Craft Brewing Business

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Craft Brewing Business

Beer billionaires: A new breed of craft brewers is emerging

Beer money cans
Does money change everything? Or nothing at all?

Craft beer is often defined by its size, but the size and scope of the industry is quickly changing and so are our definitions. Bloomberg wrote an excellent article the other day on Ken Grossman becoming the next billionaire craft beer baron, or that at least his company was worth $1 billion (he thinks that’s a high estimation). Sierra Nevada Brewing Co.‘s Pale Ale is often cited as the second-best selling craft beer in the United States, behind the Boston Beer Co.’s Samuel Adams Boston Lager, and Sam Adams is the only publicly-traded craft brewer in America — unless you’d like to count the Craft Brew Alliance or Goose Island — and the Brewers Association (BA) definition does not.

Of course, the BA’s definition has changed and evolved too. Imbibe magazine tackled the subject last year:

In a 1987 New Brewer article, [BA President Charlie] Papazian classified a craft brewery as one that used “the manual arts and skills of a brewer to create its products.” Craft — that had a nice ring. As “microbrewery” lost steam, “craft brewer” gradually entered the vernacular. Instead of keeping the term nebulous, the Brewers Association trade group chiseled out a definition. In the BA’s eyes today, a craft brewer is small (producing less than 6 million barrels annually), independent (not more than 25 percent owned by a non-craft alcohol concern) and traditional — no corn syrup please.

Like all definitions, the BA’s definition is about practicalities — it is a membership-driven organization, and it must rightfully define its membership parameters — but the perception of what makes a craft beer company is changing. A good example is this new breed of craft beer billionaires, and maybe we can learn something about what it means to be craft from this elite crowd of craft entrepreneurs. Let’s take three from the aforementioned Bloomberg article.

Grossman is the third beer billionaire to recently emerge in the U.S. Jim Koch, founder of Sam Adams parent Boston Beer Co. has a net worth of $1.3 billion. Dick Yuengling, the owner of Pottsville, Pennsylvania’s D.G. Yuengling & Son, who doesn’t identify his company as craft, has a $2.6 billion fortune.

Last year, the BA updated the definition of a craft brewer to include those using adjunct grains in their recipes, which now includes D.G. Yuengling and Son Inc. The subject seemed to be a non-issue with America’s oldest brewery. The company’s been making craft-style beers since its inception, so big whoop to definitions. Yuengling Dark Brewed Porter, for instance, is an original specialty beer that got its start 1829. Dick Yuengling speaks on the subject in another Bloomberg article, feeling the sentiment has a lot to do with a corporate tone.

“We put ‘American-owned, family operated’ right on the case. And you know what? It means something to some consumers,” he said, a smile emerging as he pulled a drag from his cigarette. “It doesn’t mean something to everybody. But they are anti-corporate America, the younger people today, and maybe rightfully so.”

The idea of corporate goons putting money before a product is a common “Big Beer” perception, so how a craft beer business is run (and who runs it) is definitely a differentiator. Let’s take the recent January issue of Boston magazine, which had a fairly unpleasant and interesting article on Jim Koch and how the seminal craft pioneer perceives the growing movement today. So the story goes.

The most recognizable man in American beer, who sold us all on the idea of craft brew three decades ago on his way to a billion-dollar fortune, was having dinner last October with a group of brewers inside Row 34, one of Boston’s top-rated beer bars. The drink list was filled with esoteric options from hot new breweries throughout the country, as well as palate-pleasing offerings from abroad. But Koch had a problem: Though this mecca for beer nerds carries two dozen beers on draft and another 38 in bottles and cans, it doesn’t serve his beloved Sam Adams.

Staring at the beer menu, Koch began to criticize the selection. More than half of it, he said, wasn’t worthy of being served — inadvertently insulting the establishment’s owner, who unbeknownst to Koch was sitting next to him. Then Koch interrogated the beer manager about the offerings. Unsatisfied with the answers, Koch complained about the beers so intensely that an employee at the bar teared up. Koch rose from his seat and walked into the keg room, where he started checking freshness dates on his competitors’ kegs.

Jack_McAuliffe_Jim_Koch
Jim Koch (left) with Jack McAuliffe, founder of New Albion Brewing Co., widely recognized as the first U.S. microbrewery when it was founded in 1976.

When you become a billionaire, people tend to identify with you less. The bigger a craft brewery gets, the more it will struggle with its credibility as a craft beer in the eyes of the consumer. Luckily, there’s a consolation prize. You get to become a billionaire. But it doesn’t have to be that way. Ken Grossman seems to be taking the idea in stride. He understands that the idea of a craft brewery, no matter size, is about connecting with a consumer in a personal way and not compromising the quality of the product. From the Bloomberg article:

“Consumers would rather connect with producers who are growing their food, cooking their food, making their beer, making their wine — that personal connection with the brand, the people behind the brand, is more and more important,” said Grossman. “Having a multinational company provide their food and beverage just doesn’t feel right.”
….

“Even though we are a big small brewer, we are still just half a percent of the U.S. beer industry. We really have not compromised our product or process. Having growth does give you the ability to improve as you go,” he said.

The final point is an important one. Growth and size can improve quality, just like it can hurt it. So maybe next time you see a headline that reads something like “Founders Brewing sells 30 percent stake to a Spanish brewery,” don’t immediately debunk a craft brand because of who owns it. Define a craft beer by the way it is owned — how it supports the industry and its community, how it fights for the environment and sustainability, how it connects with customers and how it makes bold and innovative beer. If a brewer can embrace those credos, it shouldn’t matter if they’re a billionaire or not.

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