Brewbound Session: Industry Leaders Discuss State of Craft

Craft beer has an identity crisis, Bell’s Brewery CEO Laura Bell told an audience of nearly 200 industry professionals attending Thursday’s Brewbound Session in New York City.

As the category has grown to more than 5,300 unique craft breweries with different goals, the Brewers Association’s definition of what it means to be a “craft brewer” no longer reflects what’s actually happening within the segment.

“What does ‘craft’ really mean?” Bell asked during a “state of the industry” panel that also featured Heavy Seas founder Hugh Sisson and Founders Brewing CEO Mike Stevens.

“Craft is in a place that needs to be defined a little more,” Bell argued.

Stevens — who co-founded a Founders Brewing entity that no longer meets the Brewers Association’s craft definition after Mahou San Miguel purchased a 30 percent stake in December 2014 — said it’s time craft brewers get to work on appealing to a broader audience.

(Editor’s note: The BA states that “craft” brewers must be less than 25 percent owned or controlled by an alcohol industry member that is not themselves a craft brewer.)

“There’s a huge amount of opportunity, but we have to stop trying to put it all in a box,” Stevens said. “I struggle with the confinement of the box. Why the hell can’t a craft brewery do 10 million barrels? What’s wrong with that? Why on God’s earth would that be a bad thing? So to put a ceiling on something seems quite the opposite of what you want to do as an industry.”

Stevens argues that larger craft breweries — those making more than 500,000 barrels — have a “responsibility” to clear a patch for up-and-coming brewers, even if it means making sacrifices such as exploring more affordable price points, accepting lower margins and experimenting with non-traditional craft styles in an effort to expand the consumer base.

Sisson, meanwhile, said he believes the craft segment has matured and evolved from being a group of companies that defined themselves as the “polar opposite of big beer,” to one that includes thousands of players competing “within the confines of the ‘beer’ industry.”

“We’re having growing pains,” Sisson said of the industry. “Typically when you’re having growing pains, shit happens. And we’re in that shit happens moment now. I’m still pretty bullish, but now it’s time to up your game.”

That means making significant investments into marketing, branding and quality control, Sisson argued.

“You can’t do this by the seat of your pants anymore,” he said. “If you don’t have a fucking lab, get out of the business. I mean, you gotta dial it up.”

Bell added that in her conversations with retailers, she’s getting more and more questions about quality programs.

“I think this is a great sign of maturity,” she said. “They also understand that quality beer is going to sell.”

Sisson echoed the sentiment: “My customer base has a loyalty to me of one six-pack. And the day that I forget that, I’m toast.”

Stevens told the audience that Founders has committed to examining its products and its processes, and part of that is building relationships with wholesalers and meeting any possible objections head on.

“They [wholesalers] do want to sell your beer but only if you make it easy for them to sell your beer,” Stevens said. “We got as detailed as we could so there wouldn’t be any fight back from them.”

Craft brewers have to be constantly self-evaluating and willing to change, Sisson said. Part of Heavy Seas’ evolution is “acknowledging the fact that becoming a national brand is unrealistic.

“We’re focusing our geography so we can stay relevant and find ways to become more relevant and tell the story better,” Sisson said. “We’re definitely focusing on product innovation but understanding that… the distributors have way too much crap on their plate. So if you’re going to walk in the door with a new SKU, you better be walking in with a plan that removes a SKU, minimum, because they already have more than they can manage.”

“I’m all about innovation, and Founders Brewing Company has a pipeline going, but what we’re not about is innovation for the sake of innovation,” Stevens added. “That’s kind of bullshit.”

Bell also wondered how long the never-ending cycle of innovation for one-off beers and specialty releases can be sustained for breweries without flagship offerings.

“It’s a tough balance,” Stevens admitted. “We didn’t have All Day [IPA] until 16 years into our business. So we were the ones flying everywhere. So I do understand the smaller breweries who are trying to find their place and do throw shit on the wall until something sticks.”

Founders struggled with the decision to add All Day IPA, a 4.7 percent ABV session beer because it didn’t match the company’s reputation for producing high ABV beers, Stevens said.

“We started to look at things, and we’re reaching a different audience with that beer than we were before,” he said. “What the fuck is wrong with that?”

“Nothing,” Sisson replied.

“You will have to design to break through the ceiling,” Stevens said.

However, reaching scale is never going to happen without choosing a flagship beer and building brands, Sisson added.

“The period of rampant promiscuity is coming to an end,” he said.

Meanwhile, retailers are focusing more on velocity, he added.

“On-premise is still a little slower,” Sisson said. “We’re still dealing with massive rotation nation. Nothing pisses me off more than you sell them a keg and it’s gone in two days and you’re off. Hello — last I could tell we were here to make money.”

Stevens also wondered aloud why craft cannot claim 51 percent of the market share.

“Twelve feet down the aisle is 85 percent of all beer sold in America,” he said. “Let’s go to the other side of the fence. Let’s go raise hell on them.”

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