New Belgium Brewing is struggling to be true to its small business, brewed-in-a-basement roots while trying to take its products nationwide. New Belgium was founded in 1991 by current CEO Kim Jordan and her then husband, Jeff Lebesch, who is no longer with the brewery. The company was one of the few microbrews to survive the mid-nineties when the unique craft beers were largely snubbed by consumers, even called “sulfry” tasting by Consumer Reports in 1996. Beer distributors eventually realized the higher premium that consumers were willing to pay for a craft beer, which in turn led to a higher profit margin. Microbrews such as Sam Adams (NYSE:SAM) have only grown in popularity as the years have gone by. Along with the anti-Wall Street movement, recent years have also brought a sort of anti-Big Beer cultural shift, giving microbrews like New Belgium an edge.
While the U.S. beer market as a whole is down 7% over the last decade, microbrews have been the lone bright spot in the industry touting a 12% increase in sales in the last year. Microbrews now make up 4.9% of total U.S. beer volume. New Belgium has enjoyed average annual sales increases of 15% while some of its smaller competitors have seen even greater growth. New Belgium’s Jordan believes that the allure of microbrews is chiefly quality, but certainly having an appealing story and culture doesn’t hurt either.
New Belgium’s humble beginnings and employee-friendly business model are large selling points for the company in addition to its uniquely flavored products. In 2000, the company began an employee stock ownership program and rewards employee retention with gifts like real-life versions of New Belgium’s iconic fat-tired bicycle and trips to Belgium. With a 93% retention rate, it seems employees are just as happy with the company as consumers. This has all become part of New Belgium’s anti-corporate marketing strategy, which has helped to make up for its lack of a corporate-sized advertising budget.
Big Beer companies like Miller-Coors (NYSE:TAP) and Anheuser-Busch (NYSE:BUD) haven’t been blind to the anti-corporate sentiment and have spun off their own faux-craft beer lines in order to try to capture portions of the microbrew market. Miller-Coors has seen great success with its subsidiary known as Tenth and Blake who is best known for its Blue Moon Belgium White. Many consumers assume Blue Moon is true microbrew, which is no accident. Tenth and Blake has tried to distance itself as much as possible from its parent conglomeration. You won’t find any mention of Miller-Coors on Blue Moon labels or in any of its advertising and promotions. While Miller-Coors experienced flat growth for the first half of 2011, Tenth and Blake experienced double-digit growth. While most true microbreweries wouldn’t agree, Tenth and Blake CEO Tom Cardella said, “Consumers just want great beer. They are not overly concerned about how it is made or where it is from,” as quoted by Bloomberg Businessweek.
Anheuser-Busch’s spinoff craft beer Shock Top has also exploded amidst the microbrewery boom. Shock Top boasts a 77% increase in sales in the first six months of the year. While some brewers aren’t concerned with Big Beer’s attempts at craft beers, other feel their ability to have a lower price point is an unfair advantage. Bloomberg Businessweek quoted Sam Calagione, founder of Dogfish Head Craft Brewery, who said, “They go into a Joe’s Bar and say, ‘Hey, we’ve got a craft beer. Instead of a keg of Dogfish Head at $140, we’ll sell you this quasi-craft beer for $90 and you can charge the same price per pint.’ They use these quasi-craft beers as pawns to clear the real craft beers off the chessboard.”
New Belgium is now expanding into new markets in order to continue its pattern of growth in a fiercely competitive market. There are now 1,829 craft brewers in the U.S. and 760 more in the planning stages according to the Brewers Association. New Belgium recently expanded into Virginia, Maryland, and DC, putting them in a total of 28 states nationwide. They also have plans to choose an East Coast distribution site before the end of the year. Unfortunately, with more size comes less credibility among hardcore microbrew lovers. Some feel that New Belgium has become to mainstream. Bloomberg Businessweek quoted Jordan who said, “Sometimes we struggle with these little esoteric bars,” she sighs. “They say, ‘Oh, New Belgium. That’s not exotic enough.’ I would be lying if I didn’t say sometimes that makes me frustrated.”
But for now, Jordan is trying to enjoy the fruits of her labor. She reviewed plans in October for a new test brewery tasting room in Fort Collins, CO, where New Belgium is based and she continues to believe that collaboration with other small microbreweries will help her company continue to develop unique, quExpaality beers.