As you may have heard, the largest homebrew supply group in the United Stated (Northern Brewer/Midwest Supply) was recently bought out by/partnered with ZX Ventures, a division of ABInbev. If you are not familiar with ABInbev they are the foreign-owned mega beer conglomerate that currently owns and produces 1 out of every 3 beers in the world. Some of the brands that they currently own are Budweiser, Miller, Coors, and even multiple "craft brewery" brands that might surprise you. For a great description of their methods, I would highly suggest that you watch the documentary Beer Wars. Even though it is becoming dated in an ever changing beer market, it is a great insight into the malicious business tactics that ABInbev uses against small homegrown and local microbreweries. The same tactics they may soon be applied to the homebrewing industry.

Before we discuss the homebrew aspect of the ABInbev buyouts, it is important to understand the symbiotic relationship that local craft beer has with homebrew and homebrewers. For example, when I started Stubby's Texas Brewing Inc., there were only two craft breweries in the entire metropolitan area of Dallas and Fort Worth. Today, the metroplex is supporting around 60 breweries, with more opening every year. What I think about this growth--and if it is sustainable or not--is for another blog about the approaching bubble burst. However, I can tell you I've known most of the brewers that started these breweries because they came from the local homebrew community or they were and continue to be customers at our shop. In fact, some of them even got started with our Intro to Homebrewing classes at Texas Brewing Inc., while others have used some of our beer kits to inspire some of their own recipes. So, knowing these brewers, I can assure you that they have the same passion for brewing as do most homebrewers and they are not in this business to make lots of money. The allure of making beer for a living and having other people enjoy your brand is magnetic. I know this because I seriously considered opening a brewery before opening our store. It was a hard choice because of the startup cost and overall return on investment in opening a brewery. In fact, if you are interested in opening your own brewery, you should know that in most cases it will be anything but a cash windfall. Which means most brewery owners are driven by their passion for brewing. However, not all craft breweries fall into this area these days either. Due to the recent buyouts and large payouts offered by the mega-corporations, capital investors are building breweries for the sole purpose of being bought out. Which when I encounter one of these companies, I find their beer generic and that it's very apparent that they seek to be bought out by the big boys with their business model. In my opinion, it is apparent that this other type of brewery owner lacks the passion needed to apply their artistic interpretation to their beer.

My point about the local craft industry is that it's important to understand the impact that the beer you buy has on the local economy. I have seen small breweries move into less than desirable neighborhoods and become a center hub of urban development in that neighborhood. They help revive the area by creating jobs and bringing money to the local economy. Plus, most craft breweries are also philanthropic and host regular events that benefit local charities. They strengthen their local area through their passion and individuality.

So, I'm sure you are asking yourself, "What does all this have to do with homebrew, Stubby?" Well, everything.

I think we first have to ask ourselves why did an international mega-corporation want to buy out a homebrew retailer. Do we really think that they have the brewer's best interests at heart when it comes to homebrew? Since that isn't likely, what is it they want? I think we have to start with the craft beer market and go from there. A little over 10 years ago the craft beer and import market made up only 1% of the national beer market. Today that same craft segment makes up 12-25% of the national beer market. However, those numbers do also depend on the general definition of craft beer because not all craft breweries are the small local companies I described above. Now, how does this information pertain to the homebrew market? Well, recent estimates state that as of last year, 1% of all beer brewed in the United States was homebrewed. Notice that percentage is in the same place as craft beer was a few years earlier. So, does that mean Big Beer wants to get into the market to help propagate homebrewing and therefore take away from the high profit margin of their adjunct laden lagers? I have a hard time believing this to be true.

I think when Big Beer looks at its large-but-shrinking market share and sees the billions of dollars being sucked away by pesky craft breweries and homebrewers they have to find a way to stop the bleeding. One way they they are trying to stop this trend is by buying up local or regional brewers as I mentioned above. Another is to cut the head off the growing snake that is homebrewing before it bites them too. With their funding and buying power, they could completely cripple the individualized and passion-driven local homebrewing supply market. It would be very obtainable for them to buyout multiple national retailers and put them under one umbrella. Then, where would the small LHBS be in the grand scheme of things? Would they be put out of business because Big Beer could set their prices so low that smaller retailers could not survive? That would kill off your option to buy from and support local business and require you to order from a limited set of large retailers. But then, what if they chose to close or minimize all of those large retailers too? Therefore making it difficult to get any ingredients or supplies and eliminating any aspiring homebrewer-to-pro-brewer competition before it even begins. This type of disruption would be very obtainable at a fraction of the cost of buying up all the small craft breweries. Eliminate the problem at the source. And guess what ZX Ventures is--ABInbev's disruptive growth and venture capital team

My best guesstimate is that the Northern Brewer/Midwest Supply made up about a 16th of the $800 million dollar homebrewing industry. Buying up businesses of this size is the same business tactic that Big Beer used to squeeze out the competition in craft beer in the past. We already saw it in the 90's craft boom. Big Beer bought out known and loved breweries such as Pete's Wicked Ale, only to eventually phase out and kill the brand. Is this what they hope to do with the homebrew supply chain? Add to that the rumors that the companies were purchased to also get into the supply side of craft brewing ingredients so they can squeeze out the local craft ingredient market. You may laugh and think that this type of competition elimination is not feasible, but $50 million a year has a large pull in the industry. Even more so if they buy out other large retailers. Knowing the other tactics that Big Beer uses and has used, it's not so far fetched, is it? End result: your supply needs become more complicated and local business is damaged on more than one level. 

I think it is imperative that you ask these questions when you are looking for a supplier to purchase your homebrew equipment, beer kits, and ingredients. I think it is important to know who you are buying from and which retailers have the best interest of the homebrewing community. Because just like small breweries, local homebrew stores affect the local economy by creating jobs and helping to grow the local beer scene. And when you buy from an independent LHBS, you can feel good knowing that you are helping out parents like me support my family, the families of my employees, and our local economy, Whether it's an independent local, state, or national level supplier, you will be keeping the money you spend local instead of having profits go to a huge foreign mega-corporation. This applies to both homebrew and craft brewing. Be aware of the beer you are drinking, it's either supporting that passionate homebrewer--like you--who put their blood, sweat, and tears into opening a brewery in your region or it's going to the pockets of some faceless Big Beer mega-corporation. It's your choice and it's all in the name of drinking and brewing better beer.