Hopslam: How Big Beer Is Trying to Stop a Craft Beer Revolution

A long-brewing fight between big beer and craft brewers is spilling over to Capitol Hill.

A woman shows of a temporary tattoo at the Great American Beer Festival in Denver, Colo., in 2010.

For the last six generations, beer has defined Jim Koch's family.

And for much of that time, his family's story has criss-crossed that of another brewing company, Anheuser-Busch. Koch's great-great grandfather founded their family's brewery the same year Anheuser opened its doors. Both were housed in St. Louis. Koch's grandfather even worked as a brewmaster at the Anheuser brewery post-Prohibition.

But in the years since, the Anheuser and Koch breweries have taken very different paths, ones that have led them to become more foes than friends.

In 1984, Jim Koch used his family's lager recipe to start Boston Beer Company, which has since become the largest "craft" brewer in the country. He brews Samuel Adams, a rich lager named after the American revolutionary that comes with the tagline "take pride in your beer."

Anheuser, on the other hand, has spent the last two decades swelling in size. It is known for pale lagers like Budweiser and Bud Light, "the sure sign of a good time", both of which have become cultural icons. Fourteen of its more than 200 brands alone make the company over $1 billion a year in revenue. And in 2008, a merger with beer company Inbev turned Anheuser into a global conglomerate and the largest brewing company in the world.

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In the past couple months, Anheuser-Busch InBev has been trying to expand that market share even further, with the purchase of Grupo Modelo, the Mexican beverage company that brews the popular import Corona. But the U.S. Justice Department effectively blocked that $20.1 billion deal in late January, filing an antitrust lawsuit against Anheuser because it said the purchase would substantially reduce the company's competition in the marketplace.

In a statement, Anheuser-Busch InBev said the action was inconsistent with the law and "the reality of the market place."

Although Koch doesn't want to comment specifically on the merger, he has a reason to welcome a restriction on the influence of big beer. In recent years, craft brewers have sounded an alarm over the clout of Anheuser-Busch Inbev and MillerCoors, who today control 90 percent of the beer market. Craft brewers hold just 6 percent. And they say big beer is using increasingly deceptive and strong-arm tactics to keep craft down.

"Their preferred business model is an oligopoly," says Koch of the company that was once interwoven with his family. "I don't see them as trying to deliberately set out to destroy us. But we are very potentially the collateral damage."

The Start of the Struggle

Dogfish Head’s Sam Calagione, right, and Samuel Adams’ Jim Koch, left, pose for a picture in Washington in 2011.

Dogfish Head's Sam Calagione, right, and Samuel Adams' Jim Koch, left, pose for a picture in Washington in 2011. (AP)

The battle between craft breweries and big beer stretches back to the 1990s, when the idea of buying a beer brewed by a small, independent brewery first took off. In 1991, annual volume growth of microbrewing was 35 percent. Four years later, it had leapt to nearly 60, according to the Brewers Association.

At the time, many Americans had only a nebulous notion of what craft beer was and how it was made. So when Anheuser-Busch launched a series of negative ads criticizing Boston Beer Company for using contract breweries to produce some of their beer, the ads were strikingly effective. Believing the ads were unfair, Koch appealed to the Better Business Bureau in 1997, who ultimately ruled in his favor. Neither Anheuser Busch-Inbev or MillerCoors would comment for this story, directing requests instead to the Beer Institute in Washington, a trade group that represents the entire $223 billion beer industry. The institute did not comment on the 1997 campaign.

But speaking to U.S. News from his Boston headquarters as he sampled his own beer—part of a daily routine for years—Koch is more than happy to talk about the ads, and the harm he believed they caused him. He says the campaign caused distributors to drop him across the country, and stalled the growth of craft beer for years to come.

"They have shown that they can do a lot of damage to craft brewers," he says, pointing to the flat-lining of craft beer growth in the late 1990s. "But I learned... that we as craft brewers need to, because we are all so small, stay together. If they can divide us, get us to attack each other, we will damage our industry."