Big beer’s continued pursuit of independent powerhouses still raising ire
The outrage was unmistakable after the worldwide beer giant, Anheuser-Busch InBev, swooped down in May and snatched up another craft beer favorite, this time Wicked Weed Brewing out of Asheville, North Carolina.
The brewery, voted best in the South by Southern Living Magazine, enjoyed a loyal following for its exceptional IPAs and a wide selection of sours. But backlash to the deal was immediate and brutal, with a torrent of criticism flowing across Facebook, Instagram, and Twitter. Using the #wickedgreed hashtag, the complaints followed a common theme: traitor.
“Just went to the Funkatorium and got a beer sample, told them it tasted like Annheiser [sic] Busch and walked out,” said Chris Kratzer.
“You sold out to corporate scum,” said smashercrashers.
“Aged on dollar bills from inbev,” said seanmwhite.
Dustin1300 went with the simple words, “Sell out.”
Sound familiar? It should. A little more than a year ago, Devils Backbone Brewing Company faced the same revolt, for the same reasons, when it became an ABI acquisition. Gone was its craft reputation, its spot on the Brewers Association board, and its chance to compete in the annual Virginia Craft Brewers Fest – an event once held on its own grounds.
“It was challenging at first. Reactions were hurtful, but understandable,” said Steve Crandall, Devils’ co-founder and CEO. “We made a decision that was best for our company, our employees, and our product. When we looked for a partner we had no preconceived idea of who that partner would be.”
With 10 craft breweries under its belt, and some behind-the-scenes maneuvers, ABI appears poised to put a major dent in the craft beer industry, raising concerns among brewers nationwide.
Bloomberg News reported in May that the company plans to spend $2 billion in the U.S. to boost its flagship beer brands and increase distribution. A significant portion of that money will reportedly go to building its presence in the world of craft beer.
Along with Wicked Weed and Devils Backbone, ABI’s other U.S. craft-beer acquisitions are: Goose Island Brewing, Blue Point Brewing, 10 Barrel Brewing, Elysian Brewing, Golden Road Brewing, Breckenridge Brewery, Four Peaks Brewing, and Karbach Brewing.
Kevin Erskine, a board member of the Virginia Craft Brewers Guild and president of Coelacanth Brewing Company in Norfolk, said he has no qualms with Wicked Weed and Devils Backbone selling to ABI.
“I’m actually happy for the owners and staff who hopefully made out well after spending the time and money to build their brands and loyal followings,” he said.
Erskine’s worry is what happens next.
“Whenever a consumer buys an ABI product (including the products of a craft brewery they acquired) I and many others believe they are helping to fund a company that is seeking to damage small, locally owned breweries,” he said in an email.
Liam Bell, co-owner of Rip Rap Brewing Company in Norfolk, has concerns, too. He sees ABI’s actions as good for ABI, but not necessarily good for craft beer.
“If AB wanted to, they could technically make better beer,” he said. “It’s all about money. They saw their sales slip on some of the macro-brands. Sales increased in craft beers and they figured the easiest way to increase profits with their resources was to buy craft breweries. Kill two birds with one stone. You now have the brand yourself and there’s no competition anymore.”
According to the Brewers Association, craft beer sales grew to $23.5 billion in 2016, an increase of about 6.2 percent. At the same time, beer sales overall have remained flat. This has lead some of the nation’s largest beer companies to embrace the craft beer movement, including MillerCoors, North American Breweries, and The Boston Beer Company. None of them, however, have been as aggressive as ABI.
Critics contend the company’s size allows it to undercut prices of craft beer competitors, making it harder for craft breweries to sell their products. ABI also runs the distribution channels in some states, which can give it priority on shelves.
The company made other decisions that have critics grumbling, including reportedly cornering an entire South African hop harvest through its ownership of SAB Hop Farms, which it took over during its acquisition of SABMiller in 2016. According to several industry publications, including Food & Wine and All About Beer Magazine, the move blocked U.S. craft breweries from buying those hop varieties.
Meanwhile ABI, through its company ZX Ventures, purchased a minority interest in RateBeer.com, a website that along with Untappd and BeerAdvocate, serve as a kind craft beer Consumer Reports.
The deal, finalized in October 2016, was only recently made public. Sam Calagione, founder and president of Dogfish Head Brewery in Delaware, and Shane C. Welch, founder of Sixpoint Brewery in Brooklyn, New York, have requested the site remove its reviews of their beers, according to a recent New York Times report.
In that article Dan Kenary, founder and chief executive of Harpoon Brewery, expressed concerns that “ABI could pressure RateBeer to put its products front and center on the site, influencing a browser in the beer aisle who pulls out a phone to check reviews.”
“They could do it in ways that consumers wouldn’t even know how their decisions are being influenced,” the Times quoted Kenary as saying.
Growth is something many breweries struggle with, and some find creative ways to make possible. Brooklyn Brewery, New York’s largest state-based brewer, worked a deal in its efforts to expand beyond the control of the state. Seeking to establish a footprint overseas, the brewery sold off a 24.5 percent stake in its operations to Japan conglomerate Kirin Holdings in October 2016.
Devils Backbone looked at its partnership with ABI as a chance to grow its product without losing quality. In the year since the deal was inked, the brewery has improved its lab equipment, expanded its Lexington packaging plant, boosted its market penetration, and grown from 140 employees to 200.
The Wicked Weed deal could allow it to skirt North Carolina restrictions that limit production to fewer than 25,000 barrels each year. The brewery now will be able to more easily move some of its production outside the state and increase its national penetration while still maintaining its brewery status in North Carolina.
Wicked Weed has been mostly mum since the purchase. Neither it nor ABI responded to multiple efforts for comment. But the Asheville brewer did post a public statement on Facebook in May: “Just over four years ago, we started out with a simple idea: make great beer. From west-coast IPAs, to barrel-aged sours, we’ve been able to create world-class ales in a city that we love. We’ve grown from a small Brewpub with 60 employees, to a company with 4 locations and over 200 employees. In order to innovate, push the boundaries, and grow, we’ve decided to take on the High End branch of Anheuser-Busch as a strategic partner.”
The brewery did lose its annual festival, the Funkatorium Invitational, which typically drew more than 70 craft brewers from across the country. Organizers canceled the event, planned for July 8, after many brewers withdrew. One of the big sticking points in craft beer circles these days, and likely a reason for many of the Funkatorium defections, is the fact that technically Wicked Weed is no longer considered a craft brewer.
According to the Brewers Association, craft brewers are small and independent. Another stipulation: “Less than 25 percent of the craft brewery is owned or controlled by an alcoholic beverage industry member that is not itself a craft brewer.”
The association feels so strongly about this it created a seal that can be used by craft brewers to prove their independence to customers. The seal, announced in June, features an upside-down beer bottle and will be available to businesses that meet the association’s definition of a craft brewer.
“As Big Beer acquires former craft brands, beer drinkers have become increasingly confused about which brewers remain independent,” said Bob Pease, association president and CEO. “Beer lovers are interested in transparency when it comes to brewery ownership. This seal is a simple way to provide that clarity – now they can know what’s been brewed small and certified independent.”
The news met with an immediate rebuttal from ABI, which released a video of officials from several recent acquisitions criticizing the seal and saying the current controversy was hurting the industry and helping its wine and spirit competitors.
“At the end of the day we are all making beer; we are all brewers, whether you call us craft or not craft,” said Walt Dickinson, Wicked Weed co-founder, in the video. “This is a civil war. Meanwhile this armada of boats is coming from across the Atlantic to crush us.”
Despite that controversy, Devils Backbones’ Crandall says he still considers himself a craft brewer.
“There is a huge misconception of what craft is,” he said. “If I’m making a beer before acquisition using the same brewer, same equipment and same ingredients, how can you say that is not a craft beer?”
But Coelacanth’s Erskine believes ABI is buying up craft breweries in an attempt to confuse the marketplace. He said people often conflate “craft” with “quality,” when in fact the term is meant to denote small, independent breweries.
Many critics contend that quality eventually suffers when a big business buys up a smaller one. To Rip Rap’s Bell, craft has a deeper meaning – it’s about local business and local support. That community connection is what sets craft breweries apart and explains the local fallout from the Wicked Weed and Devils Backbone purchases.
“It’s important to know that the beer you buy from me, that money is staying in Hampton Roads instead of going elsewhere,” Bell said.
And there is always the issue of quality. Opponents of these kinds of deals often worry that large corporations will eventually change recipes to lower costs and make more money for shareholders.
Crandall said that would not make good business sense. “I don’t believe AB wins by cheapening our brand and minimizing the ingredients in our craft beer,” he said. “They win by continuing on the path that we are going down with amazing brewers, unique ingredients, innovation, quality control, and supporting the craft industry.”
Erskine says he isn’t convinced that ABI has a love for craft beer. Its purchases are a product of the lack of success in breaking into the craft beer market with what he calls “faux crafty brands” such as Shock Top.
“They seem to be trying to acquire a stable of brands that they can use to take over the taps of bars and shut out small local breweries who, as a whole across the country, are having a negative impact on big beer’s profits,” he said. “ABI makes a good story about acquired breweries staying the same – and nothing changing. But the truth is that things do change.”