Owning and Operating a Brewery: Part 3 of 1000 – Navigating Conglomeration

I want to start out this short rant of mine with a very simple statement. You want to sell your brewery to another brewery? Go for it. I don’t care. Basically no one should unless you own stock in that brewery. Otherwise, this is just craft beer’s social justice warriors not grasping that breweries are businesses. “Selling out” may or may not affect your product, time will tell. The classic justification trotted out by those who find themselves on the defensive (cough, Wicked Weed, cough) for doing this usually consists of “this will get our beer out to more people”….when its really about the truck of money that backed up to the loading dock. Once again, not judging just burning away the bullshit. If someone offered me money for my brewery, I would sell. It is a thing ultimately. A thing I love, a thing I created, a thing that gives me a creative outlet, but still a thing. And if someone wanted to buy a thing from me, I would sell it for a price. When Ballast Point was sold to Constellation for 1 BILLION dollars…of course it did. We are talking about orders of magnitude more money that I can’t imagine or will earn in my entire lifetime.

So I want to be clear that I don’t care about the “crafty” beer movement as much as most. I know they are capturing these brands so they can place “craft beer” in baseball stadiums and things that do directly hurt my brewery, but it is never my ambition to compete with InBev…at all. InBev isn’t creative or smart enough to make their own high quality brands, so they purchase them. Makes sense to me.

There are three purchases recently that make me slightly more concerned. First, the purchase of Northern Brewer. For those of you that don’t know (why are you reading this blog?) Northern Brewer is one of the largest homebrew supply shops in the country. Full disclosure, my wife’s cousin works there but I won’t pull punches here (he has nothing to do with the purchase). This is a dangerous move by Budweiser / InBev. They aren’t trying to control the homebrew market, I’m sure they don’t care about all the beer being made in basements across the country. When they did this several months ago, I predicted that they would start buying more ingredient suppliers (grains / hops). Once again, should have the owners of Northern Brewer sold to InBev? I don’t care if they do or don’t, that’s their thing, do with it what you will….they don’t owe me anything. If I feel strongly about it, I can use my money elsewhere, and maybe I do more now than I did before.

Second, my prediction of InBev buying suppliers (sort of) came true. InBev “purchased” the entire hop industry of South Africa. The reason why I say “sort of” is that basically all the hop farms in South Africa were put there by SABMiller and when Miller was purchased by InBev, those farms became property of InBev. 2017 will be the first year that those hops will be used exclusively by InBev brands though, previous years you could purchase those varieties from different brokers. No longer. This is another situation though, “do with your thing what you want…” You own a hop farm, you have no obligation to sell those hops to your “competitors”….you can use them all. What worries me is that there’s no reason why they will stop with South Africa. Sure it makes sense now but, for example, there are approximately 58,148 acres of hops in the U.S. If we assume that you can make $25,000 per acre of hops (for super expensive hop)…the entire US hop market is less than 1.4 billion dollars. InBev’s revenue for 2016 was 45.5 billion dollars. Yeah, this move makes me more worried. InBev has the financial power to purchase all the hops in the US and charge (WHATEVER) to the entire industry.

Let’s get to #3, Ratebeer. Ratebeer is a beer rating / review site that I myself have used. I stopped reviewing beers when I opened a brewery but I frequently use Ratebeer, Beeradvocate, and Untappd as references and resources. They are important databases that contain the knowledge, pedantry, and squabbling of hundreds of thousands of the most important professional appreciators of beer in the world. I’ve met some of my best friends through those websites. Ratebeer announced this week that in 2016, InBev bought a minority share in the website. So again, should Joe Tucker sell his website to InBev? Even a minority share? Sure, it is his thing…I probably sound like a broken record. But this isn’t the same as buying a small brewery in Phoenix or a homebrew shop or stating that you are no longer selling hops from your own farms….this is one of the largest companies in the world buying a portion of beer press.

I am not a complicated person. There are basically two things I respect: honesty and strength. I don’t mean physical strength necessarily, I mean being a strong person. Having a principle and standing by it, even when it can only hurt you. Your personal ethics help define your character, and your personal ethics are made up of all the things you will do even when those things are dangerous and harmful to your personal self or property. So, Ratebeer wasn’t “honest” about this acquisition. They hid the details for months, coming out after a “trial” period where they were able to demonstrate the benefit of this relationship to their other stakeholders including their users. OK, if you say so.

Does Ratebeer, as one of the most popular craft beer websites owe some transparency to their users? Do users have a right to know who has access and what the data is used for? Maybe maybe not. But if you don’t, your values must not include honesty…which means you lose my respect (see above). If Ratebeer views itself as an objective filter of the beer industry…they should behave as such.

Sam Calagione, the owner of Dogfish Head Brewing, had THIS to say about the acquisition. His desire to be removed from Ratebeer started somewhat of an internet riot. Dozens of breweries emailed Ratebeer asking to be removed from the website. If you are curious what happens when you ask Ratebeer to remove you from their site, you receive this email:

We’ve received your inquiry about content removal from RateBeer.

The beauty and value of RateBeer comes in our users’ ability to add publicly available content to our database. If there is a particular piece of content that you are concerned with, please refer to the processes defined in the Digital Copyright Millennium Copyright Act section of our Terms of Service here:
https://www.ratebeer.com/useragreement.asp

Thank you,

Joe Tucker

Since Sam’s blog post cited a few principles of transparency, I looked up the transparency standards of some real journalists, such as NPR. They are below:

Independence

To secure the public’s trust, we must make it clear that our primary allegiance is to the public. Any personal or professional interests that conflict with that allegiance, whether in appearance or in reality, risk compromising our credibility. We are vigilant in disclosing to both our supervisors and the public any circumstances where our loyalties may be divided – extending to the interests of spouses and other family members – and when necessary, we recuse ourselves from related coverage. Under no circumstances do we skew our reports for personal gain, to help NPR’s bottom line or to please those who fund us. Decisions about what we cover and how we do our work are made by our journalists, not by those who provide NPR with financial support.

• Conflicts of interest
• Interacting with funders
• Owning our news agenda
• Outside work
• Paying our own way
• Working for NPR while keeping the public first

So, many of you (most of you?) will disagree with me. I think I wrote this in such a way to annoy those who hate these acquisitions and annoy those who think they are a good idea. Here’s my closing thought…the craft beer industry has seen dramatic growth over the past 20 years. Shit, I…ME…THIS GUY…owns a fucking brewery. Yeah, it’s a popular and awesome industry….but the reality of this industry is that we are a tiny sliver of the market (sure a growing sliver of the market) that is basically controlled by a monopoly. The past several years of conglomeration demonstrates that the biggest players in this industry see that sliver and think its an opportunity. But when you look at their bottom line (45 billion) and I look at my tax returns for the brewery….it is hard to see how they couldn’t just crush me the second they noticed me.

I think I’ll leave it there, the 12% of the industry will start to shrink if the company that control 80% of the world market for this product wants it to. And they won’t do it by buying all of our breweries. They will do it by controlling the press, the ingredients, the distribution, the tap lines (pay to play), and any other ways they can. Proceed with caution.