Consolidation, Not Innovation, Defines This Decade in Craft Brewing

Good news for all the dullards in your life who’ve been complaining that there are “tOo mAnY bReWeRiEs” in these United States: there’s now one less. Earlier this week, F.X. Matt Company, a 135 year-old brewer in Utica, N.Y., announced it would acquire Flying Dog Brewery, shifting the Frederick, Md. firm’s production north and shuttering its brewhouse in the Old Line State.

“We have worked with them for many years, they are a prestigious family-owned brewery with more than 135 years of history, they are committed to building on the deep roots Flying Dog has established in Maryland, and their capabilities will take Flying Dog to a new level,” Flying Dog’s chief executive said. Which, sure, whatever, that’s probably true. But two things can be true at once, and often are, and when you zoom out from the particulars, and deals like this wind up looking less like serendipitous synergies than marriages of convenience. The craft beer business is getting harder by the day, and firms that valorized their independence and unorthodoxy with the wind at their backs are newly amenable to handing over the reins to larger, more conformist players now that it’s buffeting them face-first. If innovation — of mash bills, of business models, of whatever — defined the American craft brewing industry last decade, consolidation of and among its small and mid-sized firms is defining the business in this one.

It’s been four years to the month since Boston Beer Company (BBC) swallowed Dogfish Head Brewery. Valued at around $300 million, it was the biggest merger of Brewers Association-defined craft breweries of its day, and will probably stay that way forevermore. (Though the terms of most of these deals, including Flying Dog’s with FX Matt, go undisclosed because the firms are almost always private.) But since then, there have been enough mergers and acquisitions in the U.S. beer business that Patrick Bateman himself would be like, “impressive, very nice” and then ask to see Paul Allen’s card.

The deals haven’t always been craft-on-craft, either: see Monster Beverage Corporation x CANarchy Craft Brewing Collective; Tilray x SweetWater, Green Flash/Alpine, Montauk; Sapporo x Stone; Kirin x New Belgium, Bell’s; and so on. But those bigger-fish moves, taken in consideration with ongoing private-equity roll-up roulette and a rising drumbeat of small-bore M&A action between simpatico-ish local and regional firms seeking safety in combined scale and/or someone else’s operating budget, and the shape of this thing becomes impossible to ignore. Times, they are a-changing, and the industry is a-consolidating apace.

There’s nothing wrong with consolidating, mind you. I make no automatic moral judgment there, and frankly I don’t have a ton of patience for those who do. A generation of big-time craft brewery owners are about to age out of this business, and they deserve a shot at selling to a like-minded firm that will carry on their legacies, like Larry Bell took with Lion Little World Beverages, Kirin’s vexingly named Australian subsidiary. Flying Dog throwing in with FX Matt seems like a net-positive for the owners of both firms (if not Flying Dog’s production workers, who will reportedly find themselves out of a job once that company’s Maryland plant shuts down this summer.) Ditto, the growing gaggle of minnow mergers that feature small breweries buying the brands, recipes, and sometimes even the physical operations of nearby competitors who’ve hit hard times, retirement age, or both. Hell, I don’t even think P.E. amalgamations, like the Southeast’s Made by the Water coalition, cobbled together by Wiregrass Equity Partners, are de facto unholy. America’s Facebook uncles may believe there are too many breweries these days, but I tend to like drinking fresh beer produced locally — even if the dollars flow elsewhere.

But. But! I can’t help but notice that this consolidatory pattern roughly coincides with a protracted stretch of profound unoriginality in the craft brewing industry. As full-flavored beer became ubiquitous, it lost its novelty with the American drinking public, which turned its attention and spending power towards more explicit commodity beverage-alcohol products like White Claw, Twisted Tea, and the like. Craft brewers have struggled to find an answer ever since, and have mostly failed. Craft hard seltzer sorta worked, to an extent. Launching spirits-based canned cocktails has been a decent move, if you’ve got the distillery or the dough to build one. Hard kombucha, hard coffee, non-alcohol craft beer… this stuff shows some promise for some breweries, but as iterative or incremental add-ons, not future flagships.

Innovation on actual beer these days is… I mean, what even is it? Pastry stouts are old hat. Brewing beers with popular cereal brands is played out. That hazecanneries print money with weekly IPA releases featuring slightly different combinations of hops is meme fodder among enthusiasts; that craft lager is always on the cusp of going gangbusters is a punchline, even for longtime industry evangelists.

“I think it’s fun, heartwarming, hilarious that every year, ‘next year’ is going to be the year of the lager” Dogfish Head co-founder Sam Calagione said earlier this month at the North American Beer Writers Guild’s meet-up in Nashville during the 2023 Craft Brewers Conference. “But I’m going on the record with all of you right now: next year is going to be the year of the lager!” Dogfish Head, incidentally, is a good example of the tension between consolidation and innovation in today’s craft brewing industry: under the BBC umbrella, the Delaware brewery’s portfolio has gotten tighter and less prone to the whimsical pursuit of unconventional ingredients and techniques that made Calagione and co. such a hit in the first place. Out with the Midas Touch, in with the focused SKU mix and spirits-based canned cocktails. So it goes.

Whether it goes thence for Flying Dog as it enters its FX Matt era remains to be seen. The company has already entered its (inevitable) beyond beer era with a hard tea, and it’s got entrée into canned cocktails via Right Coast Spirits, a joint venture between it, Harpoon, and FX Matt’s Saranac brand introduced last summer. The FX Matt plant in Utica has “almost zero limitations,” Flying Dog’s Caruso told Brewbound, pointing to opportunities to expand the brand’s footprint in the high-ABV convenience store segment — “plagiariz[ing]” a page from New Belgium Brewery’s playbook — with existing imperial and double IPA products, and its intention to push further into the generalist “adult beverage category.”

“So we’re going to try to optimize the portfolio and we’re gonna innovate without any restrictions basically on package or format and that’s sort of the whole point,” he said. But innovating and optimizing are nearly opposite forces in this business, and if recent history is any guide, that tension doesn’t typically produce more and more-compelling core beers — not “iN tHiS eCoNoMy,” at least.

🤯 Hop-ocalypse Now

As a matter of editorial policy, Hop Take avoids invoking the name “Ted Cruz” whenever possible. But That Sniveling Weasel (R-TX) is unfortunately relevant in our arena thanks to the new pressure on Anheuser-Busch InBev he’s bringing to bear with fellow Island of Unfit Senators resident Marsha Blackburn (R-TN.) A month and a half into the conservative controversy over Bud Light’s brief, unremarkable engagement with one (1) trans influencer, the pair of partisan hacks are demanding a Beer Institute investigation into whether the macrobrewer violated its guidelines by “marketing to individuals younger than the legal drinking age,” citing the fact that actor Dylan Mulvaney’s series on TikTok was called “365 Days of Girlhood.” It’s a craven, spurious gambit designed to score culture war points and further dehumanize trans people, but it also inadvertently calls attention to real squishiness of the industry’s self-governance on social-media marketing. Broken clock, twice a day, et cetera.

📈 Ups…

The Beer Institute and National Beer Wholesalers Association say the industry’s economic impact topped $409 billion last year, $78 billion more than 2020… Appalachian Mountain Brewery’s founders are back in charge of the North Carolina firm, having bought it back from Anheuser-Busch InBev… The fundraiser for costs related to the cancer diagnosis of popular industry pundit Alex Kidd of Don’t Drink Beer is almost halfway to its $420,000 goal… Beer Kulture, Women of the Bevolution, and Brave Noise doled out $17,000 and a bunch of services to its inaugural women/nonbinary industry grant-winner…

📉 …and downs

The Human Rights Campaign finally had enough of ABI’s equivocating on trans rights, suspending the firm’s previously perfect rating… Delivery heavyweight GoPuff f*cked around and found out in Massachusetts, where regulators just revoked its liquor license… Sazerac can’t duck the class-action lawsuit against its malt-based Fireball dupe, judge rules…

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