Article By: Lew Bryson
Thirty-five years ago, wine was in the same market position as beer is today - a commodity. Largely, it was bought by the jug, it was bought on price, and it was not bought with any consideration to "pairing" with food, except that maybe you got an Italian wine when you were having spaghetti. "Red with meat, white with fish" was about as far as anyone got.
Over a third of the market was imported wine that largely tasted like the domestics, but had a higher price and a different bottle. American wine had a poor reputation in the rest of the world, even though we made and sold a lot of it. And when we saw a drunk on the street, holding up a building, we called him a "wino".
It's symbolic of how drastically things have changed that the word "wino" has practically disappeared from everyday speech, because wine's image has improved dramatically. Wine is almost universally considered a fine, upstanding drink that has vague associations with wealth, nobility of character and sophistication. It is recommended by doctors to their patients for heart health, even though some studies show that it's the alcohol, not the redness of the wine that has the effect.
Look at wine, and see beer's future, if brewers are smart enough to secure it. Wine's redemption came about through small producers with a vision of what was inside the bottle, not the labeling and marketing on the outside. It was vintners - winemakers who toiled for years, making better and better wines that couldn't always find a market. Sometimes they stumbled, but always it was interesting. Eventually they had a product that was worth selling, a product that objective tasters were surprised to find was the equal of long-established European vineyards.
That's when the real work started: getting it in front of people. The smartest thing these small vintners did was connect wine and food. Getting chefs interested in how fine wine paired with their food ensured that those fine wines would appear in their restaurants, particularly once the margin was established.
But of equal importance was the whole idea of distinctive wine types and styles, so that "red and white" became "Cabernet Sauvignon, Merlot, Barolo and Chardonnay, Pinot Grigio, Blanc de Noirs". The very difference, the taxonomy, became interesting, and more importantly, became a point of differentiation. People who knew what these wines were became pleased; they owned their wine knowledge, and it made them willing to pay more for a good wine.
When these two trends became solid and broad, the small vintners began to find themselves the chevaliers of American wine - the champions of a new market, which had very little place for jug wines. It was segmented, it was all about difference, not similarity. It was more knowledgeable, it was more demanding, it was more exciting, and by heavens, it was profitable, much more so than selling a bunch of jugs of Hearty Burgundy and case after case of screwtop Ripple and Thunderbird.
Everyone knows this story, so why does everyone find it so hard to believe about beer? Even craft brewers seem to find it hard to believe that they'll ever break out of their little 3% of the market. But it's all up to them. They have to make good, consistent, interesting beers, they have to make some new ones every year, and they have to sell the public on them-or at least the chefs, to start. Once they do, and they're verging on it now, the market is going to change.
Beer has always been short-term business. We're often not looking any further down the track than the next delivery, or maybe to the next season. Beer is a fresh food product and it has to be sold relatively quickly, so we fall into a short decision cycle, and it rules our thoughts. That's not always so bad, but it can set you up to get blind-sided by things like the Pabst explosion, or the malternative backlash, the microbrewery shakeout - leaving you with pallets of stuff you can't move with a fire sale.
So it's a good idea to step
back a bit occasionally. In that spirit, I offer these ten
predictions on how things will look ten years from now in
the US beer market. No guarantees, of course, and there will
always be unpredictable bumps in the road - the Atkins Diet
and the carb craze, for instance - but there are some things
that are easy to see, and some that are more like
1 Say good-bye to the three-tier system. Current court cases make this almost inevitable. Wholesaling will change completely as the legal basis of the business will go away -possibly before five years is up - and wholesalers will compete and survive solely on their business merits: service, selection, price. Those with the most cost-effective operations will have the best chances. Current affiliations with large breweries may not be an advantage, as those breweries are the ones most likely to be pushing hard for direct sales to large retailers, who would mostly just as soon buy direct. (Given the costly experience of some manufacturers with big retail chains like Walmart, the large brewers should perhaps be careful what they wish for.)
Earlier this year I gave a
presentation on this subject to the Pennsylvania Malt
Beverage Distributors Association. As some of us left the
hotel afterwards to go get a beer, I pointed to a Sysco
truck making a delivery at a restaurant: "There," I said,
"is the future of beer wholesaling. They don't have a
three-tier system, but they still have a business." Then a
man hopped out of a small delivery truck alongside the Sysco
semi and started unloading crates of live lobsters. A craft
brewer who was with us said, "But that's the future of beer
wholesaling, too." He's absolutely right. There will be real
opportunities for small, specialist operations who are
willing to work hard for a much larger margin on smaller
2 The retailing of beer will also change when the three-tier system goes away. State licensing laws regarding where beer can legally be sold will inevitably come under attack next. They may or may not stand court tests - they are also under attack by European businesses as being in restraint of trade against WTO rules. There is speculation that these laws will be the bone America throws to Europe to keep them from breaking open the market for privatization of public libraries, municipal water systems and the Post Office. If chain retailers -supermarkets, convenience stores, warehouse stores - get the right to freely sell beer, large producers will sell beer directly to them. It will change mom and pop retailing as everyone flocks to the supermarket for cheap mainstream beer. Beer specialty stores will survive in the same way wine specialty stores survive: by going to the top of the pyramid. As the beer market changes, the specialty stores with solid relationships with their suppliers will thrive.
3 The market will change. The history of the wine market is an indicator, the growing, serious presence of high-end beers in newspapers like The New York Times and the Wall Street Journal and magazines like Saveur is an indicator, and the growth of the craft brewed beer segment against the drop in the overall beer market last year is an indicator. Both American and foreign craft brewers are showing the necessary consistency and useful innovation they will need to win over both the everyday drinker and the serious aficionado. They have the money to invest in the equipment and talent they need to produce high-quality beer, every batch, and they're using it.
How quickly will the market change? It's changing already, and it's accelerating. The two major small brewers' groups in America, the Association of Brewers and the Brewers Association of America, have merged, a move that is sure to lead to a unified, louder voice for these brewers. Growth continues, and most of the brewers between 1O,OOO barrels and 1OO,OOO barrels annual production are growing at a pace over 5%.
That's something that should fall by the wayside, too - like the wine industry did in the 197Os, craft brewers should stop looking at raw volume. It's what you make that matters most in the new market, not how much. Dogfish Head is one of the first brewers to realize this, downplaying barrelage in favor of critical acclaim and figures on profitability.
The push could falter if brewers lose sight of the ideal: better beer, at better prices, in better variety. Beer is still a ridiculous bargain, even in the face of wine prices lowered by the recent grape glut, and price increases that are too steep could cut into growth. But a failure to raise prices will both mire beer in the image of a cheap drink, and deny breweries the margins they need to improve and expand.
If craft brewers continue
to close the gap between high-end beer and mid-grade wine in
pricing, they will become more attractive to retailers as
they do, because if the pricing increases are done
correctly, there shouldn't be any drop in sales to
consumers. Consumers are certain they like these beers, and
they will pay higher prices for them, as long as they can
buy consistent, innovative and above all, fresh, well-kept
beer from stores that take beer seriously.
4 That doesn't mean the big brewers are going to collapse any time soon, say, before the next geologic era. Anheuser-Busch is in good shape to continue to dominate the US market, and their international operations continue to grow. SAB/Miller is showing growth for the first time in years with new ad campaigns that show a smarter company in charge. This is the Miller that came out of nowhere in the 196Os to become a strong player. They have stopped the decline in their sales, and should show growth, defying negative predictions.
But Coors-Molson (or Molson-Coors, if you prefer) will continue to slide as their competition grows larger through acquisition. They are up against three of the five largest breweries in the world: Anheuser-Busch and SAB/Miller in America, and InBev in Canada, not to mention the competition from Grupo Modelo's Corona family. Coors has put all their eggs in the Coors Light basket, and that always-risky strategy is starting to show its flaws.
Any discussion of big brewers in American has to include Corona and Heineken. Grupo Modelo and Corona seem secure. Their international market is booming, the American market continues to buy the vacation in a bottle idea. The only possible fly in their sunblock is Anheuser-Busch's relentless attempts to gain control of the company, which likely won't affect US sales anyway, but will change relationships. Heineken still seems to be running scared in a Europe caught in the grip of consolidation fever, but their US position remains strong.
But the increased market
share of the craft brewers will have to come out of someone
else's piece of the pie. Where? Imports are a likely target,
as are the domestic premium brands. Inevitably, these beers
are the jug wines and the imports that taste like domestics.
The large brewers, who can read American Vintage as easily
as I can, will likely take the Gallo route and create
craft-type beers of their own (Again, they jumped the gun in
the mid-9Os with Elk Mountain, Blue Moon and Miller
5 Yuengling will continue to grow on the East coast, and will continue to keep itself to the east. They currently are filling a large niche between the big mainstream brewers and the craft brewers, transition beers for people who want something more but are still price-conscious. Samuel Adams has likely peaked, and will continue in a slow decline. The "mega-micro" idea is too dissonant for the consumer. The Samuel Adams brand may taste like a craft brewed beer, but it increasingly acts and looks like a mainstream brand. Sam Adams Light, a very good beer, suffers from the same dissonance. Craft-brew, in most consumers' minds, should be at least regional if not local, and the idea of a light craft brew simply jars too much. Redhook and Widmer, also good beers, have the same problem.
How Sierra Nevada, a
home-grown national craft brewer, avoids this has a lot to
do with their silence in the market. The craft brew consumer
is not one who can be easily swayed by advertising. They
want to taste the beer. This may change as the market for
these beers expands, or it may actually grow with the
market. Remember: focus on the inside of the bottle.
6 High-end beer will finally find its way into high-end restaurants, and the pay-offs for everyone will be large. Chefs don't really care about advertising campaigns. They are artists, they are passionate - what they care about is taste. Get beer into the hands of chefs, and their palates will tell their heads that this is a drink that is at least as complementary to food as wine is. The chefs will get excited, the chefs will excite the staff, the staff will excite the customers, and the customers decide on a relatively inexpensive up-sell that tastes great. When they go home, they will know they can go to their local beer store and repeat the experience at will.
7 Beer does not have terroir. The closest thing is the origin of the barley and the home of the hops, but these ingredients can be bought by any brewer on the open market. The same goes for equipment, yeast and any adjuncts. What does make a difference is the brewer. It is the particular brewer's skill, training, heart, vision, passion, and depth, their will that makes exceptional beer. A small number of brewers have become known to a small number of fans: John Maier of Rogue, Ray McNeill of McNeill's, Vinnie Cilurzo of Russian River, Phil Markowski at Southampton Publick House, Rob Tod at Allagash, and Massachusetts' own Todd Mott and Dan Paquette.
The reputations of these
brewers will continue to grow, and will influence the sales
of the beers they produce. If they move to another brewery,
that reputation will follow them. Producers will value this
asset and reward it. Retailers will become aware of it and
8 American brewers have mastered the hop. They proudly display hop varieties on their labels, websites and marketing materials. They know what varieties will add spice, grass, citrus, and earth notes to their beers. They understand malts, and work with a dizzying assortment of British, American, German, Belgian, and Canadian malts. American beers show a broad range of color and almost all the malt characteristics the rest of the world enjoys - a true malt dryness in the manner of Munich lagers still seems to elude them.
But what about yeast? For years, American craft brewers have mainly used four yeasts: a standard lager yeast, the so-called "Chico" ale yeast (said to be the Sierra Nevada strain) that is a dependable and clean workhorse, a similarly clean altbier yeast, and the much-derided (unfairly so) Ringwood yeast. There are others, to be sure: hefeweizen strains, Belgian yeasts for specialty beers, and some use a couple different ale yeast strains. But by and large, most American craft beers are made with one of those four strains.
That's going to change.
After years of talking about how wonderful British beers are
without the courage to use the yeasts that make them that
way, American brewers are beginning to switch from the
clean, dependable, safe yeasts they've relied on to the
sometimes more temperamental but distinctly more flavorful
yeasts British brewers use. They're opening all-Belgian
style breweries, all-weizen breweries, and trying new lager
strains. That change is real and happening, and it's
accelerating as more brewers realize that their customers
are looking for beers that are really different, not just
hoppier or darker.
9 Hop varieties, yeast strains and malt characteristics will start to become as familiar to beer-lovers as grape varieties and wine regions are to today's wine-lovers, and similarly, they will become sought after. I asked this question of various craft brewing pundits two years ago: is differentiation on yeast or hops of value or interest to the consumer? No, they all said, they don't know or care about the difference.
That's going to change, and the current popularity among aficionados of the new Simcoe hop is only the start of it. This happened on a small scale with the Cascade hop back in the mid-199Os, and again with the advent of the 'super-Cascade' Centennial hop, but now with the Simcoe it is taking off. Maltsters will gain new importance as consumers learn that they actually favor the taste of beer made with Durst malts, or Crisp malts, or Briess malts, or different base malts like 2-row pale, Munich, or pilsner, and start to look for those beers. Yeast strains have the potential to be just as desired, once the public gets the information about them.
All of these things are about telling the consumer what to expect in the bottle, something brewers have been woefully lax about for the most part, despite the "style guidelines" they supposedly brew to. Some brewery websites and marketing information presents the bare bones, but the consumers are waiting for someone to bring it to them in a way that makes sense, so they can truly know what to expect when they buy a beer.
Ridiculous? No one's going
to go looking for Sharp Creek Simcoe Sparkling Ale instead
of Harpoon IPA? Then why do we buy Chardonnay and Merlot and
Zinfandel instead of Big Red and Dry White? More information
means a consumer who has a better chance of buying a beer
she likes. More attention paid to that consumer by the
brewer - and the retailer - means more repeat sales.
10 Alcohol levels of "standard" beers will continue to creep upwards towards wine levels; consumption levels and price levels will adjust accordingly. Wagner Valley is a successful winery in the Finger Lakes. They added a brewery to their operation a few years ago, and contrary to all 'normal' brewery expectations, their biggest seller is their Sled Dog Doublebock, a massive, sweet beer that is one of my favorites of the type. Why does this big 8.5% ABV beer sell so well, when beers around 5% ABV are supposed to be the big sellers? Because you can sell more of them before people get stupid.
Think about it. What do the people coming to Wagner Valley usually drink? Wine. Wine drinkers don't like bitter beers - they're not used to the whole idea of "bitter" - and they're completely comfortable with beverages of 8% ABV and more. I've been harping for years on the idea that brewers should be producing more low alcohol beers because you can enjoy more of them, and I'm starting to think I've been looking at it all wrong.
Perhaps what brewers should be doing is brewing beers with plenty of flavor, regardless of the alcohol, and price and package the bigger beers appropriately. A truly big beer is expensive to make, due to ingredients and longer aging time - charge for it! A bigger beer will not sell as much per customer, because they can't drink as much- charge for it!
Brewers, thankfully, are
smarter than I am, and are beginning to do just that.
And those are just some of the big changes coming in the next ten years. I don't claim they'll all come true, but who's going to hold me to it in 2O15? I'll be happy to be proven wrong, so long as I'm around to enjoy whatever's being brewed then.