Guess Who’s Getting into Craft Beer? Here’s a Hint…

The world of craft beer keeps getting bigger and bigger.  Let me, just as an example, talk about the Boise, Idaho area.  First we had the Boise Co-op with their craft beer offerings.  Then we got a couple bottle shops in Brewforia.  Then Wine markets began to carry a larger and larger selection of craft beer.  Then you began to see some selections on regular grocery store shelves.  Then it went to the convenience stores, finally a place to buy a decent Russian Imperial Stout at 2 am.

Well there is a BIG player getting into the market segment (as they call it).  WalMart is going to begin to carry craft beers.  At their annual convention in Las Vegas this week their Craft Brewers Pavillion was the star of the show and representatives from Stone and Allagash were in attendance.  The fact that Craft beer sales have shot up 14 percent while fizzy yellow lifting juice has decreased by 2% over the last year has not escaped them, and they are ready to jump in with both feet and begin to thrash around.

Clearly this is a good sign of the strides that craft beer has made over the last decade into the mainstream beer market, but will the current and fast moving waters of the massive retailers pull craft beer under?  Here is what I mean.  Walmart has done incredibly well as a retail chain because they are so large they can tell manufacturers what they will pay for product.  To date the craft beer world hasn’t worked that way.  Craft is all about flavor, unique ingredients, seasonal releases, and to a large degree rarity.  Rarity ends up inflating beer prices and allowing brewers to charge enough for their product to turn a profit.

If Walmart comes in, and begins to demand more and more product, that rarity to some extent goes away.  With rarity going away for some beers, what will happen to the others?  There are a million different scenarios that could play out here, but my pea sized brain could only come up with two.  First, Walmart begins to demand more and more craft beer at a lower and lower price.  This makes brewers look to reduce their overall costs to keep profit margins high enough to make it worth their while and BAM, you have Stone’s Arrogant Rice Bastard! I’m pretty sure that isn’t where Craft beer needs to go.  Cheaper ingredients almost always means less flavor, and that is where the craft beer geek lives.  Its all about flavor for us.  The other possible scenario I see is less defined, but involves brewers selling their souls and moving into more mainstream brews that sell well, so you end up with mini macro breweries that again begin to sacrifice quality for quantity to serve the monolith retailer.

So I guess I see this as a good news/potentially bad news event in the world of craft beer.   Time will tell, but I’m thinking it could mean changes in the world of craft that we don’t really love.  What do you think?  Will you abandon the bottle shop for the cheaper prices WalMart will undoubtedly bring to the mix?  Let us know in the comments?

-Don

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48 Comments on “Guess Who’s Getting into Craft Beer? Here’s a Hint…”

  1. October 20, 2011 at 11:51 am #

    The Target in my neighborhood carries craft beer. As these stores are now one-stop shops for most people I think it’s reasonable they would carry craft beer. With the exception of some produce and cuts of meat I can get everything I need at Target. I don’t really see it being a detriment to the industry. The demand is simply shifted from a grocery store or liquor store to Walmart. If anything it’s good for the environment because people won’t have to make multiple stops. Way to save the Earth, craft beer!

    • Don
      October 20, 2011 at 11:58 am #

      Well Matt time will tell. I agree that convenience is nice, but WalMart is such a huge retailer, they have actually put manufacturers out of business by demanding too much product at too low a price. This craft beer thing needs to be handled with kit gloves, but I don’t think Wally World has the finesse it might take to successfully navigate these waters. If they do, great. If not, it could damage craft beer.

      • October 20, 2011 at 12:26 pm #

        Walmart has a vested interest in only allowing craft brands that can keep pace with the new demand. A friend of mine is a very small time wine producer. He landed an account at Costco and has to constantly assure them he has enough inventory to keep the shelf full. If Walmart dedicates shelf space to craft beer there is a cost associated with replacing/reorganizing that space if the craft brands can’t meet demand. I agree with “builder” below; They will stock borderline mass market craft beer like SN Pale Ale, Fat Tire, and possibly some Pyramid out here in the West.

        • Don
          October 20, 2011 at 12:31 pm #

          You really think that is all they will stock? I think you will see distributors catering to them as a huge client, and potentially at the expense of the local bottle shops. One thing is for sure, whatever they do it will be interesting. Perhaps a first for WalMart. Being interesting, that is…

  2. October 20, 2011 at 11:58 am #

    I’m not worried. First, craft beer has enjoyed the growth you pointed to without Walmart. Craft beer doesn’t depend on Walmart-sized distribution to succeed. Walmart may sell some craft beer at lower prices, but all that will do is cause problems for small, locally-owned beer sellers. Ma and Pa’s bottle shop may feel a hit when that sixer of Dale’s goes for a $1-2 cheaper price at Wally World. Second, I doubt we’ll see any extreme beers at Walmart. No CBS. No Sexual Chocolate. No Pliny. No Hopslam. Etc. Walmart will expand craft beer’s reach and ability crossover, but true beer nerds like us won’t be going there for our needs. Instead, I suspect Walmart will stock session beers and regular brews. You know, those year-round beers your favorite craft brewery makes but you never drink. Here in Missouri, I suspect their shelves will be filled with New Belgium Fat Tire, Boulevard Unfiltered Wheat, and Schlafly Pale Ale. No big deal.

    • Don
      October 20, 2011 at 12:20 pm #

      Wow so many great comments here! Of course you know me Zac, I’m a glass is half empty kind of guy, so this sort of major shift scares the hell out of me. I guess I just look at the down side to things. I do agree that it is a shot across the bow for mom and pop grocrey stores and bottle shops. If they don’t compete they will lose ultimately, and that has its down sides as well. The distribution of craft beer has been so grass roots it is difficult to know what this shift to the mainstream might produce.

  3. BeerBanker
    October 20, 2011 at 11:59 am #

    Yeah, if a beer is rare currently, it’s due to there not being enough of it due to limitations at the brewery (as opposed to rare just due to distribution – a west coast beer not being distributed to GA. Looking at you Russian River !) . WallieWorld being involved will just provide another outlet clamoring for those rare beers. Now, for the beers that have production volume but just not the distro channel, this could be a boomtime…Of course WW will push against craft pricing, but I see the losers as being the macro producers losing shelf space AND the small liquour stores who currently can’t sell craft brews at a discount and will be slammed hard by the competition from WW down the street…

    • Don
      October 20, 2011 at 12:23 pm #

      Hopefully this will allow some breweries to make volume sales, and then concentrate on their special stuff for other markets. Some beer is just so limited there is really no way for a small brewery to produce enough to satisfy all the demand that there is for it. Perhaps having a cash cow will allow them to produce more of the really crafty stuff too.

  4. October 20, 2011 at 12:08 pm #

    Hopefully by selling so much product to Walmart, brewers like Stone will be able to sell it to them for a little less and still turn a profit just because of sheer volume. I see what you mean and I’m sure that some will sell out but I have to think and hope that brewers like Stone and Dogfish Head will not and these are some of the more popular brewers, so if Wally World wants to sell what the people want they will have to find a comfortable medium with companies like Stone. Hopefully Walmart is smart enough to try to sell regional brews as much as possible too. I’m not sure exactly how their distribution works but I know they sell some regional foods so you would think they could work out the same with beer. Right now craft beer is doing just fine without the evil empire so if the price isn’t right, hopefully most of them tell Walmart to take a hike. I think the kind of people who enjoy craft beer probably don’t mind making a trip to a specialty shop to get it if they need to.

    • Don
      October 20, 2011 at 12:35 pm #

      The ripple effects here could be pretty large, all the way down to the growers of Hops and Barley. I could also begin to see more of a division of labor so the brew houses are buying more value added products to make beer with, allowing them to increase volume to better meet demand.

  5. October 20, 2011 at 12:09 pm #

    I’m not really worried about this. I almost feel like it’s asking if you mind if your favorite band gets signed to a major label. Do you call them a sellout? Ultimately, I doubt it will really affect the beer that most people buy. I have friends who will walk into a draft house and still ask for a milled lite. A lot of people are set in their ways.

    • October 20, 2011 at 12:15 pm #

      I’m not sure selling out is such a bad thing. People have to pay their bills and feed their children, right? Agreed on all points, though.

      • October 20, 2011 at 12:21 pm #

        Yeah that was basically what I was getting at. There are people who understand that bands are in it to make money, but there are others who think the band should stay a secret or something. Just like I don’t mind it when bands get bigger; I also don’t mind it when beer companies get bigger either. Now if the breweries change to become more wallmart friendly, that would be different.

        • Don
          October 20, 2011 at 12:25 pm #

          And that is my concern in a nutshell. Will breweries cowtow to the big retailer, and begin to brew “walMart Style” beers. I certainly hope they do not.

  6. October 20, 2011 at 12:11 pm #

    I’m not sure what the outcome on the market or the beer will be. Someone will cater to their pricing model, I’m sure. But maybe craft breweries don’t have to. I just starting seeing Odell beers at Winco (a value grocery chain here in Idaho). Odell rarely budges on the price of their beers. And at $9 something a six pack, they haven’t at Winco either. Breweries will take into account what it’s worth for to them to knock down pricing/ingredients. If you cheapen your beer, you run the risk of cheapening your beer brand. That’s the antithesis of what most craft breweries are trying to do.

    Also, I’ll believe it when I see the craft beer on Walmart shelves. The article ( http://t.co/0Xr37Jr ) quoted former Walmart CEO and current board member Lee Scott. And it pretty much sounded like a gentle directive to distributors. But I’m sure the macro breweries won’t be happy about this, and you know they’ll be putting all kinds of pressure on the distributors to protect the shelf space they have and acquire this new shelf space Walmart might create.

    I guess what I find so interesting here is that they basically put distributors on notice. Walmart is making more shelf space for craft beer and our buyers will be purchasing more and more of it. That’s a strong stance from largest grocery chain out there—one that’s clearly different and one that all other grocery chains will have to listen to and consider.

    • Don
      October 20, 2011 at 12:26 pm #

      You are absolutely right Chad that speech was designed to put distributors and grocery chains on notice that Wally World is going craft, and they better be able to deliver or get left behind!

  7. Michael
    October 20, 2011 at 12:32 pm #

    Thumbs down to Walmart carrying craft beer. Too many ways they can screw things up. If the dollar signs look good then nobody thinks about the unintended consequences. I’m with Brother Don on this one.

    • Don
      October 20, 2011 at 12:36 pm #

      Thanks Michael I was feeling a bit like a lone voice in the wilderness here. I am hopeful that this will be good, but it may totally change business models of some breweries.

    • October 20, 2011 at 2:06 pm #

      If I were a craft brewer, I would also want to ensure that my beer was being shipped and stored properly, otherwise they may be exposing Wal-Mart shoppers to less than fresh beer. It could end up harming the brewery’s reputation.

      • Don
        October 20, 2011 at 2:09 pm #

        Maybe craft brewers should limit what they sell to WalMart to only Stouts and Barleywines. That way if it ends up in a warehouse or the corner of a supply room for a year or two, thats ok. Just a thought.

  8. John King
    October 20, 2011 at 12:43 pm #

    I’ll be waiting for the “drunks of Walmart” page.

    • Don
      October 20, 2011 at 12:47 pm #

      Oddly enough a move into the craft beer segment might class the joint up a little, don’t you think?

  9. October 20, 2011 at 12:51 pm #

    Personally, I avoid Walmart like the plague. I always seem to get the one person in front of me at the register that still pays with a check. And they rarely have ID! I don’t consider Walmart to be any more or less evil than any other multinational corporation, but they have built their business on catering to the lowest common denominator. Craft Beer is a far cry from the lowest common denominator. The whole point of the Craft Beer movement is to create beers that are flavorful, sometimes unique, and always from the highest quality ingredients. I don’t think the Walmart model will work with this industry.

    • Don
      October 20, 2011 at 12:56 pm #

      Precisely my point, and thus I’m afraid what it might do to the craft beer industry. I’m sure some will see the potential for big $$ and cater to them, but at what cost? There are all sorts of externalities here that could create long term problems for craft beer.

      • October 20, 2011 at 1:41 pm #

        As I’m sure has been said before, Craft Beer has been a grassroots movement with a fiercely loyal and well informed following. This is where the consumer is ultimately responsible for what happens to it. Once we start putting price before quality, then the movement is sure to die a slow death. Not saying that I want to pay a fortune for a good beer, but there’s a definite balance between quality and price. The key will be to maintain that delicate balance.

        • Don
          October 20, 2011 at 1:54 pm #

          Absolutely true, but as I said before that will take some kit gloves on Walmart’s part to negotiate fairly and in a way that allows their suppliers to maintain quality. Typically they have been hamhanded and treated all their suppliers like shit. I hope there is enough integrity built into the movement to withstand what will undoubtedly be a large amount of retail pressure to perform for some of the breweries.

  10. October 20, 2011 at 2:17 pm #

    Here in Colorado, you can’t buy full strength beer at supermarkets, Target, Wal-Mart, etc. and most brewers think that’s a good thing. I agree. By having customers go to a specialty store, this preserves family-owned businesses, plus customers are exposed to a much wider range of product, instead of picking up “the usual” while they shop for groceries. My local store keeps all of the BMC crap all the way in the back, and the good stuff toward the front, so that customers will (at least subliminally) get exposed to more choices.

    The problem with big-box stores is that (aside from their predatory practices) they can only carry a small range of craft beer, which is not an accurate representation of the industry or the choice available to the average consumer. In any case, if I could get craft beer at Wal-Mart, I still wouldn’t shop there.

    • Don
      October 20, 2011 at 2:19 pm #

      All I have to say is 12 packs cans of Ranger IPA baby! I’m all over it if it happens!

  11. October 20, 2011 at 3:13 pm #

    I’m w/ you on the Ranger cans Don.

    As for Walmart–we never use it.

    My take on it is:
    1) Craft brewers as a whole are iconclastic enough that they won’t bow to that kind of pressure.

    • Don
      October 20, 2011 at 3:39 pm #

      Hope you’re right. But just about anyone can be beaten up with a big bag of money!

  12. October 20, 2011 at 3:19 pm #

    Lets try to finish this…
    2) The few that do will either have to take a hit in their profits or use cheaper ingredients. If they opt for the latter and the result tastes like crap, we craft beer drinkers won’t buy it. Thus they will be replaced by somebody with a bit more class.

    As with so many things, the buying public can have the final say, if we have the will to do it. If we refuse to buy crap, they’ll stop selling crap. As long as the public is willing to accept crap, because its cheap, that’s what they’ll get, crap!

    • Don
      October 20, 2011 at 3:40 pm #

      Like I said, I hope you are right! 😉

  13. October 20, 2011 at 3:35 pm #

    Power to the people!!!!! lol

  14. Mark Moeller
    October 20, 2011 at 4:40 pm #

    First off, I hate WalMart. They are an evil corporation and I disavow what they stand for. That said, I have experienced Craft Beer at Winco, another discount food store in my region. I am still struggling for financial security at this point in my life and if I can get a 6 of Deschuetes Jubelale for a consistently lower price, I like that. They do not carry an astounding beer lovers selection, but they do have distinctly craft offerings. In fact it is a similar selection of breweries that I see in some convenience stores and mini marts around for an increased price, so it seems like those breweries are covered as far as sacrificing profit. I am in my mid 20s and I know many of my friends who are still trying to pinch pennies and have never had the balls to spring for craft beer. I wish WalMart was not even in existence, but as far as the concept for lower priced easily available craft beer, I think it can ultimately help gain followers for the craft beer movement.

    • Don
      October 20, 2011 at 4:55 pm #

      I’d agree Mark, it could be good, especially for the uninitiated. If you go to Winco, which we have in Idaho, check out Fred Meyer, they have a pretty good, and growing craft beer selection. Lots of 22 oz bombers for a great price. Last time I was there I picked up a Sam Smiths oatmeal Stout, and Alameda Imperial Stout, and a Ninkasi Oatis and I think I paid about $10 for the haul. That isn’t bad for stouts! I think the weakest is the Ninkasi and I think that comes in around 7.2% ABV. Good deals all. Also, I think it is interesting that WalMart is the number 1 retailer on the planet yet no one admits to shopping there! Not saying you do, but in my household they are a necessary evil. If I could afford it I would only shop at local groceries, but that isn’t gonna happen anytime soon.

  15. October 20, 2011 at 4:59 pm #

    I agree wholeheartedly with the view that craft beer drinkers know the difference between a very good, unique product and something that is not. If Wal-Mart, in their dominating way, ends up forcing those craft breweries that sign on with them (probably only the national ones) to start using cheaper ingredients, thus affecting the taste, we just wont buy it. Period.

    The passion, interest, and knowledge of craft beer drinkers and the ingenuity, imagination, and drive of craft beer brewers is what got us to the state we are in right now with craft beer and I don’t think anything can change that. The roller coaster has broken off it’s rails and is ROCKIN!!

    Hell, if anything the involvement of Wal-mart in the craft beer arena may pan out like this:

    1. Wal-Mart contracts with regional breweries (b/c these are the ones who are in a place to keep up with production demand). Breweries like New Belgium, Stone, Dogfish, Pyramid, Widmer, Abita, etc.

    2. Wal-Mart (since they are just about everywhere) puts those “gateway” beers into the hands of more people.

    3. A fraction of those people (10-15%) begin getting more interested in craft beer.

    4. Give that 10-15% some time and soon enough they will venture to a fun, local beer-related event and learn. Then they begin to make stops at the local bottle shop, homebrew store, beer bar, etc.

    I definitely don’t condone WallieWorld and never shop there but I see this as a potentially good thing. If things start turning foul, the people will start to catch on. I feel like craft beer drinkers are pretty astute people and keep up with current events via social media, news reports, etc. If things start going south, we’ll have something to say/do about it.

    • Don
      October 20, 2011 at 5:12 pm #

      I could also see this as creating a new “class” of craft beer drinker. You will have the geeks that fit squarely into your example, the great unwashed that are the BMC drinkers, and the WallyWorld craft beer drinkers that stop at Fat tire and SNPale Ale. And hopefully the breweries that do supply WW will tell them where to shove it when they drop their prices too low.

  16. October 20, 2011 at 5:16 pm #

    I have experienced both sides of Walmart. My wife works for lets say a division of Walmart. She is duel licensed in her field and works for them part time. I don’t know about the average worker but in her case they treat her very well, pay competitively and highly important to us they are very flexible with her schedule…that being said, I work for a large trucking company who frequently does business with Walmart and they can be very difficult to deal with from the business side of things (that’s putting it lightly). So I have mixed feelings about them but we do shop there quite a bit and if I am able to get the craft beer I like there at a better price, I surely won’t pass it up.

    • Don
      October 20, 2011 at 5:26 pm #

      Well thank you for coming out of the closet Haas! 😉 I think it is funny how many people that commented on this post started with “First of all I don’t shop at WalMart” I find it hard to believe. Like saying you “NEVER” eat at McDonalds, well someone is consuming all those billions of burgers!

      • October 20, 2011 at 7:41 pm #

        Well believe it bud!

        I grew up w/ McDonalds in the 50’s & early 60’s–the very first one was in DesPlaines, IL, a hop, skip and a jump from our home in Chicago at that time. But the last Mickey D’s I had must have been 15 or 20 years ago. The only fast food joints I hit now are Taco Bell and Subway and those very seldom (like once or twice a year.) When I want a burger, I go to Beck’s, my favorite local watering hole, order a bison burger topped w/ cheddar cheese & onion rings, a side of slaw and a pint or two of whatever draft microbrew they’re featuring this week–beats McDonald’s (or Burger King, or Wendy’s) any day of the week!

        Also, I don’t think Walmart will ever have a real impact on the kind of hole-in-the wall place I discovered just this past week–it had literally hundreds of microbrews, including one whole wall of bombers! (I even got up the nerve to try a 16oz bottle of Banana Bread Beer–to my surprise it wasn’t half bad. Although the only nose you get off it is bananas, the taste and body are pretty much that of a decent American-style ale.)

        Finally, I repeat, we don’t shop at Walmart–never, ever! Having said that, we’re not w/o sin. My wife does shop at Tarzhay, BJ’s, Shoppers, and Walgreens, so we’re not totally out of touch w/ retail reality. And we also watch for quality items that we would buy anyway, being offered for sale at the discount, buy-out places like Ollies and Big Lots.

        • Don
          October 20, 2011 at 10:07 pm #

          Not saying any one person does, but clearly most people do. Sounds like a great place you found there!

  17. October 20, 2011 at 6:16 pm #

    Had some Mickey D’s for lunch…. McDoubles are delicious… Especially when you smash some fries on top of the burger and add some extra ketchup and mustard…nothin like raidin the dollar menu…..haha. Yeah, that’s probably why the shirts I just ordered are 3XLT….

  18. October 20, 2011 at 7:08 pm #

    I haven’t eaten at McDonald’s in 11 years. Just sayin’….haha

    • Don
      October 20, 2011 at 10:05 pm #

      Well it’s been at least 11 days for me :). I’m not saying that you eat or shop there, but lots of people do, and for some reason there is some sort of stigma attached to it. I guess I don’t get it. Not like there is anything wrong with shopping where you like and can afford.

      • October 21, 2011 at 3:42 pm #

        No stigma, but for the number of empty calories I avoid by not eating there, I can afford to have another beer!

        • Don
          October 21, 2011 at 3:49 pm #

          I’m sure the calories at Beck’s are far fuller and richer! 😉

  19. October 21, 2011 at 12:44 pm #

    Sorry I got to the table a bit late but hopefully there’s still some leftover pie for me to nibble on….

    Unfortunately, I agree with you completely. I was uneasy with the news when I first saw a tweet from Anat Barron. My take on it then was more along the lines of being wary of what the big bad boys will do in response to what they would clearly see as an invasion of their turf. I can’t imagine it will be positive for the craft beer industry or for us.

    Do I see the top tier craft brewers like Stone, Bells, Great Lakes and others dumbing down their brews to gain acceptance on shelves at Wal Mart? No. I’m pretty comfortable that the legit players won’t bring their bombers to that party – it’s not who or what they are. What I do fear is that they may start to feel pricing pressure elsewhere if too many craft beer fans do end up spending much more of their craft beer money at Wal Mart on “second tier craft brews” which I believe is the group Wal Mart is going to target. If that happens their response could be unpredictable – some may be forced to look at cheaper ingredients to maintain their competitive positions at craft beer bottle shops, others may further reduce distribution and focus on local markets. Who knows.

    The bottom line is that I really don’t think this move is going to play out well. Hope I’m wrong.

    @TheAlemonger

    • Don
      October 21, 2011 at 12:57 pm #

      Agreed, I think anytime you get into bed with a corporate giant, there are always unanticipated consequences.

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