Confusion in the marketplace: craft beer’s sustainability conundrum

In an increasingly-competitive beer market, craft brewers seem to be underselling their sustainability credentials. Paul Gatza, senior VP of the professional brewing division at the Brewers Association, speaks with Ben Cooper about what sets craft brewers apart and why they seem not to be taking full advantage of some natural strengths. 

Massachusetts academic Professor Ellis Jones evokes the work of no less a figure than Max Weber in trying to explain why US craft brewers underplay their strengths in sustainability but finds no definitive answer. In this era of conscious consumerism and heightened competition, when major brewers are shouting sustainability claims from the rooftops, why indeed?

Paul Gatza, who heads up the professional brewing division of the Brewers Association (BA), suggests simple decorum as a reason. Craft brewers find it "a little unattractive to be bragging about that sort of thing".

It seems a bit of a stretch to imagine zealous entrepreneurs with a product to sell would be holding back out of modesty. But Gatza, who joined the BA in 1998 and must know the craft brewer mindset better than most, goes on to say craft brewers "want to be known for their beer", and engage in sustainability practices because "they're the right thing to do".

Craft consolidation vs. Big Beer takeovers

Whether craft brewers should make more of their sustainability credentials is a particularly salient question at the moment, given the tough market environment that is exacerbating a consolidation trend in the craft sector. Gatza foresees more consolidation but makes a big distinction between mergers between craft brewers, such as the recent deal uniting Boston Beer Co and Dogfish Head Brewery, and a takeover by a mainstream brewer. "There's a far greater likelihood that the acquired or merged brands will be left to do their own thing," he says. A craft brewer will "understand what craft is", how another craft brewer will have built its business, and that the company it is buying has - note the choice of words - its own "fan base".

Acquired brands just become brand families that serve the purpose of filling shelves

That's very different, Gatza maintains, from the approach of larger brewers "where acquired brands just become brand families that serve the purpose of filling shelves. I think it's a different thing," he says. "There's more knowledge and I think it will work a little better."

Looking forward, he anticipates more deals between brewers that already know each other well. "I think we're going to see more small-on-small consolidation where maybe a 10,000-barrel brewer buys a 4,000-barrel brewer. That's what I think is more likely. We're going to see them in the same states or in the same general region where the principals of the companies know each other.

“They've been seeing each other at festivals or at retail establishments or state guilds meetings over the years, and they've just started to have conversations. Maybe one of them is looking to get out and another is looking to have a little more capacity but can't really add on to their current space, those kinds of deals, where it's more out of relationships than it is out of someone looking at another company and saying 'I think we could do something more with that'."

Navigating consumer confusion in the craft marketplace

The picture painted here does indeed seem a far cry from the cut-and-thrust of Wall Street deal-making and the world of the multinational corporations, and it's no surprise that Gatza stresses the value of independent ownership.

The BA exists to "promote and protect American craft brewers, their beers and the community of brewing enthusiasts". In defining a craft brewer, the organisation sets a reasonably generous bar in terms of sales, including brewers with annual production of up to 6 million barrels, but is markedly stricter regarding independence from larger drinks firms. A craft brewer member cannot be more than 25%-owned by another drinks company that is not also a craft brewer.

We're putting significant resources and efforts into helping consumers understand who is an independent craft brewer

Gatza says the earlier craft beer "buying spree" by multinationals "created some confusion in the marketplace". As the sector consolidates further, the BA is keen to ensure consumers know the difference between an independent craft brewer and one that is part of a larger drinks corporation.

He said: "We're putting significant resources and efforts into helping them understand who is an independent craft brewer, who shares a lot of those intrinsic values, and who is affiliated with the large brewers."

Craft brewer seals underline shared sector values

In 2017, the BA launched its Craft Brewer seal and claimed that by the end of 2018, the seal had been adopted by more than 4,000 brewers in the US, representing over 80% of the country's craft beer volumes. There are around 7 million "core craft drinkers" in the US, the BA estimates, and close to 30 million "adopting craft drinkers" who drink craft beer regularly as part of a varied drinking repertoire.

Adopting drinkers have become "very appreciative" of what craft beer has to offer and "are starting to look for the independent craft brewer's seal on packaging," Gatza says. "Now, I don't think quite yet that that's starting to permeate the general public. So, that's the big challenge going forward, to help build those values in the general public."

Gatza suggests there is a "natural scepticism" on the part of consumers when it comes to sustainability claims by large corporations

He believes the introduction of similar seals by peer organisations in the UK, Ireland, Australia, and, most recently, in Canada by the newly-formed Canadian Craft Brewers Association, underlines a growing international dimension to the "shared values" of the craft beer sector. In the US, a further "big challenge", Gatza continues, is market access. "With the three-tier system, the large brewers often have distribution locked up." The emphasis on "values" speaks to a close association between craft beer and sustainability, which could be key in battling those hegemonic forces of 'Big Beer'.

In contrast, Gatza suggests there is a "natural scepticism" on the part of consumers when it comes to sustainability claims by large corporations but, significantly, he adds: "Now, that could be breaking down a bit. They're certainly marketing that side of what they do." As the Ellis Jones research points out, this is precisely what craft brewers are not doing.

Craft beer’s cooperative culture and community innovation

Professor Jones suggests a cooperative rather than competitive culture in craft beer militates against point-scoring. He also notes that craft brewers tend to adopt a "non-confrontational" approach to their larger competitors and realise, with the focus on key quantifiable metrics relating to resource efficiency, larger brewers would outscore them anyway.

This is a challenge that SMEs in any sector potentially face. Broadening how sustainability is discussed and evaluated would certainly benefit craft brewers, and the growth in the 'B Corporation' movement may be a boon in this regard. When Colorado brewer Upslope became the 20th craft brewer worldwide to gain B Corp status last year, founder Matt Cutter said it had sought the accreditation to "benchmark and continually improve the influence of our business on all of our stakeholders: our employees, customers, community and the environment".

People who get into craft and are involved in it, they want to do their own thing and their own thing is often community-based

Gatza highlights the craft sector's strong record on philanthropy and community investment and the fundamentally important link between sustainability and innovation. "A lot of the craft brewers tend to have very similar values when it comes to making something that's different and challenges the edges of what's been done before," Gatza says. "There's a very strong innovative sense. These were early hallmarks of craft but it still exists today. People who get into it and are involved in it, they want to do their own thing and their own thing is often community-based."

"Doing their own thing" has clearly served craft brewers well so far. Communicating more directly about sustainability, however, may be an instance where conforming to the corporate zeitgeist could be fruitful.

This article originally appeared on just-drinks.

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