What "Selling Out" Allows a Craft Brewery to Do

I expected the new New York City offices of Anheuser-Busch InBev (ABI) to be shiny and sparkling, with a massive marble foyer, a fountain or two, perhaps a few badass bald-eagle sculptures guarding the entryway. Instead, I arrived in a small, unfinished lobby and entered an elevator still caked in construction dust. It's perhaps fitting that this work-in-progress office is in Manhattan's Chelsea neighborhood, home to New York's so-called "Silicon Alley": On the eighth floor resides The High End, the start-up group that now handles ABI's growing craft-brewery portfolio. Or, as some would call it, the nefarious department responsible for handling all the once-craft breweries that have sold out to ABI.

"Selling out." It's a term that used to apply only to formerly edgy comedians taking bags of cash to appear in lame family comedies. But in 2011, Goose Island Beer Co., a long-beloved Chicago brewery, stunned the craft-beer world by selling in full to ABI for a reported $38.8 million (a number that, in retrospect, seems like a downright steal). Many beer geeks handled the unexpected news, well, not so gracefully.

"I'd like to see some sort of statement from AB or GI [Goose Island] saying the beer will remain unchanged and have the same quality standards but I'm not holding my breath," wrote a commenter on BeerPulse back in 2011. "The price may drop, but the quality will drop even further in all likelihood," wrote a Reddit user on that same dark day. "The corporate hacks promise not to change but then they start focusing on every penny and begin cutting corners." These sentiments were common, as was one offered just a year later by a Quora user: "Has Goose Island beer become more watered down since they were purchased by InBev?"

"When I hear people say that—'You'll water down their beers!'—I think, 'Why would we do that?'" Felipe Szpigel tells me as we sit in The High End's "Stella Artois" conference room, sipping on 10 Barrel's Cucumber Crush Berliner Weisse (solid). Szpigel, formerly ABI's global trade marketing vice president, has been president of The High End since it was formed in October 2014.

Five years after that shocking Goose Island purchase, craft-brewery acquisitions are on the rise. I count at least five major deals in 2016 alone, most notably MillerCoors' purchases of majority interests in Georgia's Terrapin Beer Co. and Oregon's Hop Valley Brewing Co. Yet, even as macro-brewing acquisitions become more and more frequent, beer lovers still routinely throw around the fanciful negatives they're sure will soon characterize the formerly independent breweries.

"And thus goes the flavor," wrote one internet commenter on the day the Terrapin deal was announced.

"Does anything actually improve when Big Beer buys you?"

ABI, some would argue, is the biggest culprit in this craft-acquisition game, having snatched up seven additional craft breweries since that Goose Island deal—five in 2015 alone. Far be it from me to act as a propaganda arm for a $200 billion company headquartered in...uh, is it Belgium at the moment? But I thought it was time someone went to the original founders and employees of the numerous craft breweries that have been acquired, not just by ABI but by other corporate beverage behemoths, like Constellation Brands, Heineken, and Mahou San Miguel, to try to get the full story. What's been going on since these acquisitions—for better or for worse? Does anything actually improve when Big Beer buys you?

"I think all our beers are getting better," Chris Cox, of 10 Barrel Brewing Co., tells me. He's one of the founding partners in the Bend, Oregon, brewery, which ABI acquired in November 2014. ("At least you could have had the decency to SELL OUT to an American company," wrote a [former] fan on the brewery's Facebook page the day of the announcement.)

"This year's Fort Collins batch of our winter ale [Pray for Snow] was way better than any batch we had ever brewed," Cox tells me, claiming it's now more consistent, and even more flavorful. He's using "Fort Collins" as shorthand to refer to one of the many off-site breweries that now handle many of The High End breweries' flagship brands.

Vicky Wasik

Blue Point's Toasted Lager is now likewise produced at that Fort Collins, Colorado, brewery, as well as one in Baldwinsville, New York. Todd Ahsmann, Blue Point's president, is quick to mention the numerous times that brewery cofounder Mark Buford has said that its flagship Toasted Lager is "now being brewed by the best lager-makers around." Blue Point was ABI's second craft acquisition, in February 2014. ("Sell outs!!!" said one fan on Facebook. "Its a shame cause they make some pretty good brews." [sic])

ABI owns 12 massive brewing facilities throughout America—not just that famous one in St. Louis—and it's making some serious craft-brewing investments in at least four of them (the aforementioned Fort Collins and Baldwinsville locations, as well as ones in Merrimack, New Hampshire, and Williamsburg, Virginia). These formerly "lager-only" sites are being retrofitted specifically to handle craft beer in ways that the craft breweries themselves simply couldn't afford back when they were independent operations. InBev's added a Super Sack system to each of those four satellite locations, which cuts down on the manual labor needed to handle specialty malts, along with hop backs (containers that add delicate hop flavors and aromas to wort), conical tanks, and more cellaring space.

But ABI has invested directly in each brewery's hometown facility, too—it gave 10 Barrel $10 million to buy six new 400-barrel tanks, for instance, and it's helping Blue Point open a new 40,000-square-foot facility housing brewing and packaging operations, a tasting room, and office space. Collectively, these improvements have led to the production of more consistent flagship beers for many of ABI's craft breweries. Say what you want, but Anheuser-Busch is famous for making a uniform product—one bottle of Bud tastes like the next, and, nowadays, one bottle of Toasted Lager should taste like the next as well.

"Our quality assurance and quality control practices and instrumentation have improved exponentially since we were acquired in 2011," notes Ken Stout, president of Goose Island. "The consistency and stability of our beers, across the portfolio, have never been better."

So what, you say? So the world is soon going to have a lot more identical, factory-cranked-out bottles of Toasted Lager and Honker's Ale, beers that aren't really prized amongst today's beer geeks anyway? That may be, but these investments are also critical for the experimentation that leads to more exciting brews. In fact, the promise of these added resources was one of the key reasons the Goose Island team even considered joining up with ABI.

As of 2010, Goose Island's 312 Urban Wheat Ale accounted for around 65% of the brewery's production schedule. At GI's Chicago facility, 312 was brewed in mere 50-barrel batches. (A "barrel," in this context, is a unit of measurement equal to 31 gallons of beer, or about two kegs' worth.) Moving that beer, along with its IPA and Honker's Ale, off-site to Baldwinsville, where the three flagship beers could be brewed in massive thousand-barrel batches, has allowed Goose Island to focus more on experimental beers. This has mainly meant buffing up its wine- and whiskey-barrel-aging program back home in Chicago.

"Back in 2010, they [the Goose Island brewers] didn't have time to work on what they most loved, their barrel program," Szpigel explains. ABI has allowed for the change, with Goose Island's barrel "warehouse" moving from a two-car garage across the street to a massive space that now holds around 30,000 barrels. "I get goose bumps every time I go in there," Szpigel tells me.

Just five years since its acquisition, Goose Island releases what are surely the most widely available barrel-aged beers in all of America, if not the world. This includes its Bourbon County Brand Stout line, which comes out every Black Friday, with an outpouring of beer fans lining up to score bottles. And then there are its "Sour Sisters," wine-barrel-aged farmhouse and wild ales released throughout the year—some of the only barrel-aged sour beers you're likely to find in many regular supermarkets.

Goose Island's Bourbon County Brand Stout. Vicky Wasik

Then again, significant expansion doesn't always come without hitches, or, at least, greater public scrutiny when things happen to go wrong. Just last year, in what is likely the biggest black eye in the brief history of ABI's craft brands, various batches of Bourbon County Brand Stout were found to have been accidentally infected with a strain of souring bacteria. This sometimes occurs at breweries that barrel-age both stouts and sour beers within the same facilities, but it had never occurred on such a large scale before, and it had never happened to Goose Island in the two decades plus it had been making Bourbon County Brand Stout. ABI offered full refunds and free T-shirts to customers affected by the bad bottles, but the schadenfreude was immense in the craft-beer community, with many online commentators blaming the infection on ABI's perceived cost-cutting methods.

It's hard to call it cost-cutting, though, when Goose Island's production capability at its original Fulton Street brewery in Chicago has also expanded. Like 10 Barrel, it's installed additional fermentation tanks, a brand-new mash filter (which increases wort efficiencies and yield), and smaller items like a new centrifuge (which helps clarify hazy unfiltered beer without stripping it of its intended flavor). Capital from ABI also helped the brewery open a new Chicago tasting room last year. The biggest gift of all from "Uncle InBev," though, is surely the 1,700-acre hop farm in northern Idaho that's now at Goose Island's disposal. ABI has owned it since 1988, but now gives Goose Island the run of the place to grow the majority of the specialty hops it needs for its beers. Elk Mountain Farm grows 50 varieties of hops, many of them exclusively for Goose Island.

Hops growing at Elk Mountain Farm. Rabi Abonour

"We have unprecedented access to more hops and malt than we ever did before. I feel like a kid in a candy store!" Goose Island's then-brewmaster Brett Porter told Reddit users during an AMA last year. (Porter now serves as director of craft innovation and brewing for The High End.)

Increased hops availability and usage have also been critical for Elysian Brewing, acquired by ABI in January of 2015 ("everyone has a price..SELLOUTS!"). While Goose Island, Blue Point, and LA's Golden Road Brewing wanted to move their flagships off-site to places like Fort Collins and Baldwinsville, Joe Bisacca of Elysian was simply looking to turn his beloved Space Dust IPA into the company's top dog.

"Joe was brewing Space Dust just once a week, but he wanted to brew it more," Szpigel explains. "'If I just had the hops, it would be my flagship,' he told me. Szpigel asked how he could help.

It turns out that what Szpigel and ABI could do was acquire enough Chinook, Citra, and Amarillo hops that Space Dust could be brewed whenever Bisacca wanted—and that's exactly what they did. Since then, Space Dust has experienced sales growth of 2,000% and overtaken The Immortal IPA as Elysian's biggest seller, just as Bisacca once wanted.

The fact that Szpigel can snap his fingers and suddenly make exotic hops appear actually causes many beer enthusiasts to fret. They wonder if ABI's foray into craft beer is now preventing legitimate independent brewers from obtaining valuable ingredients—like Citra, for example, a hop variety that's particularly coveted these days. But Szpigel laughs at that idea, pointing to the fact that ABI owns Elk Mountain outright and can thus use it to grow any hops it wants, something that would hardly affect your friendly neighborhood brewer. "What do we have? Five percent of the craft market?" he retorts. "It would be impossible for us to control [the market for all] these hops."

Goose Island's former brewmaster Brett Porter checking out some Cascade hops at ABI's Elk Mountain hop farm. Rabi Abonour

Whatever the case, ABI brands, at least, love the way Szpigel empowers them when it comes to their recipes. "ABI understands our need to purchase the best ingredients we can find, instead of questioning whether or not beer drinkers would be able to tell the difference, as some non-brewery investors might do," says Meg Gill, cofounder and president of Golden Road. Before Golden Road was acquired, in September of 2015, Gill and her two partners were relying heavily on small-business loans from Bank of America Merrill Lynch. That meant money was always tight and had to be used strictly to help the brand grow; there were no resources for experimentation.

"We don't have investors and a bank to pay back anymore," Gill says. "The margins we needed to hit on our beers are now gone"—ABI doesn't necessarily care if each and every beer released makes a solid profit—and "it's changed how we think about our portfolio in a major way and has benefited the beers more positively than I expected."

By moving its flagships off-site, Golden Road was able to free up capacity and kick off a barrel-aging program for the first time—it's now buying as many wooden barrels as it can fill for a new Anaheim facility, opening in late fall of 2016. Gill also cites the example of Wolf Pup, its recently released session IPA, which ABI allowed her team to brew with "no limitations on ingredients or cost." She's so pleased with the result that the brewery plans to go national with the offering. "I've always been incredibly proud of my team and our beers, but we're now at a different, better level," Gill tells me.

Goose Island's Ken Stout agrees with Gill. "The biggest problem we had in 2009 and 2010 was that we couldn't keep up with demand," he says. "So when ABI contacted [founder] John [Hall] in 2010, it was all about providing solutions for our greatest challenges—meeting demand, future growth, advancement opportunities for Goose employees, et cetera. One of the reasons that John recognized ABI as the best option for Goose is that, as a brewery, ABI would understand our business and ways of operating better than a bank or private-equity firm."

Brad Stevenson, chief production officer at Michigan's Founders Brewing Co., tells a similar story. "In our industry, the phones are ringing all the time, 'Do you want to be bought?'" he tells me. "After a while, you sit down with banks, private-equity firms, and breweries. We talked to a lot of people, but decided we wanted to deal with brewers over banks." Stevenson's brewery sold 30% ownership to Spanish brewer Mahou San Miguel in late 2014. ("I'm not a huge fan of Founders anyway, and I am disappointed in them for 'selling out'...")

Funding that comes from fellow breweries also allows everyone access to the minds of fellow brewers. "It's a partnership, and we're sharing best practices," Stevenson says. "The key benefit of being connected with a large and entrenched, 125-year-old brewery is on the technical level, the production level." And, while he admits that an all-lager brewery can't really teach his brewers much about improving the flavor profiles of their high-ABV coffee and maple syrup stouts, Belgian-style fruit beers, and hoppy IPAs, Stevenson does think Mahou San Miguel can offer substantial expertise in expanding production while keeping output consistent.

Founders finalized its deal in January 2015; by the end of February, Stevenson was already taking his eight brewhouse team managers to see Mahou San Miguel's largest brewery in Madrid—a facility nearly 10 times the size of Founders' setup in Michigan. (Something must have happened on that trip, too; Founders has just announced plans to release its first mainstream lager, PC Pils, later this year.) Likewise, Tonya Cornett, 10 Barrel's R&D brewer, and Kevin Watson, Elysian's lead brewer, recently took their brewing teams over to Belgium to brew a strawberry lambic at the ABI-owned Belle-Vue Brewery. Still, most of these brewers' mastermind sessions happen back home in America.

The High End's New York office has just 50 employees, with another 200 spread throughout the country. They include not just suits—"First of all, no one is wearing a suit, as you can see," Szpigel notes, gesturing out of the windowed conference room toward the floor—but many beer geeks as well, hoodied out just like a group of programmers. The office employs people like Andie Davies, the current treasurer of the New York City Homebrewers Guild, and even a Master Cicerone (of which there are only about a dozen in the entire world). Once a month, The High End has a "quick connection" with each brewery it owns, offering help with anything it needs, whether that's giving advice on a new recipe, trying to crack the code on some innovative brewing technique, seeking out access to an experimental hop or a new piece of equipment, or figuring out how to market a new beer it wants to launch into the world. Every three months, there's a longer, more comprehensive off-site strategy meeting, where founders and general managers from all eight of the craft breweries meet for three days to predict where the industry is headed, discuss current innovations, and flat-out tell The High End how ABI can better serve them in the future.

"We always start with their dream—what beers do you want to brew, and what markets do you now want to be in," Szpigel says of his initial pitch to new acquisitions. In saying this, Szpigel believes he's demonstrating the hands-off benevolence of ABI toward its micro acquisitions. But he's unwittingly unveiling what scares many beer geeks the most about Big Beer's entrance into craft.

"If price is all that matters to drinkers, there's simply no way a smaller, independent brewery can compete"

Using ABI's distribution network, its craft brands now dominate shelf space and tap handles across the nation. Not only that, but the beer is often priced lower than other similar but independently owned craft beers. That has led to accusations that ABI is intentionally undercutting competition: Goose Island kegs, which were once $110, can sometimes be found for $56, and six-packs dip well under 10 bucks, even in major cities. If price is all that matters to drinkers, there's simply no way a smaller, independent brewery can compete.

Now that Founders is part of Mahou San Miguel, it's expanded to 38 US states and 23 additional export markets—foreign cities where it would never have been able to obtain shelf space without Mahou's muscle. Constellation Brands is taking Ballast Point (which it bought for $1 billion last November) and its popular fruited IPAs into markets where the publicly traded beverage powerhouse has long maintained distribution and retail relationships, owing to its varied portfolio, which includes offerings as diverse as Corona and Svedka Vodka. Similarly, Heineken is using its international distribution power to get Lagunitas (with which it formed a joint partnership last September) into European markets like France, Denmark, and, of course, the Netherlands, all places where Heineken already sells incredibly well.

Anne Becerra

"We are sharing our 23 years of knowledge of building a small brand with Heineken, and they can apply some of those things to their own small brands," Karen Hamilton, director of communications at Lagunitas, tells me. "In return, they are giving us access to the world." It's a statement that could easily be seen as either positive or ominous, depending on your viewpoint.

Many of the founders, brewers, and even rank-and-file employees seem to stay on after a macro-acquisition. (10 Barrel lost a mere one employee out of 215 after the sale.) You might think, "No shit. Money talks." Fair enough, and even as I did my research, as I met with many of these exceedingly happy men and women now working for The Man, I couldn't help feeling a bit uneasy. How could I fully believe the words of people made millionaires by ABI, and thus quite possibly turned into Manchurian Candidates by higher-ups? What about the founders and former workers who weren't so jazzed about their companies' acquisitions?

There's the sad and amusing tale of Greg Hall, the former brewmaster for Goose Island. On the night his family brewery's sale to Anheuser-Busch was finalized, he reportedly got drunk and urinated into two pint glasses at a local Chicago bar, saying that he had "fucked up big time."

You can also read about Dick Cantwell, a cofounder and co-owner of Elysian, who resigned three months after ABI acquired his brewery, noting, "I am a craft brewer, past, present, and future, no matter what I end up doing." (Even in resigning, though, he nonetheless said that ABI had presented him with some "pretty exciting future possibilities.") And in late July of 2016, four prominent Ballast Point executives left the company, including some who had been there since the brewery's beginning, two decades before. In explaining his departure, chief operating officer and head brewer Yuseff Cherney wrote that he was "[a]lways dedicated to the craft."

So what does the "craft" in craft beer even mean these days? There are now more than 4,500 breweries in America. Many are small and independently owned; some are mid-sized and supported by banks and private-equity firms out of New York; and then there are the big boys, with their massive purchasing power. But no matter a brewery's size, no matter who is funding these operations, it's literally impossible to predict the quality of beer it pumps out. Many independent nano-breweries make absolute garbage. Many corporate giants make outstanding products. So does it really matter who is pulling the strings? Who's holding the checkbook? It might.

In July, the US Department of Justice approved a $108 billion merger between ABI and SABMiller, the world's two largest brewers. Even in accepting this major consolidation, though, the DOJ immediately put a couple of rules in place, a small acknowledgment of the problems that could arise when all beer is owned by Big Beer. First, ABI will now have to notify the DOJ's antitrust division of any potential craft-beer acquisitions during the next 10 years. ABI will also be prohibited from employing certain practices to discourage beer distributors from selling rival craft beers—like offering cash-back incentives if ABI's own products make up a specific (high) percentage of a distributor's sales. You might know that ABI has captured around 50% of the US beer market, but potentially more dangerous is the fact that it also has equity agreements with more than 500 independently-owned distributors nationwide (and outright owns 21 distributors). Under the three-tier system, if you control the distributors, you could, in theory, control how all beer is sold in this country.

Nikos Ridge, founder of Ninkasi Brewing, told the Wall Street Journal that ABI's distribution practices and incentive programs are tantamount to "saying, 'We would like to shut down a massive pillar of the United States distribution system to craft.'"

Of course, even if ABI controls the market and the distributors, it doesn't control the bars, brewpubs, restaurants, retail shops, and supermarkets, which would be silly not to continue offering a wide variety from those 4,500 American breweries. In fact, there are so many great breweries nowadays, I'm not sure those people who were once yelling "Sell outs!!!" have time to care about the ones that got away. I know I don't. Even Greg Hall has apparently come to terms with the nebulous state of the industry: Last year, he sold his first post–Goose Island company, Virtue Cider, to, you guessed it, ABI.

Even better, I'm told that Hall recently visited an ABI location now brewing the Goose Island beers he once helped create. He earnestly told the workers there: "I can't tell you how proud I am you're now brewing my beers."