Slate Money: The Craft Beer Edition (Live)

Date: December 31, 2016
Podcast: Slate Money
Summary by: Podcast Summarizer

Episode Overview

This lively Slate Money episode, recorded at Union Hall in Brooklyn, delves into the booming world of craft beer. Host Felix Salmon and co-hosts Cathy O’Neil and Jordan Weissmann bring together pioneers and new faces from the craft brewing industry—including leaders from Harpoon, Brooklyn Brewery, and Night Shift—as well as industry advocates, to discuss what craft beer is, why it matters, the economics, regulatory hurdles, and the brewing world's rapid evolution. The show covers business, taste, history, distribution, and the tangled web of American alcohol laws—with plenty of wit, candor, and audience energy.

Key Discussion Points & Insights

1. Defining Craft Beer

• What Makes a Craft Beer?

  • Craft beer is not defined solely by production size, but by distinctive flavor, aroma, and color—unlike the mass-market light lagers dominating the US market for decades.
  • Steve Hindy (Brooklyn Brewery):

    "Craft beer has flavor, it has color, it has flavor, it has aroma, and it's very distinctive. And you can tell one from the other.” (05:05)

  • Major breweries make “tasteless” beer by design, aiming for mass appeal rather than character.
    • Steve: “They make beer for the masses. ... They don't want to determine that the vast majority of people don't like flavor in beer.” (06:02)

• Imports vs Domestic Light Lagers:

  • Most international mass-market beers (Heineken, Stella, Corona) are stylistically and taste-wise light lagers, like mainstream US brews. (07:12 onwards)

2. The Rise of Craft Beer in America

• In the 1980s, imports and craft beer collectively made up just 2% of the US market. Today, that’s jumped to about 30%.

• Number of breweries in the US soared from ~2,000 in 2011 to ~5,000 in 2016.

  • Felix Salmon: "We've gone up two and a half times to 5,000 breweries in the past five years.” (13:00)

• Historical Context:

  • In the late 19th century, there were 4,000 breweries for 40 million Americans; now there are 5,000 for 325 million.

  • Brewing was and is often tied to locality, though brands like Brooklyn Brewery now have global reach.

  • Steve Hindy on locality:

    “Many craft brewers starting up today are hyperlocal. They're really focused on the local community.” (17:09)

3. Business Realities: The Best or Worst Time for Craft Brewing?

• Corporate Buyouts:

  • Major conglomerates (AB InBev, Constellation, etc.) have been snapping up successful craft breweries for huge sums—e.g., Ballast Point sold for $1 billion, Lagunitas for $500 million (21:31).
  • Dan Kenary (Harpoon):

    “It's the best of times and the worst of times… It's gotten incredibly crowded and confusing… they [AB InBev] really don't want people to know who's independent and who's not.” (20:23)

• Valuation & Distribution:

  • Distribution is a bottleneck: with consolidation among distributors and restrictive franchise laws, smaller brewers struggle for shelf space and market access.
  • Some breweries, like Night Shift, now self-distribute or even own a distribution company to guarantee market access. (23:01 onward)

• Supply Chain Constraints:

  • Limited manufacturers for bottles and cans means supply issues, especially with canning lines (only two major suppliers in the US: Crown and Ball).
  • Rob Burns (Night Shift Brewing):

    “We get a phone call saying … we don't have the capacity to make cans for you anymore. … And that was a day after we signed a $250,000 purchase on a canning line.” (25:46)

4. Tasting & Beer Culture

• While brand and marketing remain important, all agree that flavor is essential; “It all starts with the liquid that’s in the bottle or can.” (27:43)
• The can vs bottle debate: Can technology has improved; cans keep out light and are actually superior for freshness.
  • Cathy O’Neil:

    “Tastes better out of a can than a bottle?” (28:06)

  • Rob Burns:

    “The can format is a better format for beer. It doesn’t allow light in there. … It’s lightweight to ship.” (28:27)

• Enjoy beer however you want—"enjoy the damn beverage.” (29:55)

5. Trends & Anti-Hop Backlash

• Hoppy IPAs are the dominant style, but there’s chatter about an upcoming backlash—possibly with more interest in less-hoppy, more balanced styles (e.g., Golden Ale, Kolsch, sours).
• Jordan Weissmann:

  “Every bar you go to, there's a lot of sour beer. ... Where should our listeners be paying attention to?” (36:35)

• Trendsetting cities: Portland, Seattle, Asheville.

6. Regulation, Distribution, and the Three-Tier System

• America’s alcohol laws are a tangled mess, with most regulation handled at the state level—resulting in bizarre rules (e.g., you can’t buy beer onsite at Georgia breweries; PA only allowed cases until recently; requirements for name/address records).

  • Nancy Palmer (Georgia Craft Brewers Guild):

    “In Georgia, when you walk into a brewery, you cannot buy a beer. ... You also can't buy a sandwich.” (40:43)

  • Katie Marisick (Brewers Association):

    “If you're in Maine, you can only get a growler filled if the growler is from the brewery that you're buying it from.” (40:17)

• The Three-Tier System:

  • Post-prohibition, to prevent vertical integration (brewers owning bars), a system was put in place: Brewer -> Distributor -> Retailer.
  • This was intended to raise prices (for tax and public health reasons), but has led to a tightly-controlled, often monopolistic distribution bottleneck—hurting small brewers’ access and consumer choice.

• Franchise laws: In many states (e.g., Georgia), breweries can be “locked in” with a single distributor, with no ability to change if poorly served (47:31).

• Result: Both monopsony (brewer with only one buyer) and monopoly (retailer with only one source for each brand).

7. Magic Wand: What Should Change?

• Katie Marisick: More government investment in hops and barley (better ingredients), and franchise reform (more flexibility for small brewers).
• Nancy Palmer: Uniform, level playing field across states, ending the over-regulation and patchwork “arms race” of local laws. (51:48, 52:10)

8. Craft, Micro, and Nano Breweries—What’s What?

• Definitions (57:23):
  • Craft brewer: Less than 6 million barrels/year, independent.
  • Microbrewer: Fewer than 15,000 barrels/year.
  • Nano brewer: Even smaller, often homebrew scale.

9. What Does America’s Beer History Say About America?

• Post-prohibition America’s decentralized, heavily-regulated beer market reflects the country’s values on local control, risk aversion with alcohol, and suspicion of monopolies.
• Nancy Palmer:

  “We created a system that would kind of encourage local control, and a craft brewer is exactly that... wonderful corporate citizens inside of small communities.” (61:08)

• Regulation is both a major business barrier and, paradoxically, has enabled the local craft boom.

Notable Quotes & Memorable Moments

• On the soul of craft:

  "The first hint I have that I'm drinking a craft beer is it tastes of something.”
  —Felix Salmon (05:34)

• On distribution pain:

  "You got your brand and you're selling it to a wholesaler and they're doing a lousy job, but you can't move your brand.”
  —Dan Kenary (24:38)

• On regulation:

  “In Alabama, if you buy a beer to go, then you have to register your name and address for every purchase.”
  —Nancy Palmer (41:04)

• On America’s beer laws:

  “You get tons of rules about this... these big bad giant brewers from God knows where are going to be kind of negatively influencing our hometown community.”
  —Nancy Palmer (54:00)

• On industry optimism and entrepreneurship:

  "We wouldn't exist without the pioneers … But one of our keys to success has been our distribution. We've self distributed all our beers from the beginning because the access to market was such a fragile and scary thing for us.”
  —Rob Burns (23:01)

Timestamps for Important Segments

• Defining Craft Beer: 03:40 – 06:46
• Business/economic history of craft beer: 12:00 – 17:09
• Corporate buyouts & distribution bottlenecks: 20:23 – 24:30
• Supply chain, glass/can shortages: 25:35 – 26:36, 30:27 – 32:01
• Taste vs marketing/brand: 27:21 – 28:06, 29:13 – 30:02
• Beer trends (hoppy IPAs, sours, etc): 35:15 – 37:16
• US alcohol law oddities and regulatory hurdles: 38:20 – 43:18, 44:28 – 47:31
• Three-tier system and monopolistic distribution: 45:00 – 48:49
• Definitions: craft vs micro vs nano: 57:23 – 58:42
• Audience Q&A: Beer in America and regulation: 59:14 – 62:09

Concluding Thoughts

This episode offers a detailed portrait of the modern American craft beer landscape—equal parts celebration, cautionary tale, and call to fix outdated and protectionist booze laws. The deep affection for flavor, entrepreneurship, and local business weaves through every topic, even as guests lament the corporate incursions and regulatory spaghetti that complicate independent brewing. If you care about business innovation, regulation, taste, or just enjoy a good pint, this episode is a memorable, entertaining, and surprisingly educational roundtable.

Bottom Line:
Craft beer is booming—despite massive regulatory hurdles, distribution squeeze, and corporate “giants”—all driven by entrepreneurs, passionate fans, local love, and the perennial American thirst for something a little different, a lot tastier, and not afraid to challenge the old guard.