Is Beer the New Wine?  Part 2 (the Dark Side)

Hugh Sisson’s Diary of a Brewer

Continuing our discussion of parallels between the craft beer and small winery industries – both market segments have lately developed multiple tiers of products. In wine you often see a producer with a “value” line, followed by a “premium” and a “reserve” line.  In craft beer, we are beginning to see similar developments with either a high gravity line, small batch series, or similar developments.  I think this is a good thing as it broadens a brewer’s reach to additional segments of the market and also potentially raises the public perception of the company’s quality level.

While many of the parallels between the growth of craft beer in today’s market, and the development and tactics of the boutique wineries (that grew so well in the 80’s and 90’s) is largely positive, there are some developments that have taken place in the boutique wine industry that do not, in my opinion, bode well long term for craft beer.  Should the craft beer industry follow the wine industry in these areas, I believe we could see some problems down the road.

First and foremost, consolidation in production.  Many of the more successful California wine properties have over the years gone from being founder owned and operated to part of much larger corporate entities.  This certainly improves marketing efficiency as well as developmental working capital and potential economies of scale in purchasing of some commodities.  And with the wine industry, this potentially can work – principally because the “boutique” wine industry is tied to the land, and as long as the managing entity respects the unique character of the property, quality is usually maintained or actually improved upon.  There doesn’t necessarily seem to be a problem with XYZ Corporation producing 15 different chardonnays from 15 different microclimates under 15 different labels – the products really are different – and the differences are seen as a “strength” and a marketing positive.

But I am not sure the same kind of approach would be successful for craft beer.  Since beer is largely not tied to the land, but is instead much more tied to the personality and style of the brewer (hence theoretically more mobile), consolidation could easily be tempted to economize by “rolling up” several small breweries under a single large roof for efficient manufacturing. And while having a single corporate wine maker who might oversee production of many different brands is not necessarily a bad thing in wine, in craft beer it could remove the personality behind the products, negating the whole reason we small brewers exist. I can even envision a marketing decision being made to “use Liquid X for all of our golden lager beers, Liquid Y for all of our pale ales,” and so on and so forth.  I am not saying this has happened yet with craft beer, but if you look at the old business model of G. Heilemann Brewing Company in the 80’s, this is basically what they did.  And I have certainly heard a few rumblings about some large corporate dollars coming into the craft arena to do a “roll up”, so don’t think this sort of thing is out of the realm of possibility!  If that occurs it seems counter to the whole spiritual genesis of craft beer which was based on individual expression and passion for unique beers. 

Even without such product homogenization, consolidation for craft is probably not a hugely positive thing.  The larger entity invariably will stay focused on its core brands, and the acquired company will likely always be in the shadow of its larger sibling – especially as regards management through distribution.  Perhaps Anheuser-Busch has indeed changed its perspective on the world of craft beer, but I have heard from more than one AB distributor that, after AB took an equity position in Redhook , the conversation went something like, “Okay here are the craft sku’s you wanted, now go sell more Bud Light!”

Again in my opinion, a major factor in the success of craft beer is the broad range of personalities in the industry and the way they interact and enhance one another.  While there are many areas where craft beer does (and should) emulate the developmental pattern followed by the wine industry, I think the temptation to consolidate should be resisted at all costs.  For the reasons outlined above, and many I am sure I have not yet thought of, such consolidation would run counter to the excitement one experiences when attending a festival and meeting 10 different brewers with 10 different beers, all swapping jokes and enjoying the diversity of the experience.