Is The Glass Half Full or Half Empty?

By Glenn DeLuca


So we just finished another year of the burgeoning craft beer industry and some
might say it was quite a year. One indication might be the fact there are now more
than 5,000 craft breweries in the US. That could be a good thing, but not always.
Unfortunately I would say more of the new craft breweries (most out of NJ) I had the
opportunity to sample were not that good. Many had one beer in their lineup that was
good and the rest were either pedestrian or even lousy.  And I guess it could be
worse since my go to beer bar, the Cloverleaf, doesn’t automatically bring in the next
new brewery; they tell them to bring in the goods first so they can check them out.
That’s great business sense as we, their customers, expect to be tasting good beers,
no matter who makes them, and they don’t want sixtels of a not so good beer
languishing on their lines trying to get rid of it (like I have seen in other bars.)

Many of the new operations are small so they’re really not going to make a “big”
impact on the industry. Some will pump cash back in or look for a partner so they can
build a bigger system. Many continue to exist on the phenomenon of selling out of
their tasting room. Tasting rooms are a real attraction today and many of us like to
make the rounds and sample new and different beers. But tasting rooms have
changed. They used to be places that were typically a small, not so attractive, part of
the brewery where it might be cold in the winter, hot in summer, cluttered with stuff;
well you may remember a few.  Now they’re separate rooms with a fancy bar, seating,
decorated, but more importantly not the inexpensive beers of years ago. Many
charge $5 or $6 a pint or less, which the  ”licensed” brewpubs should and are not
very happy about. And some charge $16 or $20 a four pack which the beverage
distributors/liquor stores should not be very happy about. To be honest I’m less
concerned with the liquor store issue as selling product out of the tap room cuts out
both the distributor and the store, both of which are already doing well. But letting
craft breweries charge what a bar or liquor store do certainly seems to be an unfair
advantage to me. And if the ABC (or whatever they’re called) in many of these states
actually looks at what’s happening and begins to regulate the tasting room aspect,
well that may well curtail some of this unbridled expansion.

If a small operation can sell the majority of what they make out of their tasting room
and supply a few draft accounts, they can eke out a living, but they’re going to have
to be really good to begin to grow, as with the continued proliferation if there are
alternatives it’s got to be good. That’s not bad for the industry because it’s all about
the quality of the product whether there are 5,000 or 2,000 craft breweries. And let’s
understand, I’d venture to say a percentage of the new ones started out as home
brewers with their friends telling them they should go into business, as opposed to
learning the process at a brewery and moving on or coming out of a brewing school
and learning the craft. It’s very akin to being a chief; you know how to cook food, but
it doesn’t mean you know how to run a restaurant, even though you really want to be
your own boss.

So what has this continued new brewery, tasting room phenomenon and our quest
for the latest and greatest done?  Well there are some major breweries who are
rebranding; take New Belgium (yes that of Fat Tire fame) decided to rebrand their
Ranger and Rampart, IPA and DIPA brands. I think that’s code for we’re starting to
have trouble selling them, because there are 8 gazillion IPAs out there. Also
Firestone Walker who decided to “suspend” their Proprietor’s Reserve series
including Wookey Jack (Black Rye IPA),  Double Jack (Imperial IPA) and Opal (Dry
Hopped Saison). These were small batch/innovation beers that are now yielding
space for other innovative beers. I’m sure F-W will come out with some other beers to
fill the void, but they may have already come up with something the public likes with
their Luponic Distortion, which they update and release every three months. That
allows them to keep the name, but have us consider it a new IPA every three months;
not a half bad idea. Dogfish Head is doing something similar, yet different, with their
Alternative Take series. #1 was an Imperial IPA, #2 was an American Wild Ale and #3
is an American Double/Imperial IPA (guess they couldn’t decide which it was.)

So yes with the proliferation of craft beer and the further proliferation of IPAs, the
selection is out of control and it’s becoming a problem for many established
breweries that already make great beers, but we, the consumers, want to try the
latest and usually not so greatest. There were also some, what appear to be, major
“chinks in the armor” in 2016. Probably the biggest would be Stone, who laid off 5%
of their workforce in October, since the easiest way to cut costs is to cut workers. It’s
very interesting after an extremely ambitious expansion plan of a $25M Brewing
World Bistro & Gardens in Berlin, Germany and a $75M VA brewery. They also
entered into a “licensing” agreement to a $26M concept hotel in Escondido, where
they’re headquartered. So does the licensing agreement mean they’re solely getting
paid for their name or do they have an interest in the place? But maybe even more
important is their recent $90M arrangement with a private equity firm, VMG Partners.

Although the official statement blamed ”Big Beer pressure” and the “further
proliferation of small hyper-local breweries”, I’d be more inclined to look at this as the
product of multiple, not so good, decisions than a downturn in the market.
The week prior to that, the CBA, Craft Brew Alliance, laid off half their workers in their
Woodinville, WA brewery. Again this seems like an issue tied to an agreement
w/Pabst to brew Rainier, which hasn’t materialized as expected, rather than a major
setback in craft brewing. It is interesting that Pabst has the option to buy the entire
facility in 2016-18, so they have some thought about becoming a “real” brewer again
instead of having all their beer contract brewed.

And hey the big boys continue their quest to be a player in craft beer. AB/InBev’s
High End Division was not as active as they have been in the past with only one
acquisition, Devil’s Backbone out of VA. This is an interesting one as there’s been a
lot of hype about the quality of their beers. Mid-Atlantic Brewing News did a front
page article on them where they say they were afraid of the influx of West Coast
brewers (Stone, Ballast Point, Green Flash) all building in VA and that it’s basically a
cash infusion to help them to do all kinds of great stuff (small bottling line for rare
beers, $2.5M brewpub addition, develop the 85 acres around brewpub for RV
hookups, a new 50K sq. foot shipping and packaging facility) but they’re not trying to
change how we brew. Pretty amazing how much cash High End is putting into this
one.  I should expect to see them on my NJ shelves at some point this year. They’re
not really happy with how the VA Craft Brewers Guild ousted them and wouldn’t let
enter their beers in the best-of-state competition before the deal closed. Guess the
“dark side” isn’t so dark when you join it and trying to sing “Why Can’t We Be
Friends” or “Cumbia” isn’t going to change other craft brewers’ minds. Or craft
drinkers who are giving them an earful in the tasting room.

I will still drink beers I like from acquired breweries but I will continue to remain vigilant
and skeptical. You just need to give High End time to make their impact felt. We saw
a classic example of that recently when they had the second release of the “Rare”
Bourbon County Stout. Those who waited in line a year earlier and paid upwards of
$75 for a 16.9 oz. bottle the year before were a little shocked and surprised, and
maybe a touch mislead. First of all I think you’re crazy to stand in line and then pay
an outrageous price for a bottle of beer, but to each his own. But then when it’s
released again you really have to ask what gives. That’s when High End/Goose
Island give us their “alternative facts;” well it’s really the barrels that are rare so that
makes the beer rare…come again! So is High End really a wolf in sheep’s clothing???
And on a side note, do you think with states beginning to legalize marijuana that
AB/InBev might ever regret choosing the name “High End” for their craft division as
they may well want to get into that industry also in another 5-10 years.

Not to be outdone, MillerCoors’ craft division, Tenth and Blake, had a busy year
buying Hop Valley Brewing in OR, Revolver Brewing in TX and Terrapin in GA. We’ll
have to wait and see what MillerCoors does in the future as part of Molson Coors
instead of SABMiller.

I do like to try to keep up with the latest happenings and regularly like to pick up Ale
Street News and the other regional brewing news when I see them. They have some
interesting articles and do cover the craft happenings/developments in different
areas of the country. They must be very happy that High End was created and
continues to grow as I’ve seen many quarter, half and full page ads for craft
breweries they’ve bought. Their mission is ”to promote the appreciation of the finest
beers available in the U.S. and throughout the world” so  they’re all about the beer
no matter who owns/brews it.

So is the glass half empty or half full…well from my perspective at least it’s typically
got a good beer in it, and for now that’s what really counts.

Glenn DeLuca writes about beer and culture of drinking. He may
be reached by writing

***   ***   ***
Glenn DeLuca
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