Point of Brew: ABInbev and the Brotherhood of Brewers

By From page A9 | February 27, 2014

Some years ago, I gave a talk at the Craft Brewers Conference that suggested too many craft brewers were making what I called extreme beers. I suggested they were catering to a few devoted and vociferous aficionados who were pulling the craft industry in a dangerous direction toward the highly alcoholic, extremely bitter and sour end of the flavor spectrum. I thought (and still think) this was counterproductive to the long run to the growth of the craft segment.

After nearly 40 years, the craft penetration of the beer market is about 6 percent and one company owns one-quarter of that volume. Is that really success?
Predictably, a well-known and successful brewer took umbrage at my characterization of some craft brews and went out of his way to tell me so in no uncertain terms. I replied that his beers in particular were the poster boys for my point and should carry a red-flag warning to potential customers. Neither of us liked this conversation (and perhaps regretted it); it has taken some years for friendship and cooperation to be re-established.
However, I am sure that neither one of us has changed his mind; we are just willing to give the other guy space to hold his own opinion and our brotherhood in beer and brewing remains intact.
I was therefore intrigued by a headline in the Sacramento Bee Ticket section at the end of January that read “Brotherhood of craft beer threatened?” Turns out that Tony Magee, owner of Lagunitas Brewing Co., had lambasted Jim Koch, owner of Boston Brewing Co., on Twitter (of course!) for targeting Lagunitas IPA draft beers. Jim had brought to market a copycat beer called Samuel Adams Rebel IPA and specifically identified as “West Coast style IPA”; Tony thought this put Jim’s Rebel into Lagunitas’ territory.

Now, it seems to me perfectly normal for brewers to compete head-to-head for sales based on beer quality; brewing companies, even quite small ones, employ marketing personnel to do exactly that. Fair competition is one thing, but unfortunately, there are many underhanded schemes that tilt the playing field and that is quite another matter; perhaps there is more to this squabble than meets the eye and that fuels Tony’s rage. We don’t know.

However, there are thousands of IPAs out there; I can assure Tony that every brewer making an IPA, not just Jim Koch, is trying very hard to take away Tony’s tap handles in bars all over the country. At the end of the day, Tony’s only true defense in the competitive marketplace is the truly splendid beers that Lagunitas makes under the direction of head brewer Jeremy Marshal, a Davis brewing student.
The author of this piece, Justin Grant, goes on to speculate that with the drastic increase in competition in the craft industry, now with some 2,700 breweries nationwide working with a small slice of the market, there is bound to be more conflict among craft brewers that will undermine the cohesiveness and strength of the community; that is the brewers’ brotherhood.

That is possible because most craft breweries actually have passionate red-blooded owners who might well take personally the struggle for sales in the marketplace however fair that competition might be. Craft breweries are personal fifes, not large, faceless, emotionless, calculating, international, corporate entities with chief executives.
There is nothing to prevent the chief executives of large, faceless, emotionless, calculating, international, corporate entities making each other’s lives a misery. Contemporary with the article mentioned above I stumbled on this headline, “Warsteiner shares $145 million fine; ABInbev escapes.”
Turns out that ABInbev’s German operation ratted on their fellow brewers. To put it in the words of the magazine article: “The investigation was launched (by the Federal Cartel Office) on the basis of information from the German branch of Anheuser-Busch Inbev SA, which wasn’t fined as a result of its cooperation.”

This implies that ABInbev had some culpability but, by coming clean, saved its own bacon. Apparently, the five major German breweries fined (with six more under investigation) were caught fixing prices; they conspired to push up the price of a hectoliter of draft beer by between 5 and 7 euros (maybe $7 to $10) and the price of a 20-bottle case by one euro.
I think shopping one’s colleagues to the tune of $145 million might well threaten the brotherhood of brewers; indeed in this case there are a number of high-level executives who appear to have personal responsibility because the price-fixing arrangements were made informally, almost casually, doubtless over a glass or two of beer. I’m sure they are upset!
In any human endeavor in which there is competition, success and failure, there will inevitably arise personal enmities; it cannot be all wine and roses. Indeed given the vigorous, inventive, intensely alive folk who are drawn to risk everything to make craft beer, it is amazing we can even think in terms of a brotherhood of brewers.
But remarkably, and for the most part, we can.
— Reach Michael Lewis at [email protected] Comment on this column at www.davisenterprise.com

Michael Lewis

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