Traditional beer companies are copying craft brewers, but the wine industry isn't interested

Imagine this scenario:

You're sitting at the dark mahogany counter of a craft brewpub. Exposed bulbs are dangling from a thatched roof, aluminum pipes snaking across brick walls to red copper conditioning tanks.

The building is a repurposed garage, and the doors open onto the outdoor seating area strung with fairy lights.

On the handwritten 20-by-10-foot blackboard, you have more than three dozen choices, but it's clear what you're not going to get at a pub like this.

Heineken, Coors, and Miller Lite.

It's in places like this that craft beer has managed - perhaps by happy accident - to bridge the demographic gap between beer and wine. So far, the effort has contributed to craft brewing's success.

While the traditional beer industry has been losing both market share and the interest of millennials - who are turning in part to wine but largely to spirits - a report from the Brewer's Association showed that craft-beer volume is up 16% this year.

Nearly 700 craft breweries, which operate at a smaller scale than the traditional brewers and put a stronger emphasis on experimenting with flavors, have opened this year.

And this week, a global mega-brewer, Heineken International, announced that it would acquire half of Lagunitas Brewing Co., valuing the sixth-largest craft brewery in the US at a rumored $1 billion, according to the Press Democrat.

The craft-beer industry has marketed itself as different from the large brewers: tasty, interesting, and elevated, as well as casual. Perhaps even more important, craft brewing is a local experience for consumers. In many cases, the beer is made close to where it is consumed.

This has allowed craft beer to slot itself between wine and traditional beer as a beverage option. What had kept beer and wine separated was their disparate demographics. If wine were the dress donned for glitzy parties, beer were the pair of khakis worn for a Fourth of July barbecue. Wine was for women, while beer - along with spirits such as whiskey and bourbon - was for men. And while wine could be drank for a quiet night in, beers was for loud and rowdy pubs.

Craft beer offers a third choice. Traditional beers, many of them mass-produced pilsners, are criticized for being bland. According to Tripp Mickle at The Wall Street Journal, craft brewing has embraced flavor and a wide range of beer-making styles, experimenting by adding ingredients such as chamomile, chocolate, and orange peels.

This overlaps with what consumers have usually associated with wine, that it has "delicious taste" and "pairs well with food," according to Nielsen.

Goes with food

"The number one objective of the craft-beer association is beer-food pairings," said Kellie Shevlin, the executive director of the Craft Beverage Expo, which brings together makers of wine, beer, and spirits in an effort to share knowledge among industries.

The Brewer's Association also released this chart of food and beer pairings, while a 2011 Demeter Group analysis of the industry showed that craft brewers met a consumer demand for "extreme flavor" and "high alcohol content."

Craft breweries are also tapping into a key demographic that has money to spend, a demographic that is stereotypically associated with wine: women. According to the Beer Association, women between the ages 21 and 34 now consume 15% of the craft-beer volume.

Young consumers love local

Nielsen reported last year that 54% of millennials said buying a locally made beer was important.

Craft brewing plugs into this preference because many of the beers are made locally and consumed close to home.

For Anthony Accardi, who owns Transmitter Brewing in Queens, New York, producing just 700 to 800 barrels a year, staying locally owned is important for him as a founder. (For perspective, regular old Budweiser, not Bud Light, sold 16 million barrels in 2013.)

"It's pretty hard to make money," Accardi said. "We're constantly chasing the cost of goods sold, which is always rising.

"But we don't have investors," he added, "because we don't want it to take away too much equity right now."

The brewery has managed growth through money from Accardi and his business partner, Rob Kolb, but also through community programs, such as the Community Supported Brewery Program, which for $175 gives each customer two bottles of beer a month for six months, along with T-shirts and glasses.

The program supplies the brewery with immediate capital for ales that could take four months to brew, and it helps to create a community around the business.

"The customers are pretty loyal," Accardi said.

Many breweries - though not all - hold the same business philosophy as Transmitter Brewing. They have avoided big-time investors and are trying to grow with the capital they have on hand.

The process may be slow, but Accardi said it was worth it to maintain control.

So what are craft breweries doing that the wine industry isn't?

Craft Beverage Expo's Shelvin thinks about the differences as similar to those between an adult and a child.

"The wine industry is 60, 70 years old, and the beer industry is 30 or 40 years old," she said. "The spirit industry are teenagers. Which makes the sake and meads industry infants. They've just entered kindergarten - or they're just learning to walk."

So the wine industry has a been-there-done-that attitude when it comes to marketing. But the craft-beer industry's relative youth translates into a willingness to try new things and to learn from other industries.

"Beer is killing it right now," Shelvin said. "Wine is like, 'We're great ... what can we learn from breweries?' And beer is like, 'We're new, try us, high-five!'"

Craft breweries are reaching out through social media to connect with their customer bases and provide news and information about products. And that speaks to millennials. Fewer players in the wine industry have done the same, Shelvin said.

Millennial consumers have different drinking habits than their parents

Shelvin said "Gen X is plastered to categories," meaning there are wine drinkers and beer drinkers, with little overlap.

Millennials, meanwhile, are "equal-opportunity drinkers."

"What's happening now is a lot of people who drink wine are also drinking beer," Elizabeth Thach, a professor of wine and management at Sonoma State University, said. "Beer is not the enemy."

Thach said the wine industry was nervous about beer taking market share, but craft beer is a tiny fraction of the total beer industry (again, craft brews just surpassed Budweiser in sales in 2013, with 16.1 million barrels to Bud's 16 million - but that's the entire craft-brew industry, versus a single brand of macro-brew). Consumers are drinking differently, and drinking more variety, but they haven't decisively shifted the traditional beer-wine balance of power.

But Big Beer has noticed. Anheuser-Busch InBev and MillerCoors have jumped into the craft-brewing business with brands such as LandShark and Blue Moon. Consumers and experts dispute whether these are authentic craft brews, but the point is that Big Beer now sees craft brewing as a business opportunity, rather than a local curiosity.

Some observers are worried that the nascent craft-beer industry is headed for a bust, primed for oversaturation before it has a chance to be a real contender with wine. But for now, no one knows how it will all end - or even if it will end. We could be witnessing the beginning of a permanent change.

Bart Watson, the chief economist at the Brewer's Association, says the industry is "certainly growing."

"The need for brewers to differentiate and produce world-class high-quality beer," Watson said, "is more important than ever."

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