PORTLAND, Ore. (TheStreet) -- The most common narrative surrounding craft beer is that it's a thriving, growing niche of small brewers looking to take on the big beer establishment.But by whose definition? The Brewers Association craft beer industry group reserves the right to define "craft" as its sees fit and boils its definition down to three key qualifications: A craft brewer must be small, which in this case means its produces 6 million barrels a year or less; it must be independent, which means less than 25% of it is owned by a company that is not considered a craft brewer; and it must be traditional, which requires using an all-malt beer as its flagship or using malt -- instead of adjuncts such as corn and rice -- or makes at least 50% of its beers without using those adjuncts for anything other than enhancing flavor. By those qualifications, the craft beer industry produced 13.2 million barrels last year, up from 11.5 million in 2011. It grew 15% by volume and 17% in dollar amount last year to take a 6.5% share of the beer industry's production and 10.2% of its revenue. That's all assuming, however, that the association's perception of craft lines up with everyone else's. The folks at beer industry publication Beer Marketer's Insights, for examples, tend to quibble with the Brewers Association on a few minor points. Within the past five years, the publication has broken out beer into seven price-based categories: imports (Guinness, Duvel), craft (Sierra Nevada, New Belgium, super premium (Blue Moon, Bud Light Lime), premium (Budweiser, Coors, Miller), sub premium (Pabst Blue Ribbon, Keystone), malternatives (Mike's Hard Lemonade, Smirnoff Ice), malt liquor (Colt 45, Steel Reserve) and no alcohol. Beer Marketer's Insights agrees that Chicago-based Goose Island, which was bought by Anheuser-Busch InBev ( BUD) two years ago and has some of its beers brewed at A-B facilities, isn't craft. It has also reversed its stance on MillerCoors' ( TAP) Leinenkugel by rescinding its craft status and does not consider Blue Moon craft. But the publication splits with the Brewers Association in its belief that the Portland, Ore.-based Craft Brew Alliance ( BREW) -- and its Widmer Brothers, Redhook, Kona and Omission brands -- are craft beer. Anheuser-Busch InBev owns 32.2% of CBA and gives the company access to its distribution network, but Eric Shepard, executive editor at Beer Marketer's Insights, says his publication sees no evidence that A-B exerts any influence over the CBA brands.
Putting CBA back into the mix would add 675,000 barrels last year alone. Shepard also takes the view that Burlington, Vt.-based Magic Hat and Seattle-based Pyramid Brewers have maintained enough autonomy under the ownership of KPS Capital Partners' North American Breweries and, after a sale last year, Costa Rica-based Florida Farm & Ice, that they, too, should be considered craft. That combination would add 337,000 barrels to the equation. "NAB may be a slightly harder pick," Shepard says. "They may still be made in craft breweries that exist and stand alone, so I'm fine with it. I can't say I lose any sleep over it at night, and it's a small number in the grand scheme of 208 million barrels." So why does Beer Marketer's Insight's count of 13.9 million barrels of craft beer production still fall short of the more than 14.3 million that would result if CBS, Magic Hat and Pyramid were added to the Brewers Association craft beer number? "I think BA is a little high on its total," Shepard says. "When I look at the overall industry and take out everybody that I think I know and make a master table, I can't justify a million barrels higher than their number. In the grand scheme of things, 300,000 to 400,000 barrels on 208 million is meaningful to only three or four people in the world, and I'm one of them." In fairness, keeping any one beer category straight isn't easy. Shepard had to shift Fosters and Beck's from the import category to superpremium after MillerCoors and A-B began producing the domestic supply of each in the U.S. Bud Light Lime could just as easily fall into the flavored malt beverage category, but it's still unclear whether MillerCoors' Redd's Apple Ale will join Leinenkugel's shandy as superpremium or get sorted with Smirnoff Ice under flavored malt beverages. In the craft category, however, the lines are a bit more clearly drawn because they need to be. While Shepard and Beer Marketer's Insights differ with the Brewers Association on certain points, it acknowledges that BA's definition of craft exists with the purpose of preserving the premium price that those who fall under the definition can charge. British brewer Brew Dog, for example, noted that the presence of Blue Moon alone makes a definition of "craft" a necessity if only to give consumers a point of reference. Even big brewers acknowledge the power and meaning of the term, with MillerCoors' Tenth and Blake division of beers including Blue Moon referring to its brands as "craft" on conference calls and Tenth and Blake head Tom Cardella asserting his belief of the need for BA to have a definition but repeated his perspective that craft "isn't about size, it's really not about the ownership," but rather "the art and science of beer coming together." SAM) founder and Samuel Adams Boston Lager creator Jim Koch, who had far different thoughts on the topic. With much of Boston Beer's share price tied to his brand's ability to draw premium prices as a craft offering, he also sees much higher stakes in what appears, from the outside, to be an esoteric, nitpicking debate. "This goes to the continued existence of craft brewing. We craft brewers have created a category that is able to command a price premium based on our points of difference from the mass domestic brewers. And that has created a lot of profitability in the category and a lot of growth. But at the end of the day, let's be real. Tom, you guys make great beer, you have great brewers, you have access to ingredients, raw materials etc. that is better than anybody else and you do it at significantly lower cost. And the big brewers have distributor clout and retailer clout that craft brewers will never have. So if we don't have a point of difference that's meaningful to consumers, we probably in the long run can't survive." Without that definition creating that level of separation, Koch says the term "craft" just becomes a commodified marketing term. When that becomes the case, not only will small brewers lose the premium prices that sustain their growth, but big brewers won't be able to command such prices to support more costly ingredients for brands including Goose Island, Leinenkugel's and Blue Moon. While that's a strong argument from the Brewers Association, Beer Marketer's Insights and everyone else to keep the big brewers out of the craft club, it also makes the arguments that gray-area outliers including Pyramid, Magic Hat and the Craft Brew Alliance beers should be allowed in, if only to avoid further confusion. "The typical drinker doesn't care about the numbers, they care about the beer," Shepard says. "They vote with their wallets, ultimately, and while some purist may not like what gets included, the consumer is going to do what he or she wants to do." -- Written by Jason Notte in Portland, Ore. >To contact the writer of this article, click here: Jason Notte. >To follow the writer on Twitter, go to http://twitter.com/notteham. >To submit a news tip, send an email to: email@example.com.