(This originally appeared as my “Brewing a Better World” column in the Summer 2007 edition of American Brewer magazine.)
In the past quarter century, ownership of beer companies has been expanding and contracting at the same time. Overall, there are more independently-owned breweries in the U.S. But both nationally as well as globally, fewer companies take much bigger slices of the pie.
As the craft brewing renaissance expands in places as diverse as Russia, Vietnam, Italy, and South Africa, the number of small breweries grows. Yet three of the world’s largest beer companies have been formed by mega-mergers within the last five years, creating truly global giants the likes of SABMiller, InBev, and Molson Coors.
Annually, the world’s five largest brewing companies (the three above, plus Anheuser-Busch and Heineken) produce about 750 million hectoliters of beer, earn $65 billion in revenue, and employ a quarter of a million people. Nearly one in every seven beers in the world is produced by just one company: InBev, Earth’s largest beer corporation by both volume and revenue.
As most American Brewer readers are well aware, Anheuser-Busch dominates the domestic market, producing almost 50% of America’s beer. Simultaneously, the number of microbreweries has grown to over 1400 since the movement first took hold in the late 1970s. But all of America’s craft breweries combined represent under 5% of the country’s beer sales (measured by either volume or revenue), a fraction of the size of even the smallest of the three biggest brewing companies operating in America.
But 50% market share isn’t enough for Anheuser-Busch. The mandate of corporations is growth. When market penetration reaches a plateau, the only way to grow is through acquisitions. So A-B has been buying up stakes in craft breweries. The latest is a 49% ownership share in Old Dominion.
So what does the exhortation to “support your local brewery” mean when your “local” brewery is owned by a global corporation?
The first question from most customers after such a buyout is whether the beers will change. And, of course, the company issues assurances that they will preserve the integrity of the beer. But is this the right question? After all, its not unheard of for craft brewers to “change” their beers. Beers evolve and there’s nothing inherently wrong with that. However, the last thing I would expect Old Dominion’s new owners to do is drastically alter the current beers. For one thing, they know customers will revolt if they come blasting in with too many changes right away.
Besides, craft beer is seeing strong growth in demand while industrial beers have hit a ceiling. Why would Anheuser-Busch buy a craft brewery and then dumb down the products, destroying the most valuable asset? But there are other assets that, by definition, Anheuser-Busch can’t buy: small size and independent ownership.
According to the Brewers Association, to be called “craft,” a brewery must be small, independent, and traditional. Small means annual production under two million barrels –unless Old Dominion grows overnight by at least a factor of ten, there is no immediate danger of surpassing this production threshold. Independent means: “less than 25% of the company is owned or controlled by an alcoholic beverage industry member who is not themselves a craft brewer.” By this last definition, Old Dominion is no longer a craft brewery. Even the beer itself, according to the Brewers Association, is no longer craft beer because “craft beers only come from craft brewers.”
In a blind tasting, no beer judge is ever going to say, “hmm, the aroma suggests this comes from a brewery more than 25% owned by a non-craft brewery.” So why does independent ownership trump what’s in the bottle? Because beer has long been more than just a delicious liquid made from “traditional” malted barley.
Beer is deeply intertwined in the fabric of society. From the economic to the intangible, locally-owned breweries deliver social value better than global companies. Let’s look first at the economic benefits of local ownership.
A 2002 study conducted in Austin compared the economic impact of a Borders Books and Music with two local businesses in the same neighborhood. For every $100 spent at Borders, the study found that $13 flowed back into the community in wages, expenditures, taxes, and other expenses. Whereas, the comparable figure for Bookpeople and Waterloo records, the neighborhood book seller and record store respectively, was $45. The two independent stores yielded a local economic impact more than three times higher than the big box national chain.
In 2004, a larger study was conducted in the Andersonville district of Chicago. Ten local businesses, including four restaurants, were compared against ten chain store competitors. For every square foot occupied by a local firm, local economic impact was calculated at $179, while each square foot occupied by a chain firm offered just $105. The study also found that local businesses paid more to staff, spending an average of 28% of revenue on labor compared to 23% by chains. Local firms procured local goods and services at more than twice the rate of chains and contributed more to local charities and fundraisers than their national counterparts.
Economics aren’t the only social advantages to local ownership. Today, breweries are literally our neighbors. The majority of Americans now live within ten miles of one. Most of these are actually brewpubs, places where people go to drink beer in their neighborhood. For that matter, even most production breweries have adjoining pubs or tasting rooms where regulars congregate to socialize.
Studies conducted in British pubs have shown that a majority of patrons rate social interaction higher than alcohol consumption when asked why they go to pubs. Brewpubs go a step further than pubs. Not only are they locally-owned, they actually make what they sell – that’s a radical concept in a world where most goods are manufactured abroad and shipped around the world before reaching customers. Customers value the intimacy provided by brewpubs with strong social networks that include not just regular patrons, but brewers and owners as well.
Ownership by faraway corporations is alienating. That’s the opposite feeling most people seek when they drink craft beer at their local brewery. Local ownership and on-site production help to revitalize beer drinking as a means of community-building, emphasizing the values of social interaction over the value of financial transaction.
Support your local – “craft” – brewery.