Craft Beer's Moment of Truth

Nobody saw this one coming, but with the creep of consolidation in the craft beer world it seems like maybe we should have.

When Sam Adams brewer Boston Beer Co., maker of Sam Adams, merged with Dogfish Head nearly two weeks ago it felt like craft beer had been turned on its head. Consumers have long been accustomed to the craft buyouts from "big beer," but what to make of it when the "buyer" was a craft pioneer? And what would become of the "victim," a longtime craft darling with a fair amount of clout in its own right?

                                                 

The first thing to figure out, of course, is what actually happened. Despite being officially announced as a merger, many outlets reported that Boston Beer Co. had bought Dogfish Head. The difference, technically, doesn't matter much from an economic standpoint. Money changed hands, and now there is one brewery where before there were two. But from a craft beer fan's viewpoint, the meaning of the deal hinged a lot on how its framed.

To think of a buyout is to imagine a corporate, profit-driven mentality being forced onto a previously creative and innovative company. For example the friendly, convenient, local bank which gets bought out by an international behemoth - say goodbye to the extended hours and free pens. But even moreso, the concern is that the smaller company will lose direct control over how they run their business, becoming stifled by the strict moneymaking business policies from "the higher ups."

On the other hand, to think of it as a merger is to view the deal as a collaborative brewing venture, much more in line with craft brewing culture. For decades, the craft beer industry has been defined by its dedication to principles: quality, creativity, and camaraderie over profits. Profits were always important, obviously, but seemingly never at the expense of those principles. Boston Beer Co. has operated as a publicly traded company for over two decades prior to this merger, and few have ever accused them of selling out their principles for profits. Boston Beer certainly has its critics as it has grown and required various expansions of the term "independent craft brewer" by the Brewers Association. Yet now, a veritable bandwagon of people are certain that this merger is the beginning of the end for craft beer as we know it.

The negative viewpoints may be right. Business forces have been chipping away at craft beer for years, with private investment groups forming brewery conglomerates and taking controlling stakes in breweries. Once a company is publicly traded, or owned by investment money, the basic concept of capitalism often requires a heavy focus on profits. And, like the local bank that gets bought out, the profit driven mindset has a way of trickling down to the subsidiaries.

                                                             

But consider the counterbalance: in the ABV merger/buyout, Victory and Southern Tier were given seats on the ABV board. Both continued to exercise control over day to day operations and top level decisions. Even if there was a corporate mindset whispering in their ear, they had the power and prerogative to push back against it, if they felt the need. By most accounts, they've succeeded in maintaining their integrity and brand value simultaneously. Or maybe the breweries coordinated the buyout carefully enough that there wasn't even any corporate pressure at all. Either way, the result has been largely just a continuation of both brewery's pre-buyout approach, but with more resources.

Ultimately, it feels like the fate of the Boston Beer-Dogfish Head deal will come down to the same issue: will there be a profit-driven mindset that eats at independent decision making, or will principles continue to act as the first priority? Consider the principles of the two men who engineered it: Boston Beer Co.'s Jim Koch, and Dogfish Head's Sam Calagione. Both are highly regarded as leaders in the craft community. More importantly, both are widely considered to be craft beer purists, putting their love for craft beer and innovation ahead of short term profits. The new Boston Beer Co. will have considerable power in the industry. The concern from craft beer fans is how they will wield it...to help push macro beer further onto its heels, or to squeeze out the smaller craft beer competition?

Although this deal may have been made partly out of necessity due to market forces, there is also some serendipity in two incredibly enthusiastic brewers coming together. There are reports that this idea was originally hatched directly by the two, in a discussion over a beer. And we get the sense that those stories aren't just fanciful reporting; it feels like exactly how you'd expect it to happen from these two pioneers. And if it comes down to trust, it's nice to have breweries with long track records to consider.

So, was this a ruthless business move that will ripple across the industry, consolidating craft beer power and capsizing many small breweries along the way? Or was this a victory for craft, showing that the original craft beer principles can and will continue to grow by joining forces to provide a stronger platform for all craft breweries? In this, craft beer's moment of truth, only time will tell. But these crossroads have always been inevitable, and if we can't trust Jim Koch and Sam Calagione to navigate them gracefully, we probably couldn't trust anyone.