The Beer Guys!!
In
the first part of this interview, I sat down with Sam
Calagione, president of the Dogfish Head Craft Brewery, and
Tomme Arthur, head brewer for the Port Brewing Company, to
discuss the business of beer and what it takes to be the
face of their brands. In this second edition, these two
personalities address Anheuser-Busch’s renewed interest in
the craft beer category, the tough fight ahead for small
brewers and small distributors, and why most beer priced
over ten dollars isn’t worth your money.
At the recent
Craft Brewers Conference in Seattle, Calagione gave a
rousing keynote address to the gathered attendees. Featuring
more than 18OO craft brewers from around the world, the
event also played host to the 2OO6 World Beer Cup and its
awards. To the friendly audience, Calagione delivered a
speech filled with obscure literary and musical references,
and an ode to his friend Tomme Arthur, that built to a
single, unmistakable crescendo: Craft brewers should be
proud of their successes, celebrate them, but be prepared to
defend the ground they worked so hard to claim.
In one
particularly interesting passage. Calagione reported:
“Americans will always vehemently protect their right to
create an alternative – not just an alternative to giant
breweries, which is what we represent, but to the increasing
homogeonization of American culture. It’s not outlandish to
recognize our boil kettles as modern day melting pots – the
sources of beers as diverse and colorful as the people who
buy them. Made by people as diverse and colorful as the
people who buy them.”
ANDY
CROUCH How
important is it for a brewery to have a face or a specific
person identified with it?
SAM
CALAGIONE Whether
what people identify with is a person or a name, it all
boils down to what makes your company distinct. It can be a
person, Fat Tire beer, Arrogant Bastard, but whatever it is,
the most important thing is that in this very crowded market
place, that you brand stands out as being unique. Sometimes
that is a combination of a personal element and a brand that
has a unique identity. It’s probably not as easy as it was
five or six years ago to do that because there are so many
breweries doing such interesting things.
There’s a lot of
different models for that. There’s not just one route to
success for building a brand, but many different ones.
What’s important is that you prioritize building a brand
that is unique compared to the others out there.
TOMME
ARTHUR I think
what’s been a bigger challenge for a lot of us is the
Johnny-come-latelys, the me-too’s. We’ve been doing things a
little bit differently for a long time. I refer to them as
flavor driven beers, as process driven beers, they are just
beers that we want to make. We don’t make them that way
because we think it is a marketing tool, it’s because we
believe in the process and in getting the results. But right
now, it’s chic, it’s in. It’s to the point where everybody
is doing it and there’s a lot of people who aren’t doing it
well. People are doing it because they see there are
ten-dollar bottles of beer. It’s weird because there are
going to be a lot of ten dollar bottles of beer out there,
but guess what. That devalues and demystifies some of the
things we are doing because someone may not get to our beer.
Where we may have been the one or two ten-dollar bottles of
beer in a spot, and the first two they try may suck and they
may not be willing to go back to the other ones. That’s a
challenge and a shakeout. Everyone sees that there is a lot
of press to be had and a lot of love in this extreme beer
movement. I don’t really call it an extreme beer movement
for what we’re doing. It’s just the beers we want to make in
the ways we want to make them and that’s the story we’re
telling.
Everything we’re
going to do at the new brewery is about this story that we
tell. We’re not going to look at every beer and say, “could
we use chrysanthemum flowers because it’s going to give us a
better story?” No, it’s “is that the flavor we’re looking
for.” There are plenty of brewers that are looking at Sam’s
beers thinking, “Man, that guy’s telling a lot of stories
with these things, I’m going to go out and do that and hope
that I can get press or ten-dollars a bottle and not be
worried about it. That’s scary.
SC
I agree with you Tomme, but to an extent what you’re saying
[is] it’s sort of an extreme beer shakeout that
mirrors the craft beer shakeout we had back in 1995 and
1996. Where maybe it wasn’t a ten-dollar, cork-finished beer
but it was a seven-dollar six-pack that made the suits on
Wall Street say, “Oh, I’m going to open a brewery.” We lived
through that and I feel the customer lived through that with
us. I feel like they are the ones who are ready to call
‘bullshit’ on the people that bring pseudo, derivative stuff
to the market in 2OO6. They are way better prepared to call
‘bullshit’ on that stuff than they were in 1995 when guys
were coming out with bad product.
TA
It’s good that there is at least a database or an
opportunity for research to be had with these beer websites
that people can go look at. But there is still this sense
that people are going to get burned and that’s going to hurt
and take its toll. We’re not getting into cork-finished
bottles because we think it’s an opportunity for us. We know
that’s where our beers need to be. Somewhere down the line,
your beers will survive the shakeout because they have
pedigree, they’ve been made that way, and the story, the
personality, and they’ve been made this way for a reason. I
think the more barrelage that goes on, the more of these
things that come out, we’re going to see a lot of beers that
aren’t worth peoples’ time. We don’t want to be the next big
thing, we’re not interested in being the next flavor of the
month. It’s hard because when you release a new brand from a
new brewery and people get all excited about it, you are the
flavor of the month. You then have to find a way to grow
above that.
SC
I’m sure there is some of that reactionary brewing going on
for some of the bigger extreme beers, but I’m excited to see
your beers come out here and get on the shelf next to ours.
I’m excited to see [Russian River’s] beers come out
and [Avery Brewing’s] beers. There’s definitely a
karmic element to what we’re doing where we’re trying to
help the breweries we believe in get a presence in every
market. One bottle of Pangaea on the 75O-millilter shelf
next to a bunch of imports and Belgians says something.
Twelve bottles of great American, unique, exotic beers says
something altogether different. It legitimizes the category
and helps us break down that pricing ceiling that beer
suffers from compared to wine. I’m really excited to see the
brands that are stepping up and trying to get a national
profile for their more exotic beers.
AC
Recently, we’ve heard a lot about some larger American
brewers either taking a renewed interest in brewing or
distributing more flavorful products or in craft brewers
themselves. What are your thoughts on what this means for
craft brewers?
TA
Anheuser-Busch is capable of making any beer they choose to
make. They have more money than God. I think their biggest
problem is distribution; they have it, but that their
distributors don’t know how to brand or deal with those
beers. So even if they were to come out with the beers on a
Budweiser, corporate level, then they’d still have to send
them through their A-B houses and the A-B house would have
to figure out how to deal with them. On some level, it’s
just great to see that they are trying because it portends
that we have great things ahead of us. They look at our
segment as being very healthy. They are not going to accept
that our numbers are going up seven-percent in terms of
growth every year.
AC
What about the possibility of further acquisitions or
takeovers of craft brewers by larger breweries?
TA
At the end of the day, the craft beer consumer is a lot
better educated now and I think they really appreciate the
independence of the breweries they support. I’m kind of
betting my life, my home, everything that I’m mortgaging
against this brewery expansion. I’m betting that whether
Anheuser-Busch owns one-percent of your company, that it’ll
be viewed as being a little bit pregnant. I think it’d be
very difficult for a brewery to sell some equity share and
not have it be perceived as a scarlet letter on their chest
as they try to sell their own beer through A-B’s
distribution network.
AC
Do you think it’s likely that A-B will seek equity shares in
more breweries than it already has?
SC
I’ll play devil’s advocate here and play a worst-case
scenario forward. Let’s say they line up a network of eight
breweries nationally that they are going to welcome into
their distribution network. Let’s say they buy 25-percent of
those breweries to begin with and those breweries realize
what an amazing network Anheuser-Busch has built. Now these
eight breweries go out and invest fifteen-million dollars a
piece in bringing their breweries to the next level because
they can’t fill the pipeline that is now so huge. Now
they’re sitting on fifteen-million of debt. What happens if
Anheuser-Busch says, “You know what? I don’t really like
this and I’m going to kick you out of my distribution
network unless you allow us to buy 51-percent of your
company.” Now you’ve got all of these small companies on the
line. I just see it as a very slippery slope and its not one
I’m interested in. I don’t know how you do it and not need
their distribution. I don’t know how you take their
distribution and not become addicted to it.
The smaller
distributors are targets in the same way smaller breweries
are as well. If they basically in a panic say, “Well, if I
don’t sell out now to the big guys, my brands are going to
ditch me for Anheuser-Busch and then I’ve got no equity in
the company I built.” There are distributors our size who
mortgaged their lives to start their companies who are in a
very similar position and I’m hoping they hold their ground.
I’m not against Anheuser-Busch. I’m against totalitarianism.
It’s getting to the point it’s a monopoly. I’m betting every
cent towards not letting their be a monopoly.
TA
There’s always going to be someone who sells out
though.
SC
Yes.
TA
You say eight, but if they only get four then it’s still a
pretty good success rate. It’s interesting because
[Anheuser-Busch] has three breweries on what I would
call the West Coast: Widmer, Redhook and Kona. So I don’t
really see them looking to the West Coast.
AC
Many craft breweries are now to the point where their
capacity is quite substantial. Are craft brewers going to
hit a point, a glass ceiling, above which they cannot go
without some help with distribution?
TA
The biggest thing that is yet to be determined is whether or
not exporting becomes viable. I don’t think there is a lot
of people who have focused on the potential for growth in
exporting. As American craft brewing maintains its
viability, I think exporting is going to become more a part
of it. The Brewers Association is certainly looking at that
as a real positive.
I think that
most of the breweries still have options available to them.
There are not, to my knowledge, very many breweries who
presently distribute in all fifty states. So growth is
possible on distribution levels, but then it becomes access
to the market. Access to the market is going to be
tough.
