Winning the Revolution, Losing the Peace

Exploring the Ups and Downs of the Recent History of Craft Beer

July 1, 2017 By Tom Acitelli

This story was adapted from the newly published second edition of The Audacity of Hops: The History of America’s Craft Beer Revolution by Tom Acitelli. Another book by Acitelli, Whiskey Business: How Small-Batch Distillers Are Transforming American Spirits, is also out now.

The commercial commenced with scenes of one of its breweries at work, including an anonymous pair of hands crinkling hops. The words “Budweiser Proudly a Macro Beer” popped onto the screen over the scenes, which also went on to include the famed Clydesdale horses and friends enjoying the brewery’s finished product.

Then came the Anheuser-Busch InBev commercial’s unmistakable angle: “It’s Not Brewed to Be Fussed Over.”

The ad superimposed those last two words over an earnest-looking man with a handlebar mustache and glasses dipping his nose over the rim of a goblet of dark beer.

In case any viewers missed the point, another shot of tweedy men analyzing their obvious craft beers in what looked like a trendy urban bar followed further shots of casual enjoyment of an ice-cold Bud, as did the words, “It’s Brewed for Drinking, Not for Dissecting.” On and on it went for a full minute: “Let Them Sip Their Pumpkin Peach Ale: We’ll Be Brewing Us Some Golden Suds.”

The commercial aired during what turned out to be the single-most-watched television show in American history to that point: Super Bowl XLIX between the New England Patriots and the Seattle Seahawks on Feb. 1, 2015. More than 114 million people tuned in for the game, and presumably many of that number saw the commercial, too—or at least saw it later, if tens of thousands of YouTube replays are any evidence.

It was clearly designed to mock, as one AB InBev executive put it, “the overwrought pretentiousness that exists in some small corners of the beer landscape that is around beer snobbery.” It worked.

“The whole ad was uncalled for,” Larry Bell of Bell’s told The Chicago Tribune. His brewery went so far as to release 48 bottles of what it called Pumpkin Peach Ale, made with peach puree and a pumpkin Bell grew on the roof of his Chicago home. “It’s a fuck you to Anheuser-Busch because they sent us a fuck you,” the owner of the Midwest’s oldest craft brewery told the Tribune.

Even fellow Big Beer titan MillerCoors let AB InBev have it, lecturing its archrival in a tweet: “We believe each and every style of beer is worth fussing over.”

Also, it seemed to some that AB InBev had singled out for lampoonery millennials, that generation of approximately 75 million Americans born after 1980 and now coming into their financial own. “This is a somewhat odd approach to winning over young drinkers, which, presumably, is AB-InBev’s goal,” one writer noted.

Many industry observers, too, pounced on the fact that one of the several craft breweries that AB InBev had purchased recently, Seattle’s Elysian Brewing, had produced at least two pumpkin-infused beers.

“I find it kind of incredible that ABI would be so tone-deaf as to pretty directly (even if unwittingly) call out one of the breweries they have recently acquired, even as the brewery is dealing with the anger of the beer community in reaction to the sale,” Dick Cantwell, a founder of Elysian who opposed the craft brewery’s sale, wrote amid the fallout. “It’s made a difficult situation even more painful.”

Finally, the whole thing smacked of desperation. Here was the world’s largest brewery spending $9 million—the cost of a 60-second Super Bowl commercial—to tell the world that it did not feel threatened by craft beer.

Yet Anheuser-Busch InBev likely got the last laugh. Reaching more than one-third of the American populace all at once, the Super Bowl ad was the single, biggest burst of press American craft beer had yet gotten. It was just that, to the tens of millions who did not follow the industry that closely, it was bad press, a sign of little love lost between craft beer and its longtime Moriarty.

Infighting Ensues

Not that craft beer in the 2010s needed any help with unfavorable publicity. There were the wider interrelated controversies regarding the definition of craft beer (and brewing) and whether some companies still fit that definition.

And then there were multiple smaller controversies that seemed big to those involved and that, taken together, fostered a kind of tinny static not endured in two decades. D.G. Yuengling & Son’s freshly minted craft status via a Brewers Association definition change in 2014, and the Pennsylvania brewery’s continued distribution expansion, rankled smaller competitors.

Yuengling’s rollout—it spilled into 6,000 Massachusetts bars, restaurants and stores pretty much all at once in late 2014, for instance—meant other brands got bumped. In perhaps the most ironic instance, a Yuengling tap replaced one for a beer called Slumbrew Porter Square Porter, from the Somerville Brewing Co. in the Boston suburb—at a bar in Somerville’s Porter Square.

Also in Massachusetts in late 2014, Dann Paquette, the then-owner of a Boston-area craft brewing company, accused two bars over Twitter of essentially accepting bribes in exchange for carrying beers from certain breweries.

The accusations of pay-to-play—or, more accurately perhaps, pay-to-pour—rent the normally collegial New England craft beer scene and led to a state investigation. That investigation, in turn, led to an approximately $2.5 million fine against the largest craft beer distributor in Massachusetts.

On the other side of the continent and a couple of months later, Tony Magee’s Lagunitas Brewing Co. sued Ken Grossman’s Sierra Nevada Brewing Co. over supposed copyright infringement. At issue was a new Sierra Nevada release called Hop Hunter IPA, the packaging for which Lagunitas contended in federal court looked strikingly similar to the packaging for its own flagship IPA, which had done so much to not only establish Magee’s brewery but also the very IPA style in the United States.

After a storm of criticism, Magee announced a day after his company had filed it that he was dropping the lawsuit. “I went home feeling like I had been beaten up, and all I did was stare at the screen,” Magee told a San Francisco publication.

The Lagunitas–Sierra Nevada dust-up highlighted similar disputes in an American craft beer movement with more beer names, and explanations for them, than ever. Simply put, the industry appeared to be running out of words and images to describe what it was producing. This led to infighting over the use of certain puns related to common terms such as “hops” and to the names of beers themselves.

One of the more noteworthy instances again involved Lagunitas. Atlanta’s SweetWater Brewing Co., whose flagship was an extra pale ale called “420”—a common code phrase for smoking marijuana—sent a cease-and-desist letter to Magee’s outfit, which had for years used “420” in its beer descriptions. Lagunitas dropped the term—SweetWater owned the commercial trademark for 420.

Craft brewers found grounds for conflict even on an issue that seemed tailored for unity: further excise tax breaks from the federal government. The original per-barrel excise tax cut in 1976 had helped spur craft beer’s tremendous growth. Its preservation in 1991 was instrumental in sustaining that growth.

In 2013, the Brewers Association and its congressional allies started pushing another tax cut. It would halve the amount, to $3.50, that breweries paid on their first 60,000 barrels annually and reduce by $2 a barrel the tax on all subsequent barrels up to 2 million. Each barrel above 2 million would be taxed at the regular rate of $18. And only breweries producing less than 6 million barrels annually would qualify for the tax breaks.

This last facet of the proposal is what irked some craft brewers (and observers outside the industry). It was one thing to support a cut for the industry’s legion of smaller breweries—most operations easily fell below that annual 60,000-barrel cutoff—but it was another to help breweries such as the Boston Beer Co., Yuengling and Sierra Nevada that produced hundreds of thousands, if not millions, of barrels a year and whose principal owners were billionaires on paper.

That these already-flush companies would reap most of the benefits of the proposed tax break thoroughly annoyed some of their colleagues. Besides, as many inside and outside the industry noted, craft beer was growing comfortably in the new decade. Did it really need a tax cut to spur growth?

In the end, and due in part to significant pressure from Big Beer’s lobbying for its own tax reduction, the Brewers Association in mid-2015 swung behind revised legislation that reserved most of the benefits for breweries making no more than 2 million barrels annually, rather than 6 million.

This sparring between larger and smaller operations also manifested itself in marketshare. In October 2016, Stone Brewing, one of the biggest craft breweries, announced it was laying off about 5 percent of its approximately 1,100 employees. The company explained in a statement that competition from Big Beer’s newly acquired craft breweries and “the further proliferation of small, hyperlocal breweries” forced its hand in the layoffs.

That latter reason—the launch of so many smaller breweries—underlined a bitterly ironic trend in the craft beer movement circa 2016. Localness had been one of the defining features of the movement early on—beer as a local product from a local company for largely local consumers, a return to the old days of American brewing in general, before the post–World War II rise of the Big Beer conglomerates.

Now, though, these thousands of smaller breweries with their local fan bases were eating into the bottom lines of bigger craft beer pioneers who had leaned in part on localness to grow during their own early days.

What’s more, these upstarts were claiming reputation, too, not just sales. Few people alive had done more to popularize American craft beer than Boston Beer’s Jim Koch. Yet, a January 2015 Boston Magazine cover story, shared widely on social media, explained that “local beer geeks—the industry’s connoisseurs—think [Koch has] lost his edge.”

Their main rationale? Like with other larger craft breweries, the beer was just … too familiar. The co-owner of a Boston beer bar pronounced the entire Sam Adams line “mediocre,” in fact, mostly because he saw it as so “middle-of-the-road” compared with what else was now out there.

Finally, some familiar arguments found their ways back into the American craft beer movememagnt. Occasionally, owners of physical breweries would publicly criticize contract brewers or those, such as Boston Beer, that initially built themselves up through contract brewing before launching their own facilities.

And numerous brewers mounted vigorous assaults against that stylistic hegemon, the India pale ale and its iterations, which remained the top-selling craft beer style in the United States, a status that AB InBev’s takeover of IPA producers such as Goose Island only enhanced. Hence the rise of esoteric styles such as gose and the session beer trend.

A Movement in Flux

The disputes, the Big Beer and private equity takeovers, the definitional challenges, the reactions and counterreactions to major trends—it all fomented a general sense of an American craft beer movement in flux, as did a spate of transitions in the upper ranks of breweries and organizations beginning in 2014.

Daniel Bradford sold All About Beer Magazine and its World Beer Festivals to Chris Rice, a business-side executive at the magazine who became its president and publisher. Charlie Papazian stepped down as president of the Brewers Association he had been so instrumental in building up, with Bob Pease, its chief operating officer, succeeding him.

New Belgium Brewing Co.’s Kim Jordan stepped down as CEO to become executive chair of the brewery’s board of directors. Greg Koch made a similar move at Stone, transitioning from his day-to-day role to fill a newly minted executive chairman position. Stone’s longtime brewmaster, Mitch Steele, also left the company to found his own concern. Steve Dresler, Sierra Nevada’s brewmaster since the early 1980s, also announced his exit due to retirement in 2017.

Rich Doyle, a founder of the Mass. Bay Brewing Co. (better known as Harpoon) and its chief executive for years, stepped down as part of a stake sale to the company’s employees. Doyle in early 2015 launched a private equity fund to invest in craft brewers wishing to avoid takeovers by entities not as steeped in the business as he. The fund’s first acquisition was Louisiana’s Abita Brewing Co., now the South’s oldest craft brewery.

As much as change seemed the only constant, though, there was a fair sense of déjà vu in the controversies and the complaints, and in the change itself.

The American craft beer movement since Fritz Maytag’s rescue of Anchor Brewing in 1965 had seen many exits, a lot of them abrupt, as well as shakeouts. It had felt the financial hammer of a disgruntled Big Beer sector and the avaricious indifference of financial markets. The tax debate was a rerun of a rerun. Prodigious growth was nothing new, nor were struggles with distribution, government red tape or defining just what the whole thing was supposed to be.

And, while many analysts and breweries sought to credit or blame craft beer’s explosive growth for the trends and challenges in the second decade of the 21st century, there might have been much simpler explanations.

The global market for mergers and acquisitions was hotter than at any time in modern business history, for one thing. Craft beer was but one of many industries that the bullish atmosphere and access to cheap financing affected. This suggested that the pace of Big Beer and private equity acquisitions might ebb. What then?

The same question could be asked of the transitions underway at breweries, a trend less to do with the industry’s growth than with simple actuarial tables—people aged, moved on. Jim Koch, when asked in late 2014 about his strategy for continuing to run the Boston Beer Co., the still-trim 65-year-old replied, “To not die.”

The Future

Whatever the reasons, the repeats and the changes were being enacted—and re-enacted—on a much grander scale than ever before. It was a scale that ensured that more people than at any previous time were paying attention and that, finally, the nation’s palate might tip decisively away from watery bastardizations of pilsners to the kaleidoscope of styles American craft beer did so much to promote.

In a September 2015 Tumblr post about his company’s 50-50 partnership with Heineken, Lagunitas’ Tony Magee wrote: “Beer is an old biz in the U.S. and it used to be very orderly. Craft disrupted that and now the old order wants to find a way back to the past. It won’t work, but it’s going to try.”

Magee was right. Craft beer had upended decades-old ways of doing things in the industry and marketplace, and, in doing that, helped mightily to chart a mesmerizing new direction in food and drink.

What came next was anyone’s guess. The American craft beer movement had long ago pushed into uncharted territory and was now farther from the shore than ever, the end nowhere in sight, the start now slightly fuzzy, and only one thing certain. As Magee headlined his explanation of his own seismic shift, “The future will not be like the past.”

Indeed. On May 4, 2017, not even two years after that Tumblr post, Magee’s Lagunitas Brewing announced it was selling its remaining 50 percent stake to Heineken. As part of the deal, Lagunitas will become the Dutch brewing giant’s global craft brand and Magee its global craft director. Both moves would have been inconceivable just a few years ago.