SAMSON v. Goliath

SAMSON v. Goliath

There is something of a Samson-versus-Goliath situation in the beer world. Big Beer – Anheuser-Busch, Miller/Coors, et al – and smaller craft breweries are at odds, fighting for the loyalty of the beer-drinking public. But, even within the smaller confines of the craft beer sphere, turf battles are being waged.

Brewers Association, a trade group that exists to promote and protect American craft brewers, reports that by the end of 2015 (the most recent year for which data is available), there were 4,225 craft breweries in the U.S., 2,000 more than just three years earlier and more than have ever existed in our country.

Brewers Association points out that overall production of beer was down 0.2 percent in 2015, while craft beer production was up 12.8 percent. That translates to 141.4 million barrels of beer brewed by the big boys and 24.1 million barrels by craft brewers. What’s the significance? Craft beer took more than $22 million – a 16 percent increase over the previous year – from the bank accounts of mass beer producers. That isn’t chump change and the big boys noticed.

In an effort to rally fans around its brands, Anheuser-Busch famously lashed out with a “peach pumpkin beer” commercial during 2015’s Super Bowl. The pricey spot took aim at hipsters and craft beer by making fun of small breweries’ creative flavors. The pitch didn’t work – it caused a backlash and actually spurred several breweries to produce peach pumpkin ales. And craft beer sales still grew, while sales of domestic lagers like Budweiser slowed.

Perhaps the most significant danger to small brewers is the new trend of mega brewers buying out established craft breweries. In 2011, Goose Island Brewing Company raised the ire of craft beer drinkers by selling a controlling share of the brewery to AB/Inbev for $38.8 million. Since then, AB/Inbev has snapped up seven more craft breweries, including Blue Point, Breckenridge and Elysian. Other conglomerates like Constellation Group, owners of the Robert Mondavi wine brand, have swooped in to grab a piece of the action. Constellation made headlines procuring San Diego brewery Ballast Point for a cool $1 billion (that’s with a B).

As big brewers rush to infiltrate the craft brewing industry, there’s an internal trend emerging: Craft breweries acquiring other craft breweries. Last year, in a surprise move, Oskar Blues Brewery purchased Florida brewer Cigar City Brewing for $60 million. The move was part of Oskar Blues’ strategy of infusing cash into smaller breweries needing a leg up to the next level. Similarly, Harpoon Brewery co-founder Rich Doyle stepped away from Harpoon and started a consortium that acquires small breweries and helps them grow by injecting cash and pumping up back office acumen. His first purchase: Louisiana’s Abita Brewing Company.

For those who vow to never drink a beer born at mega brewery, here’s a news flash: The world is slowly shrinking. The next few years will be pivotal. An emergence of craft beer coalitions may be just what the craft beer industry needs. As the market increases, ingredient shortages increase. Independent brewers may find it tough to obtain or afford the basics. What’s the remedy? Groups of local brewers banding together in loosely organized coalitions? Time will tell.

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