Measuring Success for Small Breweries

Let's pretend you are starting your own business. You have a great idea to bring a new product to market that you think everyone is going to love. For the purpose of this exercise, let's say you're making widgets. You pull together the funds, whether it be through loans, investors, or venture capital, and you set off to follow your dream, making the best damn widgets anyone has ever seen.

You work hard at this for 10, maybe 15 years. You're continuing to grow, the business is profitable, but you seem to be hitting a ceiling. You aren't going to make the next leap without a major expansion, which would require more investment and more work. You've saturated your regional market with your widgets, and you want to bring them to the rest of the country, but you don't yet have the capability to do so, without newer, bigger machines, a larger manufacturing plant, and many more employees.

Then, the Acme Corporation, one of the world's largest producers of widgets, approaches you and says that they want to invest in your small little widget company and help you expand your widget distribution network, let you make your widgets in their factories across the world, and greatly increase sales. But they want a major cut of the profits. Or maybe even to purchase your successful widget company outright for a ridiculous amount of money so that they can roll the widgets into their widget portfolio.

You have a choice to make. You can either accept the money from the big corporation, which is going to help you realize your dream, or you can continue to put in more sweat equity, go more into debt, and continue to slowly and organically grow your widget business over the next 20 years. I would imagine that most reasonable widget manufacturers would see this as an obvious choice.

However, when you substitute "beer" in place of "widgets" and change the Acme Corporation to Anheuser-Busch, there is one more big factor that often has to be considered - the perception of your customers. You see, widget customers don't much care where their widgets come from, as long as they're high-quality and do the job. But craft beer consumers will boycott a brand in a second if they think they have "sold out."

And maybe that's a good thing. 

You see, consumers want choice when it comes to their beer. They don't want an isle full of brands that are all owned by just a handful of major brewery holding companies. They want to see fresh, new, local brands, mixed in with successful regional independent brews.

And if that's what they want to see, if every brewery followed the model in our example above, then the customer would lose that battle. So maybe their boycott of these "sell-out" breweries is justified. If they didn't apply pressure on the breweries to remain independent, then maybe more of them would be jumping ship.

But then again, sometimes customers aren't the most rational creatures (see my last newsletter about how Not Your Father's Root Beer has become the best selling beer of the summer). There is always going to be a contingent who will buy whatever tastes good, regardless of where or how it's made.

Another example - consider Goose Island. Goose Island is now owned by Anheuser-Busch. This means that in North Carolina, we have the ability to see beers such as the 312 Wheat and the Goose IPA, that were not previously available here. And then there's Bourbon County Brand Stout. This is a limited-release barrel-aged imperial stout that comes out on black Friday each year (though, I'm sure you're all already aware). And those same customers who won't touch Matilda, Sofie, 312, or the Goose IPA all year long, well, they're the ones standing outside of the bottle shop on the morning of Black Friday, just waiting for the doors to open so that they can get some Bourbon County. And that keg, embossed with the Anheuser-Busch eagle, empties faster than you can spell Anheuser.

So, is that success for Goose Island? Sure, they got a big payday, their product that they worked so hard at for many many years is now available across the country, and people still line up on Bourbon County release day.

But if we're OK with that success, then it means we're ok with a lack of selection. We're ok with supporting the mega-corporations over the small local guys. Are we, as consumers, actually ok with that?

And it is up to the consumer. Sure, I, as the owner of a bottle shop and bar, could decide not to carry any more Goose Island beer. I could stop carrying Boulevard and Ommegang (both owned by Duvel), I could take the Not Your Father's Root Beer off the shelf. No more Hoegaarden, no Leffe, 

And what about those that are partially owned by the big guys? Should I get rid of Terrapin (21% owned by MillerCoors), Omission, Widmer Brothers, Blue Point, and Crispin?

Unfortunately, I can't make that change. Not without the help of the customer. And not if I want to stay in business.  

So, I think that leaves me with two questions:
1. Breweries, what do you define as success? Is it ok to "sell out" to a larger brewery if they can help you bring your beer to a larger audience, and customers, for the most part, are still going to buy your beer?
2. Craft beer consumers, is this OK with you? Do you mind that more and more of the shelf space is being taken up by breweries and brands owned by only a handful of larger holding companies? Or is this, in fact, a good thing, because they'll bring beers like Firestone Walker (recently partnered with Duvel) to the east coast?