She said.......
It's about the beer
He said........

Gina Miller            and                Bill Keeper
GINA-

Hey Bill,  -  Last month we discussed what "rare" really means and I'm still confused.  Well now I
have another  term that remains puzzling - craft beer. Its definition is as amorphous as it ever
was. And  to my mind that helps no one but the beer industry’s largest brewers like Pabst. Oh,
stop rolling your eyes Bill.  Even if you don't like the topic at least listen to what I have to say.

Yes, I want to talk about Pabst, the beer most craft drinkers make fun despite the fact that it
can fit under the Brewers Association's (BA) definition of craft..  Of course there are many
reasons to consider Pabst outside the “craft” beer realm: Its Schlitz brand was once bigger
than Anheuser-Busch's BUD, its portfolio is heavy with light lager, it now partners with multiple
international brands including Mexico’s Minerva and China’s Tsingtao, and it has a strong
business in decidedly non-craft flavored malt beverages such as Not Your Father’s Root Beer.

But various changes to the Brewers Association's (BA) definition have not only made Pabst’s
status an arguable point, but they’ve also diluted the essence of the term “craft beer.” The
current definition has three pillars: “small,” “independent” and “traditional.” While Pabst would
never have fit under the Brewers Association’s original limit for “small” — 2 million barrels of
annual production — the 5.5 million barrels Pabst produced in 2016 is below the 6-million-
barrel mark the BA set when it changed its barrel production limit a few years ago to
accommodate the growth of Boston Beer Co. and its Samuel Adams brand

Pabst would also have been easily excluded from the craft label for producing mostly lager
brewed with adjuncts such as corn or rice. However, the BA changed the “traditional” portion of
its definition in 2015 to include pre-Prohibition brewers, such as D.G. Yuengling and August
Schell, which have consistently brewed with maize (an ingredient once considered non-
traditional by BA. That leaves the “independent” portion, which states that less than 25% of a
brewery can be “owned or controlled (or equivalent economic interest) by an alcohol industry
member that is not itself a craft brewer.” Pabst is owned by Kashper and the private-equity firm
TSG Consumer Partners, and ownership by private-equity firms has been generally accepted
by the Brewers Association.

And that begs the question just why is Boston Beer considered craft?  In 2015, they produced
4.2 million barrels and was closer in production to Pabst’s 5.5 million than to Yuengling’s 2.8
million. They also dabbled in flavored malt beverages (Twisted Tea) and cider (Angry Orchard
to Pabst-tied Woodchuck), just as Pabst did. And if you say Pabst's export volume pushes it
over the limit it doesn't seem to effect Brooklyn Brewery remaining “craft,” despite a majority of
its production being brewed for export.

As I told you Bill, the BA's definition helps the industry's largest brewers which in turn then can
hurt the small brewers who make the great beer we both love.  


That's it from me, chug-a-lug, Bill.....see you next time.
BILL-  

Hello Gina -  Do you have secret cameras in my office?  How else did you know I was rolling my
eyes?  Anyway, let me agree that the line that the Brewers Association uses to define craft
brewers has become incredibly fine and that all the changes in it has produced some unintended
consequences. Though only two “craft” brewers have cleared the 2 million barrel production bar,
raising the acceptable bar for a “craft” brewer to 6 million it nonetheless has empowered brewers
to attempt to grow to Pabst’s size.

The BA’s tinkering with its definition of a craft brewer made it OK for relatively large brewers to be
“craft,” but the stumbles of “craft” brewers attempting to reach that size has only played into big
brewers’ hands. Each time Anheuser-Busch InBev, MillerCoors, Heineken, Mahou San Miguel
(Founders) or Kirin invests in a craft brewer, one of the first declarations they make is that
everyone at the brewery will keep their jobs. While that may not be true for people at corporate
headquarters (both MillerCoors and Pabst had layoffs at the corporate level last year), it’s been  
true so far at the acquired breweries.

That may sound like a grandiose promise, but it’s a promise that growing breweries who’ve
recapitalized through partnerships or outright acquisition have been able to keep. Unfortunately
that hasn’t been nearly as true with their true (as you say) craft counterparts, who’ve either
spurned buyers or have been unable to find investors willing to fund their payrolls and lofty
aspirations.  Because of that many of those breweries have not grown, added jobs, or prospered.

To be honest I really don't care about the Brewers Association’s definition of a craft brewer.  I
understand it's important to brewers because of tax and marketing concerns but to me the only
ting that counts is  my personal interpretation of what a craft brewer should be. To be more
specific that means the brewery does not use adjuncts (in general), has local operations with
deep roots, focuses on a variety of styles, experiments with interesting one-offs, tries to use
locally ingredients, and treats its workers fairly.  

You use Samuel Adams as an example and it certainly helped make your point.  Samuel Adams
beers are brewed at three separate facilities. One is a former Stroh plant in Pennsylvania,
another is a former Hudepohl plant in Cincinnati. They aren't producing light lager out of those
plants, but they are producing beer on that scale for 50-state distribution. That requires
automation, it requires scale and it requires production a few tiers above hand-crafted.

The only thing I will say that you will likely disagree with is that I think you don't necessarily need
to own your own brewery to be a craft brewer.  21st Amendment in San Francisco brewed its
beer at a facility in Minnesota until just recently. Notch Brewing in Massachusetts used a third-
party brewery to brew its beer until just recently. Contract brewing and alternating proprietorship
are common practices among craft brewers.

Gina, I understand that it's simplistic and dangerous to say if the beer is good that's all that
counts. The bigger a brewery gets the more likely it is to cut corners and focus on the bottom
line.  There's nothing wrong with profit but a blind devotion to it will eventually harm quality.

Here's looking at you Gina
Round 64
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