasingly embarrassing home state.
posted by haikuku at 6:57 AM on May 9, 2017 [1 favorite]
posted by haikuku at 6:57 AM on May 9, 2017 [1 favorite]
This is really fascinating, and really not anything I'd ever considered. It's particularly interesting for me since ABI bought Blue Point Brewing, who are local to me. Their beer was already pretty much everywhere, almost always priced at $10 a six-pack, but now it's also in every gas station and convenience store, and on tap everywhere, and when there are tap specials at the kinds of bars that have $4 Bud bottles, the Blue Point pints are $5.
It had never occurred to me that it's a play to close the gap between Bud and "craft" prices, but laid out like this, it really does make sense, and seems even more nefarious than just trying to own the market. It's also interesting in comparison to the catch-up that Boston Beer Company is playing: they're putting irons into every fire (with brands like Angry Orchard, Twisted Tea, Coney Island, Traveler, Truly Spiked Seltzer) actively trying to enter new markets because they're not exciting as "craft" anymore.
The super-premium craft market -- which is to say, the beer that's both hard-to-get and expensive, like Trillium, Treehouse, Alchemist -- is enormous right now, but largely fueled by a horde of box-tickers. We'll have to see what happens when the novelty wears off.
posted by uncleozzy at 6:59 AM on May 9, 2017 [1 favorite]
It had never occurred to me that it's a play to close the gap between Bud and "craft" prices, but laid out like this, it really does make sense, and seems even more nefarious than just trying to own the market. It's also interesting in comparison to the catch-up that Boston Beer Company is playing: they're putting irons into every fire (with brands like Angry Orchard, Twisted Tea, Coney Island, Traveler, Truly Spiked Seltzer) actively trying to enter new markets because they're not exciting as "craft" anymore.
The super-premium craft market -- which is to say, the beer that's both hard-to-get and expensive, like Trillium, Treehouse, Alchemist -- is enormous right now, but largely fueled by a horde of box-tickers. We'll have to see what happens when the novelty wears off.
posted by uncleozzy at 6:59 AM on May 9, 2017 [1 favorite]
Dark Lord Day is this weekend.
Unfortunately, while I like craft beer including rare and exclusive craft beer, I am also lazy.
Not InBev lazy though.
posted by srboisvert at 7:26 AM on May 9, 2017 [3 favorites]
Unfortunately, while I like craft beer including rare and exclusive craft beer, I am also lazy.
Not InBev lazy though.
posted by srboisvert at 7:26 AM on May 9, 2017 [3 favorites]
It's actually pretty mediocre analysis. Conflates accounting with economic value, underemphsizes the importance of incremental volumes through the distribution channel, overemphasizes the importance of relative price points.
Also a pretty terrible discussion of what Goodwill is. It's not just brand equity. Lots of nonbranded businesses earn returns on tangible capital in excess of cost of capital, so if I want to buy them I will necessarily create Goodwill. Indeed in the case of ABI you could argue the scale advantages of the distribution creates as much if not more of that value relative to the brands.
posted by JPD at 7:27 AM on May 9, 2017 [3 favorites]
Also a pretty terrible discussion of what Goodwill is. It's not just brand equity. Lots of nonbranded businesses earn returns on tangible capital in excess of cost of capital, so if I want to buy them I will necessarily create Goodwill. Indeed in the case of ABI you could argue the scale advantages of the distribution creates as much if not more of that value relative to the brands.
posted by JPD at 7:27 AM on May 9, 2017 [3 favorites]
The craft beer world is still reeling from last week's announcement that Asheville's Wicked Weed accepted a buyout from InBev. (I got to try them for the first time back in November; pretty good beer, but I liked Burial better.) It's made for a lot of nasty articles about WW, and a lot of their craft beer compatriots publicly declaring that they will no longer serve WW's beer or collaborate with them.
I understand the backlash when a craft brewer "sells out," but I also understand that you want to keep making beer, keep the lights on, and pay your employees. From what I recall of WW, though, is that they were already doing pretty damn good. Enough where they were able to open a second bar that featured funky sours and farmhouses etc.
posted by Kitteh at 7:29 AM on May 9, 2017 [1 favorite]
I understand the backlash when a craft brewer "sells out," but I also understand that you want to keep making beer, keep the lights on, and pay your employees. From what I recall of WW, though, is that they were already doing pretty damn good. Enough where they were able to open a second bar that featured funky sours and farmhouses etc.
posted by Kitteh at 7:29 AM on May 9, 2017 [1 favorite]
I was actually kind of fascinated by the price point issue. It hadn't occurred to me that the big companies have absolutely nowhere to go on macro brand pricing, and that issue might be driving some of the acquisition behaviors.
posted by merriment at 7:30 AM on May 9, 2017
posted by merriment at 7:30 AM on May 9, 2017
The super-premium craft market -- which is to say, the beer that's both hard-to-get and expensive, like Trillium, Treehouse, Alchemist -- is enormous right now, but largely fueled by a horde of box-tickers.
I'm kinda guilty of being a box-ticker a little bit. I am trying to be less of one so I can just enjoy really good beers when I come across them organically instead of chasing them down. A lot of my male beer friends are serious box-tickers, though.
posted by Kitteh at 7:30 AM on May 9, 2017 [1 favorite]
I'm kinda guilty of being a box-ticker a little bit. I am trying to be less of one so I can just enjoy really good beers when I come across them organically instead of chasing them down. A lot of my male beer friends are serious box-tickers, though.
posted by Kitteh at 7:30 AM on May 9, 2017 [1 favorite]
Re: WW a bunch of breweries are pulling out of their annual invitational which raises money for North Carolina charities and organizing a counter-festivalto also raise money for the same charities, none of which seems weirdly petty at all
posted by beerperson at 7:34 AM on May 9, 2017 [1 favorite]
posted by beerperson at 7:34 AM on May 9, 2017 [1 favorite]
The price point argument is kind of nonsense. On the one hand he says they can't raise prices because of elasticity issues, on the other hand he says the price spread will erode the brand. Those statements are mutually exclusive.
posted by JPD at 7:35 AM on May 9, 2017
posted by JPD at 7:35 AM on May 9, 2017
Think about the cost structure of an incremental case delivered to a retail for Budweiser vs Hill Farmstead. Even someone like Hill Farmstead has huge gross margins despite subscale brewing and very high ingredient costs.
posted by JPD at 7:39 AM on May 9, 2017
posted by JPD at 7:39 AM on May 9, 2017
I am trying to be less of one so I can just enjoy really good beers when I come across them organically instead of chasing them down
Yeah, this is the thing for me. I don't get any pleasure from waiting on a line or trying something just to say I've tried it, and once you reach a certain level of quality, everybody's take on a style is close enough that I'd rather just drink whatever's around.
The real shame is that the best brewery on Long Island does occasional can releases, but now that they're getting some heat, there are always lines, and I really don't relish waiting on line to take their beer home (and drink slowly enough that growlers are inefficient). It makes me wonder about what Alchemist seems to be doing: brew Heady and Focal nonstop and always have them available at the brewery. If these guys would just brew a couple of beers and can them regularly? I'd buy a ton of it. It's as good as any of the well-known NEIPA behemoths.
posted by uncleozzy at 7:42 AM on May 9, 2017
Yeah, this is the thing for me. I don't get any pleasure from waiting on a line or trying something just to say I've tried it, and once you reach a certain level of quality, everybody's take on a style is close enough that I'd rather just drink whatever's around.
The real shame is that the best brewery on Long Island does occasional can releases, but now that they're getting some heat, there are always lines, and I really don't relish waiting on line to take their beer home (and drink slowly enough that growlers are inefficient). It makes me wonder about what Alchemist seems to be doing: brew Heady and Focal nonstop and always have them available at the brewery. If these guys would just brew a couple of beers and can them regularly? I'd buy a ton of it. It's as good as any of the well-known NEIPA behemoths.
posted by uncleozzy at 7:42 AM on May 9, 2017
While I believe that in some ways the author is correct concerning some of the motivations behind InBev and Molson Coors I think they could achieve a lot of those goals without dumping the huge sums of money into craft breweries that they have been. Even if you conservatively value most of their purchases in the 20-25 million range it's quite possible that Inbev's total spend in regional craft brew brand is getting close to a quarter of a billion. While that's a fraction of the cost of their purchase of SAB Miller (which I guess will be partially recaptured by the sell off of assets to Molson Coors) it's hardly chump change and it's come with massive expansion of production capacity in many cases.
At the end of the day Inbev has some of the top brewmeisters in terms of maintaining a consistent product (regardless of your opinions of the overall taste) and this should allow Inbev to create "craft" brands that are highly consistent and accessible across multiple regions. While supporting the overall market value of "premium" brands is useful it's also a good business strategy to in effect freeze out people out of the rapidly expanding craft brew market and that can be done by leveraging Inbev's dominance in distribution networks.
So defensive as well as predatory
posted by vuron at 7:44 AM on May 9, 2017
At the end of the day Inbev has some of the top brewmeisters in terms of maintaining a consistent product (regardless of your opinions of the overall taste) and this should allow Inbev to create "craft" brands that are highly consistent and accessible across multiple regions. While supporting the overall market value of "premium" brands is useful it's also a good business strategy to in effect freeze out people out of the rapidly expanding craft brew market and that can be done by leveraging Inbev's dominance in distribution networks.
So defensive as well as predatory
posted by vuron at 7:44 AM on May 9, 2017
Even someone like Hill Farmstead has huge gross margins despite subscale brewing and very high ingredient costs.
Um
posted by beerperson at 7:47 AM on May 9, 2017 [4 favorites]
Um
posted by beerperson at 7:47 AM on May 9, 2017 [4 favorites]
Lol. If you work there I love your beer.
250 mil is a rounding error for inbev.
posted by JPD at 7:50 AM on May 9, 2017
250 mil is a rounding error for inbev.
posted by JPD at 7:50 AM on May 9, 2017
Part of the cost structure of a case of beer delivered from a brewery to a retailer is that the case cannot, according to federal law, be delivered to the retailer. The three-tier system in the US stipulates that producers of alcohol have to sell to a wholesaler/distributor who then turns around and sells it to retail; because of the history of alcohol production since prohibition (relatively few, very powerful producers) most of the state-level regulations are heavily tilted in favor of the distributor. The price you see on the retail shelf has to contain three profit margins: for the retailer, for the distributor, and for the producer.
Add to that that in many many many cases and business arrangements, product that ages out of its shelf life either at the retail or distribution level has to be bought back by the producer at a substantial percentage of the original wholesale price.
posted by beerperson at 8:01 AM on May 9, 2017 [2 favorites]
Add to that that in many many many cases and business arrangements, product that ages out of its shelf life either at the retail or distribution level has to be bought back by the producer at a substantial percentage of the original wholesale price.
posted by beerperson at 8:01 AM on May 9, 2017 [2 favorites]
You know, I'm someone that almost always avoids the metafilter craft beer threads despite being a big fan of craft beer, being a micromatic certified draft dispensing tech and having been the GM for 3 years of what is (in my opinion) the best draft craft beer bar in Philadelphia, a city that loves its beer....and the claim that Hill Farmstead does subscale brewing finally made me wade in. In what possible context could you support that claim?
posted by lazaruslong at 8:11 AM on May 9, 2017 [1 favorite]
posted by lazaruslong at 8:11 AM on May 9, 2017 [1 favorite]
Subscale relative to ABI? Isn't that obvious?
The distribution barrier exists in markets that don't have three tier as well.
posted by JPD at 8:13 AM on May 9, 2017 [1 favorite]
The distribution barrier exists in markets that don't have three tier as well.
posted by JPD at 8:13 AM on May 9, 2017 [1 favorite]
Ah. Yeah, my eyes definitely read that as substandard and not subscale. My apologies. Of course they are much smaller. Carry on.
posted by lazaruslong at 8:14 AM on May 9, 2017
posted by lazaruslong at 8:14 AM on May 9, 2017
I am fascinated at the idea of Bud Light being positioned in the "premium" tier.
Is that really the general (not beer snob) perception?
When I was a young lad beginning my drinking career*, Bud Light was what you bought to a party when you didn't care too much but didn't want to bring something really expensive.
It was sort of the default beer of midsummer BBQs, fine for what it is, but "premium"? I feel like that battle was lost years ago.
*Apparently not that long after Bud Light came out. TIL
posted by madajb at 8:57 AM on May 9, 2017 [2 favorites]
Is that really the general (not beer snob) perception?
When I was a young lad beginning my drinking career*, Bud Light was what you bought to a party when you didn't care too much but didn't want to bring something really expensive.
It was sort of the default beer of midsummer BBQs, fine for what it is, but "premium"? I feel like that battle was lost years ago.
*Apparently not that long after Bud Light came out. TIL
posted by madajb at 8:57 AM on May 9, 2017 [2 favorites]
I was actually kind of fascinated by the price point issue. It hadn't occurred to me that the big companies have absolutely nowhere to go on macro brand pricing, and that issue might be driving some of the acquisition behaviors.
What's missing from the price point discussion, at least from the consumer perspective, is consolidation in the megabrewery industry has allowed the "premium" brands to all creep their price points up towards craft beer prices. The megabrews own the off-brands and vintage local brands (like Natural Light or Stroh's) and use them to compete for the price sensitive market while the brand-conscious consumers are sticking to their chosen yellow and fizzy brands as the prices rise.
posted by peeedro at 8:59 AM on May 9, 2017
What's missing from the price point discussion, at least from the consumer perspective, is consolidation in the megabrewery industry has allowed the "premium" brands to all creep their price points up towards craft beer prices. The megabrews own the off-brands and vintage local brands (like Natural Light or Stroh's) and use them to compete for the price sensitive market while the brand-conscious consumers are sticking to their chosen yellow and fizzy brands as the prices rise.
posted by peeedro at 8:59 AM on May 9, 2017
I understand the backlash when a craft brewer "sells out," but I also understand that you want to keep making beer, keep the lights on, and pay your employees
I never judge breweries for cashing in, a few around here have done so. If someone offered me millions of dollars to keep doing exactly what I'm doing, it'd be hard to turn down.
Especially since the craft beer party train won't last forever, so might as well get paid while the money is still flowing.
However, I do stop buying that brand. I do not drink much beer, but when I do, I'd rather my money stayed local and helped a small business rather than someone else's bottom line.
posted by madajb at 9:06 AM on May 9, 2017 [1 favorite]
I never judge breweries for cashing in, a few around here have done so. If someone offered me millions of dollars to keep doing exactly what I'm doing, it'd be hard to turn down.
Especially since the craft beer party train won't last forever, so might as well get paid while the money is still flowing.
However, I do stop buying that brand. I do not drink much beer, but when I do, I'd rather my money stayed local and helped a small business rather than someone else's bottom line.
posted by madajb at 9:06 AM on May 9, 2017 [1 favorite]
I am fascinated at the idea of Bud Light being positioned in the "premium" tier.
Is that really the general (not beer snob) perception?
It's more an industry definition of their flagship brands than a consideration of cost or quality of the product. Like a tentpole movie franchise, it's the brand that receives the focus of the companies' marketing and consumer experience efforts to drive overall profitability.
posted by peeedro at 9:13 AM on May 9, 2017 [1 favorite]
Is that really the general (not beer snob) perception?
It's more an industry definition of their flagship brands than a consideration of cost or quality of the product. Like a tentpole movie franchise, it's the brand that receives the focus of the companies' marketing and consumer experience efforts to drive overall profitability.
posted by peeedro at 9:13 AM on May 9, 2017 [1 favorite]
I am fascinated at the idea of Bud Light being positioned in the "premium" tier.
Is that really the general (not beer snob) perception?
Sure. It's okay to bring a case of Bud Light to a party. It's not okay to bring Busch Light unless you're pretty sure it will go over.
posted by uncleozzy at 9:15 AM on May 9, 2017 [2 favorites]
Is that really the general (not beer snob) perception?
Sure. It's okay to bring a case of Bud Light to a party. It's not okay to bring Busch Light unless you're pretty sure it will go over.
posted by uncleozzy at 9:15 AM on May 9, 2017 [2 favorites]
So I found this fascinating and horrifying (and if JPD or someone wants to refute it substantively, I'd like to read a longer version of their take, too), and it got me thinking of the long term, which he doesn't really go into, despite noting that InBev thinks strategically.
So, you devalue craft beer while supporting an "ultra-high-end" market, in the service of your godawful "premium" brands. OK. Then what? Presumably you expect to kill off a lot of craft brewers in the short-to-medium term, because they don't have the deep pockets or scale to keep up the quality while the prices drop, the way InBev does. OK. I mean, awful, but let's assume that happens.
Then what? You've got a hollowed-out craft market with a smaller market share, in which you're a relatively big player with your zombie brands. Do you then ramp those down and try to take America back to basically a pre-2000s beer scene? Do you try to maintain the zombie brands to fend off a return of the craft craze? Do you slowly ratchet up production of the zombies while ratcheting down the ass beers? And what if smaller brewers start merging, and becoming larger companies with more resources that you can't just squash? I'd love to know what InBev is really trying to do, on the decades scale.
posted by gurple at 9:24 AM on May 9, 2017 [2 favorites]
So, you devalue craft beer while supporting an "ultra-high-end" market, in the service of your godawful "premium" brands. OK. Then what? Presumably you expect to kill off a lot of craft brewers in the short-to-medium term, because they don't have the deep pockets or scale to keep up the quality while the prices drop, the way InBev does. OK. I mean, awful, but let's assume that happens.
Then what? You've got a hollowed-out craft market with a smaller market share, in which you're a relatively big player with your zombie brands. Do you then ramp those down and try to take America back to basically a pre-2000s beer scene? Do you try to maintain the zombie brands to fend off a return of the craft craze? Do you slowly ratchet up production of the zombies while ratcheting down the ass beers? And what if smaller brewers start merging, and becoming larger companies with more resources that you can't just squash? I'd love to know what InBev is really trying to do, on the decades scale.
posted by gurple at 9:24 AM on May 9, 2017 [2 favorites]
You ideally kill of craft, but if you can't kill it you want to make sure those volumes go through your distribution. So you absolutely want to kill of craft not owned by you, although you are probably ok with some of the very small trophy guys being around. That's why you most see them buying players above a certain size.
But you probably don't want to make the fight about price. Just availability
posted by JPD at 10:12 AM on May 9, 2017
But you probably don't want to make the fight about price. Just availability
posted by JPD at 10:12 AM on May 9, 2017
Carlos Brito and company couldn't care less about what they sell - as long as they sell. In this case all of it is still that vaunted "share of mind" thing that AB and now ABI has been pursuing for years. What do they want? They want to be able to walk into a bar/restaurant and say "oh you want to sell a complete beer program with IPAs and everything else? Here, have Bud, Stella, 10 Barrel IPA, Blue Point Lager, Elysian Space Dust, Golden Road Get Offa That Brown and a Wicked Weed Funky Something or Other"
Every single one of them an ABI cash funnel and it gives the bar/restaurant/store/distributor the appearance of being well rounded. Make no mistake at some point the guys squeezing pennies will figure out that it's a lot cheaper to move Golden Road's production over to the Van Nuys Budweiser plant. They've done it with Goose Islands 312 and others. Slowly but surely, the passionate locality thing will die out (they think) and who cares - we still sold Rolling Rock when we moved it out of Latrobe.
posted by drewbage1847 at 10:53 AM on May 9, 2017 [1 favorite]
Every single one of them an ABI cash funnel and it gives the bar/restaurant/store/distributor the appearance of being well rounded. Make no mistake at some point the guys squeezing pennies will figure out that it's a lot cheaper to move Golden Road's production over to the Van Nuys Budweiser plant. They've done it with Goose Islands 312 and others. Slowly but surely, the passionate locality thing will die out (they think) and who cares - we still sold Rolling Rock when we moved it out of Latrobe.
posted by drewbage1847 at 10:53 AM on May 9, 2017 [1 favorite]
Is there somewhere I can go to search for a given craft brewery and find out who owns them?
posted by ragtag at 11:01 AM on May 9, 2017
posted by ragtag at 11:01 AM on May 9, 2017
Wikipedia entries usually include brewery ownership information in the infobox.
posted by peeedro at 11:12 AM on May 9, 2017 [1 favorite]
posted by peeedro at 11:12 AM on May 9, 2017 [1 favorite]
I am a little confused by his use of the term 'goodwill' and the concept of its erosion because of change in the perception of premiumness that say Budweiser has just because it costs less. What I don't understand is that isn't goodwill just the value you put on the profit making power of your thing that isn't tangible? If that is the case why does that get devalued just because perception of the brand changes? I would have thought that it only gets devalued if you make less money/don't grow as fast. Is he saying that craft brew sales take away from Budweiser? I am a little confused, I would have thought it is a little like saying Vodka dilutes the brand equity of Miller Highlife. I can see wanting to own the entire market and coopting all segments but I don't really understand the balance sheet thing. Anybody explain it better?
posted by Pembquist at 11:43 AM on May 9, 2017
posted by Pembquist at 11:43 AM on May 9, 2017
Is there somewhere I can go to search for a given craft brewery and find out who owns them?
In fact, there's an app for that!
posted by Lutoslawski at 12:41 PM on May 9, 2017 [2 favorites]
In fact, there's an app for that!
posted by Lutoslawski at 12:41 PM on May 9, 2017 [2 favorites]
Thanks for the app Lutoslawski. I inadvertently tried a new "craft" a couple years ago at a bar that used to have a decent reputation for their selection. It turned out to be utterly putrid and upon investigation turned out to be from the fascists in Golden CO. This will insure such an atrocity never happens again.
posted by Ber at 1:50 PM on May 9, 2017 [2 favorites]
posted by Ber at 1:50 PM on May 9, 2017 [2 favorites]
One thing I've noticed with all of the recent acquisitions that ABI has made is that they're buying breweries who operate multi-location taprooms or brewpubs. Is this just a coincidence, or does it signal a move to not being content in only dictating terms to two of the three tiers?
posted by nulledge at 2:35 PM on May 9, 2017
posted by nulledge at 2:35 PM on May 9, 2017
FWIW, in California ABI are in the process of planning/opening more Golden Road-branded taprooms/beer gardens: for example in Sacramento and Oakland. The linked article's tone is a good reflection of the local reaction to this.
posted by We had a deal, Kyle at 2:51 PM on May 9, 2017
posted by We had a deal, Kyle at 2:51 PM on May 9, 2017
I can't comment with any authority on the legitimacy of the author's argument regarding the financially-motivated tactics of the mega-brewers, but I found the article an interesting read. I've been reading about craft brewers selling to the bigs for years, but don't recall ever reading an argument/explanation like this one.
I mean, it's a really good question: why are the huge brewers buying up crafts? Granted, on the balance sheets, buying a craft is cheap for them, and they only seem to buy sizable, profitable crafts. But if "it's all business", then it's all about money. So the question must be, how is buying crafts monetarily beneficial to the bigs? Specifically.
I don't know if the author's right, but he's at least attempting to answer that question. Meaning, he's making it about numbers. I'll grant that it's probably not 100% about the bigs' yearly balance sheets if for no other reason that it's hard to legally quantify e.g.: muscling distributors or influencing vendor shelf space.
(I have to take him on his word that the prices of six packs from "sellouts" like Goose Island et al. actually fell in the years after their purchases. I can tell you that I'll be keeping a close eye on Wicked Weed's prices going forward.)
Full disclosure: the author is CEO of a brewery that is local to me. I've never met the guy, but they're my favorite brewery. I got married there! . . . back when they were a new business and rented out their place for private events. When the news broke about Wicked Weed's sale, we all worried that they would be next (once they grow in size). All that's to say the article was very heartening to read.
posted by cyclopticgaze at 2:52 PM on May 9, 2017 [1 favorite]
I mean, it's a really good question: why are the huge brewers buying up crafts? Granted, on the balance sheets, buying a craft is cheap for them, and they only seem to buy sizable, profitable crafts. But if "it's all business", then it's all about money. So the question must be, how is buying crafts monetarily beneficial to the bigs? Specifically.
I don't know if the author's right, but he's at least attempting to answer that question. Meaning, he's making it about numbers. I'll grant that it's probably not 100% about the bigs' yearly balance sheets if for no other reason that it's hard to legally quantify e.g.: muscling distributors or influencing vendor shelf space.
(I have to take him on his word that the prices of six packs from "sellouts" like Goose Island et al. actually fell in the years after their purchases. I can tell you that I'll be keeping a close eye on Wicked Weed's prices going forward.)
Full disclosure: the author is CEO of a brewery that is local to me. I've never met the guy, but they're my favorite brewery. I got married there! . . . back when they were a new business and rented out their place for private events. When the news broke about Wicked Weed's sale, we all worried that they would be next (once they grow in size). All that's to say the article was very heartening to read.
posted by cyclopticgaze at 2:52 PM on May 9, 2017 [1 favorite]
They are buying them because they take away volumes from their own brands which run through a fixed cost distribution system. And because their costs are lower than a craft brewers they think they can make the math work on the deals at prices which are attractive to the original entrepreneurs even without touching the beer itself.
posted by JPD at 4:22 PM on May 9, 2017
posted by JPD at 4:22 PM on May 9, 2017
From the linked EBE article about Oakland:
posted by migurski at 5:48 PM on May 9, 2017 [1 favorite]
Permits filed with the city of Oakland this month show that Golden Road is planning to open a 7,000-square-foot brewery and beer garden in North Oakland, which will take up three lots on 40th Street between Broadway and Manila Avenue.Bummer for Arthur Mac's, an outdoor beer garden that just opened on 40th St nearby, constructed from shipping containers.
According to this application with the Planning and Zoning Division, Golden Road intends to brew on site, serve food, and also feature an outdoor beer garden with fire pits. The entire structure will be — wait for it — constructed out of shipping containers.
posted by migurski at 5:48 PM on May 9, 2017 [1 favorite]
The thing with Wicked Weed played out here in Houston last fall, when local darling Karbach Brewing "entered into a partnership" with ABI. (It's a whole other topic, but the fundamental dishonesty of that phrasing still pisses me off.)
Many local tap rooms responded by dropping their beers and selling off their Karbach kegs and cans at fire sale prices, so while it's become (over time, unrelated to the buyout) easier to find Karbach at random mass-market bars, the places that really care about beer are dropping it (and they'v done the same thing with Wicked Weed, and other sellouts to ABI). This makes sense, because buying these beers now supports the stranglehold ABI has on American beer.
The granddaddy of Houston and Texas craft brewing is still Saint Arnold's, which shipped its first keg in the summer of 1994 (coincidentally, the same summer I moved to Houston). They have always been very, very clear about their disdain for Big Beer, and have been making a LOT of hay about Karbach's sellout -- as have a number of other local brewers.
(As a sidenote, Houston now hosts a seemingly impossible number of indy craft brewers. Not all of them will survive, but the "leaders" all seem to be pretty committed to independence, and not as transparently "built to sell" as Karbach was. There's lots of informal handicapping about which ones people think will make it, which is darkly hilarious.)
Anyway, the Karbach thing has been ugly. Some friends-of-the-brewery are apparently incapable of understanding why a sellout is bad for beer and bad for Houston, and why so many folks have dropped them like a hot potato. I'm not one of them; Karbach's Hopadillo IPA was my go-to for years, but I haven't bought one since the sellout. I'm absolutely on Team Fuck InBev.
The other thing, though, is that we shouldn't pretend that selling means the principals get to "keep doing what they're doing." They've sold; they're no longer in control in any meaningful sense. ABI will eventually fold them in, keeping only the recipe (maybe) and the brand. That's all ABI wants.
posted by uberchet at 7:48 AM on May 10, 2017
Many local tap rooms responded by dropping their beers and selling off their Karbach kegs and cans at fire sale prices, so while it's become (over time, unrelated to the buyout) easier to find Karbach at random mass-market bars, the places that really care about beer are dropping it (and they'v done the same thing with Wicked Weed, and other sellouts to ABI). This makes sense, because buying these beers now supports the stranglehold ABI has on American beer.
The granddaddy of Houston and Texas craft brewing is still Saint Arnold's, which shipped its first keg in the summer of 1994 (coincidentally, the same summer I moved to Houston). They have always been very, very clear about their disdain for Big Beer, and have been making a LOT of hay about Karbach's sellout -- as have a number of other local brewers.
(As a sidenote, Houston now hosts a seemingly impossible number of indy craft brewers. Not all of them will survive, but the "leaders" all seem to be pretty committed to independence, and not as transparently "built to sell" as Karbach was. There's lots of informal handicapping about which ones people think will make it, which is darkly hilarious.)
Anyway, the Karbach thing has been ugly. Some friends-of-the-brewery are apparently incapable of understanding why a sellout is bad for beer and bad for Houston, and why so many folks have dropped them like a hot potato. I'm not one of them; Karbach's Hopadillo IPA was my go-to for years, but I haven't bought one since the sellout. I'm absolutely on Team Fuck InBev.
The other thing, though, is that we shouldn't pretend that selling means the principals get to "keep doing what they're doing." They've sold; they're no longer in control in any meaningful sense. ABI will eventually fold them in, keeping only the recipe (maybe) and the brand. That's all ABI wants.
posted by uberchet at 7:48 AM on May 10, 2017
drewbage1847: "and who cares - we still sold Rolling Rock when we moved it out of Latrobe."
Not to ME, you didn't.
posted by Chrysostom at 4:28 PM on May 10, 2017 [3 favorites]
Not to ME, you didn't.
posted by Chrysostom at 4:28 PM on May 10, 2017 [3 favorites]
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For consumers, I'm not entirely sure this would be a bad deal, as at least the short to medium term result will be cheaper, high quality beer. Eventually, of course, they'll stop cutting costs with the low hanging fruit (operations, scale) and move on to reducing the quality. At which point there will probably only be a handful of craft competitors left.
posted by empath at 5:40 AM on May 9, 2017