Chicago.com
Six days ago Goose Island sold the majority control of its company to Anheuser-Busch. For the past week both companies have been silent on the matter aside from a press release. Then yesterday Goose Island CEO John Hall responded to many of his customers’ concerns in the Tribune’s Business section. His argument for the sale is just: the craft beer market is rapidly growing and becoming increasingly competitive. If his company did not make a drastic move it risked failure. That’s fair enough. No one wants to see their business collapse. I have two concerns with Hall’s response to his customers and critics: He seems oblivious to Anheuser-Busch’s true intentions; and he acts as if Goose Island would be bankrupt without this cash infusion.
The day that this sale was announced, I wrote an op-ed on why this is a terrible setback for microbrewies. In that piece, I argued that Anheuser-Busch will demand a return on its investment. Goose Island’s best craft beers (i.e. Night Stalker, Pere Jacques, Sofie, etc) do not appeal to mainstream American tastes. Most Americans prefer beer with muted flavors. Goose Island has two products that fit this need: 312 and Honkers (some people may add Matilda to this list). In order for Anbheuser-Busch to see a reasonable rate of return on its investment, Goose Island will have to mass produce its muted flavor beer, which means it will invest less in its more distinctive beers. And over time Goose Island will fall out of the craft beer market and become yet another crappy beer company.
Hall responds to that criticism by saying, “But Anheuser-Busch didn’t buy us to change us. It bought us because we can do things its people can’t. They’re megabig, so it’s harder to get people who sell huge brands to really push new products.”
That brings me to my first concern. Hall seems oblivious to Anheuser-Busch’s true intentions. I sincerely hope that Hall does not believe what he wrote. He should know that Big Beer in the America (Anheuser-Busch, Miller, and Coors) are in this business to make money, whereas small breweries are in this business to make good beer. He honestly cannot believe that Anheuser-Busch will allow him to mass produce beer that does not appeal to mainstream taste.
The second point Hall made that concerns me is this: “I’m not alone in believing that craft beer is going to, at minimum, double its overall sales in the next five-plus years. I’d like Goose Island to be part of that: for craft-beer drinkers, for what we’ve created and for Chicago. We now sell about 1 percent of the beer sold in Chicago. If we don’t continue to grow, we disappear.”
Hall completely ignores all markets outside of Chicago. Take my hometown for example. It’s a small farming community in the middle of nowhere Illinois. There is one bar in the town that has tap beer. Take a guess what’s on tap. It switches between 312 and Goose Island seasonal. In a small town where Big Beer has conditioned its customers to accept sub par beer as the pinnacle of alcoholic ingenuity, Goose Island still makes a place for itself using something as simple as a keg as its proposition value. There has to be thousands of examples like this across the country where Goose Island and other small breweries have crafted a market for themselves. So why does Hall act like none of this exists?
In addition, Hall operates two Goose Island brewpubs in Chicago. Has he ever been to them on a Saturday night? Or even a Tuesday night? One stop inside of either brewpub during peak hours is proof enough that Hall is understating his position in the market.
I have had a week to think this situation over, and I have come to the following conclusion. Anheuser-Busch has masterful sales tactics. It has been able to position its terrible products better than anyone else in America. The company functions because it is somehow able to convince us that something as repulsive as Bud Light is wonderful. Likewise, Anheuser-Busch has taught Goose Island how to sell this terrible deal to the public as if it is the best thing that has ever happened to to craft beer. Unfortunately for Hall, some of us aren’t that gullible. Goose Island selling out to Big Beer is a detrimental setback to microbrewing and craft beer in America. The history books will write this story akin to the destruction of the electric car. Don’t you get it, America? This is why we cannot have nice things!
With that said, I will end this op-ed the same way I ended the last one:
Enjoy your millions of dollars, Goose Island stakeholders. You have just been added to the list of beers I boycott. Luckily there are still plenty of microbreweries left in Chicago, including Metropolitian Brewing, Rock Bottom Brewing, Revolution Brewing, and Piece Brewery.
Goose Island, Chicago’s most famous and successful brewery, announced today that it will be acquired by Anheuser Busch, which controls half of the beer market in the United States.
Goose Island founder John Hall said, “The transaction is good for our stakeholders, employees and customers.” This is undoubtedly good for stakeholders, but whether or not this is good for everyone else is debatable. And what Hall does not say is that this is devastating news for the microbrewery segment of the beer market.
It is important to note that due to the amount of beer it sells, Goose Island is technically no longer a microbrewery. It is now classified as a regional brewery, but from the perspective of Anheuser Busch all of these small breweries pose the same threat.
To understand why this is detrimental to everyone everywhere we must take a look at three forces in the beer market in the United States:
Microbreweries are becoming more popular
Microbreweries have surged in popularity in the past 20 years. This year they are expected to make up 11% of all beer sales. And in a market where Anheuser Busch controls half of all sales, microbreweries are on Anheuser Busch’s hit list.
Anheuser Busch has a bad habit of crushing vulnerable microbreweries
Anheuser Busch usually deals with microbreweries by attempting to bankrupt them through lawsuits. It sued Dogfish Head, one of America’s most distinguished microbreweries, for using the terms Punk’in Ale and Chickory Stout, saying that these terms were too generic. In reality Anheuser Busch wanted to run Dogfish Head out of business with a frivolous lawsuit.
Anheuser Busch has gained a virtual monopoly on beer sales by taking advantage of antiquated post-prohibition era laws
Anheuser Busch benefits from the three tier system of alcohol distribution in the United States. Set up after the repeal of prohibition, this system separates brewers, distributors, and retailers. As a result brewers must sell alcohol to the distributors, who then resell the alcohol to retailers. Anheuser Busch monopolizes this system by buying out inventory in the distribution trucks, so there is conveniently no room left for the small brewers to sell beer.
Microbreweries, like Goose Island, got around the three tier system by opening brewpubs, which allows them to sell alcohol directly to customers. Goose Island’s brewpubs in Chicago are exempt from this takeover.
Given all of these facts how is this takeover bad for everyone everywhere? Anhesuer Busch’s takeover will allow Goose Island to expand its operations and produce more beer. Unfortunately, Goose Island will not use its expanded facilities to produce its more distinctive beers such as Pere Jacques, Sofie, and Night Stalker (my personal favorite).
Instead Goose Island will now emphasize the production of bland beer that has wider appeal, such as Honkers and 312. Right now you can walk into any liquor store in Chicago and find it stocked with at least a half dozen different kinds of Goose Island beer. But a year from now do not be surprised if you have to travel to one of Goose Island’s brewpubs to find the same beer as Honkers and 312 begin overtaking the shelf space of the company’s less popular beers.
Anheuser Busch became popular by creating ultra light beer with muted taste, and selling it at astoundingly low prices. Beers like Night Stalker do not fit in with the rest of Anheuser Busch’s products, so it and many other Goose Island beers will fall to the wayside. Who knows what kind of specialty craft beers will never be produced because of this?
Goose Island has influenced microbreweries across the country. Its small beginnings and booming popularity in the 90s and early 2000s proved that there was a market of beer drinkers who wanted more than what Anheuser Busch was willing to offer its customers. Despite hostile market conditions created by post-prohibition hysteria, and strengthened by big beer lobbyists in the following years, Goose Island created a niche for itself. Today Goose Island betrayed its humble beginnings and gave up on the microbrew segment altogether by selling out to a corporate behemoth.
Enjoy your millions of dollars, Goose Island stakeholders. You have just been added to the list of beers I boycott. Luckily there are still plenty of microbreweries left in Chicago, including Metropolitian Brewing, Rock Bottom Brewing, Revolution Brewing, and Piece Brewery.