The Good and Bad of 2015

Until Tuesday, it had been 25 years since I last visited Battle Ground. Back in the day, I frequented the area as a substitute teacher. Tuesday's trip was a beer excursion. I was checking out Barrel Mountain Brewing for an upcoming review.

Battle Ground was a pretty quiet town in the old days. The population in 1990 was less than 3,800 according to Census numbers. The estimated population in 2014 was nearly 19,000. Obviously, a lot has changed. There's a growing, bustling business district now. There was nothing like that in 1990. 

Barrel Mountain Brewing is a pleasing and, I'm quite sure, welcome addition to the local scene. Since opening last summer, they've built a following with a nice selection of beers and a menu I'd describe as standard-plus pub fare. 

I'll have more to say about Barrel Mountain in Willamette Week's 2016 Beer Guide, which hits news stands in February. For now, it serves as an example of possibly the most positive trend of 2015, that being the trend of small breweries expanding into suburban and rural settings. 

Having worked in Clark County from 1990 to 2009, I watched a few breweries come and go. But it was mostly a dead zone. Over the course of the last few years, things have turned. Residents are no longer forced to traverse the Columbia River to find good beer. They can find it closer to home. 

The current trend was obviously a long time coming. For many years, you had to wonder when it would happen, if it would happen. There are a lot of underserved areas, like Battle Ground, that are starved for good beer and ready to support a brewery or breweries. Finally, it's happening.

Of course, the trend isn't strictly confined to suburban or rural areas. Many underserved boroughs in cities are also getting breweries or craft-centric pubs. What's different and especially positive is that the craft movement is spreading to suburbia and the countryside. 

Some fear the US brewery count, which now exceeds 4,000, is untenable. For production breweries, there surely is a limit. But there are an almost endless number of viable locations available to small, brewpub-type operations. Expansion into these areas will likely continue in 2016. 

That's the good news.

On the Other Hand

Probably the most negative aspect of the current craft beer scene is the accelerating pace of sellouts to big beer. The list for 2015 is long and includes Elysian (Washington), Four Peaks (Arizona), Golden Road, Ballast Point and Lagunitas (California), and Breckenridge (Colorado),

No one I know expects the pace of acquisitions to slow. Big beer market share is plummeting. Craft beer market share is growing. Big beer recognizes that tasteless, mass market lagers don't have a bright future. So they're investing in the guys they can't beat. 

I have to admit being less bothered by the buyouts, which I expect, than by the reaction to them by some in the industry. There are those who see the buyouts as nothing more than some sort of natural progression in which big beer embraces craft beer as it's own and moves on.

Nothing could be further from the truth. Big beer, particularly Anheuser-Busch, is buying craft brands so it can use them to leverage its position. They want to blur the perception of what craft beer is and squeeze market access via vertical integration wherever possible, to the detriment of independent craft brewers. 

I'm truly astounded when I hear people praising what the acquired breweries are doing. "Look at all the creative beers they're brewing." It doesn't matter in the least. These breweries enjoy significant advantages over independent craft brewers. It isn't close to an even playing field.

As noted, I fully expect the buyouts to continue. What I'd like to see in 2016 is more widespread recognition of what the buyouts mean for the industry as we've known it. I doubt it will happen, but I can always hope.

There's every reason to believe 2016 will be another highly interesting, entertaining year in beer. I look forward to watching it unfold. Happy New Year to all!

Ballast Point and the Homogenization of Craft Beer

Yesterday's news that Ballast Point Brewing is being bought by Constellation Brands sent shock waves through the industry. These were different waves than the ones we've seen with other buyouts. It's a sign of the times than few are shocked when craft breweries are bought by big beer.

What shocked people about the Ballast Point buyout is the price. Constellation will reportedly pay a cool $1 billion for the privilege of owning the San Diego brewery. That number surely has more than a few craft brewers wondering what they might sell for. Everyone has a price.

On its face, the valuation seems a little crazy. Ballast Point will sell about 280,000 barrels this year and expects revenue of $115 million. The 20-year-old company has shown solid growth in recent years. Still, Constellation paid a premium, roughly $3,500 per finished barrel. Earlier buyouts were in the $1,000 per barrel range.

Keep in mind that all of these buyouts are a two-way street. Constellation, the keeper of Corona and Modelo, was shopping for a strong craft partner. Ballast Point. which launched an IPO in October at least partially to finance further expansion, was ripe for a big money partner. Both are getting exactly what they wanted.

For its part, Constellation is looking very much to the future with this deal. Craft beer owns 11 percent of the US beer market, but Constellation expects that number to grow as mass market lagers decline. Don't downplay the importance of the Anheuser-Busch/SABMiller merger as motivation. Constellation wanted to secure its place at the craft table and saw Ballast Point as a plum.

Some have poo-pooed the value of Ballast Point. That's crazy. Located in one of the nation's best beer cities, BP has a broad portfolio of beers, many of which are well-regarded outside California...they distribute to more than 30 states. They also have a small collection of pubs. The stature of the brand and their expertise at running pubs means Ballast Point could conceivably open these things all over the country. And those are serious cash machines.

What we may be starting to see with these buyouts is the coming homogenization of craft beer in this country. In the same way that fast food and a multitude of other things have been homogenized over the last 40 or so years, we may well be seeing something similar with craft beer.

When I was a kid, the national chains didn't own the fast food market. There were still a lot of independently owned and operated, mom and pop places. The big chains were around, but independents were easier to find. Since that time, the big shots have almost completely taken over the fast food landscape.

Most of today's craft breweries and pubs are independent. Imagine for a moment what happens when you have well-financed chains operated by the likes of Ballast Point and 10 Barrel opening pubs everywhere. The pubs would be backed by packaged beer in stores. Remember, these operations will enjoy huge purchasing and logistical advantages over independent pubs. Well?

Even if the homogenization doesn't happen quite as I envision, these buyouts are changing the nature of craft beer. The lines are blurring. Regardless of what you or I or the Brewers Association thinks, Ballast Point and the other purchased brands will continue to operate as craft breweries.

What everyone needs to recognize is that these breweries, by way of their connection to big beer, enjoy substantial advantages over independent brewers. The craft beer playing field is in the process of becoming a lot less level than it has been. In a nutshell, that is the risk to independent craft brewers.