Small Brew

The sale of Anheuser Busch to Belgian brewer InBev has some wondering what will happen to American beer. But craft brewing, not Budweiser, is beer made the American way.

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By any count, craft beer is one of the fastest-growing segments in the American beverage market, with four consecutive years of double-digit growth. Craft brewers, defined by the Brewers Association as any brewery that produces less than two million barrels per year and is not owned by a noncraft brewery, are poised to account for 10 percent of all beer sales by 2012. This is a staggering change: In 2007, more than 72 billion bottles of beer were sold in the United States, 96 percent of which were imported or brewed by Budweiser, Miller, or Coors. To upset that kind of consolidation is a feat in itself.

Why is craft beer suddenly making inroads now? Two reasons: a generational change among American beer drinkers and the anything-goes attitude of the American craft-beer industry. Notoriously impervious to old-school marketing hype that the big brewers have long specialized in, younger generations are also the most interconnected, networked together by instant messaging, Facebook and Twitter. They subscribe to a status system that values niche brands over mainstream behemoths, opening up the room for independent brewers to grab market share. And because beer is easy and surprisingly cheap to make, the barriers to entry to the brewing business are typically surmountable.

Thus an underground beer industry is poised to cut into the profits of the megabreweries, despite their massive advertising budgets—or perhaps because of them: The growth of craft beer may stem from the new generation of consumers’ urge to reject corporate, multinational brands, and the ubiquity that their blanket ad campaigns symbolize.

Unlike the monolithic corporate brewers, craft brewers often exhibit a gonzo entrepreneurial spirit and are motivated by fear and loathing of “the man”. Flying Dog Brewery, owned by a hippie compatriot of Hunter S. Thompson, attempts to capitalize on the DIY, antiestablishment ethic, using both Thompson’s artist, Ralph Steadman, to label their brews and a quote attributed to Thompson as their motto—“Good people drink good beer”. Flying Dog’s first beer, Road Dog Scottish Porter, was pulled from shelves because the tagline “Good beer. No shit” appeared on the label; after a long court battle and help from the ACLU, the ban was reversed, and the original tagline appears on the label to this day. But Flying Dog’s countercultural idealism goes beyond that. This past year Flying Dog released its first beer under the Open Source Beer Project: The Collaborator Doppelbock’s recipe was developed entirely by public comment.

While Flying Dog has the attitude, Dogfish Head, based in Milton, Delaware, takes a boundary-pushing approach to beer. The brewery is willing to try anything, making beers with coffee, chickory, chrysanthemum flowers, and just about every fruit imaginable. Though not every experiment is a success—the Festina Peche, Midas Touch, and Oyster Stout are all love-it-or-hate-it propositions and the Woody Belgian-American IPA was pulled and retired after only a few short months—Dogfish Head produces every recipe it attempts on a scale that allows virtually the entire country to try them.

While Flying Dog and Dogfish Head may be the embodiment of the craft-brewing spirit, breweries like New Glarus, in Wisconsin, and Three Floyd’s Brewing of Munster, Indiana, are models of localization. In the past few years, both breweries have constrained their distribution area in order to accommodate local Midwestern demand, regarding the local market as more important for sustainable growth. Both breweries have identified the need to maintain quality as the top issue even as demand for these beers has increased. From 2002 to 2006 New Glarus’ sales have grown by more than 40 percent each year. The brewery easily could have ignored parts of rural Wisconsin in order to serve the Chicago market, which it did for a few years. But then it chose to restrain distribution to ensure that its limited production capacity was being used to serve its home state.

These withdrawals prove that local markets alone can sustain micro and even midsize breweries, a model for the movement that urges local consumption to reduce environmental damage brought on by long-haul shipping. More and more breweries and brewpubs are providing beer for the bars and restaurants for their neighborhoods. According to the Brewers Association, over 20 percent of all craft beer in the US has been produced by local brewing entities for local markets. The growth in microbreweries, whose production is less than 15,000 barrels per year and are extremely local due to their small size, is up over 20 percent as well. And the brewpub, the ultimate in localization, has managed to increase by about three percent, despite the rapid turnover in new restaurant businesses.

This growth in production and new startups—last year almost 100 new breweries and brewpubs were started—is fueled, in part, by the sheer simplicity and low cost of the brewing process. Soaking grain in hot water, draining the liquid, and rinsing the grains a bit more provides the base, called wort, to which hops and yeast are added to produce beer. A simple 5-gallon home brewing setup can be had for less than $75. The commercial process, at its simplest, requires space about the size of a small bedroom and about $40,000 for a new fully electronic brewing system. The low costs make the spur-of-the-moment decision to start a brewery easy to put into action.

As brewing is getting easier and cheaper to get into, the generation now turning 21 are purchasing premium alcohol products, including beer, at a much higher rate than previous generations. According to Nielsen and industry reports, this generation spends 47 percent of its alcohol budget on beer, 28 percent of its beer-dollars on imports, and another 15 percent on craft beers. By comparison, the older generations spend only 15 percent on imports and 6 percent on crafts. Moreover, this new generation has different demands from the brands that they are looking for. Where older generations sought comfort and companionship from their brands, the new generation is looking for authenticity and is not afraid to experiment. Sites like BeerAdvocate and RateBeer offer forums where the younger generation can find more information about small-scale beers online.

Consumer interest in unique, experimental beers has encouraged competition amongst American craft brewers. This competition is producing bigger, badder beers that younger consumers, seeking the newest concoction, are clamoring for. For example, Rob Larson, head brewer at Tyranena Brewing Company in Lake Mills, Wisconsin, is determined to brew an “Imperial Black Weizen” despite being “not at all sure what the beer style is exactly supposed to taste like.” Additionally, breweries are getting savvier about their marketing to this new class of drinkers. San Diego-based Stone Brewing Company’s “Double Bastard” has a label featuring this message: “If you have even a modicum of hesitation DO NOT buy this bottle.” In return, this adventurous brewing and in-your face marketing is feeding into the younger generations’ underground aesthetic.

Thus, growth in the craft beer industry is coming from a feedback loop, the discussion between small producers and consumers. Given that 97 percent of the craft-beer industry is comprised of microbreweries and brewpubs, it is primarily a local conversation. And it is a discussion with no place for mainstream breweries more interested in appeasing their shareholders than their beer drinkers.