craft beer – GEORGE ROTHERT

Doing Business in the Pandemic

“The market has seismically changed.”

We are at the edge of a full-on depression thanks to COVID-19 virus and our government’s mis-handling of it. Many businesses, restaurants in particular, will not reopen. Some will, but maybe not for long under the new social-distancing reality. “Non-essential” businesses are gasping for air, trying to stay afloat. Highly-leveraged companies such as J. Crew and Hertz are trying to save themselves through bankruptcy protection.

Newspapers, already struggling in the new media landscape, are suffocating from even less income as shuttered businesses stop buying advertising.

Some operations are doing well. Supermarkets’ sales are up. Walmart and Target are enjoying increased business. Amazon is overwhelming landfills with packaging material and is getting closer to becoming the only place we can buy anything. The Amazon overlord may also be the owner of the last operating newspaper.

It probably surprises no one that alcohol sales are up. Sequestered people are drinking more. Alcohol-delivery sales have increased five-fold. That’s good news for the spirits trade. But not for the entire industry. The big guys are doing well; the small producers, not so much. Sales for craft distillers and brewers have fallen precipitously. We may be drinking more, but we’re drinking the cheap stuff. One example: Anheuser-Busch is selling a lot more of its Bud Light “beer.” The local craft brewer is reckoning how to stay solvent.

As a craft-distillery owner put it: “There’s a difference between feel-good booze and pandemic booze. Craft distillers make lovely spirits meant for savoring and sharing with friends. If you’re unemployed or don’t know where your next paycheck is coming from, craft is perceived as a little bit of luxury.”

National brands also have the advantage with beverage distributors. The small guys have little leverage. The nationals can pay for premium placement on liquor store websites and shelves. In the retail business, it’s known as a “slotting fee” and is normal practice for a new product to get shelf space. (In Alan Freed’s era, it was called “payola” and earned him a Congressional investigation and a ruined career.)

The wholesaler has a stranglehold on distribution. In many states producers are not allowed to sell directly to the consumer. Now-archaic post-Prohibition laws mandate a three-tier system: distiller or brewer to distributor to retailer.

Restaurants were an important outlet for craft producers. Now that is gone and is unlikely to come back as it was.

A new world is evolving. We don’t yet know what it will look like.

Beer News

One of Molson/Coors/Miller’s beer factories

Everybody loves full-flavored craft beer. (Well, almost everybody; there are still a lot of Coors Light drinkers.) In the last couple decades, so-called craft beers have taken an increasing share of the beer market. Their percentage is still small, but it’s enough so the big guys have taken notice. MolsonCoors/MillerCoors, Anheuser-Busch InBev and others are marketing their brands as craft, e.g. Blue Moon, Shock Top. They also are busy buying up small breweries. Boulevard, Widmer, Lagunitas, Firestone-Walker are among the many dozens who have outside ownership.

Can you find the name Anheuser-Busch InBev anywhere on this label?

The craft-beer industry is maturing and entrepreneurial founders of breweries are looking to retirement or a payday – or may have investors who are – or have grand visions of expansion. The giant beverage companies are eager to add an admired brew to their roster of brands. A few, such as New Belgium Brewing (Fat Tire) have taken a different path: employee ownership. Others, like Full Sail, have private equity funds as owners. But as Boston Beer founder Jim Koch recently told a gathering of brewers, PEFs are not content with collecting a share of profits. They expect a “liquidity event” event within a few years, i.e. a sale for cash.

Try to find on the label or in advertising, though, who owns a brand. They want their consumers to envision hands-on entrepreneurs working with a tight group of enthusiast-employees. The giant beer companies believe that disclosing a brand’s corporate ownership spoils the craft-brewery cachet. So you won’t find any mention of it.

The Brewers Association has come up with a seal to identify independent brews. To be authorized to display the Independent logo a brewer must meet three requirements:

Small – Annual production of 6 million barrels of beer or less.

Independent – Less than 25 percent of the craft brewery is owned or controlled by an alcoholic beverage industry member that is not itself a craft brewer.

Traditional – A brewer that has a majority of its total beverage alcohol volume in beers whose flavor derives from traditional or innovative brewing ingredients and their fermentation. Flavored malt beverages (FMBs) are not considered beers.

The Brewers Association has on its CraftBeer.com web site a tool for finding craft brewers nearby. I tried the CraftBeer.com search tool for breweries near me. Included in the list that came up were Widmer Brothers in Portland and 10Barrel Brewing in Bend. Both had the notation “Greater than 25% ownership by Anheuser-Busch InBev.” (32% of Widmer and 100% of 10 Barrel)

This poster highlighting brewery ownership is from themadfermentationist.com. An ever-changing list is at craftbeerjoe.com.

What Goes Around Comes Around

Rainer Beer had great commercials. Some featured Mickey Rooney; some were parodies of other commercials or Saturday Night Live Skits. Bud’s croaking frogs? Copied from Rainier. Others were just plain clever. Unfortunately, they did not convey that hot-looking babes were attracted to Rainier drinkers.

Continue reading “What Goes Around Comes Around”