BeerDorks.com: Reviews, Commentary and Opinions on Midwest Craft Beer and Microbreweries

 
March 30, 2009

Beer Issues:

It’s The Economy Beer, Stupid

The media claims the economy is all gloom and doom, but us Dorks know that craft beer is alive and kicking.
by Nigel Tanner

"It takes beer to make thirst worthwhile."
Contact Nigel»
Anyone seen the news lately?

Perhaps you’ve stumbled upon CNN or MSNBC, which spend 24 hours a day pummeling us with tale after tale of economic gloom, all while assuring us that President Obama will surely fix it, since he can do no wrong. Fox News says the same thing about the down economy, but their “fair and balanced” coverage leads us to believe that the apocalypse is upon us since the Democrats are in control and—GASP!—there’s a younger, non-pasty white dude in office who actually thinks for himself. For the six of us out there who still read the newspaper, it’s plastered daily with negative headlines regarding joblessness, foreclosures, corporate cheats, and stock market declines.

Regardless of your political affiliation, your cable news network of choice, or your opinion of the president, there’s no denying that times are extremely tough right now. But we’re not going to delve into government bailouts or the CEOs with no soul who run the AIGs of the world. We here at BeerDorks.com are all about the beer, specifically good, quality, American-made beer. And that, I’m proud to say, is one of the few industries in this country that is not only surviving the current financial crisis, but thriving.

I don’t want to bore you with numbers (I’d rather bore you by being needlessly long-winded, as is my trademark), but there’s a mountain of evidence out there that craft beer has thus far been “recession-proof,” to quote the media. Here at the BeerDorks.com office, Nigel receives multiple beer news alerts daily, and they are littered with stories of microbreweries/craft breweries/brewpubs across the country building, expanding, and thriving. Offhand, I can recall only a couple of alerts that had a negative story regarding the craft industry, and those were about small town brewpubs shutting their doors or abandoning expansion plans. But, when you consider how many restaurants in general are closing due to the recession, it’s not surprising that a few brewpubs are affected. If this is in fact the worst financial crisis since the Great Depression, and I believe it is, then no industry is immune to casualties.

Can you think of any industry doing better than craft beer?
With that in mind, can you think of any industry doing better than craft beer? Hell, even the post office is set to lay off 150,000. Teachers are being laid off. The medical industry is starting to suffer. All of those areas were once considered “recession-proof.” Think of the statistics we’ve been inundated with regarding retail sales, auto sales, and home sales; the numbers are so dreadful, most of us try not to think about them. Now try this on for size: according to the Brewers Association, in 2008 the craft beer industry experienced a 5.8 percent increase in volume, and a 10.5 percent increase in sales. That’s an INCREASE, folks, in a year that was a complete disaster in virtually every other sector. The Midwest and Rockies seem to be leading the current growth spurt, though the Northeast and West Coast, the cradles of the craft beer movement, continue to do quite well. Even the Deep South, long a wasteland for craft beer, has been catching on to the trend.

While there are a number of explanations tossed around for the continued growth of craft beer during a major economic slowdown, including the belief that people drink more during times of struggle, I think there’s something deeper than that. I truly believe that people take comfort in craft beer, not because of the potential to overindulge and briefly escape reality, but rather due to the fact that most of us have witnessed its growth firsthand over the past decade or so, and we realize that craft brewers are truly fulfilling the American dream. On the contrary, America’s traditional beer powerhouses, Anheuser-Busch, Miller, and Coors, have followed a path to disaster that could have been averted had they been willing to think outside the box and focus on the consumer, rather than the bottom line.

Let’s face it, the “Big Three” in beer (A-B, Miller, Coors) are carbon copies of the “Big Three” in the auto industry (GM, Ford, and Chrysler), the latter of which are seeking billions of dollars in federal aid in order to simply survive in the short term. Like the automakers, the big brewers continued to rely on a sub-par, outdated product, taking American tastes for granted and falsely assuming they’d never change. They inundated us with multi-million dollar ad campaigns that, while occasionally clever, couldn’t hide the fact that their products were far inferior to brews being manufactured overseas. When American entrepreneurs began to take advantage of a market ripe for the picking with new ideas, big beer didn’t respond by focusing on improving the product; on the contrary, they foolishly squandered millions of dollars hoping that and their name alone would squash the fledgling movement before it gained momentum.

Anheuser-Busch, as recently as a few years ago the unchallenged giant in American beer, is now owned by Europe’s king of awful beer, Belgium’s InBev.
And where are they now? Anheuser-Busch, as recently as a few years ago the unchallenged giant in American beer, is now owned by Europe’s king of awful beer, Belgium’s InBev. Massive cost-cutting measures not only threaten A-B’s once mighty brand, but also threatens to do to St. Louis what the collapse of the auto industry did to Detroit. Miller, the last survivor of what was once a thriving international beer mecca in Milwaukee, is now owned by London-based conglomerate South African Breweries (SAB), and their domestic wing merged last summer with the smallest of the “Big Three,” Coors Brewing Co., the Colorado brewer owned by Canada’s Molson Corp., forming MillerCoors. While the company line would say this is all for the sake of growth in a global economy that is permanently intertwined, the truth is that these companies peaked in the 1980s, and when faced with other challengers, albeit small ones initially, they failed miserably and had to be saved by companies based elsewhere.

Americans aren’t stupid. Just as we rage (too late in many cases) when things like the collapse of Enron, WorldCom, Lehman Bros., and AIG happen, we seek alternatives when we witness foolish business practices being conducted right under our noses. We’ll buy European or Asian automobiles if the American automakers refuse to evolve. We’ll invest in government bonds, precious metals, or anything else while big companies flail away, sending their stock prices plummeting. And, we’ll drink beer from companies that pay attention to detail, create a quality product, watch their bottom line, and prove that America is still a land where innovation can thrive, rather than drinking awful beer from companies who spend without regard and try to shove crap down our throat. Hard work and innovation do still matter here, and when it comes to beer, there’s no better example than domestic craft beer.

The comfort comes not only from knowing that we’re buying a quality product, but that it’s a product produced locally and done so with passion. The local aspect should not be underestimated or forgotten. Not only is the brewery a local entity, but often they are buying grains from Midwest farmers, hops from Northwest plantations, and providing more business for local retailers, distributors, truckers, etc. Nothing eases the sting of a recession more than knowing you’re helping your neighbor in a time of need and coming together as a community.

Community had been replaced by a faceless giant in a far off land, quality had been replaced by quantity, small farms and breweries replaced by enormous complexes where machines did all the work.
Think about that idea … “community.” In the U.S., just as was the case in Europe for centuries, the local pub has long been a gathering place for people of all backgrounds, a place where they could come to unwind, share stories, have fun, and enjoy a pint or two. Until Prohibition, beer was produced on a local level, both here and abroad, and most towns or counties had their own brewery. Prohibition dealt a death blow to many of these local establishments, as did the corporate consolidation of the beer industry in the decades following World War II. What we were left with was an inferior product that was a microcosm of what many believe was wrong with our country in the first place. Community had been replaced by a faceless giant in a far off land, quality had been replaced by quantity, small farms and breweries replaced by enormous complexes where machines did all the work. But, as is often the case in a land where the ideals of the populace prevail even in times of despair, things can come full circle and we seem to be in the process of returning to our roots. If that doesn’t make you realize the importance of drinking locally, I don’t know what will.

But alas, not everything is rosy. My biggest fear, and I’d love to hear feedback from anyone who cares to chime in, is that like many industries, craft beer will over-expand. What began as a trickle a quarter century ago evolved into a trend in the mid to late 1990s, and now appears to be snowballing. The problem with that is simple: everyone wants a piece of the pie, and many of those trying to grab their slice don’t have any clue how to successfully operate in what is still a delicate market. Even after many years of exponential growth, craft beer still accounts for only—get this—less than 5 percent of the market. Less than 5 percent! While there is a huge upside in that number, namely the fact that 95 percent of the market is sitting there waiting to be penetrated, the down side is simple. How many brewers can a country and/or region support when on average only 5 percent of beer consumers are buying their product? If Kia accounts for only 5 percent of the auto sales in a region, there’s probably only going to be one dealership selling them, not 10. Too much too fast often backfires.

While I certainly hope the bottom doesn’t fall out of the craft beer industry, and I’m optimistic that it won’t, I can’t help but be a little leery. The capitalist ideal is that brewers lacking quality and innovation will fall by the wayside, while the strong will continue to survive and thrive. You would then hope that those breweries that do survive and thrive do so by sticking to their ideals, their so-called “American dream” of making a good, quality, locally produced product that people of all demographics will enjoy. But the trend often says otherwise. It says that as profit margins increase, brand recognition becomes widespread, and popularity goes through the roof, the egos begin to increase and stagnation will ensue. The hope is that this doesn’t happen, but, if it does, that there will be a new wave of innovators right on their heels ready to take over when they falter, keeping the industry in its current successful state of growth. Let’s hope we’ve learned from our many, many mistakes and get this one right.

The point is that craft beer is more than just a hobby or something to be enjoyed on occasion; it symbolizes the American ideal. Hard work, dedication, honesty, and attention to detail produce not only a product that tastes great, but one that we Americans can take pride in during an otherwise dark time. We’ve been saying it since this site started and we’ll continue to say it after the current crisis ends, but there’s no better time to reiterate: DRINK LOCAL! Support your local entrepreneurs, be they brewers, farmers, retailers, pub owners, etc. Take pride in craft beer, and let’s hope the positive signs continue. There are no guarantees in life, and assuming that the growth of craft beer will continue at its current pace is foolish; we need to be careful in order to assure its continued growth and prevent it from falling in the same trap that the companies that brought our economy down did. We can help by giving craft brewers our own version of a bailout, one six pack at a time.





Comments
Nigel, I think your fears about the craft beer industry over-expanding are well-founded, but here's why I don't think that will happen this time around. First: home brewing. Home brewing is far, far more popular than back in the '90s when the last bubble burst, so I think the new influx of startup breweries will have a larger percentage of brewers who not only know the basics of brewing but also will have a real passion for good beer--instead of just money. We'll still see a wave of blond/stout/pale ale sewage, but we'll also see some tremendously inventive beers from these startups. Second: BeerDorks.com. And the hundreds of other sites out there dedicated to tracking down and talking about great beer. Back in the mid-90s, there were, like, 5 people on the internet, and 4 of them were arguing about Star Trek. Now anyone can hop on a computer and can pretty well figure out which new brewpub is all about great beer and which one is just churning out substandard swill in order to cash in on a trend. This, I think, will pop the bubble before it gets big enough to do some real damage. But I'd much rather see no bubble at all...
posted by EddieGlick | April 2, 2009, 8:26 AM
I largely agree with that assessment. I'm cautiously optomistic, but we've proven time and time again in this country that we know how to completely ruin a good thing thanks to greed and arrogance (and ignorance). However, I do think you make good points, particularly about BeerDorks.com. If the bubble doesn't pop, we will surely take full credit!
posted by Nigel | April 2, 2009, 5:30 PM
I agree with Eddie's points and would add as well that the 90's generations grew up knowing "Michelob" as "premium" beer, whereas today's new beer drinkers and young folks realize that the good stuff doesn't come with a commercial.
The larger issue for the craft industry growth, however, is distribution. Nearly every state has an archaic "three-tier" system which prevents or deters start ups in many cases and puts handles too often in the hands of an unknowing and uncaring beers sales force that is really only interested in which beer company is offering incentives that month. Markets like Chicago are totally on the take and its really tough for a little guy - unless they're well heeled or called for - to get a foothold.
posted by rings | April 16, 2009, 12:22 AM
Excellent point about distribution, rings, and one we're sure to touch on in a future piece. The distribution situation in many states is so old fashioned and convoluted that many small, quality brewers never have a chance make it big. It's not only a threat to the craft beer movement, it's likely the biggest threat.
posted by Nigel | April 16, 2009, 12:45 AM

Drinkin’ And Thinkin’

Beer Dorks News

Want to know how healthy the craft beer industry is? As always, look to Portland. Craft pioneer Bridgeport announces sudden closure, adding to a growing list of PDX casualties.
Did Anheuser-Busch Chicago offer their shit beer to Cody Parkey before his missed field goal? Because that may explain why he "accidentally" biffed it.
Chicago now has the most breweries of any city in the country. Other things Chicago has the most of: murders, mobsters, and Ditkas.
Trying to spin it positive, BA releases end of year graphic. Only 5% growth in the craft sector when nearly 1000 new breweries opened? That's a collapse waiting to happen.
R.I.P. Tallgrass... another casualty as the regional/national craft beer market continues to get squeezed.
Wait... Constellation Brands cut all of the Ballast Point and Funky Buddha sales staff? They merged it with their Corona/Modelo staff?? We're SHOCKED!!!
Pizza Beer founder crying about failure of company, blames everyone else. Reminder, the beer tasted like vomit. Try having better ideas or making better products so you're not a failure.
It's Bud Light so doesn't really matter, but we expect this beer to be sitting around for awhile.
Indiana brewery to open with controversial beer names to "get the conversation going". Translation: taking advantage of serious issues for free publicity.
Hundreds of amazing beers in Wisconsin and the Cubs took back the one everyone drinks just because it exists and people have heard of it. How fitting...