Sometimes, I worry I’m too hard on the craft brewing industry. With infrequent exception, the folks who own and run the nation’s ~10,000 small and independent breweries are doing their best to make high-quality beer for their customers and contribute positively to their communities. Unfortunately, operating in good faith isn’t the same as operating a good business, and as the American thirst for craft beer has plateaued in recent years, that distinction has become painfully clear.
Squaring that circle means facing hard truths about the brewing business writ large, and individual breweries’ businesses writ small. That’s no mean feat. If “D2: The Mighty Ducks” taught us anything, it’s that people don’t tend to respond well when you tell them their best isn’t good enough anymore. The industry has heard plenty of that from yours truly. But last month in Las Vegas, Scott Metzger of Craft ‘Ohana (the parent company of Maui Brewing Co. and Modern Times Beer, and the 26th-largest craft brewer by volume last year, per the Brewers Association’s data and segment definition, skated along that line about as well as anybody I’ve yet seen.
The occasion was the BA’s 2024 Craft Brewers Conference, which took place in late April in Sin City. Your humble Hop Take columnist was on location for VinePair, and the mood was mostly buoyant. The presentation from Craft ‘Ohana’s president and chief operating officer was a refreshing deviation from that at-times-surprising norm, but slotted as it unfortunately was for the final afternoon of the four-day conference, the crowd in attendance was far less than the Venetian Expo ballroom’s capacity.
More brewers ought to have heard Metzger’s gimlet-eyed takes on the myriad challenges facing craft brewers. “Our whole category can be replaced,” he said that day. “We don’t have to have a pity party about this, but every single day and every single moment, we have to continue to earn our place in this industry, earn our place in the minds of our customers.”
Even now, with brewery closures roughly matching the pace of openings, flatlining sales, and more competition than ever for America’s beer money, the craft brewing industry still hasn’t reached full consensus on this wisdom. There’s still plenty of “Field of Dreams”-style wishcasting underpinning the business — if you brew it, they will come. It’s a hopeful sentiment, and it might work for some breweries. But this is not a particularly hopeful moment for the U.S. beer business, and besides, hope is not a strategy. So I called up Metzger a couple weeks after CBC 2024 to discuss his tough-love talk in more detail, in hopes of amplifying his take to more of his colleagues (and selfishly, to let somebody else be hard on the craft brewing industry for a change).
“As I approach 18 years in the industry, I’ve seen kind of a common thread, and that is the ‘cool factor’ or appeal of our industry tends to attract people to it that do not have a business background,” he told Hop Take by phone earlier this month. “That’s not to cast aspersions … but maybe they got a little false bravado or confidence from the ‘rising tide lifting all boats’ atmosphere we saw for so long.” Metzger first remembers noticing this lackadaisical attitude among peers around 2019, when he was still working at Massachusetts’ Wormtown Brewery. “I just found myself talking about our business in the jargon and vernacular that is appropriate [for a manufacturing discipline like brewing] and seeing blank stares,” he recalls. “That, to me, was that canary” — in the coal mine, that is.
That timing is conspicuous in hindsight. The sales tide was still rising toward the end of last decade, albeit slowly. Macrobrewers were still buying craft outfits; interest rates were still low; 10-year commercial leases signed during the salad days still hadn’t turned over. Now, all those tailwinds have turned to headwinds, and we’re watching sales ebb: the BA has tracked volume declines in the overall U.S. beer business for four of the past five years (and a scant 1 percent increase in 2021), and after scrapping its way through the pandemic years with some single-digit positive percentages, the craft brewing segment’s volumes were slightly down in 2023 as well. As the tide has gone out, it’s revealed some industry rot lurking beneath the waterline.
“A lot of the struggles that I hear people asking questions about… they almost catch me off guard. Why do we have to think about our supply chain?’ Oh, what a travesty,” Metzger scoffs, pantomiming indignant gripes about the legitimate headaches that dogged the U.S. brewing industry (among so many others) during the first couple years of the pandemic as an example of the exceptionalism he’s encountered among some brewers. Challenges around black-swan-event logistics, or basic product-market fit, or anything in between, are not “unique, woe-is-us kind of things,” he argues, correctly. Craft brewers that grapple with them on that footing are wasting time and resources reinventing the wheel at a pivotal juncture for their businesses.
To emphasize this point, in Vegas, Metzger presented a reading list of management books that contain frameworks and systems that he and the Craft ‘Ohana team have found helpful, including “The Great Game of Business,” “The 12 Principles of Manufacturing Excellence,” and “The Toyota Way.” If craft brewing’s cool factor was a ZIRP-induced indulgence (it was, at least partially), those breweries that make it through this downturn will need to get a little more studious — and flexible.
As someone who often hectors craft breweries to expand their own narrow imaginations about their portfolios, their taproom experiences, and their labor relations, I get occasional guff from industry types who got into craft beer to focus tightly on, y’know, making beer. I think it’s an understandable frustration! On the phone, I asked Metzger whether he could appreciate the dismay of brewers who entered the industry during the boom out of genuine passion for its artisanal, anti-corporate, and community-oriented aspects rather than professional vanity or money-grabbing impulse, only to be told after years of honing that craft that they needed to get schooled on Six Sigma just to survive.
“I think there’s room for both things to exist simultaneously,” he responds, arguing that breweries that marry objective and subjective forms of excellence (i.e., logistical precision in the fulfillment department, and creative inspiration on the brewhouse floor) are not forsaking the latter for the former. The American drinking public has long since tired of merely exploring the sheer variety of beers on offer at a taproom or supermarket; consistent execution on coherent value propositions and experiences has superseded rote novelty as the industry’s new table stakes. Those are problems that manufacturing, managing, and marketing can solve, but only if brewers embrace those disciplines rather than lamenting the “cultural shift” that has made them necessary.
“The customer is always right,” says Metzger, but “they are completely unpredictable.” The Other Halfs and Treehouses of the world can abide by the “Field of Dreams” dogma: If they brew it, they will come, and in not insignificant numbers, too. The thousands of small, independent breweries that compose the industry’s “long tail” may be able to count on their owned-and-operated sales at low volumes, but if growth is the goal, the hype-brewery model is hope, not a strategy. Breweries like Craft ‘Ohana that rely in part on a distribution model that exposes them to intra- and inter-category competition at third-party retailers can still win growth in tough conditions (Maui’s hard seltzer is bucking that segment’s slump and posting terrific year-over-year sales growth), but not if they expect SKUs and strategies that worked in the past to work in the future. Those that do are practically daring drinkers to lose interest in their brands — and maybe in craft beer generally, too.
That’s something everyone in the industry should be worried about.
🤯 Hop-ocalypse Now
Less than a year after Sapporo USA unceremoniously shuttered its first American craft-brewing acquisition, Anchor Brewing Co., it now claims to be “fully integrated” with Stone Brewing Co., its second purchase in the segment. That integration includes a new name for the entity (Sapporo-Stone Brewing Co., naturally) as well as a $60 million expansion plan to nearly double the barrelage coming out of the firm’s plants in San Diego County and Richmond, Va. The upgrades, $20 million of which the company says are already done, are in service of a targeted 700,000 barrels annually, and a place among the top 10 brewers by volume nationally. This, at a time when something like half the collective brewing capacity in the U.S. is slack. The boom times are… back?
📈 Ups…
Pabst Brewing Co. is bringing back Not Your Father’s Hard Soda Pop for another shot, sure why not… The Teamsters are claiming victory after a three-month strike against Molson Coors in Fort Worth, though details are scarce on the just-ratified contract… Buffalo Wild Wings, one of the biggest sellers of draft beer in the country, grew overall sales 5.9 percent in 2022, just outpacing the industry… Supreme Court Justice Samuel Alito sold Anheuser-Busch InBev stock and bought Molson Coors stock at a key moment in last year’s Bud Light fiasco (woof), but at least he probably took a loss on that trade (lol)…
📉 …and downs
Heineken USA is closing Lagunitas’ taproom and production brewery in Chicago… A new study outta Carnegie Mellon University suggests cannabis users consume the drug more frequently than drinkers drink… In its suit against the $24.6 billion Kroger-Albertsons deal, the Federal Trade Commission now alleges that execs at the latter firm illegally deleted text messages… Rumors about Boston Beer Co. selling to a macrobrewer have swirled for virtually as long as I can remember, and are once again swirling…
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