Craft Beer Is the Strangest, Happiest Economic Story in America

https://www.theatlantic.com/business/archive/2018/01/craft-beer-industry/550850/?single_page=true

by prostoalex • 9 years ago

240 163 9 years ago

vkou2• 9 years ago

Large breweries ignored burgeoning niches, Watson said, particularly hoppy India Pale Ales, or IPAs, which constitute a large share of the craft-beer market.

He's reversing cause-and-effect.

IPAs are incredibly popular among microbrewers, because it is incredibly hard to brew consistently tasting batches of beer. Smothering all of a beer's other flavours, by dumping buckets after buckets of hops into it is much easier. It's why eight out of every ten craft beers are incredibly bitter IPAs.

I like craft beer as much as the next hipster, but I can't stand this trend.

elsherbini• 9 years ago

That doesn't explain why large breweries neglected to make IPAs themselves.

vkou2• 9 years ago

People aren't buying craft IPAs because they want to drink bitter water. They are buying craft IPAs, because they want to drink craft beer. Miller-Coors producing and marketing an IPA wouldn't be getting them all the sales that are going to microbrewers.

Our alcohol consumption is 60% ritual, 60% social signaling, and 30% personal preference.

dragonwriter3• 9 years ago

They didn't. They made some. [0]

They just didn't succeed in marketing them.

[0] e.g., https://www.beeradvocate.com/beer/profile/29/30064/

electricslpnsld2• 9 years ago

It's why eight out of every ten craft beers are incredibly bitter IPAs.

Is that really true anymore? If I roll by one of the local breweries, they'll have an IPA of course, but sours and saisons seem to be in a bit of renaissance right now. Hell, half the IPAs I see now are New England IPAs that barely budge the bitterness scale.

jallmann• 9 years ago

Maybe so, but sours/saisons are also much more forgiving to brew than lagers or even IPAs. Any hint of contamination in a lager is immediately noticeable. On the other hand, sour brewers have turned what would normally be flush-worthy batches into "limited releases" characterized by barnyard funk.

jdhn• 9 years ago

it is incredibly hard to brew consistently tasting batches of beer.

While I don't really like Bud, Coors, or any other macro brew, I have to give them respect for churning out a consistent product time after time. I buy a Bud in New Jersey, and I know it'll taste the same as the Bud I bought in New Mexico.

galdosdi• 8 years ago

I agree with you point but have an interesting "but technically" exception: several states such as Colorado and Oklahoma regulate that beer sold in some places must be 4%.

Many brewers make 4% compliant beer, and while labelled the same, won't taste the same.

bsder3• 9 years ago

It's why eight out of every ten craft beers are incredibly bitter IPAs.

I always saw this is a US West Coast phenomenon. Stone, in San Diego, sort of popularized the trend and then people started rolling with it to extremes.

I have a similar issue with barrel aging. I love Victory at Sea from Ballast Point (since bought out by Constellation Brands) and similarly dark "toxic sewage" as my friends so happily classify it. Barrel aging spread around very nicely through the craft brewers and always added a mellowness. That was true up until recently, where now I find "barrel aged" seems to be imparting a cloying sweetness (which I do NOT like) to everything.

I guess it is the fate of anything that gets popular to eventually go too far.

dsnuh2• 9 years ago

San Diegan reporting in! It's gotten absolutely ridiculous. They have tapped out the "like eating a cone of pure hops" quintuple imperial IPA market, and now the trend is additives. Ballast Point and Modern Times are the worst about this. We are at the "add some truffle oil it" stage.

RandallBrown• 9 years ago

I always thought Dogfish Head was the most well known company doing super hop forward beers and they're on the east coast.

throwaway57523• 9 years ago

That's nonsense. Craft breweries are businesses and they'll sell what makes money.

Also, IPAs are incredibly hard to brew, store, and distribute consistently. Hops are probably the most seasonal part of a mash bill, and high quality finishing hops are in heavy demand. And the hop acids are subject to spoilage by heat, light, or oxygen. If you want "smothering a beer's other flavors" then look no further than whiskey/rum/et al. barrel aging (and I'm not judging, whatever floats one's boat),

This isn't aimed necessarily at you, but some people taste things differently. Cilantro, infamously. But hops are another. Maybe you don't like hops (or maybe you haven't had very good ipas?)

snappy173• 9 years ago

or macro-brewed lagers. bud used like a dozen different hops in their flagship beer in order to reduce the effect if a particular hop is unavailable.

bsder3• 9 years ago

If you want "smothering a beer's other flavors" then look no further than whiskey/rum/et al. barrel aging (and I'm not judging, whatever floats one's boat),

That seems to be a current trend like the hyper-hops that everybody is complaining about.

I used to like barrel aged beers because they would take an actively good beer, drop it in a barrel for a bit, and that would add just an extra touch of something. About 5 years ago, I could order just about anything barrel-aged and I was going to like it.

Now, barrel-aged seems to be "massive amount of overpowering, cloying sweetness". <bleck> "Barrel-aged" is now a warning sign for me to request a taste first.

fouc• 9 years ago

My favourite beer ever may have been a sour aged in a bourbon cask. It was one of those one-off brews that may never appear again.

kd0amg• 8 years ago

high quality finishing hops are in heavy demand

GP's "incredibly bitter IPAs" probably don't have a profile driven by their finishing hops.

sxates• 9 years ago

I'm totally with you. Every time I go to a bar or beer garden it feels like the menus are 75% IPAs. I'd rather drink sea water.

kevin_thibedeau• 9 years ago

Before the IPA fad kicked off I used to go to a local beer megastore and specifically sample every American IPA because that was the smallest segment that was reasonable to take on in its entirety. It still took me two years to complete. Nowadays it would be impossible with the overwhelming glut of IPAs. Nor would it be very enjoyable since the fad breweries just take IPA as an excuse to overload on hops and destroy any other flavor nuance. Back then there were some true gems to be found that wouldn't even qualify as an IPA today because their hops content was well moderated.

mikekchar• 9 years ago

As a very long time home-brewer (sadly, recently lapsed), I can't go without challenging this. I grew up thinking that I hated beer. It wasn't until I drank my first English ale (I think I was 20 in a place in the world where the drinking age is 18) that I discovered that I really liked beer.

Back in the 70's an early 80's there was only one style of beer in NA. That style was defined by marketing people and if you didn't like it then there was something wrong with you. It wasn't so much that the large brewers ignored burgeoning niches, they assumed that they could strong arm everyone into accepting the same product that they had been selling for generations.

To imply that micro brewers are unable to brew consistent beer is completely untrue. Sierra Nevada Pale Ale was a revelation mainly because it has only one flavour - hops. The yeast they use is ridiculously neutral. Any flaw in production would stand out a mile. In fact, one of the reasons it was originally bottle conditioned (is it still??? I haven't had it for a very long time) was so that they yeast could slurp up all the residual oxygen in the bottle. This lets nothing stand in the way of the fruity/floral aroma.

If anything, the American micro beer revolution has neglected other styles of beer because that idea is so iconic. It's not without precedent, however. If you look at good Bohemian pilsners, you get the same idea -- a very neutral palate with just enough sweetness to provide a platform for the hops. The main difference is that American pale ales go full on fruit. (Well, being a Morovian malt lover, I have to say that I really enjoy the grassiness of a fresh Bohemian pilsner if I can get it fresh -- very difficult from here, unfortunately).

US micros make hop forward beers because they sell. Not only that, but with recent advances in hop growing (lots of genetically modified varieties -- complete with patents :-P), modern hops are incredibly exciting. However, there are still lots great examples of other kinds of beer available that are not hop forward. If you wander up into French speaking areas of Canada you will find that they are even preferred!

What you won't find very often are good light lagers. This is not because the good breweries can't make them, it's because they can't sell them. You want to go up against the big boys in marketing a light lager? Good luck!

I like a good IPA now and again, but my bread an butter is an ordinary bitter with less than 30 IBUs. It's one of the reasons I brew my own -- I can't buy it outside of the UK. However, if you are just looking for variety, it's worth going a little bit out of your way to try to find it. There are lot's of amazing hefe weizens, wits, fruit beers, bocks, porters/stouts, spice beers, etc, etc, etc brewed in the US. Even in the area of pale ales, there are gobs of ESBs and nice balanced bottle conditioned pale ales. You just have to look for them.

matthewmcg• 9 years ago

Hop additions don't necessarily cause bitterness. They can be added later in the boil or simply infused to add a floral flavor.

40acres• 9 years ago

I wonder if marijuana will also be able to avoid being crushed and consolidated by monopolies. I don't think the cigarette industry was able to avoid it but I am not well versed on tobacco industry regulations.

My gut tells me that since at the end of the day marijuana is an agricultural commodity large players will come to dominate the market. But on the other hand there is a decent variety in strain types and flavors and with time you could see interesting strains being developed that have a uniqueness similar to craft beers.

matt4077• 9 years ago

There was a recent news article on the developing market for marijuana that addressed this (was posted on HN, too lazy to search, unfortunately).

There are some state regulations restricting grow operations to remain somewhat small, and legal uncertainty has also kept the large players out of the market so far. But the trend was definitely towards consolidation, with wholesale prices dropping something around 70% from their initial levels.

One idea mentioned in the article was indeed marijuanas' character being well-suited for commoditisation, although some growers try to stem the tide by developing high-end brands. I believe they explicitly made the comparison to craft beer, where individual taste is far more different than it is for strains, which are largely defined by their content, and relative amounts, of THC and the other thing. Processing extracted THC into edibles and other largely standardised products also points in this direction.

rch• 9 years ago

It been very helpful that the state laws are in conflict with federal laws. The uncertainty causes some financial difficulties, but in general it has helped to protect smaller producers.

plandis2• 9 years ago

I don’t care much about smoking but I like edibles. From my own experience it’s entirely possible to differentiate your product as an edible and I see others finding brands they like and sticking to them. When I’m with friends buying plants they don’t seem to care as much about strain/grower (but that’s anecdotal).

wickawic2• 9 years ago

I think edibles will be mostly taken over by concentrates. Instead of (in WA for ex.) paying $40 for 10 10mg edibles, I’ll pay $20 for enough concentrate to make 80 edibles.

sf_rob• 9 years ago

In Oregon, AFAIK the laws were structured in such a way to help local growers. Growers had to be residents for X months and were quite limited in operation size to spread things out.

real_estate2• 9 years ago

Oregon probably has the friendliest laws of any US state to "small" entrepreneurs (licensing fees and residency requirements).

Places like Florida and West Virginia are more "big-money" oriented.

monocasa• 9 years ago

It's already happening here in CO. The amount of consolidation going on behind the scenes over the past couple years is staggering.

On the plus side it's mainly dispensary owners selling to other owners rather than Philip Morris.

dragonwriter3• 9 years ago

If federal legalization happens, that's when the big multinational ag/pharma firms will take over.

Trundle• 9 years ago

One thing about beer that the article didn't touch on is that it's a fragile product which has its quality harmed by the standard supply chain. It's both temperature and light sensitive.

This makes many smaller producers compared to few large producers more attractive than in a more easily transported good eg. phones. One big factory with all of the quality standards and efficiency gains that allows works great for the iPhone, not so much beer.

I don't know enough about weed to be able to say where it falls on the fragility of product spectrum, but it's a factor worth considering and I'd be interested to hear from people who do know enough.

bullsbarry• 8 years ago

To me this actually makes me respect beers like Budweiser even more. They've managed to take a fairly temperamental style of beer, mass produce it in breweries spread around the world, and wind up with a product that is damn near uniform everywhere I've ever had it. It's not my preferred style, but I don't think I've ever had a truly bad one.

real_estate2• 9 years ago

Yeah, farmer's markets are bullshit.

defen• 9 years ago

There was an interesting article in GQ on this topic a couple months ago: https://www.gq.com/story/the-great-pot-monopoly-mystery

scoggs• 9 years ago

I think marijuana being a weed :being able to grow as fast as it does while also being an incredibly easy plant to grow (or screw up, depending on how you look at tings) will lend to lots more home growing than we see home brewing, in my opinion. People are already comfortable with gardening or landscaping of some kind. I think home growing pot is more akin to the average American's day-to-day activities than anything like brewing beer is.

I think there are already too many people taking steps to catalog and categorize the already established strains and varieties of marijuana before it's already too late. That and international breeding and cataloging efforts will be the forces that help future home growers to have confidence in the genetics they are planting in the ground or substrate.

phil248• 9 years ago

The idea that "big marijuana" will take over defies every trend we've seen over the last 20 years. It's nonsensical on it's face.

It's a desperate argument by people who don't like (or understand) marijuana and are out of other arguments.

pm90• 8 years ago

MJ is an interesting product in that its not a carcinogen like tobacco. Its classification as a Schedule 1 drug has been entirely because of some racist elements of the US government making it illegal in the US.

Anyways, the point is that it can be used in various forms. I see a bright future in the edibles industry. I find it hard to believe that any of the traditional confectionery companies (which are pretty conservative) will ever embrace edibles since their market is traditionally kids.

lazerpants3• 8 years ago

ANY organic product that is burned can produce polycyclic aromatic hydrocarbons which are generally very carcinogenic.

clw8• 8 years ago

Huh, on the contrast, I find myself wishing beer flavors were as varied as weed flavors. I frequently find myself trying a new strain and having to smack my lips after each hit because I want to savor the flavor as much as possible.

chx• 9 years ago

Eventually alcohol usage will be looked upon with great fascination of a custom of a barbarian age: "They used to actually drink poison for thousands of years but we have moved on."

It'll take time but it'll happen.

landryraccoon• 9 years ago

Eventually our livers evolve (or are genetically engineered) and alcohol is just another tasty calorie source, like starch or fat.

trowawee• 9 years ago

Not sure I'd take that bet. Finding some way to get drunk appears to be one of the few real constants of the human experience.

cortesoft• 9 years ago

That is an awfully simplistic view of things. People like altering their conciousness; I am not sure that is a 'barbarian' thing to want to do.

hodl• 9 years ago

Coffee too? Even food. Even oxygen damn it! (Solar powered ai)

toomanybeersies3• 8 years ago

Humanity has always tried to find a way to get intoxicated, whether it's beer, or drinking hallucinogenic reindeer urine. It's a basic human instinct.

Maybe society will move past alcohol, but it will still be getting inebriated on something else.

Buge• 8 years ago

Maybe in a long time. But currently it seems drugs are being more socially accepted, see marijuana legalization.

msmith10101• 8 years ago

Driving in a gas powered automobile is a lot more barbaric than drinking beer ;-)

fluxic• 9 years ago

Don't blame me!

—PBR loyalist

ybrah• 9 years ago

Was drinking a PBR as I read this. I feel ashamed

djrogers• 9 years ago

Don’t be, I’m sure it’s breakfast time somewhere....

blahyawnblah• 9 years ago

Why?

I drink Coors Light all the time when I'm working out in the shop

rconti2• 9 years ago

One interesting note: The article mentions Ronald Reagan's Justice Department's lax handling of antitrust regulations as leading to consolidation in the brewing industry, but the number of breweries was near its nadir before he was elected; in 1978 Jimmy Carter legalized home brewing, which was close to the very bottom in terms of number of breweries.

https://vinepair.com/wp-content/themes/vpcontent/images/brew...

jsm386• 9 years ago

That chart is from a broader article we published last winter: https://vinepair.com/map-american-craft-brewing-history/

More recently we put together a visualization of the 1977 data at https://vinepair.com/map-american-breweries-1977/

There's also a marked up breakdown by brewery from a 1978 FTC report below the visualization.

rconti2• 9 years ago

That 1978 FTC data is fascinating! Thanks!

ovrdrv3• 9 years ago

Love craft beer and I am glad my 125K city has 5 of them, but /r/starterpacks was dead on with this one: https://i.redd.it/fio3hqlmuofy.jpg

I will be confused if I ever walk into a microbrewery that doesn't look like that!

Analemma_• 9 years ago

Oh lord, this is so true it hurts.

Living in Seattle, you’re never more than maybe 300 yards from a microbrewery— and don’t get me wrong, I love it— but they are all exactly like this.

oasisbob• 9 years ago

I have a hard time giving that starter-pack graphic too much credit because it's really describing a wider design aesthetic.

It's not just microbreweries, it's bars and restaurants too. I can think of a dozen each in Chicago, Portland, and Seattle that look like that. Hell, there are Starbucks concept stores in Seattle that look like that. I've been in tech office spaces that look like that ...

electricslpnsld2• 9 years ago

No food trucks parked out front, can't be a microbrewery!

itronitron2• 9 years ago

they put a lot of thought into those names

fendmark• 9 years ago

Not to be overly contrarian but it does seem that we are getting close to the peak for the craft beer industry.

Smuttynose Brewery going up for auction is a great example of this. https://www.pressherald.com/2018/01/18/smuttynose-brewing-in...

Many areas are getting over-saturated with microbreweries and there eventually won't be enough demand to sustain them.

In retail, $10+ average price for a six pack, the even more offensive 4 pack of beer for the same price or more.

It's great to see this growth engine for jobs, and I personally love the amount of variety and innovation we are seeing in craft beer, I just wonder how long it will last until people are onto the next trend or until the industry gets so greedy that they kill the golden goose.

adventured• 9 years ago

I agree the movement is likely nearing saturation on total number of microbreweries. However, $10 +/- a few dollars, for a six pack, is not a problem. The mediocre old domestics cost $7 to $10 around most of the US. Paying more is perfectly fine for a superior tasting product. Product price scaling works that way in most consumer goods, it makes sense.

ck4252• 8 years ago

In Scotland a few of the micro-breweries are now experimenting with Gin and Whiskey. That could be the next stage as beer gets saturated. But there's also a long way to go with beer. Atm micro breweries are mostly making traditional flavorsome ales. There's a lot of room left for experimentation, particularly in the health aspect. If someone can make a tasty, full flavored, low cal beer they'd make a bomb.

te_chris• 8 years ago

$10 (USD)? Luxury!

NZ craft beer six pack: $22.99 UK craft beer 6 pack: £14

You Americans complain too much, easily one of the cheapest countries to buy booze I've been to

maaaats2• 8 years ago

Huh, we pay around 10-14 USD for a (single) nice beer here (Norway). Of course, the high taxes on alcohol makes it so that there is relatively little price difference between cheap and good beer, so this may actually be a good thing for the craft beer industry.

grasshopperpurp• 8 years ago

This seems so 2011. I get a 15-pack of my favorite beer for $15.99 at my local store. It's a little more expensive at Pubix, though ($17.99).

smackfu• 8 years ago

Craft breweries are still small businesses and live and die by their business decisions. If you borrow millions to build a fancy new brewery/attraction, and then people don’t come, it doesn’t matter how good your beer is.

nkrisc• 8 years ago

Within about three miles of my home in Chicago there are about five or six craft breweries plus two additional off-site taprooms for two of them. They all look like that. They're still great, though.

ikeyany• 8 years ago

Half of those beers should be IPAs.

Brendinooo• 9 years ago

As someone who has a bit of a distributist streak, it's really nice to see this.

There's a craft brewery near me, and I patronize it not because it's the best beer, but because it's pretty good, and I want to support the local business.

Craft breweries seem to be pretty good candidates for distributing the means of production. I'm speaking a bit out of ignorance, but it's not a lot of ingredients and it's not a huge deal to ship and store those ingredients, correct? There are more pieces to a cheeseburger with lettuce and tomato than a beer - and meat, cheese, and produce can be harder to consistently source and keep. And because craft is a pure luxury good, price isn't as big of an issue here is as it usually is when you talk about these things.

Kalium2• 8 years ago

You are correct! It's a relatively small number of ingredients to make beer that can be shipped pretty easily. Grain, hops, yeast, water, an assortment of adjuncts.

The issues come in with the actual means of production, rather than the material ingredients. Brewing is a rather technically complex task. It's not trivial to do reliably - ask any homebrewer about batches they've skunked. It also benefits significantly from economies of scale, as at scale there's a whole world of applicable chemicals production control technologies.

It's a lot like housing. It's relatively easy to ship around wood, wire, pipes, insulation, paint, and so on. Assembling them into a working and usable house is a smidge more complicated.

SideburnsOfDoom3• 8 years ago

It's a relatively small number of ingredients to make beer that can be shipped pretty easily

Contrast that with the finished product. A hoppy IPA is at its best for a limited time, and that is shortened by exposure to light and heat. Other beer styles vary, but none last for ever. This favours local production, not storage and shipping.

wpdev_63• 8 years ago

There's an actual kickstarter that got the same idea.

https://www.kickstarter.com/projects/1708005089/pico-c-craft...

I haven't used the product but it looks like a great idea.

Kalium2• 8 years ago

It is and is isn't. Once you price it out per-fluid-ounce, it's not really any cheaper than a six-pack of Sierra Nevada.

sigil2• 9 years ago

Summary: benevolent regulation caused the craft beer boom. I call bullshit. Look at this graph [1] and tell me again how great the three-tier system was for market diversity. America went from 700 post-Prohibition breweries to less than 100 in 1978. That was the year homebrewing was legalized, and it's a pretty steady climb back up from there. Brewpubs -- which circumvent the three-tier system and its all-too-easily-locked-up distribution channels -- were legalized in the early 80s and exploding by the late 90s.

I must however agree that this is a happy development. "Beer Wars" is a great little documentary about the phenomenon. [2]

[1] https://io9.gizmodo.com/the-total-number-of-breweries-in-the...

[2] http://www.imdb.com/title/tt1326194/?ref_=fn_al_tt_1

dluan4• 9 years ago

It's not just that there was a three-tier system, but I would argue that in this particular case, it was the legalization of homebrewing that was the gateway into the innovation.

Early 80's and 90's homebrewers were essentially hackers [1], doing things at very small scales, and branching far out into experimental recipes and techniques. I'm sure there was innovation in distribution and retail over the last 40 years, but definitely nowhere near the scale of the actual brewers.

Without homebrewing, you don't get the wave of 80's self/indie hackers interested in the first place. So yeah, I could believe the author was right, without the three-tier system the little amount of innovation in brewing couldn't overthrow the total amount needed to also take over distribution and retail.

Maybe the analogy would be the first touch phones, or what Tesla is doing now with EVs.

1. https://hbr.org/2016/05/the-founder-of-dogfish-head-on-flout...

sigil2• 9 years ago

it was the legalization of homebrewing that was the gateway into the innovation.

I'm with you on this part. It's hard to imagine the boom happening while tinkering was outright illegal! Also, surely the 58 year gap (1920-1978) caused some generational loss of knowledge. The homebrewers of the 80s and 90s must have started from scratch in many ways.

without the three-tier system the little amount of innovation in brewing couldn't overthrow the total amount needed to also take over distribution and retail.

Watch "Beer Wars" and you'll see craft brewers with promising products struggling to get shelf space. The problems started for them even before the shelves: they needed to get into existing distributor's trucks, and by this stage of the three-tier game, tier 3 (breweries) had captured tier 2 (distributors). Why exactly would you let an upstart competitor onto "your" truck?

What's surprising to me is that craft brewers found a way! They succeeded not because of the three-tier system, as this article posits, but in spite of it. I'd love to hear how.

PS. You cite an article by the Dogfish Head founder Sam Calagione. In "Beer Wars" he recounts the story of how he started an illegal brewery in Rhode Island, then (because the state was small enough and he knew someone who knew someone) managed to get a law passed to legalize brewing.

erdle• 9 years ago

There still is a 3 tier system...

And the rules didn't just change... people that wanted to make changes had to lobby for years to make it happen... and then it took the right years to make it happen.

I've been a part of this activism in New York State for wine, cideries, and to some extent homebrewing my entire life and belong to a number of organizations to help make it happen.

There's also never a coincidence on timing and the economy. Governments love an excise tax and "sin" products are heavily taxed and a lot stays at the state level to where when the economy is in the dumps... they are much more willing to listen to lobbyists on ways to boost income for the state.

It works every time. In the wake of the "Great Recession," we were able to pass the most amount of pro-winery laws in a generation in New York State, unfortunately, we still came up short for our biggest initiative: WIGS aka Wine in Grocery Stores do to illegal campaign financing from overseas and domestic liquor groups. Albany is still a very dirty space. But prior to the recession, it would cost you $20K to get a license to start a distillery... we got that down to about $600. Wineries can now have 5 outlets or mini-wineries to sell their wine. The list goes on and on and it's had a real impact on jobs in Upstate New York.

You'll notice the big rule change for homebrewing happened in 1978... you had the oil crisis... Carter... inflation... and a Congress that was willing to literally let people start making beer in a super unregulated fashion to eventually boost income for the government... and of course create jobs and all that jazz along the way.

When the economy tanks again, I expect there will be marijuana legalization at the federal level.

jdminhbg• 9 years ago

Agree, and in particular this stood out to me:

If the U.S. had long ago allowed a couple of corporations to take over both the distribution and retailing of wine before the Napa Valley renaissance, Lynn told The Atlantic in an interview, Americans would be exclusively sipping three varieties of Gallo table wine. “The reason that didn't happen 50 years ago is because you had this system that was designed to promote deconcentration, to incentivize [retailers] to go out and find the new, the different, the alternatives,” he said. “It was effective in achieving that aim.”

This seems completely crazy to me. We’ve also seen an explosion in coffee variety availability, without any kind of convoluted legally-mandated distribution system. American tastes in drinks and food are splintering and opening new market niches; as long as it’s legal to fill those niches, someone will.

plantsbeans• 9 years ago

I think the author made the same point. The three tier system didn't help, but once there was an exception for craft brewers there was an opening, because the three tier system maybe prevented eg. chains of cheap bars run by AB.

pyoung• 8 years ago

Yeah, the author didn't quite connect the dots, but the general point was there.

'Craft Brewery economics' are really interesting. The margin on beer sold out of the brewery taproom is insane, 400-600%, largely because they are selling the beer at 'normal' bar prices but don't have to split the profits with middlemen or worry about transportation costs as the beer is made on site. However, if they go through the normal distribution channels in order to sell at grocery stores and other bars, apparently the margins are much closer to 5%-10%. According to some of the industry publications, there has been a bit of a retrenchment going on as a bunch of breweries overextend themselves to try and grab market share through distribution and got stuck selling low margin beer in a really competitive market.

spelunker• 8 years ago

Arguably one of the reasons why craft beer has exploded in Colorado (and probably other states as well) is because small breweries can circumvent the three-tiered system.

retail101• 8 years ago

I'm in the alcohol business and this is spot on. Many states formed a loophole where craft brewers could not only sell their wares in an onsite brewpup, but they could also SELF distribute to retail and restaurants. This allowed them to completely avoid the formal distribution system.

Beer wholesalers, feeling the pinch, are starting to clamp down to clamp down, leading some breweries to SUE state governments like in NC.

http://www.charlotteobserver.com/news/politics-government/ar...

rexstjohn• 8 years ago

These graphs are quite convincing that the key events happened around 1978 and not decades prior to that. Amazing how a little data can instantly refute pages of exposition at a glance.

The author really went out of their way to talk about Anti-Trust concerns and had to get in a dig at Reagan for loosening them...yet the graph of breweries was up and to the right throughout Reagan’s time when Anti-Trust was paused then exploded in the 90’s.

I know people that run breweries. The Tasting Rooms are extremely important sources of profit. You can sell huge amounts of bottles, kegs and cans and only get a sliver of margin. The tasting room is a profit center because you get to keep most of the margin on your own alcohol (which is considerable).

Therefore, the idea that vertical integration is evil is wrong as well. It’s hard to turn a profit as an independent without a tasting room.

Is it so hard to believe that deregulation can drive economic variety and growth?

joe_the_user• 8 years ago

Yeah, the claims of the article are kind of bizarre. I'm not an enemy of regulation as such but I recall post-prohibition regulations were very much designed to make drinking a miserable experience and prohibition itself destroyed traditions of drinking for enjoy in favor of drinking for drunkenness.

Growing up in the 70's, American beer was putrid except for a few, hard to find brands. It seems like microbrews followed after "imported beer" became a synonym for "brew that isn't horrible."

Edit: it really is worth mentioning (because the article somehow doesn't) that craft beer in the US (and earlier in England with the Campaign for Real Ale) was a consumer movement for quality as much as it was a movement of businesses. A variety of foods have had this but it's not necessarily something that can be easily transplanted to other products.

dluan4• 8 years ago

Tasting rooms are a sort of panacea for upstart breweries. If your business plan involves constantly having your tasting room packed, then you're in for a hard time because only a handful of trendy breweries will manage that with hype. Where, actually ramping up production enough to a level beyond 50 barrels is the sustainable land where then you can expand through bootstrapping or more capital investment. In other words, it's hard to turn a profit without breaking past the tasting room.

The 90's microbrewery boom was fueled by brewpubs, many of which went public because they grew so quickly. Rock Bottom, Gordon Biersch, BJs, Iron Hill, Heartland, Russian River, Pizza Port, etc. That growth was more fueled by being a place you could eat and also grab a beer, but they couldn't figure out the distribution hacks needed to reach beyond the few square miles of the shopping mall or downtown block they were located.

cthalupa• 8 years ago

Agreed - the three tier system is awful for both craft beer and craft whisk(e)y.

Big Beer is in bed with Big Distribution, and they've been able to circumvent the "protections" for years now. There's effectively two tiers, and allocation of popular beers like the annual Bourbon County release being based on sales of AB InBev products show that the second tier isn't actually able to resist the other part in an effective manner.

You also have breweries that are tiny in comparison to Big Beer that have to do silly things to sell their own beer in the taproom - most states have 'brewpub' type licensing at this point, where really small breweries can sell packaged beer to go, but then as they get bigger (But still a fraction of a percent of the size of AB InBev or MillerCoors) they have to convert to a regular brewery license. Then, if you're in a state that allows regular breweries to sell packaged beer to go, in most of them, you have to sell your beer to a distributor and then buy it back to sell in the taproom. It will never go into their possession, and you will wheel it from your packaging room to your tap room, and you'll effectively have paid a distributor 20% of your cost to do literally nothing.

It's a racket, and the idea that the three tier system as it stands now is a good thing for craft beer is insane.

It's similarly bad for the craft whisk(e)y industry, and I imagine for craft liquor in general, though I am less familiar with things outside of whisky. When doing American distribution, it is uneconomical to provide a variety of small batch offerings and extremely limited bottlings. American retailers and bars get a rather generic lineup of whisky that has a standard set of years and a few variations on barrel types.

Now go to a high end whisky bar in Asia, like the Mash Tun in Tokyo, or the Drunken Master in Taiwan - you'll find a huge variety of small batch whiskies done with bottle limits in the low hundreds, often specially bottled for a collection of these bars. And the prices to the consumer will be tiny in comparison to America, even with these being expensive cities. They can get these directly from the distilleries without the distribution markup or red tape overhead and it lets them get unique bottles and flavor profiles at a low enough cost that consumers can feel free to experiment with new whiskies without breaking the bank. I've had tabs for ~$100 that based on aged years alone would have been $500+ in the US, without even taking into account the rarity. I could never afford to do that in the US, and it's a shame, because the only people being protected in this case are middlemen and big businesses.

soared• 9 years ago

even [when] obsessed with efficiency, sometimes it is just as wise to design for inefficiency

Holy shit

hozae• 9 years ago

Love Craft Beer, hate the Gout.

jmiller099• 8 years ago

ouch

Tiktaalik• 9 years ago

In the City of Vancouver there are five breweries in my somewhat industrial neighbourhood. In another nearby somewhat industrial neighbourhood there are another five. There several others scattered about in the nearby satellite municipalities.

A decade ago if you walked into a Vancouver liquor store that specialized in craft beer you'd find it mostly full of Seattle and Portland craft beers. Now you'd find the stock overwhelmingly dominated by high quality beer made within Metro Vancouver city limits.

We don't find it at all odd to find independent mom n' pop restaurants in every neighbourhood of every town, and I believe in the long term we'll find that every town of reasonable size will have a few mom n' pop breweries that largely serve the local populace.

mberning• 9 years ago

It’s very hard for me to reconcile. I love what craft brewing has done for the industry. But it has gone to a ridiculous and antithetical place. The culture has more in common with wine than beer at this point. It is no longer an “Everyman” drink. Waiting in line for releases. $10 and $15 pours. It’s a turnoff.

wil421• 9 years ago

Why is this a bad thing? I have so many more options than the cheap beer I started drinking. The Everyman beer still exists and many people still drink it.

There are plenty of non $10 or $15 dollar pours to keep me happy. You don’t have to wait for releases. I only participate in lottery systems for limited liquor releases, screw the lines.

aidenn02• 9 years ago

Totally OT, but maybe someone in this thread knows why my favorite everyman beer (Busch) seems to not be sold in California.

cammikebrown• 9 years ago

Thankfully, in Portland, OR there are still no lines for beer and most beer is $5/pint.

afterburner• 9 years ago

People willing to pay high prices are probably what makes it possible in the first place. I feel like the same thing happened with burgers where I live; gourmet burgers became a popular thing, and suddenly there are a lot of new burger places.

hirsin2• 8 years ago

The high end of craft beer has flourished (Jester King, Perennial, Holy Mountain fetch insane prices imo on secondary markets and in person) but that didn't come at the expense of cheaper good beer too. Fremont makes 20 buck bombers but also puts out tons of Universale at $9 a six pack. Elysian too, but they've got ABI money.

cycrutchfield• 8 years ago

Yes, there is price differentiation between the low end and high end now, but it’s not even close to the magnitude that wine has. And, besides, what exactly is wrong with that?

davidw2• 8 years ago

One of the things I miss about Italy is wine being an "Everyman" drink too. I wish people would kind of get over it being "fancy" in the US.

selectodude• 8 years ago

Wine is cheap in the US, too. Table wine, even in Italy, is no better than the $5 bottles we drink here. And the $100 stuff in the US is $100 there.

archagon• 8 years ago

I mean, you also have breweries like Lagunitas slinging world-class PAs (Born Yesterday) and BA stouts (High Westified) for like $2 a pop!

kpwags• 9 years ago

I love this, but I'm curious as to how much it can grow. The neighboring town to me has 5 craft breweries on its main street. All of them are within a 1 mile of each other. It's even crazier since there are also 3 winery storefronts/bars and a craft distillery in that same radius.

The other thing I've found is that it has inspired people, including myself, to try their own hand at brewing. I just bottled my first batch and while I have no delusions that I'll start my own brewery, it's a fun activity to try one's hand at.

et_tu_brewte2• 8 years ago

With more focus on tap rooms and not so much on distribution, craft breweries can be more thought of as restaurants... and you don’t hear people complaining about too many good restaurants.

rb808• 9 years ago

What I dont understand is that in Europe there are dozens of delicious lagers, in the US I can't find any local copies. Mexican or Central American beers come closest. Surely with literally hundreds of microbrewery options there should be something close. Any recommendations?

toomanybeersies3• 9 years ago

Craft brewers don't do many lagers for two reasons.

The first is that they're "boring". You can already get lots of different mass market lagers, and they're all similar.

The second reason is that they're hard to brew. You can hide the fact that you're a shit brewer behind malt and hops (to an extent). You can't cover up poor technique in a lager. The big megacorps have got their technique down to a tee.

steveax• 8 years ago

They typically take longer to finish as well.

That said, I’ve been encouraged by more lagers from craft breweries showing up. There are some terrific ones that have been around for a long time too, say Prima Pils from Victory.

hirsin2• 8 years ago

Macrobrew can also get away with adjuncts - making their beer from corn, and cheaper - while a craft brew audience is going to be wary of corn beer (unless specifically marketed as such) and expect a more expensive malt bill.

et_tu_brewte2• 8 years ago

They’ve gotten much bigger, but fantastic lagers: https://jacksabby.com/

archon810• 9 years ago

Hoppiest*.

partiallypro3• 9 years ago

I, for one, absolutely hate the craft beer revolution in the U.S.; a lot of restaurants are changing out their taps of beers that are universally liked for craft beers. It's basically impossible to get a Stella or Heineken on tap now, everything on tap is Bud Light and a ton of craft beers. There are a few places that haven't fallen into this, but it's a big problem. I hate it. I love Belgian and German beers and it has become almost impossible to get either of them on tap unless you go to a beer hall style bar.

A few of the "craft" beers are owned by the major multinational corporations anyhow.

mylons• 9 years ago

i guess they weren't universally liked if they're getting changed out for craft brews.

marpstar• 9 years ago

you can charge more for craft beers.

phaus• 8 years ago

Since we've decided to be unnecessarily snarky to strangers, I guess you've never seen a business make a decision that doesn't necessarily have a positive impact on its customer base. That makes you essentially the only one in the known universe that hasn't noticed such a thing.

partiallypro3• 8 years ago

Craft beers are cheaper for restaurants and have a higher profit margin, and there's the "community" factor of having local brews; and in some cases just some "good ole boy" attitude. There are a lot of incentives. It has not much to do with net sales, because it is offset by other incentives. Customers don't often complain, especially in bars that are for partying and generally just getting drunk. Who cares if this local brew tap doesn't get much requests? There is no feedback, and it just drives the people who like "imports" to buy bottles and the profit margin is even HIGHER there. It's a win/win for the restaurant/bar.

xzel• 8 years ago

I'm not sure where you're drinking but I've most bars will have a basic Pils on tap, most likely a Stella or Heineken at that. Any decent bar will have some random German or German style beer made by a more local brewery on tap.

Regardless, your premise of bars changing out taps of universally liked is incredible subjective. Wouldn't they be pick beers that they think you be more liked by their public to increase sales?

I do agree the purchasing of craft beer lines by conglomerates is something to be concerned about but I like to think of those beers just being consistently available. It normally doesn't change the taste. The taste of Goose Island Sofie and Matilda beers, for example, are still great, and Blue Moon is still terrible, in my opinion of course.

intrasight• 8 years ago

It's a free world. If you don't like their offerings you can take you business somewhere else. Or you can find a BYOB restaurant and have your choice and also pay less.

bmelton2• 8 years ago

a lot of restaurants are changing out their taps of beers that are universally liked for craft beers.

I've noticed this too at a few of the bars I frequent, and there seem to be two commonly cited reasons for it:

[1] People are boycotting Anheuser-Busch because they believe that the SuperBowl ad they aired in SBLI was anti-Trump, and

[2] More commonly, people are boycotting Anheuser-Busch because of their attempts to buy up craft breweries that threaten their business, or anti-competitively strongarm the ones they can't buy by abusing the power they have through the three-tier distribution system.

More rarely, I've heard cases in which Busch (or their distributors) attempted to strong arm bars who cleared out a couple taps to make room for craft brewers by threatening their supply of their more popular products, to which the bar owners just decided to quit carrying them altogether.

[1] http://fortune.com/2017/02/05/budweiser-super-bowl-commercia...

[2] https://www.bostonglobe.com/business/2017/05/09/budweiser-ow...

Edit: s/immigration/Trump/

maxerickson• 8 years ago

People upset about the ad are upset because they think it is anti-Trump.

It's overtly positive about immigration.

Zeebrommer• 8 years ago

Indeed, between 2002 and 2007, employment at breweries actually declined in the midst of an economic expansion.

I'm not sure this is a bad thing. Although it means loss of jobs, it also means the breweries got more efficient (producing the same or more with less human effort involved). How does this work, economically? More jobs is good, more efficiency is good, but you can't have both when growth is limited.

pierre• 8 years ago

It seems to be a case of beer crafting moving from a production economy to an 'heritage' economy.

In an 'heritage' economy, proximity, uniqueness and the story of the product matter more than the product itself. We have seen it happen in France for 'macaron', wine and cheese.

More on 'heritage' economy (in french) : http://www.gallimard.fr/Catalogue/GALLIMARD/NRF-Essais/Enric...

alva• 8 years ago

Very happy about the craft beer revolution in the US. Coming from the UK, we are used to an extremely wide range of beer in our regular pubs (thanks to decades of activism from CAMRA). If you ever visit the UK make sure you visit one. Years ago the only beer I could get in regular pubs in the US were Bud light, Coors etc.

Craft Beer Is the Strangest, Happiest Economic Story in America

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