A social perspective on the craft beer boom

There are now more microbreweries in American than at any time in U.S. history – over 2000.  So why, is the beer industry seeing so many new entrants when most industries are consolidating?  Perhaps the explanation can be found by taking a look at both our history, and at human nature.

After WWII, veterans returned home from war, motivated by a desire for safety and security above all else.   One result was the birth of suburbs and the decline of traditional neighborhoods and the unique identities that came with them.  Fast forward to 1978 –  Jimmy Carter legalized home brewing, the catalyst for a slow but steady movement in American beer.  Communities of home brewers began sharing recipes and collaborating on ways to improve processes, equipment, and of course, beer.  By the 90s, some of these brewers moved out of their garages and into the public sphere, opening the first wave of new microbreweries.  Around the same time, Americans connected to the Internet.  The Internet was important for home brewers; it sped the development of their art (or craft) through the sharing of ideas and hence, the quality of beer improved.  By 2005 a perfect recipe had developed for the growth of microbreweries – brewers were inventing some of the most delicious beers the world has ever known and Americans were thirsting for an opportunity to connect with their neighborhoods and their communities.  These factors converged at the bars and benches of microbreweries, which offer a space to connect and a local product to have pride in.

Now I have to admit – what you just read is pure speculation.  But conditions are right to test the theory.

If the success of microbreweries is dependent on offering human connection and local identity, major beer makers will have difficulty growing market share by acquiring successful craft brands.  AB InBev’s acquisition of Chicago-based Goose Island is a good test case.  There has been an initial surge in Goose Island volumes as it reaches new markets, but the brand has not experienced the same success it had as a local favorite in Chicago.

On the other side of the coin, microbrewery founders are already finding that expanding distribution to reach far away beer drinkers is a complicated decision.  Dogfishhead recently eliminated exports to the UK and Canada and stopped distributing to Tennessee, Indiana, Wisconsin and Rhode Island– which could be a bell-weather of the limits of craft growth.  Craft brewers will have to contend with dropping market penetration and increasing transportation costs the further they get from home.   Samuel Adams, New Belgium and Sierra Nevada have all achieved national distribution.  All were early entrants to the craft scene, and all offer highly drinkable flagship beers.  New Belgium in particular has built a local reputation as a great place to work, and a supporter of their community in Fort Collins, Colorado.  As they build a new brewery in Ashville, NC, they’ll be challenged to adapt to the local community but maintain elements of the organizational culture which made them successful in Fort Collins.

In business, most assume whoever has the best product will win, but in craft beer, that is not necessarily true. A great product helps… a lot.  But in a market with an abundance of great products, brewers should not underestimate the power of identity and community.  Perhaps like politics, all craft beer is local.

Who killed the boob tube?

Every now and again an experience alters the way we view the world – our paradigm.  In 2001, I was part of a conversation which altered my understanding of how change occurs.

I was at  Deutsche Bank in Germany,  leading a day-long training workshop.  My clients were mid-level Credit Risk Managers, responsible for granting lines of credit and capital loans to clients within a given industry.  One manager recalled a recent decision which impacted his portfolio of cathode tube manufacturers.  He made a bold (and unselfish) decision to decline long-term loans to his clients on the grounds that flat-screen technology would render cathode tube televisions obsolete prior to loan maturity.  A long-term loan was a bet against new technology, and against change.  Deutsche Bank agreed with his decision, and was quickly followed by several other banks, greatly accelerating the world’s transition to flat screen technologies.

Every organization hopes for a leader with the vision to make transformational decisions. Instead, we should ask leaders to foster organizational cultures in which a larger range of individuals (such as my client at Deutsche Bank) are given the authority to speak up, utilize their expertise and make decisions.  Those organizations will find themselves shaping change instead of reacting to it.