This Beer Could Be Your Life: Steve Hindy On Craft Brewers Vs. The Big Guys
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It probably shouldn't have happened this way. A bunch of miscreants with oddball ideas and unusual ingredients making funny-tasting beer? Surely, Anheuser-Busch, Miller, Coors, well, they'd have nothing to worry about. Except they did. Craft beers, and the guys and gals who make 'em, have gone from curious sideshow in the '80s and early '90s to a $14 billion industry with 7.8 percent market share today, according to just-released statistics by the Brewers Association.
How'd we get here? Steve Hindy, author and a guy who happens to be co-founder and president of Brooklyn Brewery, tracks the progression in The Craft Beer Revolution: How A Band Of Microwbrewers Is Transforming The World's Favorite Drink, out next month from Palgrave Macmillan. Last week, I headed to Brooklyn Brewery's offices in Williamsburg to discuss how this David vs. Goliath story has played out as well as Hindy's place in it, and whether the big beer brands will be able to hold off this craft beer onslaught.
You were a Middle East correspondent based in Cairo, then moved to NYC and started Brooklyn Brewery nearly 25 years ago. Why'd you want to go back to journalism again and write this book?
Once you got ink in your blood I don't think you ever outgrow that. I've been collecting string for 25 years — stories, experiences with the Brewers Association. It's an unbelievable story. It'll probably be a course in business schools, because there are so many case studies you can do about starting a brewery. We've really put a big dent in the American brewing industry: it's like 10 percent by volume and 16% or more by dollars in the U.S.
It's a unique situation though because you're one of the leading figures in craft brewing and here you are writing a book about craft beer. Surely, you have good and bad relationships with your peers—
Oh, there are plenty of people who won't be happy with what I wrote. Even Jim Koch [of Boston Beer/Sam Adams] did a blurb for me. Jim and I have butted heads many times overs the years, and he wrote, "Steve Hindy and I disagree about many things, including many passages in this book." Not everyone's gonna love it but it's the best I can do. It's my point of view.
Let's talk corporate beer and craft beer. What's the current state of things in the big vs. small beer game?
Craft beer is really exploding. The numbers came out last week. Craft breweries' production grew by 18 percent. The big brewers have lost close to 18 million barrels of production in the last five years, which is an astounding volume of beer. That's bigger than the whole craft beer segment. Clearly people are choosing fuller-flavored beers over the traditional white lagers that were the workhorses of the big brewers.
Why did American palates embrace that type of beer in a way that allowed those companies to grow so big in the first place?
It all really began after Prohibition, when the breweries came back. There were a couple of thousand before Prohibition, a little over a thousand came back, and starting in the '30s is when mass transportation and mass advertising became a factor. You could have a brewery in St. Louis ship beer all over the country. Later, in the '40s and '50s, you could promote that beer on the three [television] networks and reach virtually everyone you wanted to reach.
"When we introduced Brooklyn Lager in 1988, a lot of people spit it out. They said, My god, this is so bitter and dark."
They created a product that was marketable — but what about the palate?
It's parallel to what happened with cheese. With Kraft slices becoming the main way Americans ate cheese.
Do you extend that metaphor to today to help explain why craft beer is getting bigger? People are eating artisanal sausages and they're not going to drink a Bud, they're going to drink a Brooklyn Lager?
People expect more from certain foods than they used to. Chocolate, coffee, cheese, ice cream. Beer. It's happening in a lot of food categories. If anything, beer has lagged behind coffee, chocolate and ice cream. Artisanal coffee is now like 30 percent of the U.S. coffee market. That's a number craft beer can reach too in the next 10 or 20 years.
There are so many craft beer brands now. How is the climate for craft brewers today as opposed to like 1994?
Back in the '80s when we started and the '90s when a lot of people started, beer drinkers didn't really know what craft beer was. When we introduced Brooklyn Lager back in 1988, a lot of people spit it out. They said, My god, this is so bitter and dark. Why don't you make something like Heineken? You had to explain, "Well, you know Heineken does a pretty good job making Heineken. We're making something different." Today, Brooklyn Lager is considered entry-level craft beer. It's rare that anyone is taken aback by the strong flavor of Brooklyn Lager. That's the way tastes have changed.
What are some of the other reasons for craft beer's surge?
Another reason is the advent of social media. You can start a small brewery now in virtually any corner of the United States and reach everyone you want to reach on day one without spending any money.
People must come and ask your advice all the time. What do you tell someone who wants to start a craft brewery?
Well, I don't see how you can tell them it's not a good idea. One of the interesting things I learned in researching the book is that almost 70% of the production breweries that have started up in the past 30 years are still in business.
Not exactly as dire as the restaurant industry when it comes to starting a business—
Exactly. And half the brewpubs [are still in business]. So that's a pretty good success rate. There are like 2,800 breweries in the U.S. now and there are 1,500 in the works. Could there be 4,300 breweries in the U.S.? I think, yeah, easily. There are 4,000 wineries in California. Another thing I learned in interviewing the new breed of brewer is that their expectations are pretty modest.
It's still a passion project?
It's a passion project and they're happy to be local, happy to play a role in their community. That can be a very comfortable kind of business. Some people talk about a bubble and a shakeout. Things are gonna shake out in any industry. I don't discourage anyone from starting a brewery.
You and Brooklyn Brewmaster Garrett Oliver have such a long relationship. How've you maintained it?
Garrett and I have a very close relationship and it's a very complicated relationship too. We battle each other frequently behind the scenes over the names of our beers, over our approach to marketing, over even who our friends are. We've always battled each other.
I know you guys travel together a lot. I was wondering why Brooklyn Brewery is so focused on England and Scandinavia as markets, rather that just focusing on America?
That just kind of happened. It's not like we woke up one day and decided to dedicate a lot of money to selling beer in Sweden or the UK or Australia or Brazil, or the other places where we sell a lot of beer. But it happened and we sell at full price. It's not like we're doing it for vanity. We're making full margin on beer we export. And we began to see that Brooklyn was a special kind of brand that could be international. While many of our colleagues in the east have been moving out west and all of our colleagues out west have been moving east, we've been looking at it like, why do we want to ship beer to California when it's going to cost us $3 or $4 a case to get it out there, when we can ship beer to Sweden or the UK at full margin and there's no real competition from other American craft breweries. That's a strategic advantage for us.
Back to the big brewers. You talk a lot in the book about the major breweries launching craft beer–style brands. Why does this never seem to work for them?
In the early days, the big guys were always trying to make something more drinkable than [the] craft brewers, so they were trying to move it toward the middle, toward the more bland end of the spectrum, and that does not play at all with craft beer drinkers.
So their next step is to buy a craft brewer.
They're learning. And we always knew they could learn.
Like Ommegang—
It's owned by Duvel Moortgat, who just bought Boulevard in Kansas City. Going back to the falling volumes of the big guys and the rise of craft beer. I think it's always been a very tricky problem for the big brewers because the more they throw their marketing dollars behind craft beer, the more they promote flavorful beer, the more people they convert to craft beer, and the more people who are likely to try one of my beers. We know that craft beer drinkers are not terribly loyal. They want to try different things. It's a double-edged sword for [the big brewers].
You almost feel bad for them.
No, I don't at all. They have plenty. I do think it's not an easy problem for them to solve. I don't think they really know what to do. I think they're still struggling with the whole thing.
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