10 Barrel Brewing Co., as a property of Anheuser-Busch, may benefit in many ways, but the Bend brewery may have to surrender its designation as a craft brewer.
The Brewers Association, the Boulder, Colorado-based craft brewers association that 10 Barrel and Anheuser-Busch belong to, created a three-prong test to define a craft brewer.
A brewery with more than 25 percent outside ownership by an entity other than another craft brewer may not call itself a craft brewer, said Bart Watson, staff economist for the association.
The owners of 10 Barrel did not return a call Friday seeking comment. Andy Goeler, who oversees craft brewing for Anheuser-Busch, was unavailable Friday. However, Van Havig, a member of the Oregon Brewers Guild board of directors, dismissed the notion that 10 Barrel is anything other than a craft brewer.
“Those people are craft brewers, period. It has nothing to do with who owns them,” said Havig, co-owner and master brewer at Gigantic Brewing Co., Portland. “The brewers at 10 Barrel are an all-star team.”
The other two Brewers Association “pillars” of a craft brewer are an annual output of less than 6 million barrels and a majority of its product must be beer, not flavored malted beverages. 10 Barrel is expected to produce about 40,000 barrels of beer, about half of that Apocalypse IPA, according to Anheuser-Busch.
Anheuser-Busch announced its purchase of 10 Barrel on Nov. 5 for an undisclosed amount. The sale is expected to close by year’s end.
“This deal with 10 Barrel seems to have come out of the blue,” said Paul Gatza, director of the Brewers Association.
While it may shed the craft brewer label, along with the loyalty of scores of beer drinkers who on social media publicly swore off the brand, 10 Barrel gains advantages under Anheuser-Busch, the U.S. arm of Belgium-based Anheuser-Busch InBev, the world’s largest brewer.
One is access to the second-largest network of beverage distributors in the nation, Watson said. 10 Barrel now has immediate access overnight to wholesalers that others must struggle to convince to carry its brands. That kind of widespread distribution outweighs the backlash by craft beer consumers to the 10 Barrel sale, the two said.
“If they decide they want to put that brand all over the country, they can do that,” Gatza said.
A second advantage is front-of-the-line access to resources, supplies of which may vary from year to year. When a hop shortage occurred in 2007, for example, the Craft Brew Alliance connection to Anheuser-Busch, which owns a 30 percent share in the alliance, gave the Portland-based producers of Widmer, Red Hook, Kona and Omission access to the supply it needed, Gatza said.
“Mother Nature has a role to play,” he said. “She can give us a great hop and barley crop or one that’s tough to work with from a brewer’s perspective.”
News of the 10 Barrel sale took the two experts by surprise, but the move by the beverage giant follows a trend and makes sense from a market perspective, they said.
Beer sales for Anheuser-Busch, which claims 47 percent of the U.S. retail beverage market, and MillerCoors, the next largest beverage conglomerate, have declined since 2008, Watson and Gatza said.
“The big two have lost volume pretty consistently over the last five years,” Watson said. “Primarily their flagship brands, the American light lagers, have been losing popularity as Americans look for more flavorful beers and from more independent producers.”
Beer drinkers’ demand spurred almost 11 percent growth in craft beer production each year, over the past decade, he said.
Last year, craft beer sales increased 18 percent over the previous year and appears to be on track to match that this year. U.S. craft beers and Mexican imports, which are also growing in popularity, together sold 14 million more barrels since 2008 than were sold in the previous six years, Gatza said.
In Portland, for example, craft beers outsell the big-brewers’ brands like Shock Top, Michelob and Blue Moon, according to BeerInsights.com.
10 Barrel in the first quarter of this year gained 1.8 percent share in the Portland market, the largest advance by any brewer for that period in a rough-and-tumble market, BeerInsights.com reported in April.
Meanwhile, the big brewers are left with lots of cash and looking for a way to stem their losses, Watson said. That may partly explain the hunt for craft breweries such as 10 Barrel.
In February, Anheuser-Busch acquired Blue Point Brewing Co., of Long Island, New York.
In 2011, it bought Goose Island Beer Co., of Chicago, for $38.8 million, of which $16.3 million went to the Craft Brewers Alliance, Crain’s Chicago Business reported in March 2011.
10 Barrel gives Anheuser-Busch a regional presence in the Pacific Northwest that complements its brewery purchases in the Midwest and Northeast. The Goose Island experience may prove the best model for what a future 10 Barrel may look like, Watson said.
“They’ve taken brands they thought would appeal to a wider audience and appended them to the (Anheuser-Busch InBev) production system,” he said.
Goose Island now has nationwide distribution, and some of its beer is brewed in Colorado and in New York, including 312 Urban Wheat, named for the Chicago area code.
If 10 Barrel varieties prove successful, its Bend brewery may not be able to meet demand, Watson said. That could further alienate 10 Barrel loyalists.
“One challenge that ABI (Anheuser-Busch InBev) will face when growing the brand is that while they have an advantage in brewing efficiencies and distribution, part of what makes these brands great is their connection to the local communities,” he said. “Clearly, to some people they don’t have quite the same connection they had before the sale.”
The 10 Barrel Facebook page logged about 1,000 comments on the sale, many from beer drinkers who decried a small, popular operation selling out to a multinational corporation.
Gatza said that, like Goose Island, the quality of 10 Barrel beers may remain the same under Anheuser-Busch, but that won’t dissuade beer drinkers who take their connection to the local craft brewer personally. In the big picture, however, 10 Barrel and its new owners win anyway, he and Watson said.
“Beer lovers are educated more than ever and care more than ever who makes their beer. 10 Barrel will have some consumers who won’t purchase any of their products anymore,” Watson said. “The advantage (Anheuser-Busch) brings, the scale they bring, can outweigh the negatives that being purchased by a multinational will bring.”
Havig, of the Oregon Brewers Guild, said he expects 10 Barrel to continue making the same quality beer it has since its founding.
Its sale to Anheuser-Busch indicates success on the part of 10 Barrel ownership, and craft beer in general, which defined itself as apart from big brewers. That concept, he said, is outdated.
“Bigness does not equate to lower quality,” he said. “People really romanticize beer, which is good, it’s to our benefit. But people want to believe that craft beer, in part, is the tiny producer slaving away out of love and nothing else. But even the smallest producer is a business.
“For crying out loud, we’re not wineries.”
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