San Diego Brewery May Be ‘Selling Out’. Does It Matter?

by on August 6, 2015 · 4 comments

in Culture, Economy, Environment, Ocean Beach, San Diego

elysian sucksBy John P. Anderson

San Diego County has a large beer industry, there are currently more than 110 active breweries.

Along with high numbers, San Diego has earned a reputation as a leader in the craft beer industry.

Many would rank it as the top craft beer city/region in the United States – whether it is the top dog or in the top five isn’t especially important. It’s a leader however you measure – top ranked beers, top ranked breweries, number of breweries, or gallons produced annually.

In response to loss of market share, the big brewers have adopted a strategy of purchasing craft beer brands to get a share of the sales and production growth.

As craft beer has exploded it has increasingly come at the expense of the “big brewers” – InBev and MillerCoors. In 2014 craft breweries saw production growth of 18% while beer overall saw an increase of only .5%. Read between the lines and that means that the “Big 2? are losing market share while smaller craft brewers are experiencing a decade of double digit annual growth. Many places in the U.S. have embraced craft beer as a marketing tool and part of civic identity – San Diego, Fort Collins, Grand Rapids, and Portland would certainly fall into this category along with many others.

In response to loss of market share, the big brewers have adopted a strategy of purchasing craft beer brands to get a share of the sales and production growth. With enormous assets and resources why don’t the big brewers simply establish new craft beer breweries in markets with potential? Most likely because craft beer brands are typically tied to local markets and seen as the “little guy” or underdog that embraces the community and builds a loyal band of followers. It’s hard for InBev to sell beer as an underdog.

So does it matter if a brewery is owned by a person in your neighborhood or a large corporation like InBev? For many it does.

So InBev and MillerCoors come to town and write a check with a bunch of zeroes, hope someone takes the offer, and then do their best to make sure that as few people as possible know that a big brewery now owns the “little guy”. Craft breweries purchased by “Big Beer” have included Goose Island of Chicago (2011 for $39 million), 10 Barrel of Bend, Oregon (2014 for undisclosed amount), Elysian in Seattle (2015 for undisclosed amount), and many others. Redhook, Widmer, and Kona breweries are owned by Craft Brew Alliance – a publicly traded company with substantial share (more than 30%) owned by InBev.

So does it matter if a brewery is owned by a person in your neighborhood or a large corporation like InBev? For many it does. In San Diego the economic impact of the craft beer industry was estimated at $600 million in 2014 and growing at a substantial rate. This number might be sustained if a brewer (or a few brewers) were sold but the profits earned would be sent to the corporate shareholders, not to the pockets of local owners. There would almost certainly be a reduction in headcount for administrative positions like marketing and sales and possibly in the brewhouse as well, if production is moved to larger, more efficient facilities.

Do consumers care? If the beer is good, the beer is good. In Chicago it does not seem that Goose Island selling to InBev has had a negative impact. Their annual release of the acclaimed Bourbon County Stout is a huge event. Does it matter if the beer is brewed in Chicago, and Fort Collins, and Portsmouth? Perhaps not.

San Diego has earned a reputation for being a leader in the craft beer world. … if the quality of the [mass produced] beer is reduced to drive sales and is affiliated with San Diego it could damage the overall reputation for quality currently enjoyed by the industry here.

And there are enormous advantages to the brand. With the increased assets of a large corporation, craft breweries that are sold can afford to buy end caps in Whole Foods (where I’ve found Goose Island prominently displayed here in San Diego). This success can be multiplied through scale even if the brewer that created iconic beers like Bourbon County has since left to be a cidermaker in Michigan. (The head brewer for Elysian left soon after the sale of that company as well.)

San Diego has earned a reputation for being a leader in the craft beer world. From Stone’s early role in super hop-heavy beers, which has become the signature calling card for San Diego and inspired it’s own style: San Diego IPA or San Diego Pale Ale. Ballast Point has brought hot pepper beers to the mainstream and constantly is experimenting with herbs, citrus, and other flavors. White Labs is located here in town and allows brewers to access top-quality yeast strains, and new experimental strains as well.

The recent rise of craft beer, craft coffee, and other artisan offerings is a welcome breath of fresh air and a reminder that quality and locality matters.

The current rumor is that Saint Archer is being sold to MillerCoors. This would be the first San Diego craft brewery to be sold to “Big Beer”. (There have been other sales like the recent acquisition of Alpine by Green Flash.) Losing one brewery out of 110 isn’t a large percentage. The bigger risk is that utilizing bigger assets the San Diego brand will be eroded. If Saint Archer, or any brewery, is sold what will happen when that brewery buys premium space in grocery stores? If the label says “San Diego beer” and is next to Stone, Green Flash, and Modern Times will a person in Texas or Wisconsin know which is owned by San Diegans and which is owned by a faceless corporation? Maybe they won’t care. Worse yet, if the quality of the beer is reduced to drive sales and is affiliated with San Diego it could damage the overall reputation for quality currently enjoyed by the industry here. Whether Saint Archer is actually selling or not, a sale is likely to occur in the near future given the trend of purchases by the large brewers and the reputation of San Diego beer.

InBev and MillerCoors are welcome to create craft beer. They’re welcome to buy craft breweries. But doing so in an intentionally misleading way is wrong.

For me, the ownership of our breweries matters. When friends and family, or strangers, visit us in San Diego I love highlighting unique experiences that are rooted here. Local hiking trails, coffee shops, breweries, restaurants, etc. When I travel it’s the same – there is enjoyment derived simply from the fact that what you are partaking of is part of the place where you are. The fast food nation America became in the 20th century of universal sameness erased much of the uniqueness of our country and our experiences. The recent rise of craft beer, craft coffee, and other artisan offerings is a welcome breath of fresh air and a reminder that quality and locality matters. Is it pretentious? Sometimes, maybe most of the time. Does that make it bad? Absolutely not.

My hope is that if a brewery is sold to “Big Beer” there will be a penalty to be paid. Local consumers will choose to support breweries based, owned, and operated here. Hopefully the San Diego Craft Brewer’s Guild will not allow a member that is not included in the definition of craft beer.

InBev and MillerCoors are welcome to create craft beer. They’re welcome to buy craft breweries. But doing so in an intentionally misleading way is wrong. If drinkers want to buy a McPorter or a McIPA they can choose to do so. I’ll be sticking with a Stone Enjoy By or Modern Times Black House. I hope you’ll join me for a round to celebrate the great place we live in. Cheers.

{ 4 comments… read them below or add one }

Geoff Page Geoff Page August 6, 2015 at 1:02 pm

I, for one, have heartily enjoyed the craft beer boom. For years, I only drank foreign beers because domestic American beers were awful. I left the foreign market when great American craft brews began to appear and now I’m in beer heaven. But, I make a point of only buying craft beers from breweries in San Diego County because I want to support those companies. When I travel to other states and buy beer, I always ask about local beers or check the labels and try to buy beers made in that city or state for the same reason. If I discover a local craft brewery has been purchased by one of these big nationwide companies, I will no longer buy those beers. Please, please, Stone Brewery, do not sell out, that woud be a major disappointment because that is my favorite. I agree, let’s encourage the locals to stay local.

I don’t deny that a brewery owner that has worked hard to build a brewery and can have a big payday this way has every right to do so. My decision to no longer buy that beer is no reflection of, or damage to, that breewery owner so I have no compunction about abandoning that brewery. I will always buy from the local pool of breweries no matter how small it may become.

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John Anderson August 7, 2015 at 10:49 am

Geoff – I’m in pretty much the same boat as you. Glad you’re enjoying the great SD beer scene, and hopefully we’ll see it prosper for many years to come.

In regard to Stone, Greg Koch has gone on record many, many times to say that the company will never sell out. I believe they actually changed the ownership structure or bylaws to prohibit a sell out as well but can’t find an article on that right now. Have a great weekend.

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Geoff Page Geoff Page August 7, 2015 at 12:03 pm

That is good to hear about Stone. Considering the quality of their products and the great distribution system, they certainly could get top dollar for their creation if they were so inclined. Nice to see the committment. I’ll have a great weekend, thanks, and it will include a few Stone beers.

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R. Weeks September 10, 2015 at 11:14 am

I hate to see something that has local identity get sold off. The idea of “San Diego craft beer” is now being diluted. And the local economy which supported them, and which in return was supported, is now damaged. Profits will now go somewhere else instead of staying local, with local business owners who are also local consumers. I have no ill-will to the owners who took advantage of a well-deserved financial pay-out, but now that they are not a local brand I am done with it, which is too bad since they were my favorite. Lucky for us we have another 100+ options to keep it local.

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