Competition and American Light Lager – Round 2

Competition and American Light Lager – Round 2

Let me start by saying Renegade is part of the problem. It is often only after a problem exists that we can have the clarity to see how the problem formed – hindsight, I believe they call it. Knowing how to fix the problem is another thing all together. I don’t know how to fix the problem, but between the problem forming and the problem being fixed is the intermediate step of discussing the problem. Discussion is what I hope to encourage here. Discussion is what lead me to write this as I engaged in many conversations with industry professionals and beer lovers alike that all ended in the same place. So I thought I would bring my side of the conversation forward to a wider audience. All 3 of you that read this…

The American Independent Beer movement started as a response to poor selection on the shelves at the liquor store. Once Jimmy Carter legalized homebrewing, and Charlie Papazian picked up that ball and ran with it and taught the world to homebrew, we all started exploring the wide variety of flavors that 4 simple ingredients can produce. Homebrewers took their dreams and their gumption and opened commercial breweries, some of which are the titans of the beer industry today.

When I opened Renegade, the independent beer movement was starting a resurgence that brought forth new styles of beer. When we first started, Renegade played with styles frequently and we still do today. Our taproom is full of fun experimentations. At the time when we opened, 2000 breweries were in existence in the U.S. Breweries went into less than desirable, inexpensive locations. They revitalized neighborhoods and buildings and they were able to do so because they knew that if they built it and made quality beer that offered an alternative to the American Light Lager, people would seek them out. They would find them in the dark and dank industrial neighborhoods that they had never set foot in before. When I opened Renegade, the building we took over had been abandoned and boarded up. It served as a canvas for neighborhood kids to place their graffiti. The alley way was a depository for needles, human waste, and vomit. The side walk was full of cracks and uneven places. We fixed all of that through independent beer and we were able to do it all at $6 per square foot, an unheard-of rate only 7 years later.

Despite beer seeming like a money-making machine, often times it is not. Making something, anything, is an expensive endeavor. It requires people to make it, equipment to make it, places to store it, expense to sell it, market it, and fix the equipment when it breaks. But as beer became more commercially successful, more people began to open breweries. Some were opened for passion, some were opened for the pursuit of profit, some were opened because it seemed better than working for the man. Do you remember I told you when Renegade opened the U.S. had 2,000 breweries? Well, fast forward 7 years and there are nearly 7,000 breweries in the U.S.

I’m often asked, are there too many breweries? Is there too much competition? Well in some ways no, but in other ways yes. So what is this problem I was talking about? Is it that there are too many breweries? No. But the number of breweries may be contributing the problem I want to discuss. Before I do though, let’s get some things straight 1) Renegade is part of the problem so don’t bother telling me that 2) I don’t know the solution, the point is to discuss it 3) I don’t care if you think I’m wrong if you don’t want to be constructive, don’t engage 4) This isn’t some old man reminiscing about the glory days (although I do love that song)

If you are in the music biz and you want your song played on the radio there are two ways to go about it. You can either a) put out the music you are proud of and if it hits the airwaves great or b) you can try to tweak your sound to the mimic the popular sound of the day that is getting radio play. The problem with option B is the music all ends up sounding very similar, it inhibits variation in what we hear and jeopardizes the art. If you don’t care about being played on the radio, you take your show on the road and put out your independent label music and as long as you have enough people showing up at your shows to pay the bills your art is whatever you desire it to be.

Unfortunately in the beer biz, too many of us are trying to get our song on the radio. Independent beer started as a revolution to bring liquid art into the world, to run independent businesses that valued employees and community. While those things still exist in the beer industry, the business of beer can get in the way at times. The “music” (read: beer) all starts to “sound” (read: taste) the “same” (read: IPA).  As more and more of us sought commercial success, and the data told us that IPA is what sells, we all gravitated toward making IPA.

But, let’s look at the factors that have led us to not just hazy IPA, but a plethora of IPA’s on the shelf and why that is a danger for craft beer.

Competition

As competition has increased and the overall growth of the independent beer market has slowed, more brewers are fighting for the same customers. We are all businesses with payrolls to meet and bills to pay, so if we see brewers having success with IPA, then we have to brew that style to compete for customers to pay the bills.

If 70% of music listeners like pop music, and you want to be on the radio, then you better have several pop songs for the radio to choose from. As more and more bands put out pop music and the radio has more to choose from they start to squeeze out the rock songs because 70% of the listeners will be happy all of the time and will come back for the variety of choice.

The most popular thing starts to become the only thing as everyone rushes to be the most popular producer of the most popular item.

Regression to the Mean – as our sample size has increased our data points have all landed closer to the average.

Consumerism

Consumer buying trends have changed. It is a sin against oneself to have the same product twice. FOMO (as the kids call it), Self-determination theory (as the scientists call it), is real. Seeing something new and not trying it is simply not an option. If it’s new I must have the experience. Isn’t that tiring? Sure new things are fun to try but don’t you just want to put on that old shirt you love and drink a 6-pack of the same beer you’ve been drinking for the last 10 years? No is the answer to that question. The “must-be-new” buying trends allows for a lot of breweries to sell beer, but not for many breweries to sell a lot of beer. I don’t think there will ever be another Bruce Springsteen or Pearl Jam or Rolling Stones. It’s hard to have staying power in the music biz when people want to hear something new from a new artist all the time. More artists will be heard, but less will make a rousing success of it.

Social Media

Social Media makes us all the same. If Joe had a hazy IPA and it was the B.E.S.T. thing he ever tasted, then I must have one. I can’t be outdone. The U.S. and the world is becoming homogenized because we all want to fit in. We all want to be able to say, I did that too, I heard that song, I tasted that dish, I drank that beer, I’ve been to that bar. Even if that bar was in New York, I went to one just like it in Denver and it was even better according to my Instagram picture. Social media has many evils in my book, chief among them is the anonymity that emboldens people be downright cruel to others. However, homogeneity is a true danger that social media encourages. I fear that when my children are grown, there will be no need to take them to New York or Paris or Seattle, it will all look the same. Groupthink I believe they call it – the practice of thinking or making decisions as a group in a way that discourages creativity or individual responsibility.

So Why Should I Care?

I’m not saying you should. The only reason you should care about these things if you think that independent beer and the culture they bring to the world are important. If you don’t, then I apologize for the time you have spent reading thus far. If you do care, then read on.

What’s at stake if we don’t see some changes in the direction of the beer industry?

Loss of Variety

We are already seeing a reduction in the variety of beers that are selling at stores. IPA dominates the category. Please don’t say: “I bought a sour beer/barrel aged stout/gose/insert beer style here yesterday!” Yes, anecdotal evidence can always refute aggregate evidence. Yes they are out there, however, according to the Brewers Association, IPA accounted for 75% of the growth in independent beer in 2017. So, all of the other styles of beer have to share the remaining 25%. Why is this loss of variety bad? Well, the consumer doesn’t need 7,000 variations of IPA to choose from. When this country was dependent on industrial light lager we saw the number of breweries in the U.S. shrink to 44 by the end of the 70’s. Dependency on a single category will ultimately lead us down a path of brewery closings and consolidation. Bump Williams, a well-respected consultant in the beer industry, predicts that beer will decline over the next 10 years.

Sexy Locations

As taprooms become more competitive, one obvious competitive advantage is to set up shop in a sexier location. Taprooms now are located in central business districts at $25-$35 per square foot. That means for every one beer I had to sell at $6 per SF they have to sell six. That means that old buildings don’t get fixed up. That means that you are dependent on marketing and pleasing the most people possible to get your revenue where it needs to be. That means that your Instagram becomes very important to put butts in seats and you start making decisions on how the beer looks rather than how it tastes.

With more at stake and higher bills there is less left over at the bottom of the P&L to make a community impact like Renegade’s Tap 4 Tap program or the many other charitable causes that brewers support. That means that brewers are less willing to take risks with their beer because it might not sell. They are less likely to spend time in development dumping beer down the drain looking for that new flavor. 

Corporatization

Maybe I’m wrong here, but I think the reason you buy independent beer is not just the flavor, but because you want to support the independent shops, the non-corporate entities. You want to support people that are doing it for the love and not the money. You want your beer people to give a shit about the beer, about the community, about you. That gets harder to do when you become more of a corporate entity and more and more of the conversations center around the bottom line of a spreadsheet. As that bottom line grows for the corporate models, it becomes harder for the little independents to compete. It becomes a price war and scale always wins a price war. Bought a $7.99 six pack lately? $6.99? $5.99?

So, are we doomed to repeat the past? Will we consolidate down to 44 breweries making various types of IPA? Does any of this matter? Am I completely wrong? What’s the solution to keeping the soul in our breweries? To quote Dr. Tom Petty, Ph.D. of Cool… “keep a little soul and nothin’ else matters.”

Thanks for reading.

Brian

 

 

2018-10-03T11:38:44+00:00October 2nd, 2018|