Last month the Great American Beer Festival opened in Denver for the 34th year in a row and it was bigger than ever. According to the Brewers Association, which is the organizer of the event, the GABF offered 90,000 additional square feet in the tasting hall and allowed 60,000 attendees (20% more than last year) to sample over 3,800 beers (9% more) from 750 breweries (6% more) from all over the country.
Medals were awarded in 92 beer categories (2% more) by 242 judges (2 more) from 15 countries (50% more). Winners were chosen from 6,647 competition entries (21% more) from 1,552 breweries (19% more) from all 50 states and Washington, D.C.
But the festival proceeded amid divergent trends in the industry in ownership of breweries. According to Brewers Association Economist, Bart Watson, the exponential growth in craft brewers shows no sign of stopping, with nearly two openings a day. He added, “Most of the new entrants continue to be small and local, operating in neighborhoods or towns. What it means to be a brewery is shifting, back toward an era when breweries were largely local, and operated as a neighborhood bar or restaurant.”1
In another Brewers Association press release Watson asserted, “Industry growth is occurring in all regions and stemming from a mix of sources including various retail settings and a variety of unique brewery business models.” American craft beer production volume increased 16 percent during the first half of 2015 to 12.2 million barrels, up from 10.6 million barrels during the first half of 2014.
And there are well over 1000 more breweries in various stages of planning. He even predicts, “(I)t is likely that later in 2015, or early in 2016, there will be more active breweries in the United States than at any point in our nation’s history [surpassing the high point of 4,131 in 1873].”2
But there also is a growing trend toward mergers, buyouts and consolidations in the industry that many craft beer advocates find disturbing. If you’ve followed beer industry news over the last few years or just do a web search, you will see what I mean. Just to name a few:
- The Craft Brew Alliance formed in 2008 with the merger of Widmer Brothers, Redhook and Kona Brewing and nearly one-third ownership by AB InBev.
- In recent years, AB InBev has bought into Goose Island, Blue Point, 10 Barrel, Elysian Brewing and just last month, Golden Road Brewing.
- Belgian Brewer Duvel Moortgat owns Brewery Ommegang and bought into Boulevard two years ago and just this summer Firestone Walker.
- Just last month, Lagunitas Brewing Co. sold a 50% share to Heineken.
- Terrapin Beer Co. sold a minority stake to MillerCoors in 2011, which last month bought Saint Archer.
- Last year, Founders Brewing sold a 30% stake to Spanish brewer Mahou San Miguel.
- Earlier this year one of my hometown brewers, Oskar Blues sold a significant stake to a private equity firm and last month Full Sail sold to a private equity firm.
And there certainly are many more to come. The fact of the matter is craft brewing is a business. And as in life, in business change is inevitable. Many of craft beer drinkers (and I readily confess to this) harbor an idyllic (I prefer “principled”) vision of craft brewing. We want to drink small, local, and independent, similar to what it says in the definition of craft brewer set by the Brewers Association.
Have these brewery owners “sold out?” I say yes, by definition (literally and metaphorically). But should we really blame them for seeking access to capital to expand production and gain access to new markets or because they don’t have any other succession plan or even just to take some profit for themselves and their investors? I’d like to but in this country, they have that right.
And we as consumers have a right to continue buying or to stop buying those products. From this consumer’s perspective, I won’t get mad, I will just buy my values like I do with anything else. I find the Brewers Association’s definition of “craft brewer” as a good starting point for me.3
I prefer buying products from small, local businesses. They tend to be more genuinely rooted in the community, more innovative and more collaborative (even as they may still compete). The independence of a brewery’s operation is important to me. An independent brewer is more likely to be committed to their original vision and less likely to compromise under influence of commercial imperatives. And I care about quality, not just price. Many have concerns that quality will suffer after a merger. There is historical precedent that it will but also examples where it isn’t so clear.
Whether it’s size, independence or quality, I like to know what I am buying. For me that means being able to readily find out who owns and controls the company and what ingredients are used in brewing the beer. Information is key. The market can’t work as it is supposed to if consumers can’t make informed decisions.
I value authenticity and I think I have a “right to know” if what I am buying conforms to my definition of authenticity. And that’s just plain hard to do without transparency. I wish all business owners would be ethical and responsible all the time. But we all know that is naïve. That’s why regulation generally is a good thing. It’s also why disclosure is critical. How many craft beer diehards who refuse to buy beer from a brewery that just sold out to a conglomerate will eat food without concern as to its ingredients – such as GMOs or artificial flavors and preservatives – or its ownership? But I digress.
I am increasingly interested in the ownership and control of the companies producing the products I buy. I want my purchases to reinforce my values and to reward companies whose practices track with those values. That’s why I was excited to be invited to a privately held event during the GABF called the “ESOP Celebration.”
Deschutes Brewery and Harpoon Brewery organized the event to celebrate employee ownership and brewing independence. In both cases, employees own a significant portion of the company through what is called an ESOP – Employee Stock Ownership Plan. The event debuted a collaboration beer – called EHOP – to call further attention to this alternative ownership model. They were joined by Colorado’s own New Belgium Brewing (which is the only brewery in the nation that is 100% employee owned) and Lefthand Brewing Company and Odell Brewing Company, both of which completed ESOP transitions this year.
ESOPs are a way to allow company employees direct ownership and a direct stake in the success of the company. Of course, these arrangements often don’t translate to concomitant control but they are a steo in the right direction. Comments from these brewery representatives echoed those of others who have established ESOPs in other industries, noting motives including enabling employees to share more in the fruits of their labor, and ensuring financial stability and ownership continuity over the long haul.
New Belgium has gone a step further along the road to corporate social responsibility by becoming third-party certified as a “B Corporation” (AKA, “B Corp”). B Corps are companies that pledge to incorporate social and environmental concerns (as much as profit) into their corporate culture. In many states, including Colorado, a company also can obtain legal status as a “Benefit Corporation.” Companies such as Patagonia and method (cleaning products) commit to meet standards of corporate purpose (create a material positive impact on society and the environment), accountability (consider the impact of their decisions not only on shareholders but also on workers, community, and the environment), and transparency (make available to the public an annual benefit report that assesses their overall social and environmental performance against a third party standard).
I know whenever I have a choice of which beer to drink (that is, adequate information to make a real choice), I will pick a beer from a brewer that treats its employees well, treats the environment well and is a responsible member of its community. Hopefully, more in the beer industry (and other industries, too!) will see the value in such alternative corporate structures – and the adage: “you can do well by doing good.” Craft brewers clearly have fermented a revolution in beer making. Now, maybe they can ferment a revolution in in corporate ownership and control.
1 https://www.brewersassociation.org/insights/4000-breweries/
3 https://www.brewersassociation.org/statistics/craft-brewer-defined/