6 Apr 2012

Another way to see the "revolution"

Last week I discussed why I think "revolution" is too big a word for "craft beer". Some people didn't agree and Jeff, of Beervana fame, left a comment saying why he believes that, at least in the US, there is a revolution going. Although he supported this with solid arguments and data, I'm still not convinced, but, as someone said elsewhere, it's all a matter of semantics, really.

The following day, while I was reading this excellent article about the correlation between the fall of the Roman Empire and the rise of Islam, for some reason I remembered what I had read in Brew North, a history of brewing in Canada, and I thought that there might be another way to look at this phenomenon.

As we all know, the fall of the Western Roman Empire wasn't something that happened from one day to the other. It was a long process that started in the fourth century, if not before, and was the result of many factors. I won't pretend expertise on the subject, but according to what I read, it seems that the biggest factor was that the empire had become too big for its own good.

The Roman "business model" was based on growth and expansion. Once the zenith was reached, problems started. The military structure became basically too costly, but it couldn't be dismantled because of politics and because someone had to defend the borders. This became more and more difficult as the tribes that lived in the periphery became more aggressive. All this came together with political instability, hubris, lack of vision and, of course, the almost constant internal struggles that undermined the empire from the inside.

Doesn't that look somewhat similar to what is happening to the macros? Brew North tells the story of the fall of the Canadian brewing giants once continuous growth stopped being a viable model. The difference here is that these companies ended up being swallowed by even bigger ones.

Today, the three or four giants that dominate the world seek to expand in the emerging markets of Asia, Africa and Latin America, which still offer some growth potential, while they don't seem to know what to do to keep their model going in the mature markets of Europe and North America. Most of their new products are quite embarrassing, if not downright pathetic and whenever one of them is successful with a new product, the rest follow suit with stuff that aims at the same target consumer.

Meanwhile, smaller companies whose scales and structures makes them more flexible and dynamic keep on growing in the periphery of the macros and they are also getting deeper into the territories that the big ones are not interested or able to defend.

The macros don't seem to see them as a serious threat (and I don't think they are, at least not for the moment), they consider them more like a nuisance. They are trying to absorb some of their energy and to defend their most exposed flanks with lukewarm products or with acquisitions that only open the gates even wider, just like it happened to the Roman Empire when they started to include barbarians among their troops or to negotiate with the most powerful tribes.

But there's yet another parallel to make.

As the Vandals and Visigoths conquered more of the Roman territory they started to adopt some of the habits and customs of the empire, partly because it made them feel "more civilised", but also because they understood that it was the best way to manage and expand their newly conquered realms.

Aren't we seeing something similar? There are two or three "Craft Breweries" that have announced they will (or are planning to) open factories in other locations, the most ambitious of them is perhaps Stone with their brewery in Germany. On the other hand, Sam Adams has announced Boston Lager will be brewed under license in Britain, where BrewDog keep on expanding their chain of pubs, which is not too different to what Pivovary Lobkowicz, Únětické Pivovar and other regionals are doing in the Czech Republic.

The question is what is going to happen. The collapse of the Western Roman Empire was followed by a period of chaos that eventually left on one side the Feudal system and on the other the Muslim Caliphates, with the Pope pretending he was Caesar. However, it could also be that the most appropriate analogy for this decadent empire isn't the Roman, but one from among the many that throughout history ended up being replaced by some other ascending power without things changing too much in the end.

Either way, I still believe that the rise of the "alternative" beers is to a great extent a result of something broader, but that aside, what we might be witnessing isn't so much a revolution as it is the beginning of the fall of an empire.

Na Zdravi!

14 comments:

  1. Is the craft brewery business model that different to the macros - at least in the cases you describe - expand, expand, expand...? From a UK perspective it's long been the case that the small are swallowed by the big breweries, and a rapid expansion from small to medium size put you (as a brewery owner) in a great position to sell up. I'd suggest that's more than likely what will happen with BrewDog in particular. Especially when their plans seems at least as reliant on image as they are on product, and fashions change.

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    1. A brewery is a business and, as it happens with every business, most owners will want to make it bigger. How big they want to get, it depends on each one... And I agree with you about Brewdog... I also believe it's a matter of time until bigger Craft Brewers start buying smaller ones as a way to expand their businesses.

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  2. Sorry I'm slow to reply. Setting aside the issue of revolution, I am in complete agreement with your conclusion of the fall of empires. I see this happening on two fronts, one more profoundly than the other. The one is on a company-by-company basis. It's very difficult for the Anheuser Busches of the world to continue to make half the beer in America. It's a totally anomalous state, and one bound to collapse. (Giants elsewhere will suffer similar fates.)

    I predict a more profound collapse in the empire of light lager. And I mean here the vapid, international light lagers that appear in only slight variation in every country in the world, not the delicious pilsners made famous in your country. Already the erosion is well under way, and it seems inconceivable that the momentum will revert. Those who have abandoned lame light lagers aren't about to return to them. Those who haven't will ultimately become a smaller and smaller segment (die-hards and those just dying). They may well become minority styles in two or three decades in places like the US and UK.

    And that would be a good thing.

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    1. Here the big brewers have it even harder. Regional and micro brewers do not have any issues with making pale lagers, only that they can often make it better and sell it even cheaper!

      In the US and the UK macro brewers still have the (perhaps false) hope that there will always be more than enough people willing to drink cheap(er) nondescript pale lagers. Czech macro brewers don't even have that to hope for...

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  3. Great post. In the past, we've referred to the 'craft beer revolution' as part of a wider change in society -- the end of the industrialised loaves, battery eggs, instant deserts and other products of the post-war, post-rationing era. A return to sanity after seventy years of gorging on crap.

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  4. How I missed this is a mystery to me, the best post i've read this year and bang on the money

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    1. Glad you liked it and thanks for the compliments!

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  5. I also believe the three tier system set up in the US that primarily benefits macro brewers could be their achilles heel. Not only have we seen craft breweries join together to form their own distribution alliances, but with the rise of small scale breweries it virtually eliminates the need for local distribution. Right now the big craft brewers (ex: NBB/Sierra Nevada) have seen distribution become such a burden that they think it is more cost effective to open another brewery on the opposite side of the US. Although every craft brewery carries out a different business model, don't you think that keeping their audience's attention in local markets is probably the most important survival skill at the moment? I think craft brewer's ability to divert attention away from the big brewers has been exceptional, but what happens when the market becomes too saturated with "craft" breweries? Does the revolution die or does natural selection occur? Personally, I don't believe that craft breweries will be a short-lived fad or trend, but I do believe only the best will be able to survive. With such high competition, people expect world-class beer out of the smallest of operations. Fortunately, deregulation from the government has allowed the US to adopt this craft beer identity that is, at the moment, very exciting. Thanks for the great post! Cheers!

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    1. Thanks for the comment.

      Come to think of it, in a way, the three tier system might not be such a bad thing for the "craft breweries". If the system was repealed, what would stop macro breweries from doing what they do in Europe, "buying" pubs and other retail outlets? Of course, nothing would stop, say, Sierra Nevada from doing likewise, but I believe the likes of Molson-Coors has a lot more money and resources for that.

      As you have read, I don't quite believe there is a revolution, I see this phenomenon more as part of the natural order of things. Some craft breweries have an expansion model, others are happy with a more limited "coverage". Sierra Nevada's and the other's move to set up production facilities in other parts makes a lot of sense. Whether in the long run that turns out to be good or bad for "Craft Beer" as a whole, I frankly don't care.

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  6. I've never realized that breweries buy out pubs. I've been to Europe two times, but always thought pubs just served one type of beer for no particular reason. Something like that would be severely damaging to the craft beer scene.

    And I completely agree with your point made earlier about breweries growing being a natural business progression. I can only think of a few breweries (e.g. Russian River) that do not want to continue growing if they have the opportunity.

    Are the big European beer countries beginning to see more startup breweries? If so, is there resistance against tradition? If not, do you think citizens of these countries would embrace it?

    Looking forward to future posts! Cheers!

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    1. Are the big European beer countries beginning to see more startup breweries?

      Yes, definitely. There's a boom in England and also in here in CZ. Belgium isn't doing too bad. Germany is a bit the exception, but things are starting to move a bit there.

      As for tradition. I can speak with some authority about what's happening here, but I guess the picture won't be too different in England. One thing you must consider is that here the "traditional style" (i.e. Pale Lager - Cask Ale in England) hasn't got the stigma it has in the US and other countries, even among beer geeks, so most Czech micros will stick to that. There are a few, however, that have kind of specialised in "exotic" styles, such as PA's, etc. and they've been quite successful, so much so, that now there are more breweries having a go at those kinds of beers. So what we are seeing here is VERY exciting, top of the range lagers complemented by very good Weizens, PA's and the odd Stout or Porter.

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  7. "Today, the three or four giants that dominate the world seek to expand in the emerging markets of Asia, Africa and Latin America, which still offer some growth potential, while they don't seem to know what to do to keep their model going in the mature markets of Europe and North America."

    You have just described macro adjunct lagers as the Roman Catholic Church, have you not? The Church's growth is also in those emerging markets, while Europe and North America become more secular.

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    1. That wasn't my intention (and believe, I've got no sympathies for the Vatican), and, to be honest, I don't think the interpretation is very accurate, either.

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    2. Sorry about the abrupt end. I think the Catholic Church is mostly trying to stop their flock from getting smaller. Of course they are trying to "expand" in places like Asia, but they know very well they haven't got much of a chance and, unlike macro brewers, they can't buy a local big player...

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