Mike Esterl of the The Wall Street Journal recently posted an interview with MillerCoors Chief Executive Tom Long where they touched upon many subjects, including a new aluminum can Miller Lite will be launching this spring that has two openings; one for drinking and one that allows air into the can so the beer flows faster into your mouth. They call it their “taste-flow” can, while college kids have traditionally called it SHOTGUN!
Talk turned to MillerCoors’ plans for dealing with the scrappy rebellion that is craft beer. Here Mr. Long’s comments start off kind of arrogant and wind up kind of ominous. According to Long, MillerCoors is already huge in the craft beer segment, as long as you consider brands like Blue Moon and Leinenkugel’s to be craft beer:
MillerCoors CEO Tom Long
WSJ: Small craft beers also have been taking share from Anheuser-Busch and MillerCoors. What’s your strategy with respect to craft?
Mr. Long: We’re a big player in craft. The single-biggest brand in craft is Blue Moon, which is ours. The fourth-biggest brand in craft is [our brand] Leinenkugel’s. At [craft business unit] Tenth and Blake, the plan is to grow about 60% over the next three years.
If we can play really hard in the fastest sector right now, which is craft, which we are doing, and we can do well with Miller Lite, Coors Light and Miller 64, then our company will do quite well.
WSJ: You recently bought a minority stake in Terrapin, a small brewery in Georgia. Besides money, what can you offer small brewers? Are you going to buy more of them?
Mr. Long: We can help them get distribution faster. We bring an enormous amount of assets in brewing processes, technology, procurement and back office that small companies don’t have.
We’re in dialogue with lots of companies. Those things have to work just right for them and have to be comfortable for everyone.
I had no idea that Terrapin was in bed with MillerCoors, and I think this is a clear indication of where the industry is headed. After all, Mr. Long said they are playing hard in the craft beer sector right now and, “We’re in dialogue with lots of companies.” That 60% three-year growth of their Tenth & Blake craft beer unit isn’t going to come from a run on Summer Shandy – it’ll come through acquisition. This is happening, folks.
With the big boys cutting checks left and right, any brewery that is approached by MillerCoors or Anheuser-Busch needs to think long and hard about taking their money. In five years the craft beer landscape could be quite different than today, and the breweries that strike a deal with the devil now might be the ones left standing later. I’m not talking about established powerhouses like Dogfish Head or The Bruery or New Belgium – they’ll be fine on their own – but a smaller outfit like Terrapin might be wise to take advantage of the procurement pull and distribution power that a company like MillerCoors has to offer. Terrapin might not be selling out exactly, perhaps they are just embracing the inevitable future and trying to make a smart decision for the future of their business (by selling out a little bit).
As in all matters, time will tell who is right or wrong. I guess we’ll know it’s all gone sideways when we see Dale’s Pale Ale in a taste-flow can.
In the meantime, we can expect to see more and more honest-to-goodness craft breweries forging alliances with the big boys. The future is unfolding before our eyes.
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Beer & Whiskey Brothers 
You hadn’t heard about Terrapin? Where have you been, working?
Something like that!
Remember that this is a “Minority Share” in Terrapin. That might just be enough to get at their distribution network, but not so much as to be beholding to them for…well…everything.
Agreed – it might be a very smart move – time will tell I guess.
I think there is too much being made of BMC taking over or even wiping out craft beer. They’re not worried about craft beer. It’s ~8% of the entire market. Sure, they’re dabbling, but the big boys are not worried. If anything, at the rate craft breweries are popping up, craft beer may do itself in with over-saturating the market with mediocre product. Look how that’s starting to affect corporate beer.
Double digit growth brings corporate raiders like sharks to chum, Zac. It’s a small part of the pie, but a profitable and healthy one and a smart corporate entity will find a way to get in and attempt to maximize their gain. That’s what the big boys are doing here, and it’ll change what craft beer is, just like Kraft barging into “natural” foods and Domino’s offering “artisan” pizzas.
They will sniff out a winner (someone whose culture is a decent match with their own and is making a decent product) and they will fuel their rise to the forefront of the sector, leaving the small frys making mediocre product to wither and die.
Anyway, it’ll have an impact and make what is basically still a cottage industry into high stakes business, which is a buzz kill.
As I often do, I can point to the music business as an example of how corporate doesn’t really care about craft beer that much. In the nineties, major labels started to take notice of indie bands making noise, always in search of the next Nirvana. At some point, the majors realized that buying indie labels or at least a substantial share would help them take advantage of this burgeoning market. However, by the end of the decade, mostly because of their overwhelmingly disproportionate share of the market, indies became less of a priority. See, craft, indie, and niche markets tend to grow slowly. Even during this craft beer “boom”, the growth is relatively modest when compared to the big boys. Sure, they’ll continue to play with a few craft breweries, but they’re not worried about Dogfish Head or Stone taking over a substantial part of their market.
So, how did it end in the music industry?
Well, unlike indie labels, major labels were hell-bent on making money and getting their product to consumers as easily and cheaply as possible (CD’s, MP3’s). They also shifted further and further from developing artists and selling albums to pushing acts that appeal to the lowest common denominator. Originally, this helped them grow, but it eventually became the thing that’s killing them. The technology allowed folks to steal their product for free and the sub-par product turned off consumers. Meanwhile, the indie labels have maintained slow, sustained growth. While some have gone out of business, most are thriving while corporate music fails.
My point is that corporations don’t know how to market indie and craft industries. They also aren’t patient enough to grow these industries the way indies do.Eventually, BMC will lose interest and not sweat the 8% of the market that isn’t theirs. Then, they’ll leave our precious craft beer alone. We may have to weather the storm, but I’m not worried.
Yes, but this is beer, not music.
But there are parallels. Plus, what we’re really talking about is corporate culture. That’s the same no matter the industry or market. That’s why CFO/CEO types can head companies that do completely different kinds of work. They are there to make a profit. That’s it. They don’t care about craft beer, because that would assume that they actually care about beer. And when they find out that they’ll never be able to profit as much or as quickly through buying up all the craft breweries, they’ll go back to not caring about it full-time. Eventually, it could be their demise. Just watch.
There. That’s three posts. I’ll leave it alone.
Zac always trumps Jim. Dumb Jim.
If only be word count…
Phillip Howard, an Assistant Professor at Michigan State University just produced a nice graphic of the “Concentration in the US Beer Industry.” He says on his site, “There is an appearance of great diversity in the number of brands and varieties of beer sold in the United States. The beer industry, however, is dominated by a relatively small number of firms.” https://www.msu.edu/~howardp/beer.html
Hmm…that sounds familiar… https://beerandwhiskeybros.com/2011/08/18/infographic-what-beer-brands-are-owned-by-which-companies/
🙂
Drat, I should have known you guys would be on top of it.
I remember loving Lowenbrau when I was in college (1970s). It was imported, dark and flavorful. Then Miller bought the license to brew it in the USA and included corn in the recipe (according to Wikipedia – the source of all knowledge), something the German “Reinheitsgebot” law would not allow. It went from being a dark and complex beer to a run-of-the-mill American lager with food coloring.
There’s nothing wrong with squeezing the most out of a recipe, after all craft beer is still an “industry” and they need to make a profit. Streamlining is fine, steamrolling is so wrong. Craft brewers don’t use corn. (https://beerandwhiskeybros.com/2010/11/01/i-am-a-craft-brewer-parody-the-best-video-youll-see-this-week/)
as far as the “shotgun” type of opening for the beer cans…that’s nothing new…back in the ’70’s, or thereabouts…Coors had the same type of opening…
Yes, but did the mountains turn blue back then?!
😉
knowing the mindset of beer drinkers back then…(myself included), nobody really cared about blue mountains…once the top was popped…hand over another beer… 😛
If you want to really jump in to the way-back machine, I remember beer cans that didn’t have tabs. You had to use a can opener to make two hole…ahhh, the good ole’ days.
and those cans were also tin and not the aluminum ones of today…
I remember them mostly from Mad Med, the only time Don Draper did yard work…
So, is Blue Moon Craft Beer? That’s a question that’s bugged me for a long time. I can go either way on that. Even though you will never find it in my fridge.
Charlie Papazian says “no” and that’s good enough for me!
Didn’t know that. Do you mean because of the BA requirements or did he explicitly call out Blue Moon as not craft beer? Either way, that’s good enough for me, too.
Think they don’t meet the requirements AND he specifically called them out as an imposter.
When it was created, Blue Moon was every bit a craft brew. It started in the SandLot brewpub at Coors Field, and the brewers were given free reign to create whatever they wanted, it’s because of the popularity at that location that they started mass producing it. I personally could never stand the stuff, although some the other small batches produced there over the years have actually been fairly good. But yeah, as it’s produced now, BM isn’t craft.
I’m surprised that Long didn’t mention the AC Golden R&D location that’s been experimenting with craft/macro hybrids.
The Sandlot sound like a very cool concept and has a great name. A baseball theme as well as a sandbox in which brewers can play.
The SandLot is still a great place for a beer when seeing the Rockies play!
I also wondered about AC Golden who hits the CO market pretty hard.
I’m not entirely afraid of all of the new craft beer breweries saturating the market with inferior product. While breweries are definitely popping up at a faster-than-ever rate, I’m not sure how quickly you’ll start seeing any of them on supermarket shelves. Instead what you’ll see (and are already seeing) is inferior pseudo craft offerings from the macros eating up grocery store shelf space. That’s an easy angle for them to take. A smart one. A fairly safe one. And one that accomplishes a variety of benefits for macro beer. It gets them in the craft game (or so they tell themselves). If their customers are looking try craft beer, sell them a craft beer-like product and bring the money and market share back to macro. And most importantly, these pseudo craft beers secure potential shelf space that might otherwise go to a true craft brewery product. The last point is the one the most insidious and the one that disappoints me most. We all know how hard it is for craft beer to get representation on the shelf.
Yeah, the whole distribution/shelf space game is sickening, and by having craft beers (like Terrapin, etc.) in their portfolio, MilerCoors can offer them to store buyers and still retain control of the shelf.
I’m convinced we’re just at the very beginning of a potentially seismic shift in the craft beer industry. The Swillionaires appear to have all but given up on their preciously failed attempts to capitalize on the craft beer market by producing look-a-likes and even the ad campaign warning against the scary evils of “cloudy” beer didn’t have the desired effect.
Before the sinister coupling of A-B and InBev, A-B was already testing the waters of craft beer with the Craft Brewers Alliance. Last year (or was it early this year) Goose Island fell prey. Now its Terrapin (though, at least for now, seemingly less overtly “taken over”. The guys at Aleheads did a very nice piece on the Terrapin/Tenth & Blake dynamic. Their observations, reasoning and conclusions are very similar to yours though a bit more ominous. Take a look and let us know what you think:
http://aleheads.com/2011/12/08/why-tenth-and-blake-should-scare-you/
Sam really was right when he said that its never been more important to support your local craft brewers. Not like the guy is a newbie after all.
Cheers! (I think)
That’s a looooong article!
That’s our trademark, long ‘n ominous.
I ain’t gonna drink Sun City!
If it’s SouthAfricanBreweriesMillerCoors or if it’s InterbrewAmBevAnheuser-Busch then it’s not craft beer.
Blue Moon isn’t craft. Leinenkugel’s isn’t craft. Rolling Rock isn’t from the glass-lined tanks of Latrobe anymore so it’s not a regional beer now.
There will always be real craft breweries – the mold’s broken and we’re not going back – so it doesn’t matter who or how many are sold out – actual craft beer will persist.
I agree that craft beer will persist, but the start-up, wild-west vibe that we have today wil soon begin to fade I fear.
Also, Rolling Rock is now brewed across from the Newark Airport. We’re not in Latrobe anymore!
May I respectfully suggest a reality check here Jim?
1) Change is a constant..nothing stays the same and we can never go back.
2) Capital ventures by BB into the craft market are inevitable.
That’s really not a problem if they keep their mitts off of production. What bothered me most about the interview was Mr. Long’s statement: “We bring an enormous amount of assets in brewing processes (and) technology,…” that’s the part that they need to back off on. If they concentrate on the “…procurement and back office that small companies don’t have.” part, then it could be a match made in heaven (are you reading this Mr. Long?) If they don’t, we (and our money) will walk.
It would behoove both us and BB to remember that we’re the very people who represent that 8% and growing of potential market. If they cheapen the product they’ll lose us (right now I like Goose Island and Leinies just fine.) What that’ll mean in the short-haul is that we’ll lose some favorite brews–I can list a number of former MD-based brews that I still pine for–but we’ll find new ones as well.
As for the proliferation of local craft-breweries: there’s room, especially if they stay small and local. And no matter how “‘local” it is, a craft brewery isn’t gonna survive if it 1) doesn’t provide superior product and 2) keep growth within practical limits (which, unfortunately, Wild Goose didn’t.) So the incentive is still there to improve, improvise, adapt and replace. BB, if its smart, has a role it can play, but brewing is NOT that part.
As Miller proved with its brewing Lowenbrau in the US (and making a German beer taste the same as Miller High Life with food coloring), they can’t keep their paws out of production, and will end up messing up a decent product with their superior technology.
It might be different now as the demands of the consumer have changed. You bet your butt they’re trolling around sites like this and know the score.
I agree wholeheartedly. It’s not reason to panic and change is the only constant there is.
OCCUPY UNIBEV/MILLERCOORS!!!!
Nevermind the beer really sucks…
The big issue with the Terrapin deal to many of us die-hard Terrapin fans was that Miller has been such a dogged opponent of craft beer. They’ve spent buckets of money lobbying to keep beer laws restrictive to prevent breweries like Terrapin from even opening and have also fought changing distribution laws which makes their claim of one the benefits of these deals is improved distribution really machiavellian. They only got a minority share, but having anything to do with those folks is wrong on so many levels.
Spike and John have made their case as to why they did the deal (original investors wanted them to sell 100% to someone they weren’t comfortable with and they needed $$ fast) and have acknowledged that there are many other excellent craft beers on the shelf to choose from. I’m taking that suggestion to heart. I don’t know of a decent replacement for my Wake ‘n Bake, but I’m looking.
Miller’s has a long history (back into the 50’s) of buying out local breweries and replacing their product w/ swill. Hopefully, they’ve learned a thing or two in the interim.
For those that do not know, Terrapin comes out of Athens Georgia (home of UGA), and is the biggest competition for Sweetwater which is located in the middle of Atlanta. Sweetwater is currently quadrupling their beer-making capacity. Not so much for Terrapin as these two brewers compete for sales in the surging SE market.
Big guys know of the loyalty to local brands by this point and I’d guess that they’d be smart enough to know that a corporate takeover of a local favorite would be serious bad press.
With respect to Spike and John, I can’t totally hate on the proactive move.
This whole subject has resurrected one of my recurring quandaries:
Why does BB have to rely on rice and corn to brew their beers. If they would underwrite the cultivation of quality barley as a viable rotational crop they could be ahead of the game. Barley is not only a good cover crop and resistant to cold but it doesn’t have the intensive (and expensive) cultivational requirements of corn and rice and is thus less expensive to grow and “greener.’
Is it too simple to state that BB is looking for ways to produce alcohol (Corn and Rice), but also limit taste (i.e. – Don’t use malted barley)? If people could taste their beer, they’d be doomed.
I guess what I’m saying is that they could produce good beer if they really wanted to and it wouldn’t cost them more to do so. Can you imagine being able to buy a bud that tasted like a good Czech Pilsner or German Lager? Wow, the mind boggles!