Josh Noel’s new book, Barrel-Aged Stout and Selling Out: Goose Island, Anheuser-Busch, and How Craft Beer Became Big Business, is more than a history of Goose Island Beer Co. Rather, this goes far beyond the sales itself and presents one of the best, most interesting marketing case studies I’ve read. Noel, the Chicago Tribune’s beer and travel reporter (best job ever), has been following this story for years, and weaves a tale so complex and readable that I’ve spent a couple weeks trying to sort out my own thoughts.
Push vs Pull
Marketers often talk about the balance between push and pull. Traditionally, companies developed products, and then pushed them into the marketplace. Consumers, whose choices were rather limited, then bought these products. (See Henry Ford’s statement about “having any color you want, as long as it’s black.”) For decades, marketing worked alongside sales to forecast and decide which products should be delivered to market. The big ad agencies all grew up in this environment. Everyone watched the same three television networks (and saw the same commercials). People read daily print newspapers and listened to their local radio station. Getting consumer attention was much easier.
But in recent years, the marketplace has shifted to pull. Consumers can now dictate what they want, and buy it from anywhere. A Chicagoan may listen to a podcast based in New York, read European websites, never turn on broadcast TV, and buy direct from Amazon. Many consumer companies have scrambled to switch gears, monitoring trends and reacting to them, rather than dictating consumer preference.
The most successful companies have built strong, agile R&D teams that can pounce on a whisper of a trend and deliver a mostly-baked product to market ahead of anyone else. Apple and other tech companies are especially good at this, releasing hardware that can then be easily adapted via software.
Experience vs Liquid
Beer has remained different — and that’s where Noel’s book comes in. Old-school “Big Beer” brands (Budweiser, Miller, Coors, Corona, etc) have built their empires on a push strategy that didn’t bother to differentiate their actual liquids. Rather, they sold experience and ice-cold consistency: Coors for the mountains, Corona for the beach, Bud and Miller for sports and everyday drinking. Leading with the experience rather than the liquid made Big Beer one of the marketing success stories of the 20th century.
Craft beer broke that template. Sure, the experience is part of it, particularly embracing local neighborhoods with a taproom, but craft strongly differentiates the actual product. As consumers yearn for variety, nuance, and unique flavor, craft brewers have responded by exploring new ingredients as the seasons and harvests dictate, while experimenting with recipes and techniques.
Craft breweries build brands that highlight the liquid, but the most successful ones give equal weight to the experience. For example, when Goose Island was developing 312, brewmaster Greg Hall argued for a significant shift in branding. Hall argued that 312 needed to be more than just a well made beer. Where Corona sold beach and Coors sold mountains, 312 would sell city. It wouldn’t be just a wheat ale — flavorful and refreshing — it would be an urban wheat ale.
Greg’s father, founder John Hall, thought the idea was “ludicrous,” according to Noel. “They had spend nearly twenty years building equity with local drinkers. They were the wrong drinkers, Greg argued — at least for this beer. John was thinking of the past. Greg thought of the future.”
Greg tested and validated his assumptions. The target audience (under age 40) loved it. The launch was backed by many of the trappings of Big Beer, with radio ads, sell sheets, and a punchy, playful approach that permeated coasters, pint glasses, and more. And it was a rousing success. That’s what AB bought: a strong brand with huge regional loyalty that became so successful that Goose Island couldn’t keep up with demand without sacrificing less popular, more creative beers. In many ways, this success forced the sale. Goose Island could offload much of 312’s production and free up tank space and brewers’ time to experiment and innovate — all while backed by incredible resources and deep pockets, like a yeast lab and hop farm.
Marketing vs Brewing
In craft breweries, marketing supports brewing. In AB and other Big Beer companies, it’s the other way around. Goose Island’s acquisition provides a master class in the implications of this mindset.
Over the years, Big Beer tried various strategies to compete with craft. For decades, they ignored small breweries as insignificant. As craft began to gain market share, Big Beer disparaged the beers as inferior, and then eventually began to copy them. (Most of these copycat attempts failed, but some — like Miller-Coors’ Blue Moon — were successful.) Finally, Big Beer admitted that the only way to compete was to buy craft breweries that had already built a strong regional footprint.
Big Beer understands that craft’s distinct brand promise requires a separate identity. That’s why they maintain the origin story and mythos of the craft brands they acquire, without transparency about where and how the beer is now made (often in the same tanks as Bud Light). But when AB acquires brands, it begins changing the liquid that build the original brand. Often, the flagship (such as 312) is scaled up for national distribution, which may require recipe and ingredient tweaks. Next, AB decides to cash in on some of the brand equity by developing new beers — beers backed by marketing that “make it seem like something consumers were pulling,” (p 234) rather than something created wholly by brewers. As Noel describes, “Beer didn’t start as a recipe at Anheuser-Busch; it began as an idea around a conference table strewn with laptops and spreadsheets.” (p 233) The result? A glut of beer with sub-par sales, pushed by aggressive discounting that diminishes Craft’s premium brand promise.
Big vs Small
Goose Island was just the first of AB’s ten craft brewery acquisitions. Each purchase has been strategic. AB now has a tidy craft footprint throughout the US.
So are acquired craft beer brands now considered Big Beer? Or does the spunky spirit of a “small” brewery persist beyond acquisition? For how long?
Some drinkers boycott formerly craft brands after they’ve been acquired, and that’s their right. But it’s more complicated than that. Goose Island and other acquirees have kept the trappings of their history. Today, 312 is made in Bud Light tanks in Baldwinsville, NY. It doesn’t taste quite the same, but it’s cheaper, and promoted aggressively (by AB money) in my grocery store as “LOCAL!” Casual drinkers may not know — or care — about the real origins.
New breweries continue to open nearly every day, and the craft market is strong — but saturated. Upstart breweries face a tough climb to gain drinkers, and their shoestring budgets simply can’t compete with the muscle that AB throws behind its newly acquired brands. (Beer is still subject to the post-Prohibition three-tier distribution system that limits how breweries can sell their beer to retailers. AB owns some of these distributors and has anti-competitive partnerships with others — a fascinating story unto itself.)
But if it’s really about the liquid, does it matter? The free marketeer in me wishes this was the case, but I know that when the deck is stacked, the little guy tends to lose.
Personally, I still buy Goose Island beers, though not nearly as much as I did when I lived down the street from the (now shuttered) Wrigleyville pub. Noel’s book reminded me it’s been far too long since I had any of the “sisters” beers — Sofie and Matilda in particular. This summer’s Soleil was delicious. I know what I’m buying, though.
As Noel notes, “craft beer drinkers didn’t just buy beer, and they didn’t just buy authenticity. They bought experience.” (p 133)
Does it matter who controls that experience? Ah, that’s the crux of the story.