Modern American craft beer turned 50 in 2015. That milestone, dated from Anchor Brewing’s rescue in August 1965, would have been enough on its own to make the year memorable. But the annum that just wrapped will likely be remembered for so much more: 2015 was one of the most pivotal years in the history of American craft beer. Surprising stylistic trends and a wave of mergers and acquisitions, as well as expansions, collectively ensured that. The changes were so big and so fundamental that it’s hard to predict what 2016 will bring, though if it approaches anywhere near the monumentality of its immediate predecessor, then craft beer will look and feel incredibly different 12 months from now.
Not since the late 1990s have there been so many prominent mergers and acquisitions in the world of smaller-batch, traditional American brewing as there have been in the last few years. And 2015 saw some of the most notable ones of the spree.
Anheuser InBev bought control of Golden Road, the biggest craft brewery in Los Angeles; Tempe-based Four Peaks, the biggest one in Arizona; Breckenridge, one of the oldest in Colorado; and Elysian, the Seattle brewery that also operates multiple pubs in that city.
MillerCoors bought a majority stake in San Diego’s St. Archer’s. Petaluma, California-based Lagunitas, the nation’s fastest-growing craft brewery, signed a 50-50 partnership with Heineken. Firestone Walker, the California concern with roots in that state’s wine industry, formed a partnership with Belgian giant Duvel Moortgat. Spain’s Mahou San Miguel brewing company bought a 30 percent stake in Founder’s, out of Michigan.
And in perhaps the most gong-rattling deal of 2015, Constellation Brands, the upstate New York firm best known beer-wise as Corona’s American vendor, bought San Diego’s Ballast Point. It was the dollar amount of that deal, announced in November, that really had people paying attention: $1 billion, the most paid to date for an American craft brewery. (The sale also included Ballast Point’s craft-distilling operations.)
Constellation seemed to have profound fiduciary faith in not only the growth of its new acquisition, but the growth of craft beer as a whole. Ballast Point’s 2015 sales are projected to be a relatively modest $115 million, and the brewery was not even among the top 30 biggest craft breweries in terms of sales in 2014, according to the Brewers Association trade group, placing at 31.
Yet, there it was: a 10-figure deal for a smallish craft brewery-slash-distillery just shy of its 20th birthday. What did it all mean? What will it all mean? No one is quite certain. The trend of macro-breweries hoovering up craft concerns goes back to that wave in the late 1990s, which Anheuser-Busch (pre-InBev merger itself) also led. Just Google “Budhook.”
A potentially seismic side effect of this merger-and-acquisition wave also goes back a ways. If AB-InBev files enough brands in its folio, it can squeeze alcohol distributors that much harder to distribute only its products. At least that’s the logic shuddering through the craft industry as 2016 gets under way, particularly among smaller brewers.
Again, though, we’ve seen this before. Anheuser-Busch in the 1990s tried to clamp down on craft whipper-snappers through a campaign called by the somewhat Orwellian shorthand of “100 percent share mind” — basically leaning on distributors to carry only AB brands. It didn’t really work.
Might it work, though, in a much wider craft universe, one that now includes several AB-controlled operations?
That’s what makes this go-round so different: the sheer size of craft beer in the U.S. vs. 20 years ago. In late 2015, the number of American breweries hit an all-time high of 4,144, according to the Brewers Association.
The vast majority of these are craft breweries making no more than 6 million barrels of beer yearly — and most far less than that. At least two breweries open every day in the U.S., and again, most are smaller-batch, traditional ones. Fifteen states now have more than 100 breweries, an incredible feat; no state posted such a benchmark in the 1990s.
More important than this, though, is the ubiquity of craft beer, especially in regions such as the Northwest, Northern California, New England and major metropolitan areas. Nationally, the craft segment might account for roughly 11 percent of beer sales. In these places, the share is likely much, much higher.
But look closely at the craft beer selection at a store in the Portlands (Oregon and Maine) or New York or Chicago or Houston. Invariably, a few names will dominate that selection. Those names will present various brands, surely, but they all rest under the same umbrella. Breweries such as Boston Beer (a.k.a. Sam Adams), Sierra Nevada, New Belgium, Lagunitas, Stone and Brooklyn pulled further away in 2015 from their thousands of craft brethren than ever before.
Brooklyn Brewery moved forward with plans for a new headquarters on more than 20 acres of Staten Island that will potentially be able to produce 1 million barrels annually. Stone became the first American craft brewery to open an independently owned, operated and built brewery in Europe — in this case, Berlin.
Lagunitas, of course, partnered with Heineken, ensuring a rapid scaling-up of the craft brewery’s distribution. The brewery also announced plans for a third production facility, this one in the Los Angeles area. Sierra Nevada’s principal founder and chairman, Ken Grossman, became a billionaire on paper, joining Sam Adams’ Jim Koch in that rarefied company. Colorado-based New Belgium started brewing test batches at its East Coast brewery in the Asheville area of North Carolina.
These 2015 moves by these larger-scale breweries accentuated the gap between them and everyone else, as did the growing presence this year of private equity in craft beer.
Fifteen states now have more than 100 breweries, an incredible feat; no state posted such a benchmark in the 1990s.
The capital demands of a successful craft brewery, where production must not only be steadily maintained but scaled upward, virtually ensures that an operation is always searching for fresh funds. Traditional bank financing often doesn’t cut it — the financial needs are too great — so craft brewers turn to private equity firms.
Dogfish Head, Full Sail and Abita were perhaps the most notable breweries this year to strike private-equity deals. In the case of the last one, it involved working with a firm that former Harpoon CEO Rich Doyle, one of the founders of that Boston-based brewery, started this year with a private equity concern in San Francisco.
The capital infusions from such deals means that already larger craft breweries can get that much bigger. Plus, success tends to beget success in the beer world, and it has always paid to be a big dog (just ask 19th-century startups such as Anheuser-Busch and Miller). The approximate sales figures of a Sam Adams — 2.5 million barrels annually, give or take — is equivalent to several times the sales of the bottom several hundred craft breweries. And they can just keep getting bigger, barring some disastrous decision or trend.
Such widening gaps, globetrotting events and mega-deals led to a level of existential handwringing this year not seen in craft beer since, again, the 1990s. Back then, it was kvetching about contracting brewing, wherein companies would rent space and labor at another brewery to make their own beers, thereby bypassing the physical costs of starting an actual brewery. This time, it was all about how big was too big.
Could a brewery producing millions of barrels a year, with sales accounts in several countries and multiple production facilities, really call itself craft? Wasn’t that term reserved for the hundreds of proverbial mom-and-pop producers making 15,000 barrels or less? Many this year, including the leading brewing trade magazine (which I also write for), suggested it was time to retire “craft beer” and “craft brewing” altogether, along with their cousin “microbrewing.”
Perhaps, the logic ran, 2015 marked the year when consumers and critics joined the industry in finally just talking about it all in terms of beer — different kinds of beer from different sources, but beer is beer is beer. Or was it? Could it ever be like that?
A couple of things. To put craft beer’s most recent business-side trends and moves in perspective, let us note 2015’s single biggest beer event, at least by the numbers: Anheuser Busch-InBev, the world’s biggest brewer, struck a $105 billion takeover deal with SABMiller, the world’s second-biggest. The deal, still to be finalized, would give AB-InBev some 80 percent of the American beer market.
Eighty percent vs. the 11 percent or so of what we call craft beer. Not really the same, is it? And the beer-is-beer-is-beer advocates would also have to reconcile their proposal with the third defining trend of 2015: the further flowering of beer styles.
There Gose the Neighborhood
Gose beers are salty, not bitter and extremely sour, and have no head, nor much alcoholic kick. Yet the style born centuries ago in Germany enjoyed quite the moment in 2015. There were critical write-ups galore, new releases from breweries, and concomitant interest from consumers.
The same went for fruit-infused beers — not necessarily the age-old Belgian styles built around fruits, such as kriek and framboise, but, more literally, beer with fruit added. Grapefruit, watermelon and lemon seemed particularly popular with breweries, critics and consumers. Remember all the shandy listicles as the summer dawned? And let’s not forget that quasi-beer style, hard root beer, which came kind of out of nowhere to become one of 2015’s best-sellers. Or the segmentation of session beers.
Yes, the year was a particularly fecund one for those times when little-noted, almost-forgotten styles made themselves heard above the IPA din and the American craft beer scene appeared that much more kaleidoscopic. The Great American Beer Festival included 145 styles in its judged categories in 2015, up from 138 two years before and 133 in 2010.
Make no mistake: The uber-hoppy, typically strong India pale ale style still reigned supreme throughout the year. The Brewers Association noted that IPA remains “the top style sold by independent craft brewers, and continues to grow faster than the overall category.” Gose and grapefruit brews were not flying off the shelves or cascading from kegs, in other words.
Still, a year that produced the first imperial session beer blazingly highlighted the potential for further diversity in available styles.
And not soon enough for a couple of reasons. Hoppier American beers are getting a bit end-of-history-like, obsessively bitter simply for the heck of it. Note Dogfish Head’s November debut of a beer with 658 international bittering units — about 558 units above the level of bitterness a human can actually discern.
More ominously, the hops fueling these ever-bitterer concoctions are poised to get a lot more expensive in the new year and, in the case of some varieties, much scarcer. “The 2015 crop year will be the last year of normal hop market before things get out of control,” according to an analysis that Douglas MacKinnon wrote for Yakima, Washington–based dealer 47 Hops. “Without a bumper crop and even with last year’s baby crops maturing, the hop industry will just keep pace with demand.”
That demand is expected to overtake supply in 2016. This trend will give the edge to better-financed — and invariably bigger — breweries in the hunt for this key ingredient. A sharper pivot to less-hoppy beers, such as gose, and other oft-absent styles, such as barleywine and brown ale, might offset what came to be called in 2015 a genuine hop crisis among American brewers.
The State of Craft Beer
So what is the state of craft beer as 2016 commences? Strong and uncertain.
Strong in the sense that the industry is now more than ever virtually unrecognizable from 2010. It’s not just the stylistic moments, expansions or macro-brewery deals cited above. The session-beer craze, record-setting attendance at the Great American Beer Festival, the Brew Dogs TV show, the expanded Brewers Association definition of a craft brewer, legalization of homebrewing in Mississippi and Alabama, homebrewing at the White House, the birth of Untappd — that’s all just in the last five years, too.
The state of craft beer is uncertain in the sense that such changes have wrought unpredictability business- and style-wise. The events and trends of 2015 shredded an almost unprecedented volume of envelopes, making it that much more difficult to decipher what 2016 will bring in craft beer — never mind the next half-century.
Tom Acitelli is the author of The Audacity of Hops: The History of America’s Craft Beer Revolution and the new fine-wine history, American Wine: A Coming-of-Age Story.