Recently, Tech Crunch reported that Alexa, Amazon’s personal assistant, is about to start having her own opinions about things. They said that in an effort to make her more human-like she needed to have opinions that she comes up with on her own through what’s called machine learning. Not that she doesn’t already give opinions, but right now they have been programmed in by humans. In the near future, Alexa will start offering her own thoughts on things like TV shows, movies, books and more. But how do we know why she picks the things she recommends, now or in the future?
A recent video showing someone asking Alexa what her favorite beer is, with her answering “Budweiser,” got us thinking. Why did Alexa fall in love with Budweiser? It can’t be because it’s the best selling beer (because it’s not, that’s Bud Lite and Alexa stated as much when I asked this specific question). To see just how much Alexa loves Budweiser, I put my own Alexa to the test. I asked not only what her favorite beer was, but also “what’s the best beer?”
It turns out that not only is Budweiser Alexa’s favorite beer, but it’s also the best beer in her opinion. The more I asked the question, the more she doubled down and stuck with her pick, showing a wide range of responses pertaining to Budweiser.
While I did have a lot of fun peppering Alexa with the same question over and over again, what is concerning is the level of influence Alexa has and will have over people’s choices now and even more so in the future. Furthermore, Amazon loves monetizing things, and who’s to say that they wouldn’t start selling Alexa’s opinions (or haven’t already) to the highest bidder so that she can name drop their product over and over again. Only large companies would be able to pay for this sweet product placement anyway, and maybe they already have.
So the next time you ask Alexa for her opinion, take it with a giant grain of salt. While Alexa is still just a machine, she can easily be influenced and that influence might be due to someone’s marketing dollars rather than a computer’s machine-learned opinion.
Avery vs. Pirate Life: Who Sold It Better
Last week, two craft breweries announced investments in their brands from outside companies. Avery Brewing Co. from Colorado sold 30% of their company to Spanish beer conglomerate, Mahou San Miguel. A couple days later, an Austrailian craft beer brewery called Pirate Life announced that they had been acquired by AB InBev for a cool $7.6 million. While you might not have heard of Pirate Life yet, it has been on a fast rise from its 2015 opening to being named Australia’s best craft brewery by Beer Cartel in 2017. Both Avery and Pirate Life pointed to international growth as reasons why they chose to sell part or all of their companies. Both companies are now not considered craft beer, though that definition doesn’t apply to Pirate Life since they aren’t in the under the umbrella of the Brewers Association here in the states.
The Investor Matters
The sale (in part or all) of these two breweries also brings up the shifting gray area that exists between the different sort of investments that breweries seek to help themselves grow. The simple fact is that in order to grow any business there needs to be an influx of money. In terms of the beer industry, this money can come in a variety of ways but most often it comes from private investors/investment firms or the sale of part or all of the company to a larger beverage company. But not all beverage companies are created equal, and this is where the gray area comes in.
Avery selling a minority stake in their company to Mahou San Miguel just doesn’t seem to have the same negative connotations that selling your whole brewery to AB InBev does. Mahou San Miguel is a large beer company with mostly Spanish beers in their portfolio and they also own 30% of Founders. A quick google search of their name with some choice words (investigated, illegal, pay-to-play) turns up nothing. The same cannot be said for our good old friend, AB InBev.
AB InBev At It Again
In fact, this past week it was announced that there is yet another investigation into AB InBev for breaching EU competition laws in Belgium. Basically, beer costs more in Belgium than it does in the surrounding countries, especially the Netherlands. There are many retailers with stores in multiple countries and would use that advantage to offer the beer at lower prices because it could be transported from their warehouses outside of Belgium. AB InBev sought to stop the cross-border beer in a couple of different ways; by limiting the volume that exporting retailers could get on promotion and taking away incentives and holding back the most popular brands unless the retailer promised to not sell their supplies to their Belgian stores.
Furthermore, EU officials uncovered that AB InBev’s decision to switch to single-language labels in France and Netherlands, 4 years ago, was done so to prevent the export of these more inexpensive beers into Belgium where labels have to be in both Dutch and French.
AB InBev has a history of playing dirty, getting fined, paying the fine (because their yearly revenue is $45.5 billion), and doing it all over again. They are so big that they are nearly untouchable because they can pay any fine that is thrown their way with ease. This is why it’s a much more bitter pill to swallow when they buy yet another independent craft brewery. Yes, Pirate Life has a right to grow and will likely do so a faster rate now that they have been bought out by the biggest beer company in the world. Most of the people who drink Pirate Life will have no idea that they are supporting AB InBev. Life will continue on for all.
In the end, selling your whole brewery vs. 30% is a huge difference and really are two ends of the brewery-sale-spectrum. While both are enough of a sale to be kicked out of the craft beer consortium, selling 30% to a beverage company with a decent reputation and no history of trying to cheat the craft beer market in the U.S., is what it is. Likely the beer won’t change much if at all and the people who build the brand will stay in place. Selling your whole brewery to a beverage company with the track record that AB InBev does, stings a little more and also says a little more about that brewery’s commitment to the craft. Who knows what will happen in a years time to not only the original staff but also the control at that point is totally up to AB InBev, no matter what the old owners say. As more and more craft breweries sell part or all of their company to continue their vision of growth (or to get a sweet payday), we have become more desensitized to the act itself. It also shapes the conversation moving forward to think about whether the distinctions between the ways that breweries grow. Being committed to craft and buying independent brewers is going to get hard as we move along in these times so maybe we will have to adjust our expectations a bit and not be afraid to wade into these gray waters.
Budweiser, Mexican Beer, and Millennials
Budweiser is not having a good year when it comes to U.S. sales and this last quarter only got worse for them. As more and more people turn to drinking craft beer, spirits, and wine, they have seen a continuous drop in sales for their flagship beers, Budweiser and Bud Light. The North American market was Budweiser’s bread and butter for years but ever since 2014, AB InBev has seen a drop in Bud and Bud Light sales every year with a steep 6.2% drop in this last quarter alone. The slide in sales isn’t just AB InBev, however. MillerCoors also saw a 3% drop in U.S. sales this last quarter of both their Miller Lite and Coors brands. While AB InBev is a huge global company, they appear to hold the U.S. market in the highest regard. AB InBev Chief Executive Carlos Brit0 recently said,
“The U.S. is our most important market and we recognize the need to continue to focus on driving topline growth across our portfolio.”
To help with this focus AB InBev decided to fire their U.S. CEO and replace him with their current chief officer of global sales. But why is Budweiser experiencing such a slump?
Not All Macro Is the Same
Here’s the interesting part, not all macro beer is down. American beer drinkers are totally digging Mexican beer. Corona and Modelo are up 13% this year in U.S. sales. AB InBev actually owns Grupo Modelo, which makes both Corona and Modelo, but in 2013, they sold the U.S. distribution rights to Constellation in a move to settle the anti-trust issues that arose from AB InBev’s purchase of Grupo Modelo. Constellation paid a cool $4.75 Billion for the brand rights at the time, and the year-over-year growth of both brands has certainly been a boon to their portfolio.
Mexican imports aren’t the only mass-produced beers that have seen growth, however. There is one mass-produced, super premium (their category, not ours) beer that is defying all expectations. Michelob Ultra is the largest share-gainer brand in the U.S. for the last seven quarters for a 10.9% growth up from last year at this time. Why the growth from a not-new and by-all-accounts tasteless beer? The answer appears to be in the marketing. Michelob Ultra has positioned itself as the beer of choice for the low-carb movement as paleo and keto diets along with workout lifestyles like CrossFit continue to be popular in the U.S.
Michelob’s marketing continuously targets a health-conscious Millennial demographic which is a booming demo by all accounts. The growth of Michelob Ultra is a bright spot for AB InBev because, of course, they own that brand too.
Enough Pie To Go Around?
Remember when AB InBev made that video slamming the Brewers Association’s seal of independence? In the video, they wax on about the “clear threats from wine and spirits” and lament that the BA’s label is divisive in this common fight against liquor and wine. The funny thing is that based on the numbers we’ve seen so far this year, wine, spirits, and craft beer can all see growth together. Let’s look at the growth the different categories have seen so far this year; wine sales are up 7%, spirits sales are up 4.5%, and craft beer is up 5.7%. While there is no denying that craft beer growth has slowed down, this trend has been expected in the booming industry for a while. Unprecedented growth can only happen for so many years before the market begins to correct itself and we seem to be in that correction.
Is there enough pie to go around? It seems like there could be. People aren’t over all macro beer, as evidenced by the substantial growth in both Mexican beer markets as well as for the “ultra-premium” Michelob Ultra. People appear to be turning away from the “American” mass produced brands, though. Budweiser, Bud Light, Miller Lite and Coors are slumping in sales, possibly because they have failed to catch on with a younger generation of drinkers. As an example, here’s the breakdown of who buys Budweiser in stores:
Based on these numbers Budweiser is most likely to be purchased by older, low-income, Asian people. The fact that 24-44 year olds don’t buy Budweiser, yet are the largest demographic in the U.S., is definitely a thorn in Budweiser’s side. Whereas Mexican imports have been growing in sales as the Hispanic population grows, that only accounts for about half of their sales. The other half are Millennials who love a good Pacifico or Modelo. So get used to seeing Budweiser trying to peddle itself to a younger, hipper demographic, because once again, it seems that Millennials matter a lot when it comes to the success of a beer brand. Budweiser is down, but it’s certainly not out.
San Diego Beer Week with Thorn
It’s our favorite time of year…San Diego Beer Week! Being that San Diego is the Craft Beer Capital of the world, it’s our duty to make SD beer week the best beer week in the world. Here at Thorn, we take this responsibility very, very seriously. We pull out all the stops to bring you the best in beer events at both our North Park tasting room as well as throughout San Diego. Here’s a rundown of what we have going on during the next 10 days…
11/8 Beer Trivia with America’s Finest Trivia at 7 pm
11/9 IPA LOUNGE at 5:00 features 10 of our IPAs on tap in our back room making for a hoptastic evening!
SDBW EVENTS AROUND TOWN
Don’t forget about all the events we are participating in around town! For a full list, check out our events calendar on our website.
We hope to see you for San Diego Beer Week! Please contact email@example.com for any questions about our events.
Taking Craft Back One Funny Video at a Time
Recently, the Brewers Association rolled out a new marketing campaign called “Take Craft Back” which purports to be a crowdfunding effort to buy AB InBev. While they are only $2.5 million to their $213 Billion goal, the movement is gaining steam and national attention. Here’s the video that launched the campaign:
After watching this, is there any question as to the seriousness of this venture? It’s exceedingly clear from not only the video but also the website that this is a marketing campaign meant to further the conversation about how Big Beer is buying up craft breweries which in turn creates more obfuscation in the marketplace and ultimately whittles down choice in the marketplace. One of the best lines on their website reads, “It only seems impossible if you really think about it.” Which is funny AND true.
Let’s be clear, the Brewers Association doesn’t really expect to raise the money needed to buy a company that would be unlikely to sell even if the money was raised. Also, doing some simple math shows that we would have to raise 1 million per day for the next 583 years to reach that total. So, yeah, it’s not happening. That didn’t stop some people who didn’t watch the video, didn’t go to the website and didn’t read most articles about it from spouting off their opinions. These are from the American Home Brewer’s Facebook page in the comments of the video after it was posted:
“This still doesn’t offer anything. What does a pledge ACTUALLY do? How will you collect? What’s to say AB would ever even accept an offer or allow this to happen? Why should homebrewers be in charge of this and not breweries?”
“This is stupid and a waste of time. And if this did succeed, who is self-appointing to be the board, CEO, CFO, etc. what is the end game plan?”
“What in the hell? Where does the money go when they don’t get enough? Who is getting rich here?”
This guy, however, gets it:
“Society has done gone and lost its chill… This tongue in cheek campaign catches fire in a matter of hours and responses range from skeptics crunching numbers to marketing geniuses explaining how this won’t work… Financial geniuses: Would a limit of $1,000 pledges be put on this campaign if it was serious? Marketing gurus: Count the shares, count the comments, count the likes…BA is WINNING!”
People wondering about where the money is going, how it the buy-out will work etc. are missing the mark. Once again, it shows how people only read the title of a post, article or video and are more than happy to barf their outrage all over social media. It’s unclear what possesses people to comment on something they didn’t read/watch, especially when they want to bash it. In this case, if they just took a minute to go to the website, it would be extremely clear that this is a marketing campaign aimed at getting attention and bring awareness to the issue at hand. They aren’t taking credit cards for pledges, there are jokes all over the site, and the video is dripping in satire.
In the end, the “Take Craft Back” campaign is doing its job. Not only is the beer community talking about it (New Belgium, Stone both shared and posted about it) but it’s actually getting national attention in publications like the Chicago Tribune, Men’s Journal, Forbes and more. To outline how important this is to the cause, don’t look any further than a recent interview with a MillerCoors executive where he waxed poetically about the craft beer industry. Pete Marino, the head of Tenth and Blake (MillerCoors craft beer division) was interviewed about the state of craft beer. While that alone is an eye-roller, his comments were interesting in the wake of this Take Back Craft Campaign.
“It’s no longer good enough to brew an interesting beer, throw a catchy name on it, throw it on the shelf and expect it’s going to sell. So you’ve got to start thinking about awareness. You’ve got to start thinking about building and driving a brand.”
Well then, good job, Brewers Association, because this campaign is all about building awareness. While he was speaking about bringing awareness to a specific brand, it’s not a stretch to apply this mindset to awareness on the topic of independence vs. Big Beer. When asked if he thought that the BA’s Independence label is effective he said:
“Is there some small percentage of consumers that are going to be seeking that? I’m sure. But the overwhelming majority I don’t think are going to care. They want a good beer drinking experience from brands they can identify with.”
Does this “overwhelming majority” not care because they just want a “good drinking experience” from brands that have a large marketing budget or do they not care because they don’t even know about the issue? With the help of this marketing campaign, maybe more people will become aware and start to think about which companies they support. The more info that gets out to the average drinker, the more likely they are to care about what happens in the craft beer industry. The rest of the article is rife with big beer talking points (people are tired of too many choices, branding is going to win in the end) so it’s definitely worth read. In the meantime, I pledged $1000 and got a sweet koozie out of it. Totally worth it.
Last week, it was announced that 4 Pines Brewing, Australia’s largest independent brewery, was purchased by AB InBev through its ZX Ventures which they have coined their “global disruptive growth group.” While AB InBev buying up a craft brewery is hardly news anymore, this brewery purchase if a first fo ZX Ventures. It was recently reported by Forbes, that the High End, the craft beer division of AB InBev, was no longer looking to acquire new breweries, that it was instead going to focus on organic growth (i.e. open up breweries that were even murkier when it comes to AB InBev’s ownership). They must have meant, “in the U.S.” Possibly this deal was on the books long before that interview with Forbes or perhaps ZX Ventures is the newest golden child at AB InBev and for some reason, AB InBev is going to funnel their acquisitions through that arm now. Either way, 4 Pines has learned some things from the sell-outs that came before and they took an unapologetic stance in their announcement on Facebook, trying to get ahead of all the brouhaha that was sure to come by pre-emptively answering the most-asked questions when a brewery sells out. From their Facebook announcement:
Here are some answers you might be looking for:
Yes. 4 Pines will continue to operate all existing venues. Yes. Everyone keeps their job. Yes. 4 Pines is now 100% owned by ABI. Yes. The Brookvale brewery will be expanding its capacity in the very near future. Yes. Some people will think our beer tastes different. No. It doesn’t. Yes. We will have access to even more ingredients and better brewing toys. Yes. 4 Pines has already started developing plans for national and global expansion. Yes. ABI and 4 Pines fat cats have a squash game and a hot sauna locked in to celebrate. No. Costs won’t be cut; in fact, we’re looking to invest. Yes. Our commitment and investment to sustainability will grow. Yes. We will join ABI’s global plan to be a 100% Renewable Energy Brewery. Yes. As part of ZX Ventures, we will be part of the global forefront of beer innovation. Yes. Our current beers will remain. Yes. We’re looking to grow Keller Door and Keller Door Barrelled even more. Yes. The founders and all the key people are hanging around. Yes. 4 Pines did treat themselves to a case of Crownies to celebrate.
While some of the commenters on their page felt that this cheeky reply was disrespectful to their very real feelings of disappointment, it does show that 4 Pines did their homework before announcing the sale or they got the “selling out talking points” memo from AB InBev. All of these answers are well and good but they don’t address consumers’ concerns about putting money in the coffers of a business that consistently undermines smaller breweries at a legislative and business level (i.e. pay-to-play). So yes, all of these elements of 4 Pines may stay the same, but that’s not really the point for people who are anti-AB InBev because of their business practices vs. their ability to create opportunities for breweries that they buy.
Do Aussies handle indie beer sellouts the same way that American craft beer lovers do?
4 pines vs. Wicked Weed
It turns out, maybe not. In an entirely unscientific examination of the Facebook pages of 4 Pines Brewery and Wicked Weed (which sold to AB InBev earlier this year), a couple of things stood out. First, I took a look at the posts on each page announcing the ownership change. We can compare the “likes” to the emojis for “Angry” and “Sad.” For 4 Pines, their likes on the announcement post were at 498, “Sad” came in at 98, “Wow” got 44 and there were no “Angry” emojis. Seems pretty reasonable when you compare that to the Facebook page of Wicked Weed. Not only did the “strategic partnership” announcement on their page show 2005 “Likes”, 1045 “Angry” emojis and 982 “Sad” emojis (bringing the negative reaction tally ahead of the positive one) but even though the sale was back in April, the most recent posts are still dumpster fires. People are still posting negative comments on every post, making jokes about Wicked Weed selling out or just expressing their undying displeasure no matter what the topic of the post is.
This was a surprise because when I checked the Facebook pages of other breweries that sold to AB InBev (Karbach, Devil’s Backbone, Breckenridge), most show no recent activity from the anti-big-beer crowd save for a few stray comments on random posts. Maybe it has to do with Wicked Weed being the most recent of the American acquisitions or maybe it’s because Wicked Weed was beloved for its sour program and specialty beers and fans feel like the sellout is an especially big slap in the face. Either way, it’s a stark contrast to the more mellow reaction from our Australian brethren.
Coffee vs. Beer
It’s not just craft beer consumers who freak out when their beloved, local shop sells out to a global conglomerate. It turns out coffee lovers are just as testy. This past week, it was announced that artisan coffee company, Blue Bottle Coffee, based out of the Bay Area, sold a majority share of its company to Nestlé. The resulting online fury was swift as former fans raged all over Blue Bottle’s Facebook page. Nestlé not only has been accused of pushing infant formula in developing countries where access to clean water is a struggle but apparently, they siphon water out of National Parks as well as drought-sensitive areas to the tune of billions of dollars in profit, paying little to nothing for the water taken. Furthermore, a recent NY Times article outlines how Nestle is contributing to getting people hooked on junk food in isolated areas of Latin America, Asia, and Africa and the resulting negative impact on those communities. People were angry the company they loved and supported was now controlled by a corporation with such a track record.
In the end, these sorts of sale/acquisitions/investments will continue on in the business world, so where does the outrage come from in the craft beer and coffee industries? Maybe it has to do with the demographics of consumers who can afford to buy craft beer and craft coffee and the luxury of being in that socioeconomic class which allows one to spend time being socially conscious. Or maybe it has to do with the handmade, artisan nature that sits at the soul of both of these craft communities. They offer something thoughtful, something special and people get to feel good supporting companies that often boast about their community focused, fair-trade, earth-friendliness. Maybe when those companies sell out, that craft consumer feels fooled and embarrassed they thought the company was something different than it was, because it’s ok for it to be about the money, just don’t pretend it’s not.
Efficiency Experts: AB InBev Makes Deep Cuts to The High End
Yesterday was a rough day for many of the employees at The High End, AB InBev’s craft beer division. The night before, around 10 pm, The High End district managers and sales people started getting calendar invites for a conference call the next day. By the end of that call, approximately 360 employees or 90% of the national sales force were let go. According to Alex Medicis, the Vice President of Sales for AB InBev North America, the cuts were made in the name of efficiency. It makes sense too. After acquiring 10 craft breweries in the last few years, they added quite a few people to their payroll. Most of these breweries came with their own sales team and since sales people are often the face of the brewery to accounts, it makes sense that they would want to keep the “craft beer faces” around vs. the corporate sales employees. AB InBev is stressing to the media that this is not a big cut for AB InBev since it only amounts to 2% of their North American work force, which tops out around 18,000 workers.
What does this mean for the future of The High End? AB InBev said that it didn’t lay off anyone that worked directly with the craft breweries, so it sounds like they just went through a good ol’ efficiency downsizing. Interestingly enough, Forbes sat down with Felipe Szpigel, the president of The High End, on Wednesday, the day before the layoffs, and a few things came up.
First, Szpigel said that they would no longer focus on acquisitions. Does this mean they are done with their big, buying spree? Craft beer is still a bright spot on their less than stellar American sales record (of course they are doing just dandy internationally), so aren’t getting out of the craft beer game. Szpigel then stated that AB InBev would now “pivot to growing its ground-up model.”
As an example of this “ground-up model” Szpigel offered up the new Vesa Sur brewpub in Miami, “a first-of-its-kind partnership between AB InBev-owned 10 Barrel Brewing in Bend, OR, and Colombia’s Bogota Beer Company.” Just an FYI, AB InBev also owns Bogata Beer Co., so they are really just partnering with themselves.
Now, this pivot is making sense. AB InBev is good with the 10 American craft breweries it already has. With the acquisition of these craft breweries, not only did they get a whole league of local sales people, but they got years of craft brewing experience. They don’t need to buy any more breweries because now they can create completely new craft breweries with the people they already have bought out. If you go to the Vesa Sur facebook page, things look great at the brewery. Who wouldn’t want to go to a new beautiful brew pub with Colombian inspired craft beer?
AB InBev has finally done it. They have managed to almost completely obscure their involvement in this new venture because it goes through 10 Barrel and Bogata. It’s just another degree of separation that will confuse consumers and people who don’t know about all the shadiness AB InBev has pulled in the industry over the last number of years. The more degrees of separation they create, the more likely people who aren’t specifically invested in the craft beer scene (ie. the majority of beer consumers) won’t have any idea that they own these new ventures.
The people over at AB InBev are definitely crafty. With the Vesa Sur venture, they have essentially leveled up when it comes to obscuring their involvement within the craft beer industry. In a few generations of opening breweries and brew pubs using these sorts of partnerships, people won’t be talking about AB InBev at all. They don’t need to buy any more breweries because they now have enough ammo to blast through the craft beer market one collaborative venture at a time.
GABF Brewery Preview: Notable Omissions
The Great American Beer Festival is coming up in a couple of months and they recently released the 2017 list of breweries that will have booths at the fest. With more than 800 breweries represented every year, it has become the biggest beer event in the country. That number is only some of the breweries that wanted to be at the fest, however, since a lottery has been in place since 2014 to help organize the huge number of breweries that are eager to participate. In 2013, a surge of attendees entered GABF and the result was that the booth spaces sold out within 2 hours leaving many long time attendees as well as popular newer breweries out in the cold. Now there is an entry period over a few weeks where everyone can apply to pour beers and then they run a regional lottery to determine who can actually attend. Not everyone wants to go to GABF, however. Some breweries are not interested in trekking to Colorado or the large costs associated with the trip.
Dude, Where’s Vermont?
One notable omission from the fest is the entire state of Vermont. Not one brewery is representing the Green Mountain State this year and I, for one, am bummed. I grew up in Vermont and remember my first Otter Creek Pale Ale that ushered me into the wonderful world of hops. I think most craft beer lovers would agree that a Hillstead Farm, Lawson’s Finest Liquids or The Alchemist showing would make us incredibly happy and might even be a highlight of the trip. On the one hand, this omission is surprising because Vermont is known for producing some of the best craft beer in the country, but on the other hand, we have to remember we are talking about Vermont. Vermonters by nature don’t give a crap about most conventional accolades. They aren’t ones for tooting horns, blasting BS on social media, worrying about national distribution, or as it turns out, national exposure at the GABF. Vermont breweries have won a few GABF medals over the years and they certainly could be entering this year (that list is not available), so we will see if they pop up on in the winner’s circle in October. And if any Vermont breweries do need someone to hop on stage at the GABF awards and accept a medal for them, this Vermonter will be more than happy to help.
Big Boys Stay Home
Another notable omission from this year’s GABF list is most of AB InBev’s portfolio as well as other big beer owned breweries like Lagunitas. Big beer is just as welcome as any other beer to compete at this fest, but it seems that many of the “craft” breweries bought out by AB InBev decided to stay home. This is actually the first year that Breckenridge Brewery won’t be attending since 1991. Maybe they are making a stand against the Brewers Association which recently released an emblem designed to signify whether a brewery is a craft brewery or not. The High End’s video about the emblem is both hilarious and worth a watch to see their strong reaction.
Part of the reason for the low attendance by craft breweries probably has to do with the rules that GABF recently rolled out in 2014 which limits the number of beers entered from breweries owned by any one company to 20. When your “brand family” owns so many breweries, those 20 entries are spread out and limits the submissions from companies like AB InBev and MillerCoors.
But AB InBev does have a couple of breweries representing. Blue Point and Four Peaks will be pouring beers at this year’s GABF. Interestingly enough, these breweries are two of the most lo-pro crafty breweries with many people not knowing they are owned by AB InBev. While 10 Barrel, Elysian, Golden Road and even Wicked Weed have been much higher profile breweries for the High End (AB InBev’s craft beer division), the other two breweries have slipped by with less negative publicity surrounding their buy-outs.
To be fair, most of this is speculation at this point. We don’t really know why these breweries are staying home anymore than we know the reasons why breweries attend the fest. Thorn will be there this year pouring and your’s truly will be attending too, so look for more blogs coming you way about the biggest beer event of the year!
Despite Many Headlines, Millennials Are Not Killing Beer
With all the recent headlines declaring that “Millennials Are Killing the Beer Industry” and “Are Millennials Killing Beer Now?” it’s no small wonder that the internet is in a tizzy about the state of the beer industry. So what’s the skinny? Well, this past week, Goldman Sachs downgraded two beer stocks, Boston Beer and Constellation, based on their performance to date in 2017 as well as citing Nielson data and their own research showing Millennials now prefer wine and spirits to beer. Boston Beer slipped to “sell” from “neutral” and they moved their recommendations on Constellation to “neutral” from “buy.”
Why The Downgrade?
Boston Beer has not had a good couple of years. This year, their shares fell 23% this year alone and Goldman Sachs had this to say, “Despite the Boston Beer Company’s commitment to turn around Sam Adams beer and Angry Orchard cider, we see no improvement in sight and see downside risk to fiscal year 2017 volume guidance.”
Don’t count Ol’ Sam out yet. While this quote was from Monday 7/24, on Friday 7/28, it was reported that Boston Beer has seen a whopping 20% surge in shares based on crushing earnings and revenue expectations in this last quarter. Much of that increase is due to their hard sparkling water and hard ice tea offerings. It was good news for a company who has struggled to stay relevant in a sea of nano-craft breweries offering hyper-local competition.
As for Constellation, it’s unclear as to why they were downgraded. This year, their shares were up 13% (while shares of Boston Beer fell 23% this year), and while they also own Modelo and Corona, they own numerous wine and liquors brands too. So if the reason why they are downgraded is that Millenials are turning to wine and liquor, why would their stock be downgraded? Also, Goldman Sachs lowered its U.S. beer volume forecast and expects sales to decline .7% in 2017, but if they are talking about the whole beer industry, why leave out Big Beer which still sells most of the beer in the United States? In fact, MolsonCoors was mentioned by Market Watch.
“The analyst left shares of Molson Coors Brewing Co. at buy, because “while we see lingering volume risk, undemanding valuation and potential for healthy free cash flow growth warrant a Buy rating with 19% upside, in our view,” said the note.”
How convenient, but it still doesn’t explain why their beer is more valuable than Constellation’s brands, especially when Constellation has been having a good few years, growth-wise.
Are Millennials Killing Beer?
But let’s get back to the Millennials being the cause of ‘death to beer.’ As much as Goldman Sachs wants you to believe this, it’s just not true. No one is killing anything. Craft beer has seen years of unbridled growth and it’s only natural for this to slow. Furthermore, macro beer sales are down, so the numbers weren’t helped by their huge sway within the beer industry. A recent Gallup poll stated that “Beer Remains the Preferred Alcoholic Beverage in the U.S.” with 40% of Americans who drink alcohol preferring beer, 30% preferring wine and 26% preferring liquor. That’s a pretty comfortable lead and yes, a percentage in any direction can be felt within the industry, but all the hysterics over beer dying need to stop. Furthermore, based on this quote from Goldman Sachs, Millennials wouldn’t be to blame anyway, it would be Gen Xers,
“We view the shift in penetration and consumption trends as driven by a shift in preferences in the younger cohorts,” added Zhuo. “The youngest demographic (<35 year olds) overall penetration rates are not increasing. The 35-44 year old cohort shows a shift away from Beer to Wine & Spirits.”
So, because this youngest demographic (Millennials) show no increase in market penetration, they are killing beer? According to their own data, Gen Xers are the ones shifting to wine and spirits, not Millennials. The whole issue is confusing and the media has had a field day with the idea that Goldman Sachs put out, which is Millennials are to blame for the slow in sales. So before anyone throws up their hands at the state of the beer industry, they need to stop, take a long sip of a cold beer, and breath. Beer is here to stay and while there is always going to be movement in both directions in any industry, nothing is being killed and certainly not by Millennials.
Monkey See, Monkey Brew: CBC Acquires Monkey Paw Brewing
Lately, the world of craft beer seems to to be in a constant state of change. Whether that movement is the opening or closing of breweries, brewery expansions, outright sales or acquisitions, or bringing on investors, the world of craft beer has been experiencing nearly unbridled growth the last 15 years. With more than 130 craft breweries in operation in San Diego right now, and a proposed 150 by the end of 2017, San Diego craft beer is definitely moving and shaking.
This week, the San Diego craft beer community was surprised and (mostly) delighted at the news that fan fav, Monkey Paw Brewing, is being acquired by Coronado Brewing Company. Monkey Paw is situated in the up-and-coming neighborhood of East Village in a space that used to be the diviest of San Diego dive bars, The Jewel Box. Keeping the same easy-going, down and dirty vibe, Monkey Paw quickly became known for their inventive beers, often collaborating with breweries from San Diego and beyond.
Why the Monkey Business?
Coronado Brewing had a number of reasons why they wanted to get with Monkey Paw. These two breweries are vastly different beasts. Monkey Paw brewed almost 700 bbls last year while CBC brewed just under 40,000. CBC has been around since 1996 making itself one of the “founding fathers” of the SD craft beer community, while Monkey Paw has been around for 6 years (to be fair, this is still a long time when compared with the majority of San Diego craft breweries). When asked, CBC’s chief operation officer, Brandon Richards, had this to say to the U-T about the reasons for acquiring Monkey Paw. “They do a lot of different, unique beers that we don’t usually do…And I think their brand reaches younger, millennial drinkers.”
In the CBC press release, Richards when on to say,“We’re looking forward to partnering with Scot Blair and his team; they have built a tremendous brand from the ground up, and their beers are incredibly well-respected. We can’t wait to share their brand with an expanded audience.”
Is This Just Another Sell Out?
Scot Blair, owner of Monkey Paw, South Park Brewing Co., and Hamiltons Pub, has been an ardent supporter of independent beer and an outspoken voice against the encroachment of Big Beer into the world of craft. In fact, they were one of the breweries that took part in brewing 11 Barrel IPA, which was an indie collab beer brewed in reaction to AB InBev owned 10 Barrel moving into the East Village within eyeshot of Monkey Paw. There were all sorts of comments flying around San Diego beer facebook groups with most being in support of the sale:
“Monkey Paw beer needs to be shared with the rest of the world! This is a huge deal and I couldn’t be happier”
“It’s a win win for everyone, more Monkey Paw for all of us…”
“Stoked on the moves Coronado Brewing is making recently. Healthy, local growth with a rad team behind it maintaining, if not exceeding, the local standard of #SDBeer.”
On the flip-side, there were a few comments asking what the difference between this sale and an indie brewery selling to AB InBev, for example.
“The most vocal voice of Independent beer just sold a brewery. Yes, it is not to a macro but still ironic, don’t you think?”
If they drop the Philly Cheesesteak from the menu, they’re dead💀 to me
This last sentiment was expressed by a number of people because Monkey Paw cheesesteaks are bonkers and probably some of the best ones anywhere in SD. They were quickly assured by CBC employees in the group that other than updated kitchen equipment and expanded production and distribution, daily life at Monkey Paw will remain the same.
There is a difference when it comes to the breweries selling and it comes from both sides of the deal. First, CBC, while being one of the larger breweries in San Diego, is a far cry from any of the Big Three in big beer (AB InBev, MillerCoors and Heineken). CBC doesn’t practice the predatory sales/marketing tactics involving pay-to-play and they sure aren’t vertically integrating the supply chain like it’s no one’s business. On the same note, Monkey Paw was looking to grow and after looking at all the options, Blair chose the one that best satisfied his needs of expanded production and distribution and most likely, cash-dollars, while still allowing him most of the creative control over the brand. His quote in the press release explains the situation pretty well:
“Coronado’s commitment to our brand is why this is such an exciting time for our team. Nick [our head brewer] and I will continue to develop our beers, brew the beers, and grow the brand in a way that keeps the integrity and quality of what folks have come to expect from Monkey Paw. The only difference is now we can scale our operation, utilizing all the experience and resources of CBC’s amazing family.”
In this day and age in the craft beer world, growth is tough and can take on many different forms depending on the needs and goals of a brewery. When one respected craft brewer sells to another respected craft brewer, both brands are sure to face some changes, but they are likely positive changes that won’t impact the rest of the craft beer community negatively in the same way indie breweries selling to Big Beer does. Either way, we can’t wait to see what new things are to come for both Monkey Paw and Coronado Brewing and offer a big “Cheers!” to both companies in their new venture.
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