Friday, May 11, 2012

Stifling the South

I want to preface my post today with a clarification, basically so I don't have to explain myself later if people get the wrong end of the stick. I like the beers of Sierra Nevada, Oskar Blues and New Belgium.

With that out of the way, let me continue. If I were in the planning stages of starting a brewery over here on the East Coast of the USA, especially in North Carolina, but also Virginia and South Carolina, I would be worrying right now. I would be worrying because all three of the aforementioned businesses are planning to build breweries in North Carolina, all of them clustered in the Asheville area.

On one hand it is excellent news, it will create jobs, which will spur local economies as workers spend their money, so from a economic point of view this development is very welcome. A further benefit that has been mentioned is their beers on the East Coast will be fresher and of a higher quality, personally I am a little dubious on this, but there we go. Certainly they will be cheaper to distribute, but I very much doubt the consumer will benefit from that in any way shape or form, just as the consumer doesn't benefit from the transportation savings of using cans instead of bottles.

My concern then is that these expansionary moves will stifle the local craft brewing industries and that market share which previously supported much smaller operations will be lost to the bigger company. Of course, the economist will say that this is simply the invisible hand of the market, but I have an aversion to invisible hands grabbing small companies by the neck and squeezing the life out of them. Naturally there is the argument that having these big businesses on their doorstep should encourage the smaller local breweries to up their game so they can compete with the big boys, but the question remains will they have the resources to do so?

I can't help but think that this is the first stage in the consolidation of the craft brewing industry, where the bigger companies start to force their way into markets by opening brewing facilities in various parts of the country. While we will see more and more Sierra Nevada, New Belgium and Oskar Blues beers in the supermarket aisles, we will see fewer local brews except at specialty outlets like Beer Run here in Charlottesville.

As I commented on my Twitter feed the other day these expansions are really no different from AB InBev buying up facilities to brew Budweiser in around the world, it's just that the beer is a bit better.

5 comments:

  1. I"m not sure I agree. I think these new, bigger brewers in NC will help to add to the collective Brewing voice which could allow us to change laws to make it even more friendly to brewers.

    More brewery means more people looking for brewing jobs here. Perhaps that means local universities and community colleges added brewing courses and possibly degrees.

    Perhaps more local ingredients being produced here. They are already producing Hops, perhaps malt as well.

    Perhaps instead of shelf space being overtaken it is expanded. Ask yourself, how much better has the beer selection gotten at EVERY store in NC since 2005? I'm not saying they are all great, but you can probably at least find a Sierra Nevada Pale Ale or Fat Tire in a convenience store now. That didn't used to be the case.

    Maybe Oscar Blues and New Belgium coming here makes it easier for other NC breweries to start canning. As both of them do and often the biggest hurdle is the cost is the run of cans.

    Also, more choice and exposure usually leads to a more informed consumer. A better informed consumer is more likely to choose local and choose quality.

    It could be great for NC all the way around.

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  2. Kipp,

    Thanks for your comment, and your interesting perspectives.

    As I say in my post, I think the job creation side of these moves is an excellent thing. I wonder though how many people who want to be brewers will go to work for the big companies rather than smaller local operations?

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  3. It will not hurt the locals who are making good beer, have a loyal following and good business practices. These brands are already competing against locals in every aspect. I do expect them to spend more money on marketing in their local markets but little will change but the origin of the beer. I'll be glad to consider New Belgium, Oskar Blues & Sierra Nevada #ncbeer

    Dave - craftbeercollective.com

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  4. Thanks for writing this post. I've seen more than a handful of similar opinions on Twitter, but 140 characters is no room for explanation. I'm another NC resident, so it's interesting to hear opinions from people elsewhere who are affected by the news of these breweries expanding a little differently. While it seems that a second physical location has sparked this discussion, I think it has little to do with it. Most of your points are addressed by expanded and increased distribution (if I understand them correctly). Many of the same arguments involving economies of scale and larger craft breweries could have been made before any of these announcements and concerned the same breweries as well as those like Stone and Dogfish Head, who undoubtedly enjoy some advantages due to their size (as well as different challenges). If you're looking locally at North Carolina, I don't think much will change-at least in the near future. Most of the other breweries located near the future sites of these second locations have limited packaging and are mostly available on draft. Not only do I think shelf space will be little affected, but I don't think it's currently a big issue to these breweries. They're local hangouts and true locations in their community. Taprooms, restaurants and music venues at the new locations will have an impact about the same as any new bar opening up in town. The effect on tourism, I think, will only be positive. I just don't think many people who would have visited a local brewery will now visit one of the new locations instead-it will likely only add to the stops. In addition, I think the bigger names will bring some new visitors to the area, who then only have more places to discover in the existing local breweries.

    Where I think there will be the biggest impact are any markets where these breweries' beers are not currently distributed or are limited in availability (not North Carolina). Sure these markets may experience increased competition and shifts in shelf space, but that's much less about the second location. A similar effect could have been created by an expansion of the primary breweries, and has been in markets across the country when distribution territories have expanded.

    New breweries continue to open up in areas that some think are already saturated. The ones who succeed find a way to offer something different. I just read that there are 10 breweries slated to open up in Colorado soon. Denver Beer Company did the same not long ago and has found its own niche within a market that doesn't seem to be hurting for a place to drink a beer.

    I have little fear of these expansions and look forward to the positive economic impacts they will have. It is craft breweries like New Belgium, Oskar Blues, and Sierra Nevada that have helped make craft beer what it is in America. Part of that means consumers who appreciate a variety of beer and don't view it as a single, swillable commodity. Those same consumers can see and know the difference between Asheville's Wedge Brewery and New Belgium, and they aren't looking to replace one with another.

    AJ - wortandyeast.com

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  5. Fuggled, you raise some good points. But remember the New NC 3 are still tiny in comparison to the Big 3. You can't really compare them, it's like apples and lemons.

    Furthermore, the NC 3 are so entrenched in the craft beer community and will be embracing their new microbrewery neighbors for sure. I happen to personally know some of the folks from the New NC 3 breweries as well as most of the folks from all the Southeastern breweries.

    All these companies operate with the same craft mentality of fellowship and camaraderie. This will indeed encourage everyone to up their game, it will create jobs and commerce and I foresee everyone getting along just peachy with open arms.

    Katie - taphunter.com

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