PORTLAND, Ore. (MainStreet) – There are more craft beer brewers today than a year ago, but there are still a bunch of brewers formerly known as craft feeling left out of the club.
Last year, the Brewers Association craft beer industry group cut some slack to brewers who use maize, corn or rice as adjuncts in their brewing process and increased their ranks considerably. Before that, the Brewers association — which also runs the Great American Beer Festival and the American Homebrewers Association — was leaving out some of the oldest independent breweries in the country.
After a whole lot of soul searching and a big change of heart the association changed its definition of a craft brewer last year — already flexed in 2010 to raise the production limit for small brewers from 2 million barrels to 6 million to accommodate Samuel Adams producer Boston Beer. By softening its stance against the use of rice and corn as adjuncts and whittling down the “traditional” pillar of its craft brewer definition, the Brewers Association finally welcomed brewers including Pottsville, Pa.-based D.G. Yuengling & Son (the oldest in the U.S., founded in 1829); St. Marys, Pa.-based Straub Brewing (1872); New Ulm, Minn.-based August Schell Brewing (1860); and Monroe, Wis.-based Minhas Craft Brewery (1845 as Blumer Brewing) into the fold.
While the new definition technically won't go into effect until the Brewers Association compiles its stats for 2014 in February, the change was a huge deal for the group and the craft beer community in general. The Brewers Association's board of directors includes some of the most influential names in craft beer, including Sierra Nevada founder Ken Grossman, New Belgium Chief Executive Kim Jordan, Dogfish Head creator Sam Calagione, Deschutes Brewing leader Larry Fish and Allagash head Rob Tod. Those are some of the longest-tenured individuals in this corner of the industry, and their craft brewer definition's impact on small legacy brewers likely wasn't lost on them.
One of the bigger issues, however, was that the Brewers Association's stance was causing some fracturing among small brewers at a time craft beer could least afford it. The Brewers Association had been sponsoring the Small BREW Act in Congress and pushing for tax breaks for brewers that produce 6 million barrels or less. The Washington-based Beer Institute industry lobbying group had been supporting the competing BEER Act that would give tax breaks to all brewers, but in ] increments based on production. The Brewers Association's proposal draws a firm line between “craft” and importers/big brewers, but it looked shaky when BA was actively deriding small brewers as “crafty.” The board of directors knew it needed those small brewers' support but, according to BA's statement, “to change horses in the middle of the Congressional session could have burned the association's ability to get Congressional co-sponsors for any legislation, perhaps for a couple of decades.”
The political implications of this tweak shouldn't be overlooked. The Brewers Association acknowledges that its is trying to take 10% of the beer market by volume and changed its mission statement to reflect a new goal of 20% market share by 2020. By bringing Yuengling on board, BA just added a brewer that produced 2.79 million barrels in 2013.
That said, it doesn't mean the Brewers Association is willing to bring in any brewery with less than 6 million barrels of U.S. production. The “independent” portion of its craft brewer definition still applies, and still excludes any brewer selling more than a 25% stake of their operation to a member of the alcohol industry that isn't a craft brewer. That leaves out Fordham and Old Dominion, as those Delaware-based brewers are 49% owned by Anheuser-Busch InBev(BUD) - Get Report , and recent Patchogue, N.Y.-based A-B acquisition Blue Point Brewing.
That 25% stake is now the line of demarcation. Fall on or beneath it, as Athens, Ga.-based Terrapin Beer does with a sub-25% stake owned by MillerCoors (SBMRY) (TAP) - Get Report — and you're in. Drift above it with a share owned by MillerCoors, A-B InBev or any other large brewer BA deems inappropriate (though Kansas City-based Boulevard Brewing and Cooperstown, N.Y.-based Brewery Ommegang's owner, Belgium's Duvel Moortgat, is just fine by the BA) and you're excommunicated.
While the craft beer blacklist isn't what it used to be, there are still enough notable brewers on it to make it worth mentioning. Here are just five:
5. Goose Island Brewery
Why it's not craft: Owned by Anheuser-Busch InBev
Goose Island couldn't win, so why try?
The Chicago brewery got its start in 1988 but got its first taste of craft beer wrath when it joined up with Redhook and Widmer Brothers in the Craft Brewers Alliance in 2006. Despite saturating the Chicagoland area in 312 Urban Wheat during the summer and warming it with its barrel-aged Bourbon Country Stout during the winter, it occasionally drew critiques for associating with a collective that was distributed and partially owned by Anheuser-Busch.
Despite a trophy case full of medals from the Brewers Association's Great American Beer Festival, whispers about the supposedly inevitable drop in Goose Island's quality became deafening. Last year, founder John Hall sold the company to Anheuser-Busch InBev outright for $38.8 million. Since then, questions about Goose Island becoming a national brand (which it was, to a degree, when the Craft Brewers Alliance brewed it in various locations) and about Bourbon County Stout going year-round have continued to circulate.
There's still release-day, line-waiting, ticket-holding demand for BCS in Chicago this year and nothing about Goose Island's numbers indicate outsized success as A-B's “craft” beer brand. According to Beer Marketer's Insights, Goose Island sold 150,000 barrels of beer in 2011, its first year with Anheuser-Busch. Not only is that less than half of the 623,000 barrels sold by the Craft Brew Alliance in the same year, but it's a fraction of the 713,000 barrels sold by Colorado-based New Belgium and the 858,000 barrels unloaded by California-based Sierra Nevada. It's a little brewery in a big company, but it's getting a lot more company these days.
4. Mendocino Brewing
Why it's not craft: Owned by UB Group in Bangalore, India
It's one of craft beer's most important breweries, as well as one of its most cautionary tales. Back in 1983, Michael Laybourn and Norman Franks bought the brewing equipment from pioneering microbrewery New Albion Brewing and hired New Albion founder Jack McAuliffe to run the place. McAuliffe came up with the recipe for the brewery's flagship Red Tail amber ale and made it the cornerstone of California's first brewpub and only the second post-Prohibition brewpub in the U.S. behind Bert Grant's Yakima Brewing.
That lasted for nine years before the owners got the idea to sell shares in the company and advertise the sale with fliers in their six-packs. By 1997, UB Group owner Vijay Mallya had bought up controlling interest in the company. The Brewers Association craft beer industry group actively considers Mendocino not craft, while Mendocino-owned brewing facilities in Saratoga Springs, N.Y., are used largely to produce UB's Kingfisher line of beers. Red Tail Ale and its home brewpub still exist as relics of what once were, but Mendocino Brewing is a hollow shell of the promising brewery it was 30 years ago.
The Brewers Association doesn't consider it a craft beer, largely because the overwhelming majority of UB's U.S. output is Kingfisher light lager. If it did, Mendocino would have been the 31st-largest craft brewer in the U.S. in 2013 and the 41st-largest brewer overall.
3. 10 Barrel Brewing
Why it's not craft: Owned by Anehuser-Busch InBev
In many corners of the country, beer drinkers would simply stop buying a beer they either didn't like or no longer felt like supporting.
In Bend, those drinkers are a bit more vocal about it. When 10 Barrel sold to A-B late last year, their Facebook page and Twitter feed were filled with angry voices declaring them sellouts, vowing never to drink their beer again and trying to turn anyone within shouting distance against the brewery. This has gone on for months and still hasn't ended.
To some, it may look like the outsized zealotry of a fanbase that may need to drink just a little less beer. To locals, however, it speaks to just how deep the relationship with 10 Barrel was and what the beer community in Bend and Oregon in general had invested into the brand.
After being founded as Wildfire Brewing back in 2006, the brewery switched names to reflect its original 10-barrel brewing system in 2009 and made waves by hiring away brewmaster Jimmy Seifrit from Bend neighbor Deschutes Brewing in 2011. 10 Barrel followed that by hiring brewer Tonya Cornett away from Bend Brewing that same year to serve as their head of research and development and absconding with hop-centric brewer Shawn Kelso from Baker City, Ore.-based Barley Brown's in 2012 to lead the brewing team in the Boise, Idaho, brewpub that just opened last year. Earlier this month, it hired a fourth award-winning brewer — Whitney Burnside of Pacific City, Ore.-based Pelican Brewing — to run its third brewpub when it opens in Portland, Ore., this year.
10 Barrel just won three medals at the Great American Beer Festival in Denver in October — including a gold for Cornett's Cucumber Crush Berliner Weisse — and was definitely on the “craft” side of the “craft vs. crafty” debate. Now, to its harshest critics, 10 Barrel just joins Blue Point and Goose Island on A-B's craft trophy wall. To its supporters, it's still the brewery that made Apocalypse IPA and a stable of other great beers. To its owners, it's just a better-funded, better-supplied version of the brewery they ran before. To the Brewers Association, 10 Barrel is a far less independent version of its former self that just gave itself every advantage craft brewers don't typically have. It's not saying 10 Barrel isn't a quality brewery: It's just saying it isn't craft anymore.
2. Pyramid Brewery/Magic Hat Brewing
Why it's not craft: “Imported adjunct beer sales exceed domestic production”
This has nothing to do with Pyramid's apricot beer, its brewpub in Seattle, its restaurants or its bland labeling that make it look oddly like Costco house brew. It has nothing to do with Magic Hat's apricot beer or its Burlington, Vt., brewery being surrounded by high-profile competition such as Hill Farmstead and Heady Topper maker The Alchemist.
Remarkably, it doesn't even have much to do with who owns those two breweries. Pyramid's been on a wild ride since 2008, when it was sold to Magic Hat Brewing for roughly $25 million. Just two years later, investment firm KPS Capital Partners and its North American Breweries snatched up both Pyramid and Magic Hat and included them in its stable alongside beers such as Genesee Cream Ale, Dundee Honey Brown, Canada's Labatt Blue and Costa Rica's Imperial.
In 2012, KPS Capital sold NAB to Cerveceria Costa Rica, a subsidiary of Florida Ice and Farm, for $388 million. That makes Pyramid, Magic Hat and tiny Portland, Ore.-based Portland Brewing even more minute portions of a large international conglomerate.
Beer trade publications used to break out Magic Hat and Pyramid's sales separately and last clocked them in at 337,000 barrels in 2012. That's about equal to the 336,000 they sold both the year before and in 2008. But the overall NAB number including Genesee and imports jumped to nearly 2.6 million barrels. Again, not inherently bad, but the fact that those barrels not only include Labatt's — an Anheuser-Busch InBev product produced in Canada — but include more of it than any is amount of beer that NAB produces in the U.S., means it has to go.
That doesn't mean those breweries can never be craft again, mind you. It just means that Magic Hat, Pyramid and Portland have to hope that demand for Labatt's wanes a bit. For example, Boulevard Brewing in Kansas City and Brewery Ommegang in Cooperstown, N.Y., are owned by Belgian brewer Duvel Mortgaat, but each is still considered craft because Duvel imports relatively little beer into the United States. Portland-based BridgePort and Shiner, Texas-based Shiner, meanwhile, only gained “craft” status in 2006 when parent company Gambrinus lost the right to import Corona. Though tastes have shifted since the last time Magic Hat and Pyramid were considered “craft,” BA would be more than happy to welcome them back as soon as they ditch their awkward Canadian friend.
Well, it's 32.2%, but why make a big deal about percentages?
Beer Marketer's Insights doesn't, which is why Executive Editor Eric Shepard includes CBA in its craft beer numbers. That group's Widmer Brothers Brewery operation got its start when Kurt and Rob Widmer first opened shop in Portland, Ore., in 1984. Its Redhook brand, meanwhile, has been around since 1981 and has breweries in Washington and New Hampshire. Even relative newcomer Kona Brewing has made beer on Hawaii's big island since 1994. In Shepard's view, all of that far outweighs the percentage of A-B ownership.
“The notion that Rob and Kurt Widmer aren't craft brewers is an absurdity to me,” he says. “ At 24% [A-B ownership share] they're pure and at 26% they're dirty? There's a certain sense of it being ludicrous."
Yet BA and its supporters say that the 25% stake isn't so arbitrary. While the CBA says A-B has no real administrative control or production input and functions more as a partner and lender, the BA and its associates say CBA's refusal to buy back the offending 7.2% stake says that A-B is pulling the strings.. Meanwhile, the Widmer Brothers still have a big stake in the company and Kurt Widmer still serves as its chairman. His brewery still serves as the company's creative craft nexus, while the Redhook brand has been revived as a gateway beer for non-craft drinkers. Through partnerships with sports radio host Dan Patrick and the Buffalo Wild Wings restaurant chain, Redhook is doing what its cred-obsessed “craft” counterparts are too aloof or scared to do: Going after former light-lager drinkers where they live.
Kurt Widmer, for his part, says his brewery and CBA's exclusion is petty nonsense that only closes off options for craft brewers. BA want to put as much distance between itself and the big brewers as possible, but it does so by punishing small, pioneering brewers who worked the system and got A-B to do their heavy lifting for them. Considering the heavy consolidation within the beer distribution industry, the Craft Brew Alliance may not be the last to strike a distribution deal such as this.
— By Jason Notte for MainStreet
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