 |
| Modern Times' North Park (San Diego) Tasting Room, 30th & Upas Streets |
BIG BEER HAS A
PROBLEM WITH CRAFT BEER BREWERS
GUEST BLOG—By Jacob McKeon, Modern Times Beer,
San Diego--Anheuser-Busch InBev is in the midst of a PR push, the goal of which
is to soften resistance to their craft brewery acquisition strategy. Sadly,
credulous beer writers aren't asking any of the right questions, so I feel a
need to respond.
The
sacrificial lamb in this takedown is Aaron Goldfarb's recent piece for Serious
Eats entitled, "What 'Selling Out' Allows a Craft Brewery to Do.” I'm
picking this one because it covers most of the bases on this issue, which makes
it convenient.
 |
| Jacob McKean, Modern Times |
I apologize
to Aaron in advance because he’s sorta conscious of the fact that he's being
manipulated, but he simply doesn't know enough about the beer business to
understand exactly how. I don’t mean to pick on him; there are plenty of other
similarly problematic articles I could have chosen. Hell, when I was a
freelancer, I would've gladly cooked up a story about how to construct a
helicopter from discarded sex toys if someone had offered me twenty five cents
a word to write it. But I’ve heard the misinformation in this piece repeated
too many times to ignore, so here goes.
I'll take
the arguments one at a time:
1) Claim:
Moving production of core brands from acquired breweries to ABI's plants
improves their quality. Goldfarb says ABI's plants are being "retrofitted
specifically to handle craft beer in ways that the craft breweries themselves
simply couldn't afford back when they were independent operations. InBev's
added a Super Sack system...hop backs...conical tanks, and more cellaring
space.” Other items cited are a mash filter, centrifuge, and tasting room.
Problem:
None of the items listed are unaffordable to independent craft brewers and none
of them are related to quality. Many craft brewers have Super Sack systems:
they cost about $25,000 and do nothing to improve quality, although buying specialty
malts in Super Sacks does reduce their cost slightly. Likewise, many craft
breweries have hopbacks; I paid about $3,000 for mine. Most breweries don't
bother with them, however, because it's generally understood they don't do a
better job of imparting hop flavor and aroma than whirlpool additions. And
"conical tanks"? What brewery doesn't have conical tanks? Literally
every single brewery can afford conical tanks. What about "more cellaring
space"? You mean, like, renting a building? Likewise, mash filters,
centrifuges, and tasting rooms are all relatively common at mid-sized
independent breweries. This is just a list of random words meant to give the
appearance that the argument has substance. ABI is spinning minor logistical
adjustments as proof of their commitment to quality. Anyone who has worked in a
brewery can see that this is bullshit.
Side note:
Calling ABI "the best lager makers around" is like calling Kraft the
best cheese makers around; allowing that statement from Blue Point’s president
to go unquestioned is bizarre.
2) Claim:
ABI is investing in the breweries themselves with the goal of improving
quality, which they couldn't have done on their own. Goldfarb writes, "It
gave 10 Barrel $10 million to buy six new 400-barrel tanks, for instance, and
it's helping Blue Point open a new 40,000-square-foot facility housing brewing
and packaging operations, a tasting room, and office space. Collectively, these
improvements have led to the production of more consistent flagship beers for
many of ABI's craft breweries."
Problem:
Anyone who has ever worked on the business side of brewing would immediately
see the problem with the first part of this claim: 400bbl tanks cost around
$100,000 each, so six of them won't add up to $10 million. Failing to notice
the huge discrepancy between the dollar amount listed and the cost of the
alleged purchase is indicative of the overall lack of industry knowledge
throughout this piece and many others like it. It may seem like a semantic
issue, but it means the author isn't equipped to dig into ABI's claims with any
authority. The second problem is a larger point and it's one that gets repeated
both throughout this article and many others: the idea that the breweries who
sold couldn't have expanded without macro-beer financing it. This is bullshit,
too. Goldfarb cites Bluepoint's 40,000 sq ft expansion, but I can think of
literally dozens of independent craft breweries that have expanded far more
aggressively than Bluepoint (Modern Times included) without ABI's money. But
the breweries who have sold and the beer writers who accept their excuses
without question would have you ignore this obvious reality because it
undercuts an excuse that tends to go over well with the public.
3) Claim:
Macro-brewers have made hops available to the breweries they've purchased which
would otherwise be unavailable to them.
Problem:
Virtually all hops, and certainly all of those cited in this article, are
available to any craft brewer willing to plan ahead and contract accordingly.
Modern Times is a mid-sized, rapidly growing brewery that almost exclusively
uses highly sought-after hops in very large quantities, and yet somehow,
without the help of ABI's private farm, we have more than enough hops
contracted to see us through the next 7 years of extremely aggressive
expansion. We are hardly the only ones who can say that. Hop contracting takes
some work, but no one needs the help of macro brewers to get what they need or
want.
4) Claim:
Macro-beer's money gives acquired breweries access to capital they could not
have gotten otherwise, and this money is spent on experimentation. Goldfarb
writes, "Before Golden Road was acquired, in September of 2015, Gill and
her two partners were relying heavily on small-business loans from Bank of America
Merrill Lynch. That meant money was always tight and had to be used strictly to
help the brand grow; there were no resources for experimentation."
Problem:
There are several, but the first is simply a failure of journalism. If Goldfarb
has simply asked Gill who those partners are, the fact that one of them is a
billionaire would have made clear that she is completely full of shit. Golden
Road was the most lavishly funded start-up in craft beer history, something
that is widely known throughout the industry. Then there's the claim that
"there were no resources for experimentation” at Golden Road, with the
implication being that the same is true for many breweries. This is also
nonsense. How money is spent within a brewery, especially one with access to
virtually unlimited funds like Golden Road, is a question of priorities, not
capabilities. If a brewery does not invest in experimentation or barrel-aging
or a sour program, it is because the people who chose how money is spent at
that brewery are not interested in those things. Again, there are literally
thousands of breweries with far fewer resources than Golden Road or Goose
Island who do all of those things and more.
The vast
majority of independent craft breweries successfully rely on bank financing for
their expansions. Interest rates are at nearly historic lows, and banks are
more eager than ever to work with bricks-and-mortar companies with solid cash-flows.
If you want bank financing and your business is even moderately healthy, it is
there for the taking. My experience with several rounds of major expansion is
that the equipment financing expanding breweries need is usually the easiest
type of financing to access, and that banks are generally understanding of how
and why breweries spend money.
5) This one
isn't a claim, it's a key piece of information that goes maddeningly
uncommented upon. Goldfarb writes, "Gill says. 'The margins we needed to
hit on our beers are now gone'—ABI doesn't necessarily care if each and every
beer released makes a solid profit—and 'it's changed how we think about our
portfolio in a major way...'"
Problem:
This is the most predatory and ill-intentioned thing the macro brewers have
done with their acquisitions, and Goldfarb allows Gill to cite it as evidence
of their benevolence, which drives me nuts. The reality is that selling a
product at or below cost is an anti-competitive business strategy that is
intended to put smaller competitors out of business. If there's one thing
independent craft brewers can't do that macro-brewers can do it is lose money.
And this strategy is, by far, the most effective way for macro-brewers to
reduce consumer choice and extinguish the craft beer movement they’re now
trying to co-opt. Goldfarb remarks upon this later in reference to $56(!) Goose
Island kegs, but fails to grasp that this strategy is THE reason for these
acquisitions. Not quality, not making dreams come true, not sharing information.
The goal is to destroy craft beer from within by operating acquired breweries
as zombie brands that wreak havoc in the marketplace long after the life has
been squeezed out of them.
6) Claim:
Being acquired by a macro-brewery gives access “to the minds of fellow
brewers,” allowing breweries to improve their practices.
Problem:
Craft beer is the most open, collaborative industry I know. There is absolutely
no shortage of access to information from “fellow brewers.” I have not once
been told something was “proprietary information” by another craft brewer. If
there is anyone in the beer industry who jealously protects their “trade
secrets”, it is the macro-brewers, who are notorious for their harsh treatment
of employees who fail to obsessively protect information from competitors.
"The minds of fellow brewers" are there for anyone to access, no
buy-out necessary.
7) Claim:
Breweries can’t expand their geographic distribution without the “muscle” of
macro brewers. Goldfarb claims Founders "would never have been able to
obtain shelf space” in “foreign cities” had it not been partly acquired by a
macro-brewer.
Problem:
Independent craft breweries expand their geographic distribution literally
every day. There has never been a time when distributors were more eager to
take on new brands. This has, in fact, been one of the seismic shifts in craft
beer over the last decade. In the late ‘90s and early ‘00s, craft breweries
often had to beg and plead distributors to take them on. Now, distributors are
so eager for new brands, the Brewers Association has had to enact a rule
preventing distributors from openly pitching to craft brewery owners at the
annual trade show because it became overwhelming. Meanwhile, loads of craft
brewers of all sizes are jumping at export opportunities, which are abundant.
Hell, Modern Times, which is about one tenth the size of Founders, exports to
12 overseas markets, zero “muscle” required.
-------------------------------------------
Here’s the
truth: selling to a macro-brewer is the fastest, simplest way to turn equity in
a craft brewery into cash. That’s the only reason to sell to them. Anyone who
claims otherwise is full of shit.
Cheers &
thanks,
Jacob McKean
Modern Times
Beer
San Diego
http://moderntimesbeer.com/blog?cc
No comments:
Post a Comment