Why Anheuser-Busch's Purchase Of 10 Barrel Brewing Is Bad For The Industry

Yesterday the news that Anheuser-Busch was acquiring Bend-based 10 Barrel Brewing sent ripples throughout the entire industry. Most of the comments I read, both on 10 Barrel's facebook page and in reply to The New School's story, expressed shock, disappointment, and even anger. In the midst of all this, a few commentators and critics backed the acquisition as just another part of doing business, a sign of the times in craft beer becoming big business. They are not wrong in reminding us all that this is a business and that beer quality likely will remain the same. If you're one of these people, I must posit that you may be out of touch with craft beer consumers. Most of them are turning their backs on 10 Barrel not because they fear for the brand's quality, but because they don't want to fuel mega conglomerations that are increasingly controlling the world.

We are at a time in history where people crave authenticity and fear that big business will ruin the small empire we have built. Some people can ignore where their money goes, how a business is run, and who it benefits, especially if they like the product. Many of us– myself included–cannot, as evidenced by my twitter stream:

Oregon Tr'Ale Gear @OregonTrAleGear
@timhohl @PDXBIZJournal  We've been big fans of @10BarrelBrewing , but feels unsavory to support AB when so many other great OR IPAs exist.

Tony Coulombe @tonynw318
dont understand the fury over 10 barrel stuff? imagine the owner of the Sounders buying the Timbers too? thats what it feels like 4 fans

Josh Gates @JoshGatesPDX
Sold to Anheuser-Busch before opening in #PDX? I do not like this. Guessing hardcore beer folk won't either.

cwatkiii @c_watkiii
WAS excited for their #pdx opening but no longer

Krista Skucas @kskucas
@NewSchoolBeer Boycott our new AB InBev establishment about to land in Portland!

On facebook and other forums, it was even worse, like this one pulled from Willamette Week:

GreyCelt_PDX • 3 hours ago

One more step in the "beginning of the end" of the microbrewery revolution. This is truly saddening to hear.

Or this one from The New School's original story:

Joe
November 5, 2014 at 10:56 pm
Fuck Budweiser and fuck 10 barrel the god damned sell outs.

Some people describe Anheuser-Busch/InBev as an "evil" corporation; this gives the company too much credit. A publicly traded company with a board of directors only cares about one thing, and that is making money. Corporations are in fact treated as people under 19th century US law, and therefore

"the corporation is a psychopath. Like all psychopaths, the firm is singularly self-interested: its purpose is to create wealth for its shareholders. And, like all psychopaths, the firm is irresponsible, because it puts others at risk to satisfy its profit-maximising goal, harming employees and customers, and damaging the environment. The corporation manipulates everything. It is grandiose, always insisting that it is the best, or number one. It has no empathy, refuses to accept responsibility for its actions and feels no remorse. It relates to others only superficially, via make-believe versions of itself manufactured by public-relations consultants and marketing men. In short, if the metaphor of the firm as person is a valid one, then the corporation is clinically insane." – The Economist

A-B's purchase of 10 Barrel Brewing, like its purchase of Goose Island, won't likely directly lead to any decrease in the brand's quality for now, but history and logic can lead us safely to conclude that when the company's margins are dipping and management is trying to squeeze a dime out of a nickel, they won't be afraid to cut costs, be that from ingredients or staff. Commentators arguing that this is a good thing or just part of the business remind me of financial advisers before Wall Street screwed all of us over, only when it comes to big beer no one will bail you out. I saw some pundits commenting that many brewery owners may dream of cashing out. I fear that is true, and if it is, we could be looking at a bust similar to the dot-com bubble of the late 90s. Mark my words, business owners getting into the beer business just to make a buck will be the doom of us all. America does not need more big regional brewers with bottles in every supermarket! We need more local brewpubs in every neighborhood. Gathering places for friends and family to meet over well crafted ales and lagers, not a 6-pack of cans from Newport available in Florida.

10 Barrel Brewing is famous for its all-star stable of brewers, from Jimmy Seifrit, who used to be at Deschutes, to the industry's most famous award-winning female brewmaster, Tonya Cornett, to big daddy Shawn Kelso. To beer geeks, having these innovative brewers behind the wheel is everything, but to an international company like InBev, these are simply replaceable employees. What do they need to pay Tonya Cornett a big salary for? They already have her award winning Cucumber Crush recipe! Do you think A-B will value those employees who crafted a great beer? Do not kid yourself! Can you name one well-known brewer from one of the macros?? I guarantee you they have fantastic world-class brewers but they are anonymous worker bees in a colony of millions. Business-focused columnists equate those upset about the purchase to naive hippies who do not understand how business works. I would argue it's passionate consumers who got into craft beer because the dollar and price was not the bottom line. I do not begrudge anyone for getting rich, but once the industry starts to become more about making money then making beer, it's doomed. Again, these business commentators will say capitalism is good, "greed is good," but they either forgot or never really realized the popularity of craft beer or microbrew hinges upon the fact that it is made by people, not corporations, and for the love of the craft, not the money.

Here is a quote left on facebook by the former National Sales Manager for Ninkasi Brewing, Marty Ochs:

"Good For Them, but how did you not see this coming? REALLY? Owners are the sons of a former A-B Wholesaler, Business was built as an investment piece from the get go, rebranding became non-descript to distance from location, they are only in A-B houses, A-B houses put a full court press on the brand for two years, AB internally was shopping for a brand for 4 years now, A-B is looking to solidify the I-5 corridor of distributor ownership (Olympic Eagle will fall soon!), and the cost of competing regionally as well as nationally is not possible without this sort of investment, see Reyes and the Laguinitas relationship. People thought Ninkasi would fall, but they cost too much, this was a smarter move."

Marty is right, and that's what scares me. How many Coors Light swilling "entrepreneurs" are watching this whole 10 Barrel acquisition with dollar signs in their eyes and plans to open "craft" breweries in the next few years?

Those who argue it would be bad business for InBev to fuck with a good thing might be right in the short term, but what happens when growth slows and sales are stagnant? Corporations do not care about quality, they care about profit; craft brewers are profitable now, but things will inevitably slow. What happens then? Take, for instance, the fact that Budweiser and most macro beer sales are way way down, BUT A-B is still hugely profitable. How is that? Through cost-cutting and continuous growth and acquisitions that open up new markets. Trust me, these guys will happily stick it to anyone if it means their quarterly profits are up and the board is not going to have to answer to shareholders. Just look at the way Wall Street sold out the U.S. economy to get rich quickly, never looking past the next few years of earnings results. Just earlier this year Anheuser-Busch bought out Portland-based beer distributor Morgan Distributing, and rumors suggest the company wanted the larger Maletis Beverage. Promptly after the purchase, A-B had Morgan dump all of its craft brands. A-B is with one hand gently swooping up its biggest long-term competitors and with the other hand sweeping them under the rug. Why is A-B even allowed to purchase distributors? The Three Tier System set in place after the repeal of prohibition is supposed to stop that from happening, but every state defines how these rules work differently, and A-B has a history of owning its distributors and using them to push around the smaller brewers.

Quoth National Branding and Marketing Strategist Mark Reber on our initial story on the acquisition:

"The quote by the InBev guy says it all because it says nothing about beer. "We see tremendous value in the brewery's unique offerings and differentiated style." That's little more than marketing-speak. Value. Differentiation. This is, fundamentally, the problem when small, artisanal businesses sell to the largest players. The buyer wants the brand the the alleged value. In this case, to grab more shelf space. And, given the successes that 10 Barrel has enjoyed, why sell now? Why at all? I certainly wouldn't suggest that they miss an opportunity to cash out, but the deal seems premature."

InBev is not just targeting the smaller craft brewers, it is trying to control the entire game. The company swooped up Grupo Modelo last year, and rumors suggest SABMiller is next. The only significant piece of the pie the conglomerate might not be able to acquire is Molson-Coors due to DOJ antitrust laws. Regardless, if InBev controls the whole industry, then the next step is making it as profitable as possible, and that will not happen by raising the quality of beer. Talk to any brewmaster of the old guard, say Larry Sidor, who know owns Crux and once brewed at Olympia, and he would tell you these breweries once made a decent if not fine American lager that most would be proud of, but when the time comes to cut costs the recipes change and cheaper ingredients are used. If and when A-B-InBev has control of the vast majority of the industry, the company will be forced–forced–to find new ways of making the company profitable and anything will be on the table, first and foremost the less profitable craft brewers. There is a reason why the big guys have only recently turned their attention to the small brewers: the industry was not profitable enough because brewers were doing it for fun and for passion. Buyouts like this call that exact passion that made American Craft Beer what it is today into question.

Proven methods the macro brewers have used to make beer more profitable: Bud was once known for using whole leaf hops, but years ago switched to extracts, leaving hop farmers with a huge surplus. Large brewers also use cheaper adjuncts like corn and rice to boost the alcohol and cut costs, brew a base beer for multiple brands that tastes the same and is slightly changed by adding water or salts to alter ABV or mouthfeel. Can you imagine if your favorite IPA was the same as the Double IPA, only literally watered down?

This article is not about 10 Barrel Brewing Co. It's about the future of the beer industry and how it is impacted by decisions like this. I will continue to drink good 10 Barrel beers, the brewery employs some great people who don't deserve to be blacklisted. According to rumors, 10 Barrel was heavily in debt, so perhaps the owners had to sell or were looking at a paycheck so big they could not say "no." I cannot judge them personally. I must admit, I never really understood legendary publican Don Younger's famous line, "It's not about the beer, it's about the beer," but I think I do now. I think what he was saying is it's not about that alcohol in your glass, it's about the people, the community, the friends, and the family that create this art form and those we enjoy it with; that the beer is something greater than the water, malt, yeast, and hops in your glass. In the grand scheme of things, the A-B 10 Barrel purchase is but a tiny ripple, but to quote, of all people, Bruce Lee, "When you drop a pebble in a pond you get ripples, soon that ripple fills the whole pond." I am no Chicken Little screaming about the sky falling just yet, but if we see something bad coming this way 10 years from now, I won't be polite enough not to say, "I told you so."

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