Craft Business Daily:
|As we come off a year that saw the total amount of M&A and operational breweries at an all-time high, there has been no shortage of ink on “the squeeze.”
Simon Thorpe gave an extensive speech on the subject at Brewbound’s San Diego session. The CEO of Duvel Moortgat spoke on the certain pressures craft brewers are feeling and shared tips to avoid becoming “pulp” [see CBD 12-09-2015].
Now, the Charlottesville Tomorrow out of Charlottesville, Virginia, has offered a focused look on the squeeze and how it’s impacting their brewers.
Hunter Smith, president and head brewer at Charlottesville’s Champion Brewing, said macrobrewers’ expertise in “marketing and advertising” leaves him feeling a bit apprehensive. “Without customers doing a ton of independent research, it’s really easy to sell a [non-independent brand] just like it is the product of a small-town handmade craft brewery … That is where independent brewers like myself have concerns,” said Hunter.
It’s the reason why educating consumers has become one of Hunter’s top priorities. “It’s really important to know who owns your brewery, because the beers will still be good,” he said. “But [what if the money] all goes up to one office in South Africa or Belgium?”
But Bart Watson, chief economist at the Brewers Association, said “the real danger” is the big guy’s influence on distribution networks. You’ve likely heard of Anheuser-Busch’s VAIP incentive program, which “could provide up to $1.5 million for distributors who sell 98% ABI products,” per WSJ.
The BA doesn’t have any “problem with AB incentivizing their distributors to sell more of their products,” Bart said. “We have an issue with them incentivizing distributors not to sell competitors’ products. … This is an access-to-market issue for small independents. If one channel is now unavailable, they only have one option, and one option isn’t an option, it is a forced choice.”
On the other side, Robbie O’Cain, brewmaster at Crozet’s Starr Hill Brewery, said that as of now they haven’t seen any detrimental effects from A-B’s new program. He admitted, “That’s where you could have some issues, but so far with our wholesalers there have been no problems.”
RACE TO NATIONAL. Another common corollary of “the squeeze” is the race for craft brewers to reach national distribution. Readers have told us, in fact, that they’re surprised at the size of some brewers rapidly opening up new markets, who seem to want to reach critical mass before some coming implosion.
“I don’t want to say it cannot happen … but certainly with 4,000-plus breweries in the country, the challenges are getting steeper,” Bart said.
First Beverage director, Ryan Lake, agrees with Bart’s sentiments. “I don’t know how many more will become national… I don’t know if there is room for five more national brands or if it is two or if it is 10, I just know it’s getting harder,” Ryan said.
It’s the “million-dollar question,” Hunter said. “If consolidation starts taking all the opportunity for market share, then people have to start picking, OK, we can only be this big … I still think it is perfectly reasonable to think that everyone is going to have their little piece.
“I don’t think that there is going to be a paradigm shift now that big beer wants to start carrying craft beer that we’re all screwed,” he said. “I don’t think that it’s going to change the underlying reason that people have always bought craft beer: that it tastes better, that it is made with better ingredients and there is a face and a name that you are supporting.”
Still, Bart believes breweries are now taking steps to avoid stretching themselves too thin. “We are seeing depth rather than breadth of distribution — focusing on one area, rather than many different places,” he said.
Champion, for example, has a relatively centralized footprint. The brewer is hoping to churn out 9,000-10,000 barrels this year and will send them out in Virginia, North Carolina and Washington, D.C.