'Beer Wars' Falls Flat

The German Beer Market

As a beer buyer who works with several distributors, inc. Stone, in Los Angeles I feel we are very fortunate to have craft brewers here in California that can distribute their own products. Increasingly I am approached by local brewmasters who can promise to bring in their beer whenever we need it. In addition, this holds out the promise that when they grow like Stone, they can begin distributing other people's beers. I can only commend, applaud and admire Greg and the rest of the folks at Stone for supplying us with beers that could be seen as direct competitors. In fact, as we all hopefully know by now, this market is not a zero-sum one and the ethos of craft beer is respecting and learning from others, all the while loving your own product. Arrogant AND humble!

Finally, Amy's point about the future of the US beer market is well taken. In the past, there were countless breweries with small market shares here. Perhaps we are revisiting that era ever so slowly. For a very different type of beer market, albeit a changing one, I suggest a glance at the German one. As the Wikipedia page indicates, even the biggest brand only has 7% of the market. Some call it "fragmented", I'd call it locally-oriented.

"While the beer market is weaker but more centralized in northern Germany, the south has lots of smaller local breweries. Almost half of all German breweries are in Bavaria[11]. In total, there are approximately 1300 breweries in Germany producing over 5000 brands of beer. The highest density of breweries in the world is found near the city of Bamberg, in the Franconia region of Bavaria. The Benedictine abbey Weihenstephan brewery (established in 725) is reputedly the oldest existing brewery in the world (brewing since 1040).

The biggest German brands in volume terms (millions of hectolitres) are Oettinger (6.7%) followed by Krombacher, Bitburger, Warsteiner, Beck's and Veltins[12]."

cheers,

Carl Berqguist

Los Angeles

Carl Bergquist of CA @ Apr 27, 2009 17:34:51 PM

Response to Greg Koch

Greg,

Thanks for commenting. I realize that craft brewers face an uphill battle versus the large brewers. I was pointing out your success to indicate that I don't think the situation is as dire as the movie suggested. Yesterday I was in a local liquor store that had a nice selection of Bud, Coors, and Miller as Stone, Boston Beer, Smuttynose, and High and Mighty. Distributors and retailers are business people and will respond to the "pull" you describe.

I wanted to congratulate you on articulating, both in the panel and in blog comments your vision of what economic success and growth means to you. I don't believe that it is inevitable or desirable that all companies wind up as big as Anheuser-Busch.

Amy Mittelman of MA @ Apr 27, 2009 15:22:47 PM

Distribution stranglehold

Thought I should drop in and respond to the comment that our success refutes Anat's point about the 3-tier stranglehold. I can fully understand that our substantial record of year-over-year growth might make it seem that it's not an issue, however I can assure you that it is very real. Stone is located in California, one of the few states that allows self-distribution. Without this, we could not have grown and flourished. Stone Brewing began in 1996, and we were self-distributed from day one. No wholesalers were interested in carrying our brands. In 1997/98, we made a strong effort to find a wholesale partner in SoCal as we were bleeding money doing it ourselves. We were turned down by every single wholesaler in our region. Luckily, we managed to hang on and eventually began to flourish.

Today, even with our growing reputation, access to market and business ethics (ie. fighting against underhanded nonsense that is all-too common in the beer biz) remain our biggest challenges. Craft beers should have a much stronger presence in the marketplace based upon their popularity, viability and growth than they do. I realize that it may seem counter-intuitive for me to talk about our constant day-to-day struggles on one side, and our year-over-year growth on the other, and still state that we are faced with an unbalanced and uneven world in the classic David v Goliath sense, yet it is very, very true. Craft beers remain falsely suppressed in the marketplace relative to demand and true growth potential. One needs to look no further than major sporting venues, other public venues and airports as just one example of the remaining imbalance and lack of access to market (statistically, patrons of such venues and travelers represent a much higher percentage of craft beer consumers than national averages).

Overall, we are very bullish about our future and the future of craft beer. We have the extraordinarily important and quite strong element of "pull" on our side (meaning that the demand of consumers -- the "pull" in the marketplace), which has been key to the growth of our segment. Craft brewers brew great beers that consumers are gravitating towards, and this consumer "pull" is our saving grace. As you noticed in the movie, the big guys exert an massive "push" (placing products that the companies want to "push" onto store shelves and bar/restaurant tap towers, ahead of absent consumer demand) that effectively pushes craft beers aside. If that Goliath "push" was applied with even the lightest of touches to the great independent craft beer brands, we would see massive changes in the marketplace nearly overnight.

At Stone, we spend little time whining or complaining, focusing instead on doing a great job and producing beers that excite ourselves and our fans. It's hugely gratifying work and I will readily admit that we're having a terrific time.

Thanks for the conversation!

Cheers,

Greg Koch, CEO

Stone Brewing Co

Greg Koch of CA @ Apr 21, 2009 08:26:50 AM

Amy Mittelman is author

I wanted to clarify that it is guest blogger Amy Mittelman, and not me, who wrote this review. Thanks, Kimberly

Kimberly Palmer of DC @ Apr 20, 2009 13:50:41 PM

Great Review of Beer Wars

Kimberly,

I really like you're review. It was a great recap of the movie. I agree that the movie was marked to the craft beer geeks but seemed more appropriate to someone on the bubble.

The movie could have gone in many different directions. Here are some possibilities

- Dive deeper into the varied state laws (case law in PA, 3.2 limit in Colorado, etc).

- Show more hurdles that challenge small craft breweries.

- Showing trends that have created the craft increase (some drinkers changing from quantity to quality, health reasons, gluten free beer).

- Increase demand for craft exports (lightly touched upon)

- Showing how far a typical brewery distributes.

- The challenges of a brew pub and maybe the fact that many smaller breweries use a contact brewing model.

There are millions of directions.

If you would like to read more of my thoughts, please visit: http://tinyurl.com/cvd9ry

Sean

2Beerguys.com

Sean of MA @ Apr 20, 2009 12:49:47 PM

Weak

I watched the movie and was disappointed. Poorly put together, old news information. Blah.

Matt of CA @ Apr 17, 2009 16:01:15 PM