The fastest-growing craft beer isn’t beer at all

We respect that Small Town Brewing has had enormous success with Not Your Father’s Root Beer since Pabst purchased the brewery and the brand in June.

We also respect the fact that, as market research group IRI and beer industry publication Brewbound point out, it’s outselling craft beer brands including Boston Beer Co.’s
 Samuel Adams Boston Lager, New Belgium’s Fat Tire and Lagunitas IPA. We also respect that it’s brought in $75 million through Nov. 1.

We just don’t respect it as a beer, which is certainly what it’s going for. From the line-art, vintage labeling to the language used by Pabst and Wauconda, Ill.-based Small Town when describing it, Not Your Father’s Root Beer desperately wants into the craft beer category, and it thinks it’s found its loophole: gruit.

Historically, gruit is a style brewed in Europe during medieval times that commonly used herbs including yarrow, juniper, rosemary and woodruff for bittering. Hops didn’t come into vogue until about the 16th century, which meant brewers had to use what was lying around and what the landowners permitted you to grow. However, Pabst and Small Town seem to jointly believe that gruit simply means “malt beverage without hops.”

This is why Pabst owner Eugene Kashper told a crowd at a conference in New York last month that he wanted Small Town to “become America’s gruit brewer.” It’s why Small Town thrice called Not Your Father’s Ginger Beer “gruit-inspired” in the statement announcing its release. “Gruit is German for ‘herbs’ and is an ancient way of bittering and flavoring beer using roots, spices, flowers and berries,” Small Town founder Tim Kovac says in the same release.

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It’s an interesting pitch, to be sure. But you know who might not buy it? The Scots, who know a thing or two about gruit. One of the most popular alcoholic ginger beers in the world, Crabbie’s, is produced there and somehow never refers to itself as gruit or refers to a legacy of beer brewing. In fact, Crabbie’s original incarnation was much closer to wine.

Know who else doesn’t buy it? Boston Beer Co. If hard root beer or ginger beer were even closely related to German brewing tradition, Jim Koch would have it in the Samuel Adams lineup faster than you can say Reinheitsgebot. But when Boston Beer decided to launch its own alcoholic root beer, ginger ale and orange cream ales, how did it do so? By handing those duties over to its Alchemy & Science branch in Burlington, Vt., and releasing them through the Brooklyn-based Coney Island Brewing Co. brand it purchased from Shmaltz Brewing in 2013.

Why? Because Boston Beer Co. knows a flavored malt beverage when it sees one. It’s been selling the Twisted Tea brands since 2001 and has used them to effectively boost overall sales without sullying the Samuel Adams brand. It not only saves the company’s remaining craft beer credibility, but it opens up a vast, growing market.

As IRI notes, flavored malt beverages — or “progressive adult beverages” — account for only 3.25% of “beer” sales. However, that’s a little more than triple similarly fast-growing hard cider’s share of that same “beer” market. According to Nielsen, flavored malt beverage sales volume grew 9.5% last year, with 13 new brands accounting for 13% of all sales. Nielsen notes that, of all drinkers, millennials ages 21 to 35 are 54% more likely to drink flavored malt beverages than the average drinker. Compare that to boomers and pre-boomers, who are 27% to 71% less likely to drink flavored malt beverages than average. It isn’t a gender issue, either, as women are only about 10% more likely to drink flavored malt beverages. Compare that to craft beer, where men are 49% more likely to drink it while women are 46% likelier to stay away.

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While craft brewers have been loathe to try their hands at flavored malt beverages, brands like Mike’s Hard Lemonade have developed a craft-like following. Mike’s 1.6 million barrels of production last year made it bigger than all craft brands except Boston Beer and Yuengling. Anheuser-Busch InBev NV
meanwhile, took notice and paid $350 million last month to buy Mike’s for its Labatt’s division. That only adds to A-B’s flavored malt beverage portfolio, which already saw 11.6% growth in 2014, according to IRI.

While even Diageo PLC
 has gotten into the game with its beer-ish Jeremiah Weed and A-B-owned Bass has had a go at it with its Hooper’s Hooch “alcopop,” very few of these flavored malt beverages have dared to call themselves “beer.” You could, says MillerCoors’ Redd’s line, but dating back to its days in Poland, that’s always been actual beer, regardless of what purists might think of it as a fruit beer.

However, we can’t blame Pabst, Small Town and the Not Your Father’s brands for trying. Craft beer sales surged 22% last year to $19.6 billion, and craft beer accounted for 19% of beer sales in dollars, according to the Brewers Association craft beer industry group. Granted, craft beer is only about 11% of the beer market by volume, but that speaks to just how much of a premium craft beer commands. If Not Your Father’s Soda of the Month can continue using craft-style marketing and craft-style placement in taprooms and bottle shops, it can keep fetching that very craft-like $10.99 per six pack.

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Pabst knows what it’s doing. It’s regularly traded in on vintage brands like Pabst Blue Ribbon (whose sales continue to increase year over year), Old Style, Lone Star and Rainier to build value for its brewery-free operation. Now that it’s building a test brewery in Milwaukee, using the actual “gusto” formula in Schlitz and putting real IPA in Ballantine’s India Pale Ale bottles, it’s actively seeking craft credibility. However, until it develops a reputation beyond that of a cheap, canned alternative for cash-strapped beer drinkers, it has to get a handhold any way it can.

Even if that means producing “craft beer” sodas that aren’t all that beery.

Jason Notte is a freelance writer based in Portland, Ore. His writing has appeared in The New York Times, The Huffington Post and Esquire. Notte received a bachelor’s degree in journalism from the S.I. Newhouse School of Public Communications at Syracuse University in 1998. Follow him on Twitter @Notteham.

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