Craft beer could become a victim of its own popularity.
By: David Olive on August 30, 2013 - Toronto Star
A funny thing happened on the way to global domination of the world beer market by a handful of “macrobreweries.”
The industry consolidation of recent decades has put about 85 per cent of the Canadian beer market in the hands a foreign-owned duopoly of Molson Coors Brewing Co. of Denver and Anheuser Busch InBev SA (AB InBev), based in Brussels.
But the advent of the brewing behemoths spurred a consumer backlash that has yielded more neighbourhood and regional independent brewers, and more distinctive brews than we’ve been able to choose from since the 19th century, when local brewmaster Joseph Bloore gained such renown that a major thoroughfare was named for him.
Thirty years ago, there was just one lonely “craft” brewery in Canada, Vancouver’s Horseshoe Bay Brewing, launched on a shoestring in 1982. By 2009, there were 209 microbreweries in the land, most in Ontario (92), British Columbia (49) and Quebec (42). B.C. not only is the birthplace of Canadian craft brewing, but it’s there that craft brews account for 12 per cent of total beer sales, by far the highest in Canada.
In the U.S., where the now non-U.S.-owned Bud brand long commanded almost half the entire beer market, 409 new independent breweries were launched last year alone. And there are another 1,250 or so microbreweries on the drawing boards.
Closer to home, the likes of Mill Street and Steam Whistle are regarded as something close to Toronto civic assets. And it won’t be long, it seems, before most sizeable towns in North America have a local brewery they can call their own.
Niagara College, well known for its winemaking school, also boasts an eight-year-old brewmaster program. Alberta’s Olds College is emulating Niagara College with a second Canadian brewmasters program, already fully enrolled, at 26 students, for its launch next month.
But as welcome as this unanticipated alternative to bland macrobrewing is — to say nothing of the boost to local civic pride — don’t count on the craft-beer boom to last. Indeed, it might already be close to peaking. Here’s why:
•Saturation. It won’t be long before there are too many brews chasing too few beer lovers. The “barriers to entry” in this business are low, as you’d expect in a country of amateur home-brew makers. The waves of industry consolidation have put a lot of used brewing equipment on the market at reasonable prices not calculated to dissuade wannabe brewing entrepreneurs from the daunting challenges facing them.
If you’re wondering about the odd names of so many craft beers — YellowBelly (St. John’s, Nfld.), Raging Bitch ale (Maryland), Dark Horse Lambeak Wants Blood Orange (Marshall, Mich.) — a peculiarity of this boom is the need to stand out in an increasingly-crowded field. And the tradition of brand loyalty has given way to beer as a faddish product.
•Falling consumption. A recent Gallup poll confirmed the secular, or permanent, decline in North American beer consumption. Decades of health alerts about beer bellies and punitive treatment of drunk drivers, and the recent continent-wide crackdown on campus binge drinking, accounts for just 41 per cent of Americans aged 18 to 29 citing beer as their preferred beverage alcohol, down from 71 per cent in the early 1990s. And that number is down to 43 per cent among those aged 30 to 49. Which means that both trend-setting youth and deep-pocketed adult consumers are turning away from beer.
•Davids and Goliaths. The combined stock-market value of the world’s top two brewers, AB-InBev and London-based SABMiller PLC is almost $230 billion. For years, the craft-brewing “juggernaut” has been for the macros a mere nuisance at worst.
Indeed, the macros profit from renting their spare brewing capacity to overgrown craft brewers. That has resulted in only a bit of snark from aficionados insisting a brew whose production is outsourced is not a genuine craft beer. Flourishing craft brewers, like all start-ups able to graduate from survival to viability, hit a point where they either ramp up to meet existing and potential demand, or they wither.
The macros have gotten into the “small” beer niche themselves, of course, with brands that are passably flavourful. These include Shock Top Belgian White (AB InBev), and Six Pints Beer Academy Kölsch (Molson Coors), or Blue Moon (Molson Coors). The craft-brew lobby has failed to enforce labeling of these “faux craft” beers as such.
There is no matching the super-brewers’ resources in hyper-efficient mass production, marketing prowess, and all-important distribution.
“When AB [AB InBev] owns a distributorship, they have a lot of control,” Paul Gatza, director of the craft operators’ Brewers Association lobby, told the New York Times. That clout extends over which brands the macros will ship and at what quantity. The macros obviously favour their own brands.
And the likes of SABMiller, with more than 200 brands on six continents, can easily under-price its latest “faux craft” beers to win back market share from independents.
•Sell-outs. The macros also have the clout to simply buy a craft brewers’ hard-earned success. Molson Coors alone snapped up Ontario’s Creemore Brewing Co. in 2005, and the esteemed Granville Island Brewing Co., Canada’s second-oldest craft brewer, five years later. Toronto pioneer Upper Canada Brewing Co. sold out to Guelph’s Sleeman Brewing Co., which soon enough slipped down the gullet of Sapporo. (In the U.S., it’s no different: In 2011, AB-InBev took over well-established Chicago craft brewery Goose Island).
An industry now increasingly ripe for yet another round of consolidation has seen this phenomenon before. In the 1950s and 1960s, Toronto tycoon E.P. (Excess Profits) Taylor — or, more accurately, his able hired hand George Black, Conrad’s father — pressured dozens of independent breweries to sell to his Canadian Breweries combine, becoming for a time the largest brewer on the continent. (Canadian Breweries evolved into also-ran Carling O’Keefe, which disappeared in a merger with Molson Cos., which itself was rolled into Adolph Coors Co.)
There has, in short, been a pleasing abundance of choice for beer lovers in the past. But each of those golden ages has culminated in scores of breweries being swept into combines.
Expect no different outcome this time. At least the current boom has given us mirthful brand names, including Polygamy Porter, brewed with pride in Utah, naturally. The tagline for this Park City-based company’s flagship brew, nodding to controversial local tradition, is “Why Have Just One?”
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