Boozin’ Blog

There is a belief out there that beer is recession proof. Proponents of this idea point to the smaller recession in recent decades where sales of beer improved while the rest of the economy retracted. The idea is that as money gets tighter people want to continue to drink - or drink more - and the cheapest way to do so is to buy cheap beer. Nothing like a sixer of Stag to forget your shrinking 401(k), right?

But this monster of a recession that we’re in now has all of us rethinking that meme. Is beer really recession proof or is it just recession resistant? Every couple of weeks a new report or study comes out conflicting the previous studies - beer is improving, beer isn’t improving, this or that segment of beer is improving while the other isn’t. It’s basically a lot of economic mumbo-jumbo where statistics can be and are used to explain any particular position.

I’ve tended to take a bigger picture approach to this. Before the recession beer sales were generally stagnant or in some years even in decline. Wine and spirits were giving beer the sort of competition here in the US that it simply wasn’t used to. After ruling the liquor industry for so long beer was starting to have self-esteem issues.

But within that trend there was a dynamic that I, as a good beer lover and tireless promoter, found particularly heartening. While big beer here in the US struggled to figure out how to increase or even maintain their position, craft and import beers were going gangbusters. Year after year the craft beer segment showed double digit increases in sales. My analysis is that Americans were finally realizing the truth of the old joke: American beer is like having sex in a canoe; it’s fucking close to water.

Given that the fact that we’re getting mixed signals from the beer market now during this recession isn’t really all that earth shattering. Big beer continues to languish while craft beer continues to improve. Some are calling the improvements in craft and “above-premium” beer sales a desire for “affordable luxuries” among American drinkers.

That might be. Or it could be that beer really is recession proof. The trend of shrinking big beer sales and improving craft beer sales has continued unabated despite the recession. This is what it was doing before and this is what it’s doing now. Had the recession not have happened would the beer sales picture be any different? It’s tempting to think that it wouldn’t be.

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Malt Advocate, a whisky magazine, has named its pick for the microdistillery of the year. Before I tell you who the honoree is, take a guess where it’s located. Scotland? Ireland? Kentucky? Nope. Nope. And Nope.

The big winner for 2008 is Penderyn Distillery in Wales. Who knew there was good whisky made in Wales? Well, besides the Welsh, I suppose.

But what’s a microdistillery? This word caught my eye because I’ve been amused to watch the rise and of a similar term – microbrew. Beginning sometime in the 80’s and then getting big in the 90’s were the now virtually unheard of microbrews. Ever wonder what happened to them? Many slipped out of existence thanks to their own success.

See, the word micro necessarily implies smallishness. At the time they were making the inescapable comparison between themselves and the evil megabrews – Bud, Miller, Coors. Everyone loves a good David and Goliath story so it was quite a lot of fun to watch the microbrews march onto stores and take up their rightful space on the shelves. It wasn’t long, though, before beer geeks were explaining to themselves and their patient loved ones that Sam Adams and Sierra Nevada weren’t really micros. To qualify as a microbrewery one had to brew X or less amount of beer. One by one beloved microbreweries were becoming micros no more but *gasp* megas!

Fortunately the Brewers Association and others started using the term craft beer and microbrew has virtually fallen out of use. However, the somewhat more ambiguous distinct of “craft” makes the lines between the former micros and the establishment beers against which they were rebelling somewhat less bright.

But how long can a term like microdistllery last? The clock is already running. One distinction of microdistillery according to Malt Advocate is that the distillery can only be ten years old or younger. In this case micro is more about age than size which is a fascinating choice. Suppose a whisky maker remains small and innovative purposefully sacrificing growth for creativity. I guess after ten years we’ll just have to call them craft distillers.

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Surely by now you’ve heard of the bid for Anheuser-Busch that Inbev is rumored to be considering. At this point there’s only rumor and speculation but this is often how these things first appear in the world of big business before becoming reality.

There’s enough real to this rumor to make Bloomberg columnist David Pauly wring his hands fretfully about the fate of his beloved Budweiser. Never fear, Dave, Bud will be safe. Given past performance I doubt that Inbev will dismember nor significantly alter the well-known brand. There might be some shuffling and shifting of small aspects of Bud but the taste and the general market position of it will remain largely intact.

The real danger of the Inbev takeover is what it will mean to the craft beer industry. The story of such take-overs in Europe has been one of the race to the bland. When big beer companies like Inbev take over smaller brewers their big, recognizable brands remain but the smaller product lines tend to get choked off.

Anheuser-Busch, on the other hand, long ago recognized the potential of the craft beer industry in America. They have been working on long-term strategies to claim as much of that part of the market as they can.  The “faux crafts” of A-B are well known. Lesser known is the huge investment that A-B has put into independent brewers. Deals like the one famously made with Redhook more then fifteen years ago are far more common these days than most beer drinkers realize. A-B owns minority shares in small, regional brewers all over the country and has made distribution and marketing available to these brewers that otherwise would have been out of reach.

Does Inbev understand to potential of this market? I doubt they care. Although A-B’s motives are no less based in profit they have the ability to think long term while Inbev’s exploits seem more focused on a slash and burn policy designed to produce quick profit.

By the way, I recognize that fans of Rolling Rock with memories must now think that I’m completely nuts.

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Here’s what happens when a marketer tries to understand the beer business. In a recent article in Forbes Jack Trout tries to get his head around the US beer business and why the biggest selling brands have been stagnant over the last few years. They’re offering too many different kinds of beers, he explains.

He’s a blowhard, I reply.

In fact he’s a self-contradictory blowhard. Within his own article he contradicts his own premise. He points out that big beer companies with their variously branded lagers are loosing market share to craft beer including their own faux crafts like Blue Moon and Leinenkugel. But variety is one of the strengths craft beer. The biggest craft brewer, the Boston Beer Company, has a huge number of different Sam Adams beers available and that hasn’t hurt their sales.

I could also point to the continued success of wine despite the fact that the products produced by almost any given winery are many and often take some study to understand. And how about the evolution of vodka over the last few years? You can buy vodka flavored with almost every imaginable fruit and somehow consumers are able deal with that. But I’m not here to argue about marketing.

Granted, the various versions of Miller, Bud and Coors are essentially the same beer with different labels but Trout doesn’t make this clear. In fact I’m not sure that he even realizes this. He seems to think that all beer is the same and so, his logic goes, why should any brewer have more than one product?

Choice is saving beer from this sea of the same that seemed likely to define beer as recently as 15 years ago. US beer drinkers are finally discovering the variety of beer and the pleasures of it. They are voting with their dollars for beer that tastes of more than fizzy, slightly sweet water.

So, Mr. Trout, why don’t you go out and actually try some of those “wacky American beers” before you try to evangelize your marketing gospel to them? You might find some truths that are not available in your statistics tables and marketing textbooks.

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