My primary goal of 2020 is to read for fun more often, and I can say I am off to a hot start. The first book I tackled was Audacity of Hops by Tom Acitelli (technically a re-read). For those that know me, this book directly coincides with my research interests. But this book does much more than provide me with background of the craft beer revolution; it was something to sit back and relax to.

The book dives primarily into the early roots of the craft beer movement with names like Fritz Maytag, Jack McAuliffe, Michael Jackson (no, not singer-songwriter), and Charlie Papazian. These four are arguably the Mount Rushmore of the craft beer movement.

Fritz Maytag: bought Anchor Brewing Company in 1965 sparking the craft beer movement; many future brewers got their start in the industry because of Maytag’s Anchor Steam

Jack McAuliffe: former Navy engineer who started New Albion Brewing Company in 1976; used discarded milking equipment for brewing and used gravity as the main power source; known as the “Father of the Modern Microbrewery”

Michael Jackson: author of The World Guide to Beer, which categorized different beer styles and helped put American craft beer on the international beer playing field (as prior to 1977, U.S. beer was known for its homogeneity and lack of flavor)

Charlie Papazian: founder of the Association of Brewers and the Great American Beer Festival; author of The Complete Joy of Homebrewing which provides nearly 400 pages of advice to homebrewers

For any of those with the slightest interest in craft beer, I promise this book is worth your time. But one thing I do want to take a moment to highlight is how Big Beer — the Anheuser-Busch and Miller-Coors of the world — tried to stunt and invade on the growth of craft beer.

At first, they ignored craft beer movement. But as it gained traction, they did all they could to limit craft’s market share. Starting in the mid-1990s, they engaged in a variety of of mechanisms to achieve these goals. I want to highlight three: (i) phantom crafts; (ii) distribution restrictions; and (iii) acquisitions. These tactics are still used today, and it can be argued that the most successful tactic has been using their deep pockets to acquire successful craft brewers.

Phantom Crafts

Once it became apparent that craft beer was not just a fad, Big Beer invaded the market by brewing “phantom crafts.” These beers mimicked the craft beer styles, but were brewed by companies such as Anheuser-Busch InBev or MillerCoors. More importantly, Big Beer hides the fact that they’re brewing the beer. Instead, they create a brewing company and a back story that fits the bill of a craft brewer — small, traditional, and independent. One of the original phantoms, still around today, is Blue Moon brewed by “Blue Moon Brewing Company” — owned by MillerCoors. Blue Moon is a Belgian style witbier, but look at the label below…

Figure 1: Blue Moon brewed by Blue Moon Brewing Company = Miller-Coors. Source: Kell, 2016 available at: https://fortune.com/2016/07/12/beer-calorie-count-labels/

No traces of MillerCoors. This is no accident; it is intentionally misleading. Even the ingredient list: brewed with coriander and orange peel; it’s something you would expect to see on tap at your local brewery. And then there is Shock Top, brewed by Shock Top Brewing Co.” Again, see the label below.

Figure 2: Shock Top brewed by Shock Top Brewing Co. = Anheuser-Busch InBev. Source: BeerPulse, 2011 [available at: https://beerpulse.com/2011/08/new-beer-labels-cigar-city-highland-atwater-belgh-brasse-little-mountain-shock-top/ ]

This one is owned by Anheuser Busch InBev. What should stand out is how marketed these products are compared to even the largest craft breweries. For a really cool article on this, check out Ben’s Beer Blog’s article on Shock Top (link here: https://bensbeerblog.com/2014/09/22/labatt-is-planning-an-expensive-intentionally-misleading-ad-campaign-for-shock-top/). Punchline, Big Beer has deep pockets allowing them to spend more on advertising for one product in one year than most craft brewers will spend on advertising in their lifetime.

Distribution Restrictions, Tap Control, and Shelf Space

The second tactic Big Beer uses is flexing its market power and deep pockets to limit craft brewer access to distributors, as well as controlling bar taps and shelf space. For those unfamiliar with the beer industry, distribution of beer does not go directly from the brewer to the retail shelves. Instead, there is a “middle-man” serving as the distributor. But to be plugged into this channel takes some market clout. It is highly restrictive for craft brewers, especially the smaller you are.

Figure 3: The three-tier system for beer distribution. Source: Associated Beer Distributors of Illinois, 2020 [available at: http://www.abdi.org/the-three-tier-system]

Acitelli specifically alludes to one conference presentation in 1996 by August Busch III:

“The world’s biggest brewer had launched a squeeze on distribution through what it called by the decidedly Orwellian name ‘100 percent share of mind.’ It all started in March 1996, when August Busch III told a national wholesalers conference, ‘Each of you [must] exert your undivided attention and total efforts on Anheuser-Busch products. If you sell our competitors’ products, can you still give us your best efforts? I don’t think so” (pg. 221).

I mentioned market clout. Well, AB InBev has plenty of it. If AB InBev even suggests they will pull their product (e.g., Bud Light) from the distributor if the distributor carries craft beer, it serves as a hefty deterrent. Is the distributor really going to risk losing its biggest account? The same concept goe for bars, restaurants, liquor stores, etc.. If you carry craft, we will pull Bud Light.

The three tier distribution system is highly competitive and favors the big players in the industry. However, some recent policy shifts related to on-site distribution has made this issue easier for microbreweries (see: Malone and Stack, 2017 “What do beer laws mean for economic growth?” for more on this). On-site distribution allows craft brewers to avoid the restrictive three-tier system by distributing directly out of their taproom. So next time you check out your favorite local brewery, grab a six-pack to go. That’s brewer self-distribution in action.

Acquisition

The final tactic Big Beer engages in to cut the market share of craft beer is through acquisition. The phantom crafts were a hit when they first came out, but sales became stagnant and eventually started to decline. Craft beer sales on the other hand continued to grow. Knowing craft beer was here to stay, Big Beer began buying out successful (or semi-successful) craft brewers. The original buyouts include Leinenkugel in 1988 by what is now MillerCoors and RedHook by Craft Brew Alliance with majority shareholder Anheuser-Busch. These acquisitions occurred before phantom crafts hit the market, but the number of acquisitions has increased dramatically in recent years.

When Big Beer buys out, or buys a significant portion of the company, oftentimes they allow the brewery to continue brewing their original products. The benefit is they provide the technology for a more efficient brewing process (lowering costs) and give some marketing power. Unfortunately for the fans of supporting true craft beer, the line continues to be blurred. Some of the brewers that were the building block to the craft beer industry have since been acquired by Big Beer or non-craft beer conglomerates — losing their craft beer denomination — include Lagunitas, Elysian, Founders, and most recently, New Belgium.

Final Words

If supporting the craft beer industry is something you take pride in, but are now unsure whether what you’re drinking is craft, then “Seek the Seal.” The Brewers Association created the label in 2017 to combat Big Beer’s attacks, and craft brewers have taken to it. As of 2018, over 4,000 craft brewers across the country have adopted the label. So if supporting local, or supporting the little guy, is something you enjoy, #SeekTheSeal.

Figure 4: “Seek the Seal”
Source: Brewers Association

Cheers!

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