Big Beer, dogged by sagging brands, tries to control the market.
One of my many favorite craft brews used to be Lagunitas IPA, brewed in Petaluma, about 40 miles north of San Francisco. I used to be a regular buyer for home use – though when I’m out, I try beers I don’t know. In 2015, Heineken International, one of the world’s largest multinational brewing conglomerates with 180 or so brands, from Tiger to Tecate, bought a 50% stake, following in the footsteps of other multinational brewing conglomerates: they’re all on an acquisition binge of American craft brewers.
Why? Because craft beer sales have been soaring, even as sales of the big brands, despite costly marketing and Super Bowl ads, have been sagging. The market is tilting toward craft brews, and the conglomerates figured this out too.
Conglomerates are cost-cutters. They buy a brewer and try to make it work by cutting costs. One way they cut costs is by using cheaper commodity ingredients that their other breweries buy, which pushes down costs. This is American corporate theology.
A crucial ingredient in beer is hops. Craft brewers use carefully selected specialty hops. Some of the best hops in the world are produced in the US, often on a relatively small scale. But these products are more expensive than the commodity versions traded globally.
After Heineken bought Lagunitas, I was worried about the cost cutters, but continued to drink the IPA. For a while, it was fine. But not too long ago, I noticed a change in taste. It had lost its pizzazz. What killed the taste of this IPA? Here’s a guess: corporate cost-cutters who insisted on saving a few cents per bottle by switching to cheaper hops.
Also, the corporate marketing folks might have figured that the bitter flavor of hops could be watered down in some way so that more people who don’t like bitter flavors would buy the beer, and those who buy it, might drink more of it. That’s the reason why these ingenious marketing folks made sure decades ago that the bitter flavor of hops was leeched out of the big brands.
[Update April 24: Karen Hamilton, Director of Communications at Lagunitas, stated emphatically, “Nothing has changed,” and added: “You’re incorrect about the machinations of our partnership and its impact on our beers.”]After a couple of months of being frustrated, I switched. There are other brews to choose from. So what’s the problem? And how big of a problem is it in this vibrant entrepreneurial chaos of craft brewers, a booming industry that came out of nowhere?
In 1980, after decades of consolidation and mergers, there were just 92 breweries left in the US, most of them controlled by a handful of big corporations. Per-capita beer consumption had begun to decline, though overall beer consumption was still inching up due to population growth. But there were also some craft brewers among them, and their sales were soaring, and other entrepreneurs jumped into the fray and made great beers. By the end of 2016, according to the Brewers Association, there were 5,234 craft brewers and brew pubs in the US.
Growth in overall beer sales stopped years ago. In 2016, they remained flat at 197 million barrels. But sales of craft brews grew by 6.2% to 24 million barrels, and sales of imports, controlled by Big Beer, grew by 6.8% to 33.4 million barrels. And that came at the expense of Big Beer domestic brands.
Why have craft brews succeeded while the big brands have languished? It was the combination of Yankee ingenuity and America’s new hankering for a flavorful beer. Americans had been fleeing the big brands for decades – no matter how much they spent on advertising – and sought solace in wine and liquor. But with craft brews, there were alternatives.
So Big Beer with its languishing brands is once again trying to take control of this $108-billion market. AB InBev, the world’s largest brewing conglomerate (among others, it has acquired Anheuser-Busch and a gaggle of US craft brewers), and Molson Coors, the world’s third largest brewer (among others, it has acquired MillerCoors and a number of US craft brewers), carve up between them about 90% of US beer production.
Where are the folks from the Antitrust Division of the US Department of Justice? No one knows. Meanwhile, the largest two brewing conglomerates that dominate the US market are marketing what CNN calls “fake-craft brands.” In this clip, Sam Adams beer founder Jim Koch tells CNN that this threatens the real deal.
This is how the American Beer War has turned sour. Read… Layoffs Hit Craft Brewer, as Big Beer, Big Money, Overcapacity Rattle American Craft Beer Market
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It’s worth remembering that the craft brewer who was “gobbled up” by one of the international mega-brewers likely did so because he/she couldn’t pass up the money. I doubt that AB InBev put a gun to some brewer’s head and said, “Sell or else”.
With that said, it’s sad that a lot of serious beer drinkers are taking another walk down the Road of Deception in the Land of Corporate America.
Yes. It is said that Lagunitas was acquired at a valuation of $1 billion. So a 50% stake would be $500 million.
I don’t see a huge issue with the fact that full disclosure isn’t present. It’s not hard to figure out if a certain beer will support a local guy or one of the big two. Not much different than private labeled products that are everywhere.
One of my favorites is Lagunitas Lil’ Sumpin’ Sumpin’ and I have been drinking it for a few years. I haven’t noticed a difference in the taste and I actually like the fact that it has become available almost everywhere in the country. I was in SW Florida a few weeks back and had a taste for a Corona and a lime but it was $9.99 for a six pack. A Lil’ Sumpin’ Sumpin’ was $10.99. It was a no brainer to choose the Lagunitas.
I still prefer to hang out behind the dumpster at 7-11 drinking Mad Dog 20/20 from a paper bag.
Gershon – Haha don’t knock T-bird and the ol’ night train … I’ve tried T-bird and it tastes just like Japanese “Felix’ or “Fusen” chewing gum.
I used to hang out with my cronies drinking Boones Farm Strawberry Hill and smoking Swisher Sweet cigars. We thought we were the epitome of cool. Then we turned 13.
Oh, and I forgot to add:
http://www.bumwine.com
I concur about drinking MD — you can savor the bouquet of flavor when that stuff comes back up!
Double your fun!
Consumed Lowenbrau in the 60’s. Excellent beer. Miller bought the brand in 1975 and started producing in Texas. Tasted just like Lone Star. Great disappointment. Coopers Sparkling Ale – still bottle conditioned!
– It’s not only beer that’s had a change in taste (and not for the better). It has happened with other things I eat & drink as well.
– And if they don’t change the taste then they try something else to increase or preserve their profits. (e.g. reduce the content of a package).
I used to drink Canada Dry soft drink. Then it got bought out and it became sweet water with a slice of ginger waived over it. Junk.
Wolf,
Have you considered making your own? Great hobby. It’s also fun to do with a partner.
I had a chemist friend teach me to make wine from grapes. We used to import grapes from all over, mostly CA, Or and WA. My best was a 2008 Zin from California. That year I spent $1800 on grapes. Alas, the last drought and the CDN/US exchange rate nixed it for me. Too expensive. I am now making fruit wines with no additives, whatsoever. Blackberries make a terrific and rich wine.
My nephew is very much a brewer. He loves making beer…and drinking it. :-)
regards
One of my old friends on the East Coast makes his own. I’ve not yet had a chance to taste it. But I hear it’s pretty good.
My problem is I don’t have time. And I like drinking good beer more than I like making it. So something has to give.
I’ve heard that wine’s actually a lot easier than beer to make.
There is wine, and there is good wine. The secret to making good wine is using good grapes. Plus, being clean and meticulous. I think beer would be a lot touchier due to the different ingredients. However, once you have your recipe down and sourced ingredients, I would think it would be a similar process.
For table wine I actually prefer my second run.
What is nice is to go into your ‘cellar’, in my case a cool concrete floored storeroom, and seeing 400+ litres of good wine all waiting patiently.
I gave a lot away as presents. :-) It is easy to get into a drinking habit when you have lots on hand, so now I seldom even drink, anything. It screws up my sleep which is quite common as one ages. Apparently, and according to Google.
Well then Wolf.. y’alls just gonna have ta do what I does . First off shop at stores with knowledgeable staff who know whats going on when it comes to buyouts etc and aint afeared to spread the word … and then … the moment your favorite Coffee Wine Beer Distilled beverage gets bought out … move on to another .
I just checked – because I keep running into locally brewed beers that I haven’t heard of, including right now, as I’m out for dinner: at this very moment, there are 33 different craft brewers and brewpubs in San Francisco (a smallish city with only 840K people).
Come to San Diego on a beer pilgrimage. We’d love to have you! 120+ craft breweries in the county (and that’s excluding the big boys like Stone, Ballast Point, and AleSmith)!
I’d love to!
A lasting quality quaff, will win through every time. A stable taste.
Locally we have a pub brewery with small hotel, that started life in the late 1800’s as a coach rest stop. It is now on the third owner since then. Each and every successive ownership added to the business positively, rather than the common business practice now of gutting it for increased profit.
They have a small retail outlet on the premise that sells not only their product, but others as well. This is the only place where you may find their fine brews. The quality is still there. Year after year. The current owners are now elderly and don’t plan to change a thing.
I don’t hold out hope that this will be the case going forward. So far this little jewel has escaped the hubristic, money grubbing, corporate type. The one thing that is constant, is change. I sincerely hope it changes for the better. By the way, the pub food is to die for!
‘how capitalism cannibalises itself’. but surely that’s ok – the winners are the original entrepreneurs who developed a great product and cashed in, and the discerning consumer will still be catered for by the thousands of remaining independents. who loses?
Yup, consumers are still king if they exercise their brains and wallets appropriately.
People who really enjoyed the particular flavor of that brew.
Good ingredients are expensive, and so is paying attention. A successful industrial product has been engineered to need a minimum of these things. But as long as brewers are able to start up (and find a brand name they won’t be sued out of — this is a big new cost of entry), there will be good beer around. Your main problem will be to find it.
The end will come when players find out they can start something they call a craft brewery, and sell out in a couple of years for a billion dollars. When brewing no longer involves beer, that will be it.
The Twin Cities and Minnesota have a number of craft breweries:
http://mnbeer.com/breweries/
I am loyal to a family owned brewery in New Ulm Minnesota, Schell’s, that’s been in business since 1860!
One issue brewers may face is planting acres for malting barely will be down this year. Much of the barley planted in North Dakota and eastern Montana is two-row instead of six-row, and Anheuser-Busch has been pushing this trend. Six-row barleys are better suited to being grown in this region.
When my father and I sold our wheat seed genetics company to Limagrain Cereal Seeds in 2010, the breeder who took over for my dad, Dr. Blake Cooper, had been Anheuser-Busch’s barley breeder for the prior 15 years. LCS has a great malting barley named ‘Genie’ that is used by many of the craft beers in Fort Collins CO.
Nothing wrong about this. St Louis experienced its craft beer boom the minute In Bev purchased Busch. Now craft brewers make great product for a while, build brand recognition and then cash out to the larger brewer which quickly destroys the brand. Someone from the original company then starts a new brewery and the process starts over again. The problem will be when the larger companies create new legislation to “protect” consumers, forcing out smaller companies and making us all have to drink beer infused with low quality adjunct that tastes like shit and provides free migraines.
Brilliantly stated . And in fact its already happening . Here in Colorado InBev etc provided most of the finance to defeat the bill to finally allow Grocery Stores to sell Wine and Beer here in CO .. because they feared that would fuel the Independent’s growth to the corporate interests detriment even further
And yeah aint it just a kick in the ( censored ) how crap corporate beer and fruit bomb spoofelated wine gives your the migraine of the month after barely a glass or two ?
But if I may .. a slight change to your moniker
BUY LOCAL … as in everything … when ever possible … period . It aint always easy … but for you and those around you its well worth the effort
A friend of mine makes his own wine. It’s lovely stuff, friendly and hangover-free. Contrariwise, I came across an ebook at Project Gutenberg (http://www.gutenberg.org/files/53458/53458-h/53458-h.htm), The Science of Cookery, from 1892. Reviewing the industrial processes of the time, the author points a finger at a process that adds gypsum, or “Spanish Earth” to wine to clarify it. The process converts tartrate salts, which occur naturally in grape juice, but cloud the wine, to sulphates which are invisible, but awkward once they get into the human body.
I hate to throw away all this scientific progress, but I still distrust industrial products.
Many years ago, I traveled to Ohio for a meet with the extended family
When they found out I was staying at Uncle David’s place, they all started telling me “For God’s sake, don’t drink his wine”
Except for my Uncle Carl, who said “Aww, it’s probably okay…….he managed to get all of the leaves and twigs out of this batch.”
For the record, i thought it was pretty good. After two glasses, I noticed I couldn’t feel my legs or arms anymore.
I think the migraines come from the excessive amount of sulphites that the big producers love to add. As for sulphates, I think that fermetation can reduce them to sulphites if that is the problem.
Ok Jim, I get the anti trust argument. But why has the cost of Sam Adams gone up so much along with the monopolists?
Like the sell out craft owners, Jim is riding that train too $$$$$.
Just sayin
Vote with your wallet. Refuse to buy corporate beer.
Seems like artisan beers are everywhere in the US these days. I used to brew my own back in the 80’s. Pretty easy, but the batches were small and bottling was a hassle. Taste was quite good, though. Lagonitas IPA has a pretty high alcohol content if I remember correctly. Over 6%, I think. I could have one, but not more. Lightweight.
Is overall beer consumption growing? Or is it just a shift from corporate brands to craft beers without the amount actually increasing overall? Sorry if I missed that part.
Per capita beer sales are sinking. Overall beer sales (197 million barrels) had 0% growth last year. But Craft brew sales grew by 6.2% (24 million barrels) and sales of imports grew by 6.8% (33.4 million barrels). So Big Beer domestic brands took a big hit.
So yes, beer sales are going nowhere, but within that market, sales are shifting away from Big Beer domestic brands to craft brews and imports (controlled by Big Beer).
I’ve updated the article to include this data. Thanks for asking.
I find it unfathomable that Big Beer is so badly managed that it has never occurred to them to improve their product so as to win back market share? What has happened to Capitalism in this country? Nothing seems rational anymore. By the way, I should describe the absolute worst American beer I ever encountered. It goes way back to when the grocery stores first started promoting “generic” products back in the 70’s. Safeway tried their hand at generic beer in these lurid yellow cans marked only BEER in bold black letters. It tasted sort of like carbonated water to which somebody added rubbing alcohol and a bit of soap for body. It neither tasted nor smelled anything at all like real beer and was gone for good in less than 2 months. have no idea what was actually in it and I shudder at the thought!
I remember that too. I never tried it. But we were joking about it endlessly.
I don’t know anyone who tried it. The label looked practically hostile. I thought they pulled the beer because NO ONE tried it. But now I know at least one person who tried it.
:-)
I’ll add one bit of global news.
Worldwide beer consumption has inched forward 0.4% year on year.
If we take the top five consumers, only Brazil (#3) saw an increase, albeit a very nice one, to the tune of 5%.
However the US (#2) and Germany (#5) have gone nowhere (0% growth) and Russia (#4) saw a modest decline, -0.5%.
What wasn’t supposed to happen is the #1 consumer is apparently going sober. China has had declining yearly sales since 2012, to the tune of about -1%, but last year the drop suddenly accelerated to an alarming -3.1%.
Very strong growth in Brazil and South-Eastern Asia has only managed to offset that sharp decline in China and the year was only saved by “unexpected” sales growth among big consumers such as Spain (#10) and the UK (#8).
This may have something to do with big corporations such as Heineken and Anheuser-Busch InBev allying themselves with discount supermarkets to slash prices on their bottom tier products on the European market.
PS: I don’t drink and get my data from Kirin’s yearly investors’ report (which includes “Global Beer Consumption by Country”), so forgive me for any inaccuracy.
I remember when there were many wineries bought out by larger rivals during the last 20 years, starting with Ravenswood. And there have been many since; I don’t want to attempt to list them all.
Before these buy-outs were occurring, there was the battle between Gallo and Constellation (Constipation) Brands over amount of retail shelf space that retailers would give them. Gallo did it by always introducing new labels into the marketplace, while Constellation was buying other brands. Others got in the same game with their brand extensions, and then there was the idea of introducing different grape types to make fine wine. And I was on the inside, as a retailer, and had to find a way to fit all this crap, much of which was a hard sell, into my shelves and racks. Every few months, the owner would walk in the department and say, “Absolutely no more new wines!” This was the easiest way to solve the shelf-space problem.
However, the most fun was when customers would ask, “Have you actually tried all these wines?”
Answer: Only if the salesman didn’t come in with a lab report/chemistry analysis.
Here is a fact – not an opinion.
I live in Juneau, AK, home to Alaskan Brewing Co. I live, literally, two miles from their brewery. When I first moved here, from Texas, I drank Shiner Bock (still my preference TBH – I love their Bohemian), which comes from an old school brewery in South Central Texas (which was settled by Germans mind you – who take their beer and dance halls quite seriously).
https://en.wikipedia.org/wiki/Texas_German
Anyway, my point is that when I moved here Shiner (and Sam Adams which was my back up) was a bit more expensive than Alaskan (5.99 a six pack for Alaskan and 6.99 for the others). As my preferred beer started going up in price, Alaskan (understandably) lagged behind, first by a buck, then by two bucks. Then low and behold – one day (literally one day to the next) – Alaskan costs as much as Shiner (and Sam Adams), a two dollar change in price.
My gut feel is that as the local distributors bumped up prices on imports – Alaskan became more competitive and hurt their overall sales/profits as folks just drank more Alaskan – so they eliminated the pricing discrepancy and started jacking beer prices in unison after that.
I just checked this morning and Shiner now is 10.79 a six pack and both Sam Adams and Alaskan are 8.49. These days I have resorted to Stella – which I can thankfully get from Costco at 26 to 30 bucks a case (also also like their store brand reds – very good quality for the price). That said, if prices keep going up, I may just have to take up pot as a hobby instead.
Now, if you go check your beer store and price those beers out – one might have a hard time explaining why Alaskan – which is brewed down the street from me – is CHEAPER where you live than where I live.
This is an observable fact.
Control and consolidation in the alcohol market has been core to the business model since prohibition. They cut costs – exactly as Wolf pointed out – and jack prices through control of the market.
And the government is in bed with the business interests, at the local, state, and federal level, and could care less about the consumer – so expect nothing to change.
Regards,
Cooter
Cooter – Its a big club!
And you aren’t in it. You and I are not in the big club.
note: With thanks to George Carlin RIP
You obviously did not read the goo-bermint stati-stink that the inflation is horrendously low 2%.
Just want to add one point; 6% alcohol content is not a necessary for beer to taste good, it’s only benefit is get-drunk-fast efficiency. A 3% beer taste just as good and you can drink more of it. Just like wine, a good beer needs to mature for as much as half a year in a cooled container, but that would not improve the corporate bottom line.
MM. You got it. I live in Seattle and have been exposed to micros for decades. Used to drink the hoppy stuff a lot but went back to good ole Rainier Beer.
I used to drink Redhook when in Seattle, but that was a long time ago.
One of the primary flavors is also the water used, or liquor to use the brewing term. The local brewery would use the local water source giving the brew a unique taste, compared to something using even the same ingredients in a different town.
When the big brewers buy them up they sample the water, and program it into the computer at the industrial brewery at the other side of the country. You then press one button and the water is altered to get the same taste…..in theory.
I don’t know if this got mentioned, but kids aren’t drinking beer, the millennial crowd is drinking hard-stuff.
So the market window is closing, also the kids don’t like the super hoppy beers, its more of a gourmet thing.
I make beer, and its still a pain, bottling is a pain, the cleaning is 90% of making beer, I have to bottle as c02 grade gas ain’t available, in USA I used to just put in corny’s ( soda cans ), that was easy, but now bottling is brutal.
It’s always been my opinion that craft-beer can’t be mass scaled, its a small batch art of high quality ingredients.
I only drink local beers now that are small shops – What happened to anti-corporate of years ago called occupy wall street ?
I still vote with my dollar and Sam Adams is only if there’s nothing else because it too is commercialized.
I know New Glarus in Wisconsin seems to be doing well. I believe they finally cracked the overall top 25 in sales volume, despite only selling in Wisconsin (barring people buying it and transporting themselves). Of course, I suppose some of that could be consolidation by the conglomerates.
Their Spotted Cow is the top selling draft beer in the state. Many of their other beers rate very highly within their respective styles. Fruit beers in particular are renowned, because they don’t go overboard on sweetness or even ABV. To me they almost taste more like a sour ale. They also do quite a few experimental brews to see if anything sticks.
Seems like a decent strategy, they’ve kind of become the unofficial state brewery of Wisconsin and don’t get bogged down in the cost and production problems of trying to penetrate other markets.
I use beer traps to control garden slugs, so I always buy two different beers when I go to the store — a good craft beer for me (lots of choices, since we have 10 good local breweries here in my town of 80,000), and whatever is cheapest for the slugs. I’ve noticed that the slugs won’t touch Miller or Bud, but they seem to really like PBR.
Amazing. Garden slugs drink beer, get drunk, and die? But it has to be the right kind of beer… Is this well-known among gardeners, or did you somehow figure this out on your own?
Its a well known gardeners trick that doesn’t kill your pets. Its actually the yeast that the snails/slugs are drawn too. So a bottle conditioned or unfiltered beer is a better bet.
A well known fact that slugs love to crawl into a bowl of beer and stay there till they die. But finding out that they loved Pabst best took some testing.
AB InBev SABMiller (one company since October 2016) owns 400 beer brands. Heineken owns 170.
We live in their world.
I think using Lagunitas as an example of skimping on ingredients to save money and impacting quality is a bad one.
Firstly, as their beers are very hop forward, once they fade then the flavor goes. As they got bigger maybe distribution increase which leads to beer sitting on shelves for longer.
I prefer some of their other beers like Hop Stoopid and Maximus, I haven’t noticed any difference in these.
Secondly and more importantly, since the deal with Heineken they have released some very good beers as special releases at ridiculously cheap prices, and distributed them very widely.
Look up reviews on youtube for their High Westified Stout or Born Yesterday fresh Hop IPA.
These are both world class beers at a price you probably won’t get anywhere else.
The deal with Heineken doesn’t seem to have impacted the quality on these.
I noticed the same thing at Red Hook. Tasted like the beer was mixed with club soda.
Take over complete:
http://www.sfgate.com/business/article/Heineken-buys-rest-of-Lagunitas-as-beer-sales-go-11121674.php
Thanks. A few days ago, I had a conversation with the founder, Tony Magee. He wasn’t very happy with the article. I can now see why he was a little on edge – they were in the middle of closing the deal, and this deal involves a whole lot of money.