Many people were surprised (and angry) to hear the news that Anheuser-Busch had purchased Chicago’s Goose Island Beer Company. We at Callahan Creek were not. I had spent the previous week at the Craft Brewers Association annual conference. By the way, have you ever landed at an airport expecting to attend a conference, and then received a call letting you know you have yet to register and also that the conference is full? It was truly a fantastic conference. As you can expect, there was lots of tasting and lots of beer talk, none of which had to do with Goose Island. A secret well kept.
So here are a few reasons the Goose Island deal was no surprise.
- Craft brewers grew 11% by volume in 2010.
- Craft brewers produced just under 10 million bbls.
- Craft pricing went up $0.42/case in scans.
Source: State of Craft Brewing Industry, Paul Gratza presentation, March 2011
Even without the financial data to support the need for the big boys to get into the category (ShockTop and Blue Moon do not count. They are Tweeners), the most telling indicator was the number of conference attendees, nearly 4,000. The talk throughout the conference was that there were only 200 people and two vendors less than twenty years ago. It is evidence that the barriers of entry are much lower for people to brew beer these days – more access to equipment, documented processes and an industry comprised of veterans with of history a collaboration and sharing.
An interesting change often occurs when it’s easier to enter an industry that’s growing. The motivation for starting the endeavor shifts from what drove its pioneers, integrity and uniqueness of the product (the heart of craft beer), toward how much money can be made. The unique taste and adventure of craft beer is what differentiates it from mass, and if VC money continues to flow into the category (e.g., On April 4, Iron City Brewing Co. was purchased by Uni-World Capital, L.P.), it will likely drive even more consolidation and a primary focus on investment returns. Some regional craft beer and microbrew favorites will become “mainstream” in order to appeal to a broader audience, perhaps losing some of the personality and character that made them different. Other possible actions may include regional brewers buying out local nuisances to reinforce their key difference: unique and interesting taste across a variety of beers.
Given our experience with Boulevard and Free State, we understand the work and competition ahead. It’s a fantastic time to be in the category.
By the way, my favorite beer from the conference was a Double Barrel Ale from Firestone Walker Brewery. This business can be fun.