Craft Beer vs. Big Beer

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“Craft beer versus big beer”.  We’ve all heard it.  Whether or not we understood what we heard is another story. Let’s define some of these terms before the bitter battle between beers begins. (Say that 5 times fast after a few of your favorite brew)

Beer, as defined by Merriam-Webster, is an “alcoholic beverage usually made from malted cereal grain (such as barley), flavored with hops and brewed by slow fermentation.”

Craft Beer is defined as “a specialty beer produced in limited quantities.”

Big Beer is yet to be defined by Merriam-Webster, but is generally the term used for beer companies that produce their product in massive quantities and includes all the beers and sub-companies that they own.  This is where the argument begins.

The Brewers Association is an association whose purpose is to “promote and protect small and independent American brewers, their craft beers, and the community of brewing enthusiasts.” This is the lobbying group for small brewers.  The Brewers Association defines a craft brewer as “a small, independent, and traditional brewery that produces less than 6 million barrels of beer annually.”  To be independent, less than one-quarter of the business can be owned or controlled by a company that is not a craft brewer. To adhere to the traditional standard, ingredients such as malted barley must be used to brew the beer.  So let’s chew on that for a second as we visit a widely known beer, Bud Light.

No one in the beer world considers Bud Light to be a craft beer, not even Bud Light’s producer, Anheuser-Busch. It is a massively produced light beer that they manage to make exactly the same, batch after batch, brewer after brewer.  That is a feat on its own that cannot go unrecognized–consistency is consistency.  On other hand, in 2010, Chicago-based Goose Island was considered to be a craft brewer, and no one argued that.  It was a brewery that produced limited quantities of beer.  Then in 2011, Anheuser-Busch purchased Goose Island.  Now Goose Island is no longer considered a craft brewer because their parent company is “big beer”.

Shock Top is another brand of beer that advertises itself as craft, yet it is also owned by Anheuser-Busch. Further, Anheuser-Busch owns more than one-quarter of Shock Top. Blue Moon is the MillerCoors counterpart, in exactly the same boat, with their slogan being “Artfully Crafted”.  So how does brands like Blue Moon and Shock Top get away with marketing themselves as a craft beer?  The answer is simple:  There is no law that determines the title of craft beer.  Of all the definitions above, none of them are laws.  The only aspect that comes close to defining the difference between craft beer and big beer is the volume of production, and that change comes in taxation.  There lies the sole difference: taxes. Like most things in the world, if you follow the dollar, you find the answers.

If a brewery makes more than 2 million barrels per year, the standard excise tax rate for a brewery is $18 per barrel, or about $0.05 per 12 ounces. However, if a brewery makes less than 2 million barrels per year, they qualify for a lower tax rate on the first 60,000 barrels.  A brewer only qualifies if they will produce less than 2 million barrels per year. Let’s put that into perspective.

A barrel = 1 bbl (barrel)
= 117 liters
= 2 beer store sized kegs (1/2 barrel)
= 344 bottles of beer
= 244 U.S. pints

Having a better mental picture of how much beer is in a barrel, go back to the taxation on breweries that produce more than 2 million barrels. At the bare minimum, 2,000,000 barrels will equal 688,000,000 twelve (12) ounce bottles of beer, or six hundred and eighty-eight million bottles of beer at $0.05 cents per bottle.  That is $34,400,000 in excise taxes.

See why the term big beer is being used more? Those are some big numbers.  I am still not denouncing big beer or craft beer, but if you do not understand both sides, you don’t truly understand your own.

For breweries that produce less than 2,000,000 barrels per year, their excise tax rate drops to $7.00 per barrel, or about $0.02 cents per 12 ounces on the first 60,000 barrels of beer that is produced.  So if a brewer produced the maximum to stay within this excise tax range, they would produce 59,999 barrels, which would equal 20,639,656 twelve ounce bottles of beer.  That is a lot of beer, but it is nearly 670 MILLION bottles LESS, but 20.6 million bottles is still a large number.

The point is, craft beer is hard to define.  Even when we look at the numbers and do the math, small can still be big, and that is the conundrum.

Want to make it even more complex? Add the word InBev after Anheuser-Busch. InBev is the European merger of Interbrew and AmBev in 2004 that bought Anheuser-Busch in 2008, creating AB-InBev. The Craft Brew Alliance has one-third of its ownership held by Anheuser-Busch InBev.  So technically, Shock Top, Red Hook, Widmer Brothers, Omission and Kona are all from the world’s largest brewer, Anheuser-Busch InBev.

And beer is was supposed to be fun….

Big beer companies have taken a large financial hit by the upwelling of smaller breweries. Nine brands of MillerCoors, Heineken, Pabst Brewing Company, Anheuser-Busch took a 30% decline in sales from 2006 to 2011 alone.  That was before the number of breweries in the United States went from 2,033 in 2011 to 2,822 at the end of 2013, with many more in the growing stages. Breweries are popping up all over the nation, and to follow the definitions earlier, unless they start out with enormous capital investments and instantly can produce and sell over 2,000,000 barrels of beer a year, all of them are “craft” breweries.  This is also a capitalist society, where businesses tend to grow or fail. Surely if someone is making a good product and demand grows, business will grow and expansion will happen. This is where subcategories come into play for craft breweries. These subcategories are Regional Craft Breweries, Microbreweries, and Brewpubs.

From 2012 to 2013, there was a 22.6% change in regional craft breweries from 97 to 119.  It’s this range that the big beer companies seek to recoup their losses from their bigger brands by buying out a small brewery, such as the Goose Island, or creating a brand and labeling it as a craft beer, such as Third Shift, a trend that is sure to continue and I predict become larger in scale until the market balances again.

Craft: This marketing term is where many consumers are unaware of the battle between craft beer and big beer, get lost in the shuffle and see something new and try it.  Since there are no laws which deem who can and cannot use the term “craft” in their marketing, there is nothing that the small, independent and traditional brewers can do to stop them.  For those that want to say that craft beer is not a marketing term, I say that all consumer trends are marketing terms. If they weren’t, we wouldn’t have had a wave of “fat free” and “low carb” statements on products over the past decade, or my personal favorite, the “Gluten Free” bottle of wine.  Craft is a marketing term, and craft brewers want to own it. This is their fight.

When it comes down to it, the battle between craft beer and big beer is being fought on two different fields, and neither side is on the same field.  The larger brewing companies are fighting for the market share and are exploiting the craft beer popularity.  Craft brewers have formed a personal identity in their brands, and anything that lessens that is taken personally.  That is not to say that big beer does not care about their product and that craft brewers do not care about money. Their focus is simply different, but they are getting closer to being on the same playing field than they think.

What I say is this: show me a brewer whose primary focus is on the quality of their product and the satisfaction that it brings their customers. That is a true craft brewer, it doesn’t matter the scale of production, and everyone’s taste buds are different.

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