Colorado Brewers Guild Shake-Up

We live in red state/blue state political times. In beer, of course, it’s macro versus craft, Big Beer versus the Independents. A shot of a different sort was recently fired in the current war for beer market share in Colorado when 14 brewers chose to leave the Colorado Brewers Guild to start a rival one based on craft-only membership.

If the creation of Craft Beer Colorado is symptomatic not only of our times, but also of the state of beer, where are we headed?

Legislative efforts affecting the sale of beer are taking place in virtually every state. But here was a case where craft brewers chose not to speak out against legislation favored by grocers and eventually lost the battle in the statehouse. There was concern about retaliation by chain grocers in Colorado and beyond, which sell a lot of beer. But even so, by brewers not taking a more public stance it has not been craft beer’s finest hour.

With more regional and national craft brewers who call it home than any other state, Colorado has quite a few beer makers under considerable pressure to continue to expand sales and to figure out how to finance it. The good ol’ days of taking market share by converting college students or just opening distribution in a new state are gone. No state is virgin territory any longer due to the growth of craft brewing and the macros are fighting back with their own brands, buying distributors where possible and by buying craft brewers. One only need look at the jump in sales of Goose Island IPA (and the attractively low price due to scale) to see how this strategy is going.

The key element to the perfect storm in Colorado is the way beer has been retailed in the state – primarily by liquor stores. But a new bill was recently signed by Governor Hickenlooper, a co-founder of the Denver’s first brewpub, enabling grocery chains to start selling more than the 3.2 ABV beer marketed under the old law. Hickenlooper thinks the new law enabling up to 20 stores in each grocery chain to start selling all strengths of beer is a bad one, but there are protections for the liquor stores, he said, who might directly be affected by a nearby grocery store. And, the governor was fearful of a ballot initiative that might have opened sales at all big box discount stores or all grocery stores.

Colorado is THE craft state in part because it’s been easier for start-ups to find distribution in a beer economy driven by brewers’ own tap rooms, smaller shop keepers, i.e. liquor store owners, and bars with multiple taps. But once the discussion shifts to larger retail outlets, it begins to favor big beer due to volume, pricing and a long history of macro brewers dominating these kinds of retailers through distributor relationships.

Given that Golden, Colorado is home to the world’s largest brewery operated by the Coors Brewing Company, it’s kind of amazing that this distribution push has not succeeded sooner in Colorado. It comes down to history. There’s a lot of respect for the legend of the guy who went out West and helped settle the territory by opening a hardware and dry goods store that supported the, um, movement. That guy is alive and well in the form of liquor store owners, the soul of craft retail sales in Colorado in large part because the state has previously allowed only one license per person or business. (Yep, a grocery chain previously could sell full strength beer in only one store in the state. And yep, Coors is the one of those selling a lot of that 3.2 beer.)

Another key element of the perfect storm is that the Colorado Brewers Guild inevitably got involved in the legislative process that was pushed by modernity, if nothing else, and new citizens moving in as well as big beer when it came to changing how beer is retailed. Above all, the grocery chains wanted the ability to sell all beer and have finally lobbied successfully for that right, although they agreed to a limit of 20 locations for each chain introduced over time – controlled by the issuance of licenses on a per store basis.

The other stormy aspect is the make-up of the current guild, which is no longer entirely craft brewers because Anheuser-Busch InBev recently purchased Breckenridge Brewery, a longtime stalwart of the Colorado craft scene, so there’s been a previously elected board member in the form of Todd Usry, the president of Breckenridge.

Led by some well-known brewers who have created Craft Beer Colorado, the schism occurred as a result of the new legislation. To the departing brewers, it symbolized an organizational process they felt was antithetical to their best interests. It highlighted an impasse when it came to an effort to restructure the organization, which was accused of secrecy among other things. But the chief complaint really seems to be compromising in the name of legislation.

Apparently, the liquor store owners decided to compromise after years of staving off the grocers and the result is now signed by Hickenlooper. The departing brewers take exception to this outcome – but strangely didn't take much of a public stand on the issue during the process. In effect, they blamed the guild for dropping the ball. It became convenient to then suggest the presence of Usry and AB InBev was no longer acceptable, a move that smacks of more scapegoating. One wonders what might have happened with this law without the current guild and how much more the legislation might have favored grocers’ interest. And if Hickenlooper was concerned about a ballot initiative, one would think the craft brewers would be too.