Two Ways to Corner the Market: The Battle of Beer

Posted on by Charles Carlin

There is a battle being played out in Ann Arbor and throughout the rest of Michigan.  No, it has nothing to do with the Michigan Wolverines lackluster start to the football season.  This battle is about beer!

To be more specific, this battle is about the rapid growth of the craft beer industry in North America.  There are two players: small, independent, (in some cases startup) craft breweries,1, and the large, corporate breweries.

At this point you may be scoffing.  But consider the facts.  In 1998, craft beer accounted for only 2.6% of sales in the United States beer market.2  In that same year, non-craft beer accounted for 89% of sales with the rest being imports.3 Fast-forward to 2013, and craft beer now accounts for 8% of the market while non-craft has dipped to 78%.4 By the end of 2013, craft beer made up 10.2% of sales in the American beer market.5 Finally, to compound these numbers, during the period between 2007 and 2012, a period during which craft beer sales boomed, total beer sales fell 2.4%, highlighting an even greater jump in the popularity of craft beer relative to non-craft beer.6

Non-craft breweries recognized these numbers and have responded.  One of their methods is to buy craft breweries, but then allow the brewery to brew beer essentially as it had before the buyout.  In fact, at World of Beer Ann Arbor, you occasionally can enjoy beers that were formerly the product of craft breweries that have since been bought out by non-craft breweries.7  One of the former craft breweries that you can still enjoy in Ann Arbor is Goose Island Beer Company, a company bought by Anheuser Busch for 38.8 million dollars in 2011.8 In 2014, Anhesuer Busch InBev bought Blue Point Brewing Company,9, whose beers were available at Ashley’s Ann Arbor earlier in the year.

Despite the efforts of non-craft breweries and concerns that the bubble (no pun intended) may soon burst, craft breweries have been starting up across Michigan and the rest of the country at an astounding rate.  More than 400 craft breweries opened across the country in 2012 and today there are over 2,500 craft breweries in America.10 This number does not include the estimated 1,500 craft breweries in the planning stages.11

As innovative as craft brewers are with their recipes, they are equally innovative in acquiring funding to build and grow their breweries.  Jolly Pumpkin, an Ann Arborite favorite for innovative and delicious food, beer, and liquor, recently opened a café and taphouse in nearby Dexter, Michigan.12 To open the new café and taphouse, Jolly Pumpkin founder Ron Jeffries, “established a fund-raising website where craft beer aficionados can help fund” the new establishments.13

Another new Michigan brewery is Witch’s Hat, located in nearby South Lyon, Michigan.  Ryan and Erin Cottongim, owners of Witch’s Hat, collaborated with the Michigan Small Business Technology Development Center,14, whose mission is, “to strengthen communities by ensuring access to economic development services and programs that cultivate sustainable projects that will build a strong foundation for the future of Michigan.”15)

Another option for aspiring brewers is crowdfunding.  In 2013, CrowdBrewed, the first crowdfunding site catered to people trying to enter the craft beer business was launched.16  CraftFund followed in CrowdBrewed’s footsteps in fall 2013.17 One brewery, The Brew Gentlemen Beer Co., was able to acquire more than $32,000 needed to start their brewery by using crowdfunding.18 Finally, AngelList, a traditional website and tool for startup companies has a page for craft beer startups.19

Clearly the massive resources of large, non-craft beer companies and the ingenuity in acquiring funding by small, craft breweries will propel each into the future.  However, craft breweries in Michigan are getting some extra assistance from the state’s legislature.  In March, 2014, Michigan Governor Rick Snyder signed into law bills allowing “microbrewers to produce more beer, increase the number of brewpubs and tasting rooms, and allow certain startups to self-distribute their beer.”20  Hopefully these bills will allow Michiganders to enjoy more of their state’s great beer.

  1. Brewers Association, Craft Brewing Defined, http://www.brewersassociation.org/statistics/craft-brewer-defined/ (last visited September 8, 2014) (defining a “craft brewery” as a brewery with annual sales not exceeding six million barrels of beer, less than 25% owned by another alcoholic beverage industry member not a craft brewer, and uses ingredients and fermentation techniques in line with traditional or innovative guidelines). ↩

  2. See Rani Molla, Craft Beer Takes a Bigger Swig of the Shrining Beer Market, Wall St. J.: The Numbers (Jul. 2, 2014, 11:47 AM), http://blogs.wsj.com/numbers/craft-beer-takes-a-bigger-swig-of-the-shrinking-beer-market-1502/. ↩

  3. Id. ↩

  4. Id. ↩

  5. See Noah Davis, The Craft Beer Market Has Exploded, And Now Brewers Are Worried About a Collapse, Business Insider (Dec. 14, 2013, 7:41 AM), http://www.businessinsider.com/alchemist-craft-beer-market-boom-bubble-outlook-2013-12. ↩

  6. See Thomas C. Frohlich & Michael B. Sauter, Nine Beers Americans No Longer Drink, 24/7 Wall St. (Dec. 9, 2013, 6:35 AM), http://www.usatoday.com/story/money/business/2013/12/09/beers-we-no-longer-drink/3915505/. ↩

  7. World Of Beer Ann Arbor, http://worldofbeer.com/locations/Ann-Arbor/social-tap (last visited Sept. 8, 2014) (citing Goose Island event at World of Beer Ann Arbor on July 10, 2014). ↩

  8. See Emily Bryson York & Josh Noel, Goose Island Sold to Anheuser-Busch for $38.8 Million, Chi. Trib., March 28, 2011. ↩

  9. See William Alden, Anheuser-Busch InBev Buys Blue Point Brewing Company, N.Y. Times (Feb. 5, 2014, 11:17 AM), http://dealbook.nytimes.com/2014/02/05/anheuser-busch-inbev-buys-blue-point-brewer/?_php=true&_type=blogs&_r=0. ↩

  10. See Davis, supra note 5 ↩

  11. Id. ↩

  12. See Lizzy Alfs, See Inside Jolly Pumpkin’s new cafe and taphouse in Dexter, MLIVE (Sept. 6, 2014, 5:30 AM), http://www.mlive.com/business/ann-arbor/index.ssf/2014/09/see_inside_jolly_pumpkins_new.html. ↩

  13. See Beth Dalbey, How Craft Beer Aficionados Can Help Jolly Pumpkin Build Taphouse, Dexter, Michigan Patch (Jan. 13, 2014, 8:29 AM), http://patch.com/michigan/dexter/how-craft-beer-aficionados-can-help-jolly-pumpkin-build-taphouse#.VA4PxWRdXle. ↩

  14. See Michael Wayland, Michigan’s Best Brewery: Witch’s Hat prides itself on beer, friendly atmosphere, MLIVE (Sept. 18, 2013, 7:30 AM), http://www.mlive.com/entertainment/detroit/index.ssf/2013/09/michigans_best_brewery_witchs.html. ↩

  15. Community Development and Assistance, Pure Michigan, http://www.michiganbusiness.org/community/development-assistance/?utm_source=google&utm_medium=cpc&utm_term=michigan%20small%20business%20technology%20development%20center&utm_content=XMeMnv2D&utm_campaign=google&gclid=CL6hk-aq07kCFUJqMgod2xYAQQ (last visited Sep. 8, 2014 ↩

  16. See Devin Karambelas, Crowdfunding meets craft beer, Usa Today (Aug. 13, 2013, 4:54 PM), http://www.usatoday.com/story/money/business/2013/08/13/crowdfunding-kickstarter-meets-craft-beer/2649139/. ↩

  17. Id. ↩

  18. Id. ↩

  19. Craft Beer Startups, AngelList (Sept. 8, 2014), http://angel.co/craft-beer. ↩

  20. See Melissa Anders, Michigan craft brewers applaud package of bills signed by Gov. Rick Snyder, MLIVE (Mar. 25, 2014, 4:36 PM), http://www.mlive.com/beer/2014/03/michigan_craft_brewers_applaud.html. ↩

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