For Pioneers, Craft Beer’s Non-Beer Future Is Non-Negotiable

In 2017, The Boston Globe, Samuel Adams’ hometown paper, reported a fact that startled plenty of casual drinkers in the broader craft beer universe. The brand’s parent firm, Boston Beer Company, was on the verge of producing more of its “nontraditional offerings” like Twisted Tea, Angry Orchard, and its new hard seltzer brand, Truly, than actual beer. “Sales of Samuel Adams and the company’s other beers have dropped significantly, as drinkers increasingly seek out new, exotic beers from smaller local breweries — or flock to crash-and-burn fads,” reporter Dan Adams wrote at the time. “[H]ow much longer will Boston Beer remain a craft beer company?”

Five years later, questions about Boston Beer Company’s “craft” status seem about as relevant as Your Cousin from Boston’s milquetoast “Good Will Hunting” sendup. At some point late last decade, with Sam sales sliding, its broader craft aspirations floundering (anybody remember Alchemy & Science?), and its flavored malt beverages firing on all saccharine cylinders, the company crossed the beer/beyond beer rubicon. It hasn’t looked back since: These days, the ratio is something like 30/70 at best, even with the firm’s 2019 acquisition of Delaware craft brewery Dogfish Head. Boston Beer Company has always drawn criticism on the disconnect between its pedigree and its portfolio, because it’s a publicly traded firm whose charismatic co-founder and chairman, Jim Koch, has balanced his personal passion for full-flavored beer with a Boston Consulting Group-honed acumen for savvy business. The firm is also fairly direct about its ambition, at least with some audiences: In October, chief marketing officer Lesya Lysyj told wholesalers that “[o]ur overall national portfolio actually skews very heavily to beyond beer. … So we really feel we are very well positioned to take advantage of this growth.”

Antiseptic? Corporate? Not craft? You decide! But the truth is, many of the same big-time craft brewing pioneers that navigated last decade’s paranoia over selling out have spent the first couple years of this decade branching out in directions Boston Beer Company already has. Stone Brewing Company is doing hard seltzers and tequila-based Margaritas. Sierra Nevada just unveiled plans for a new 500,000-barrel facility dedicated to its “beyond beer” ambitions, including hard tea and kombucha. Duvel Moortgat mates Firestone-Walker and Boulevard Brewing are also making moves: In 2021, the former acquired Cali Squeeze to “experiment in a way that doesn’t impact our traditional beer programs,” while the latter announced this past summer its Quirk hard seltzer line would be 25 percent of its business by year’s end. New Belgium Brewing has dabbled with agua frescas for years, and earlier this year doubled down on its popular Fruit Smash hard seltzer brand with a higher-ABV offering. And on, and on.

Now, some of these outfits are independently owned, while others have sold themselves to macrobrewers or mid-majors. But that’s sort of the point, right? Chin-checking a craft brewery on its Reinheitsgebot compliance and its anti-corporate bona fides was last decade’s semantic bugbear. The landscape has changed, and the terms of debate should, too. Today’s craft breweries of a certain size are morphing into multi-threat operators whose foundational fealty to “traditional beer” has been tempered by drinkers’ changing tastes, increased competition, and investors’ demands, too. Or they’d better start soon, because there’s a paradigm shift afoot: The country’s biggest craft beer producers are becoming “beverage companies,” like Boston Beer Company and those dastardly macrobrewers before them.

The bigger they are, the harder they’ll tea.

Whether they acknowledge it or not is up to them. But make no mistake: At the highest levels of the craft brewing industry, it’s happening. “You can be a small, independent beer maker focusing on beer, but if you want to be a large company making beer, you might as well assume upfront that you’re gonna have to make more than beer because the beverage industry is driving you that way,” Maureen Ogle, beer historian and author of “Ambitious Brew,” tells Hop Take. For years, Ogle has been my go-to call whenever I’m looking for sweeping context and perspective on how the American beer business’s past trajectory might shape its future. Over a dozen interviews, she’s hammered this point home again and again: It used to be that there was a U.S. beer industry, and the broader U.S. non-alcoholic beverage industry, and almost never the twain shall meet.

That’s no longer the case. Thanks to loosening laws, corporate consolidation, and the American drinking public’s relentless demand for novelty, the whole business of drinks-making is now hauling ass toward the blurry horizon line where soft and hard meet. As the American craft brewing industry’s heaviest hitters mature, with shareholders and investors and their own aspirations to contend with, they grow more vulnerable to that gravity. “I don’t think 20 years ago, that was true,” Ogle says, “but the beverage industry has just gone crazy.”

At a certain point, “maybe there’s no such thing as a beer brewery,” she adds, leaning into the riff. “Maybe that’s been the biggest shift of all.”

There was a time, not too long ago, when people would log onto Al Gore’s internet to do battle at the mere suggestion that craft beer was anything other than an artisanal phenomenon, untainted by the vagaries of the marketplace, put on Earth to do righteous battle against those corporate flunkies trying to turn beer into just another beverage. This moralistic framework — craft beer good, Big Beer bad — informed The Globe’s 2017 item and plenty of others from the era. Ironically, Boston Beer Company, one of a handful of firms that built the craft beer industry as we know it today, has belied that premise the most over the years. When word got out in 2018 that the Brewers Association planned to revise its definition of a “craft brewer” to allow for outfits that produced non-beer, for example, critics called out the organization for moving its own goalposts at the behest of one of its largest dues-payers. “In [the definition’s] twelve-year history, the criteria has changed three times already,” wrote Jeff Alworth, founder of the influential Beervana blog, after the change was codified in December of that year. “One of those changes expanded the definition of ‘small’ so that the largest and most influential member, Boston Beer … [could] remain within the organization’s definition even if it didn’t principally make beer.”

That used to be a damning indictment, but now it’s de rigueur. And why not? The segment’s salad days are behind it, and stiff headwinds are forcing formerly independent firebrands into arrangements that would’ve been unthinkable a few years ago. (Stone’s June 2022 sale to Sapporo is the highest-profile example here, but there are others.) Those bland macro lagers, villainous foils against which elder statesmen like Ken Grossman, Larry Bell, and, yes, Jim Koch, contrasted their own full-flavored beers? Flailing, failing, has-beens, never to reclaim hegemony over the American fridge. Meanwhile, there’s never been a better time to be thirsty in America! The sheer breadth of beverages, from non-alcoholic hop water, to ABV’d kombuchas, lemonades, and teas, to my personal hobbyhorsecow, whey-based hard seltzers, is breathtaking to behold.

Traditionalists with strong opinions about rauchbiers and hop varietals may take issue with the idea that big craft breweries must trial-and-error their way out of craft beer’s walled garden and into the fermentable wilds. But that’s not new. “One hundred years ago, there was a tremendous, rancorous debate among brewers about whether you were still a brewer if you were making a cereal beverage or a near-beer,” Ogle says. “If you show up at work [today] and you’re making hard seltzer, are you still a brewer? Maybe we have just come to the point where, finally, the beverage industry itself has become such a powerful force that a brewery can’t withstand it.”

This gets even more complicated once you throw distilled spirits into the mix, which of course Boston Beer Company has already done. Is it brewing to make Truly hard seltzers with vodka? No. Is Dogfish Head, acquired for $300 million by Boston Beer in 2019, less of a brewery because it’s riding its spirits-based canned cocktail line hard lately? Not particularly, on either count! But these are things that beverage companies have to do to stay relevant and solvent. The world’s biggest firms already know this. Molson Coors made a whole “thing” about tacking “beverage company” onto its corporate moniker a couple years back to show “we are serious about growing beyond beer,” as chief executive Gavin Hattersley said at the time. It’s no coincidence that the company announced it’ll be putting tequila into Topo Chico hard seltzers, too. This is the new game, and the world’s biggest craft brewing firms are starting to learn its rules.

Shout it from the rooftops of your revitalized mixed-use industrial space: The Age of The Large Craft Beer Brewer is over! Let the Beverage Company Epoch begin in earnest! Don’t fret if you’re a longtime craft beer fan who loved the whole small/local/independent thing, either. There are still, like, a bajillion beer-making craft breweries out there for you to patronize. Firms like Boston Beer Company may not be able to find the growth it needs in the segment it helped to establish; Koch just said as much in the firm’s latest earning’s call. (“What would you expect to hear from a leader whose business has only got about 10 percent of its portfolio in beer?” Hattersley retorted a week later in Molson Coors’ own call. Good show, fellas!) But smaller players have a much better shot of building sustainable, albeit smaller, businesses around traditional beer. (Some are even downsizing deliberately, like San Diego’s Lost Abbey.) They’re probably doing all sorts of experimentation, too, as they should. But only the biggest of the bunch are ever going to get sucked into the beverage company pipeline.

Whether you get upset about any of this is up to you. I’d rather you didn’t! But either way, you’ll get over it. As Chris Shepard, a senior editor of Beer Marketer’s Insights, told me last year, assessing the more muted response to recent acquisitions: “Over time, folks have just sort of understood that that’s the way things go.” I expect that to hold true for beyond-beer deviations in big craft brewers’ portfolios: Some people may get red-assed about it at first, but eventually, it’ll just become the status quo. This is just the way things go! That the American craft brewing industry was built on innovation is a bit of marketing schlock that just so happens to be true. It still is. It’s just that the biggest opportunities — the whitest “white space,” as Koch recently called it, like thousands of management consultants before and since — for innovation are, well, beyond beer. The biggest craft breweries have no choice but to chase it.

🤯 Hop-ocalypse Now

Good-idea-haver Elon Musk has completed his overpriced and potentially ruinous acquisition of Twitter, and the platform’s power users — their brains utterly poisoned from years of said platform use — are taking it about as well as you’d expect. Is this beer news? No! But, this time last year, the world’s richest man (who is also its most brain-poisoned poster) announced his intention to brew “Gigabeer” to go along with the vanity tequila he pawned off on rubes sold to fans at $250 per lightning-shaped bottle. Does the world need Gigabeer? Also no! If, as Musk himself has tweeted, “the most entertaining outcome is the most likely,” assume Gigabeer will soon launch, immediately pivot to producing Teslaquila canned cocktails, then be sued out of business for “epic” ads that depict people drinking and “self-driving.” This would be very entertaining!

📈 Ups…

New Untappd data shows U.S. taproom visits are “remarkably resilient” nearly three years into the pandemic… 6 attorneys general file to block key portion of Kroger/Albertsons merger, antitrust experts see no “clear path”… Beloved San Diego outfit Lost Abbey scales back on purpose… White Claw throws big bucks behind in-person happy-hour Instagram campaign… 40% of Anheuser-Busch InBev revenues (InBevenues?) now coming from above-core portfolio…

📉 …and downs

College-branded beers tantalize tailgaters, appall alcohol-safety specialists… The Beer Institute says Trump/Biden aluminum tariffs have cost U.S. beverage business $1.7 billion and counting… With soon-to-expire beer signaling slow sales, National Beer Wholesalers Association is “pessimistic” headed into Q4… Boston Beer’s Jim Koch on traditional beer: “The reality is it will probably not grow” again for decades… Speaking of which, spirits keep comin’ for beer’s leading share… New GreenPeace report shows the U.S. remains virtually incapable of recycling plastic packaging (like, for example, PakTech handles)… Rail strike still in the offing, with up to 75% of unionized rail workers poised to vote down carriers’ deal…