category-iconBeer Jobs

Jason Notte on Watching the Craft Beer Market

February 22, 2017

By Jeff Wiser, February 22, 2017

If I’ve learned anything in my life, it’s that there’s always more to learn. Part of that process is seeking out the right people to read and listen to. One of those people in the beer industry, for me at least, is Jason Notte (pronounced Nah-tee, “like the pine tree,” he says) who writes regular columns on the craft beer industry for MarketWatch.

I caught up with Jason recently to pick his brain on how he got into the industry, how covering the beer industry has changed over the years, and what craft trends we can expect to see in the near future. What follows are his own words, edited only for added brevity and organization.

I look for these little vignettes, these little slices of what’s going on within the beer industry.”

I cover the business side of beer and I have a weekly column over at Market Watch. I take a weekly look at whatever I feel the biggest issue is within the beer industry each week. Basically, things I look for are the bigger narratives, something beneath the level of “is there a craft beer bubble?”

I’ll take a look at things like packaging – the use of cans versus bottles. Mergers and acquisitions are always a big thing. The appearance of private equity in beer. Even talking to smaller startup breweries, such as Great Notion here in Portland. I look for these little vignettes, these little slices of what’s going on within the beer industry.

I try to give an investments audience an idea of how the industry is growing; not only in terms of brewers, but distributors, points of sale, how states are drafting beer laws. For investors, as this ends up making it into their hands – whether that’s private investment in breweries or breweries going public – it ends up mattering to them.

You’d be surprised at how many people contact me or my editors at Market Watch or The Street wondering how they can quit their cubicle jobs and open a brewery with their friends. Of course, this is how you end up with 5,000 breweries.

We walked down to the tasting room to talk to the brewers, drank their first pumpkin beer right off the tank – it was great – and we published a piece on it.”

Back in the mid-90’s, I worked at the student newspaper at Syracuse University called The Daily Orange. The sports desk there had an event during football season called “The Race for the Cases.” Every writer on the desk would make their college football picks in the Big East, and at the end of the season, whoever had the best record would get cases of beer from everybody else on the sports desk, but one of the rules we implemented was that you couldn’t just hand the winner a case of Milwaukee’s Best. You had to find something different.

We had a bunch of guys from Boston, so you’d end up with a bunch of Harpoon or Samuel Adams. There were guys from New York, so you’d get stuff from Brooklyn Brewing and Saranac. This is kind of the first way that I was introduced to many craft beers.

The first craft beer I had was probably a Saranac beer. It was their version of an IPA, which resembled nothing like the IPA’s you find today. It was strictly English style, had Tigers and the Taj Mahal on the bottle. It was very embarrassing but that was the start!

Craft beer was something that gradually made its way into my social life, but it wasn’t something I ever imagined writing about until 2009 when I started writing for The Street. I was hired as personal finance writer, but my editor said “you have to find what you’re passionate about and find the genesis of it.”

So I headed to Samuel Adams right off the bat to talk to them about seasonal releases. We walked down to the tasting room to talk to the brewers, drank their first pumpkin beer right off the tank – it was great – and we published a piece on it.

The founder of TheStreet, Jim Cramer, got a hold of that story and talked to the editor of our section and said, “why don’t we do more of that? Why don’t we cover craft beer?” And that’s where it began. It was Jim giving me that push that ends up with me doing what I do now.

You have to accept the fact that you’re not going to know everything about every brewer.”

I remember when I started that it seemed really feasible to go around the country and kind of hit everybody, or at least have a sense of the bigger players and you could get around to them all. Now, the map just changes so frequently that it’s really hard for anyone to have a deep knowledge of anything beyond their locale. You have to accept the fact that you’re not going to know everything about every brewer. You really go out and ask people questions and seek out beers.

It might seem on paper that this makes my job a lot more difficult, but it actually puts the journalism back into the job. You’re not just calling the same top-50 breweries all the time, and that’s led to some great stories. To me, that’s the key, that’s how things have changed the most and how my job has changed the most. Now I go to different people to find stories rather than just waiting for the Craft Brewers Conference or Great American Beer Fest to come around. I get out there and hit up places to see how things are different region by region.

For example, I went to Atlanta a few years ago and that was eye-opening. (Coming from Portland) you have no idea what it’s like to visit a place with such stringent beer laws until you actually go there and try to have a drink some place. Walking into Sweetwater’s brewery, they have this massive taproom that’s lovely, all glass-lined, just this big bar with tons of taps set up and you can’t drink a damn thing out of them unless you take the tour.

To me, the interesting thing is just to kind of watching the evolution. Watching the new brewers come in, watching state law, and really going out there to each market and seeing it for myself.

Honestly, to see that every brewer here can open a brewpub, every place can do satellite brew pubs and fill growlers, and send people home with whatever the consumer wants – it’s enlightening. But at the same time, whenever you travel out of state, it’s incredibly frustrating. You go to another state and say can you fill this up? “No.” Can I buy this and take it home? “No.”

The idea five years ago was that you wanted to go coast-to-coast… Now it’s kind of the opposite.”

A lot has happened in the last five years, like seeing the roll-up of breweries into private equity firms. Basically what Oskar Blues has done with Fireman Capital, bringing Cigar City and Perrin into the fold. Looking at what Ulysses Management did with Southern Tier and Victory. Looking at what everybody has had to do to survive in that medium range craft space – producing 30,000-60,000 barrels annually.

Five years ago was when everyone thought it was a great idea to open an East Coast brewery. All of the west coast brewers were looking at North Carolina and saying, “hey, why don’t we do that?” Look at the plight of everyone who’s done it – though Oskar Blues hooked up with private equity to make it work – but New Belgium’s sales are off, Sierra Nevada’s sales are off. Deschutes is opening this year and they’ve got be concerned because Stone opened up there and had to lay off people – and Stone’s sales are off, too.

The idea five years ago was that you wanted to go coast-to-coast. You wanted to not go very deep, but go very broad. Now it’s kind of the opposite. You want to be in your strongest market and be as deep as you can. You want to saturate that market before you do anything else because that’s what you’re going to need to do to survive. You’re going to need a place to retreat to if you’re under attack in other markets or have a hard time getting on store shelves. You a need place where your sales will remain strong and stable.

For big craft in the next five years, you’re going to see a race to get outside the U.S. and it’s already happening.”

Starting with 2017, I know that AB InBev is kind of hamstrung in what it can do in terms of acquisitions, so I think we’re going to see, from a brewery perspective, things kind of wind down some. I think we’ll see more from Miller Coors, but I’d be really surprised to see a lot more brewery-to-brewery acquisitions, at least on that big level.

I think what you’re going to see is the big brewers working with the brands that they have to be locally strong wherever they are. You’re seeing it here in Oregon with Ten Barrel – they’re everywhere. Think about the events that they sponsor now, the kinds of spaces they’re able to get into that any other kind of AB product wouldn’t in Oregon. You’re going to see that where Blue Point is (in New York), where Golden Road is (in Southern California).

For us out here in Oregon, the brewer’s reaction to that is always what it should have been, which is to maintain the status quo. You set up in your neighborhood, in your community, in a blank spot on the map and you hold that down. You’re going to see this effort by breweries to take it to an almost German or Belgian model where you’re opening this neighborhood pub or taproom, creating something that is special to that specific place.

For example, the breweries in Hood River, Oregon can say that they’re using the hops out of Yakima, the water coming off the glaciers of Mt. Hood, barley from small, local maltsters. You have to be able to not only create that narrative, but create that local connection with people. You’re going to see a return to that on the local level.

For big craft in the next five years, you’re going to see a race to get outside the U.S. and it’s already happening. You look at Brooklyn – they’re 80% export now. With Founders, a big part of that deal was having Mahou San Miguel bring them to Europe.

Heineken and Lagunitas, well that’s a great stoner partnership if there ever was one as they just bought out a place in Amsterdam. But seriously, there’s that built-in international piece that’s going to get Lagunitas everywhere. Constellation Brands, same thing – you’ll at least start seeing Ballast Point down in Mexico.

Kona is in Hawaii. A big reason that Anheuser-Busch Craft Brew Alliance deal was renewed this year was because of Kona, because people in Brazil love Kona. It’s now an international brand that’s probably going to save the skin of the Craft Brew Alliance and allow Widmer to dial things back a bit and stop trying to sell Oregon beer in Pennsylvania.

 

Thanks to Remo Remoquillo for the header illustration.

ZX Ventures, a division within AB InBev, is an investor in October
Related Articles

Meet the Man Who Brought His Homebrewing Hobby into Chicago’s Best Restaurants

A manager at a Chicago steakhouse, Phil Stubstad went from brewing in his garage to creating 1,000-gallon batches for nearly a dozen restaurants.

Brewer Lee Hedgmon Learned the Rules in Order to Break Them

"I was never going to give anybody the opportunity to discount me," says the teacher-turned-brewer and champion of women and people of color in the beer industry.

Loud Brewery Coming to Sleepy Town

Mike Hunsaker of Grains of Wrath is about to take his loud style, and sledgehammer, to sleepy Camas, Washington.

Loading...