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Thursday, September 4, 2014

The Inevitable Morphing of Craft Beer

Jeff Alworth's recent post on the morphing of craft beer drew a flurry of comments to his blog's Facebook page. Strangely enough, there was (when I last looked) only one comment on the actual blog, perhaps a sign that social media has overtaken blogs as the place people go to vent.

Jeff was referring to the fact that a growing number of craft brands are starting to look a lot like mass market brands. At the same time, mass market brewers are creating crafty brands and doing all they can to emulate craft brands. Thus, you have a sort of morphing or blurring on both ends of the spectrum. Interesting times.

It seems to me this transformation was predictable. There are plenty of antecedent examples in other industries. The beer industry is by all accounts an odd one, but it isn't all that much different than many others.

The allegory that works well for me is the American auto industry. Following World War II, that industry dominated our economy. American vehicles were sold here and abroad. This was largely due to the fact that our industrial base had not been shattered by bombing or incursion during the war. But never mind.

By the 1960s, if not sooner, other countries wanted a piece of the action. Germany and Japan, losers in the war, were probably the most aggressive. English cars were out there, too, always saddled with electrical and mechanical problems.The challenge for Germany and Japan was to compete in an industry owned by the United States. They were going to have to earn their way.

The strategy they used, brilliant in its simplicity, was to attack the American industry where it was weakest. American cars were big, inefficient, expensive and, in many cases, not very well-designed or built. Germany and Japan exploited these shortcoming with cars that were small, efficient and inexpensive. Build quality got better as time moved along.

Despite the fact that many of their early cars weren't much to look at, the Japanese and German automakers established themselves in the market because they offered good value. You could buy one of their cars for significantly less than you would pay for a comparable American car and it cost you less to maintain and operate.

At the time, a lot of people figured the foreign brands would stick to small cars and leave the large car market to the Americans. But that's not what happened. Instead, the established foreign brands moved beyond the small car segment and went after the core market with larger cars that were often a better value than their American counterparts.

The point is, foreign automakers morphed their products and strategy once they gained a foothold. There was also some morphing on the part of American automakers, who introduced smaller, more efficient cars, most of which weren't very well made. Eventually, competition did force US automakers to improve quality standards.

What does any of this have to do with the morphing of craft beer? Read on.

When the original craft brewers came on the scene in the early 1980s, it would have been impossible for them to enter the market with lagers. No one would have paid any attention. They needed to build a niche where the status quo was weakest. Lo and behold, craft brewers produced beer with flavor and character, a veritable vacant lot for the mass market beers.

Today, the craft beer industry is well-established. There are more than 3,000 operating breweries. Market share is growing, but still a relatively small piece of the overall beer pie. Craft brewers are essentially competing against each other for a small, albeit growing, portion of the market. This is eerily similar to what was happening in the auto industry by the 1970s.

Until now, craft brewers largely ignored the mass market. No more. Today, a few craft brands are going after the core market with products and marketing tactics that look a lot like the macro brands. So we see craft lagers with creative ad campaigns. This was inevitable and we'll probably see more of it....just as the mass market brands will continue to launch crafty beers.

Of course, the parallel to what happened in the car industry is not exact. Craft brewers have always pushed a premium product whereas the foreign car companies were initially selling what amounted to a budget or value product. Nonetheless, they shared the strategy of going after dominant industries at their weakest point, then morphed once established. By the way, this strategy isn't a well-kept secret. It's been applied many times over the years in many industries.

Where do we go from here? The reality is the number of craft breweries is growing faster than craft volume growth. While there will always be room for specialty and mainstream craft beers, the largest untapped chunk of the market is the macro segment. It seems likely this is where craft brewers will increasingly roam as we move forward.


  1. Exceptional Blog! Do you mind if I quote a couple of your posts as long as I provide credit and sources back to your blog? My blog is in the very same area of interest as yours and my users would certainly benefit from a lot of the information you provide here. Please let me know if this alright with you. Many thanks! I’m at www.beerandbody.com, we discuss the positive health benefits of beer.

  2. Everything on this site is fair game, whether you want to bash something I say or compliment it. You can link to the post or just make mention of where you found whatever it was you found. Plagiarism is the enemy of all writers and authors, but it's pretty hard to keep tabs on everything that's been posted here. I use the honor system of giving credit for photos and thoughts that aren't mine. I suspect you operate the same way.

    Thanks for the note.


Keep it civil, please.