Whazzuuuup with Budweiser’s Attack on Sacramento Brewing?

In July, the news broke that Golden Road had submitted plans to develop a new taproom in Midtown. Golden Road is a Los Angeles-based brewery known for mediocre beer and for recently being purchased by Anheuser-Busch InBev, the Belgo-Brazilian mega-conglomerate best known for producing an indistinguishable line of lagers, including Budweiser & Bud Light, Becks, Corona, Fosters, Labatt, Stella Artois and some of the biggest brewers from Argentina, Belgium Brazil, China, Colombia, Dominican Republic, the best of which are known for their flavorless, easy drinking demeanor. Those beers make a lot of people happy (and they help to finance amazing commercials). There is nothing wrong with that. But many of us prefer a more locally-flavored alternative and, perhaps more critically, brewing close to home offers substantial economic benefits.

Over the last two decades, the traditional mass-production brewers, or “Big Beer,” have been squeezed from all sides. With the takeoff of craft brewing and the increasing popularity of wine and spirits, Big Beer lost 1/3 of its market share.

Compiled by author from multiple sources,
primarily the Brewers Association and the Distilled Spirits Council

At first Big Beer ignored craft brewers. Then they laughed at them (Upsetting some of their recently purchased “friends” in the process). Now, unable to beat them, AB InBev has turned to buying them up, beginning in 2011 with the purchase of Goose Island. That Chicago brewer produces of a range of quality products, including the legendary Bourbon County Brand barrel aged stout. While some saw the slippery slope we were headed down, many celebrated their ability to get Bourbon County nationwide, without long lines on Black Friday.

For nearly three years Goose Island remained the lone former-craft brewery in AB’s portfolio, however, in 2014 it became clear that AB thought this experiment had paid off. They seemed to agree with the adage, “Once you go craft, you never go back.” Over the next two years it would add six more former-craft breweries, including Golden Road, with several more added since. AB would selectively pick one growing player in major beer markets to backstop with the kind of marketing and distribution heft that only AB InBev can provide (sometimes with questionable legality). Some of the breweries, like Goose Island, Elysian and Wicked Weed were highly respected. Others, like Golden Road, Blue Point and Four Peaks appear to have been acquired more for their strategic place in the market. All have expanded significantly since their acquisition.

Meanwhile, brewing has been booming in the Sacramento region. From just a handful of breweries at the turn of the decade, Sacramento’s brewing scene has grown over 10x with about 70 breweries, including larger operations like Track 7 and Knee Deep and smaller, critically acclaimed breweries including Moonraker, Mraz, New Glory, New Helvetia and Device. With numerous neighborhoods that have yet to open their own brewery (Pocket Brewing, I’m looking for you), room for growth is plentiful.

The Midtown scene may be reaching saturation, though. The recent closure of Rubicon, Sacramento’s original craft brewery, speaks to this likelihood. In a saturated market, adding competition will only serve to undercut the existing businesses. When that competition has AB InBev’s marketing and distribution advantages behind it, the out-of-towner is ‘starting on third base’ without having to hit a triple.

Craft beer is a valuable industry. Responsible for over 400 thousand jobs nationally including over 50 thousand in California and perhaps five thousand in the Sacramento region (author’s estimate), breweries are more than simply a bar. Craft breweries are manufacturer, wholesaler and retailer in one. If we assume the menu price is a typical 4x markup that means every $6 beer of local craft brew is keeping an extra $1 in the community after accounting for state and federal taxes. That dollar ripples out through the local economy adding another 50 cents or so of economic output. If we extrapolate that to a 1,000 barrel micro-brewery (the average California craft brewery is 5,000 barrels), assuming 200 pints sold per barrel (accounting for spoilage, tasting and frequent ‘quality control’), sending our business to this purveyor of locally manufactured beers would add $300,000 to the economy, relative to a bar or taproom serving beverages produced out of the region. Multiply that by 70 and we are looking at $21 million in additional local economic output because our drinking dollars are being spent at those breweries instead of traditional bars or places like Golden Road where the brewing occurs elsewhere.

The reality is, when AB InBev’s tasting room comes in to Sacramento, it will be undercutting our own local manufacturers and causing our region to lose in a zero-sum game. As the National Beer Wholesaler Association describes it:

“Rearranging the deck chairs in your market … does not provide a real economic impact since the size of the total pie remains the same.”

I am not sure what the solution is, but it was unfortunate that Golden Road’s minimal footprint meant it was able to sail through the City’s permitting process with no discussion of the harm it would do to our economy.

So let’s start that discussion. If you would like to learn more or have thoughts on how we can protect our local industries, I encourage you to come by New Helvetia Brewing tonight (September 5^th, 2017 at 6 pm) for a very special Wonk Wednesday, Tuesday edition. In honor of the California Craft Beer Summit this week in Sacramento, we will be raising a pint and discussing strategies to support the development and success of our local craft breweries. Also check out Cindy & Isaac’s discussion with Quinn Gardner of Sactown Union Brewery on Ransacked.