Everyone is talking about the craft movement in the US, but few are talking about the changing marketing and legislative dynamics, which may significantly impact its future. Euromonitor International explores the potential of pairing the craft movement with an equally relevant movement, crowdfunding. How will potential legislation enable crowdfunding to help craft breweries increase their capital without going public?
Craft - The Never-Ending Debate
While the Brewers Association defines craft breweries as those producing less than six million barrels and with less than 25% ownership or control by another alcoholic beverage industry member which is not itself a craft brewer - sorry Blue Moon, Shock Top and Leinenkugel lovers, this is the institutional definition - it is more of a definitional assuagement for brewers which have become fairly large and want to still be considered craft rather than accounting for how consumers define craft. According to the Brewers Association, the craft movement grew by 15% in US dollar value terms and 13% in volume terms in the first six months of 2013.
How Will Craft Compete Against the Big Boys?
The Jumpstart Our Business Startups (JOBS) Act has already created quite a stir within the investment world with Title II, which allows early stage private companies to publicly advertise and solicit investment using tools like Facebook and crowdfunding sites. However, Title III is where potential tidal waves will be summoned. While Title II opens a new portal to solicit investment other than listing one’s company on NASDAQ, Title III expands the pool of potential investors. This means that the average Joe, a non-accredited investor, can choose to participate and invest in private companies in small increments. What this means for the craft movement is that the major obstacle of raising capital to get established becomes less of a hurdle. With the approval of Title III, which is currently still in the process of finalisation prior to a vote, a craft brewery can turn to the internet to solicit capital from anyone, and anyone can invest in his/her favourite brewery without having to be friendly with the owner.
One of the fears for the craft movement is the looming acquisition threat posed by the big boys, which are seeking to ensure the growth of their portfolios. Large brewers are already making moves in this direction, even going so far as creating separate divisions operating under a different name so as to give consumers the impression that the brew they are buying is still craft. However, armed with Title III, craft brewers can maintain their independence by sourcing capital from their loyal fans and shielding themselves from the all-too-present hipster fear of being acquired by a big brand, or “selling out”.
For the consumer, the craft movement is about anti-establishment, supporting local ingenuity and risk-taking, and hearing the stories of that one special batch that they found before their friends. Millennial generation consumers, inundated with so many choices, are constantly seeking to differentiate themselves, and the pairing of craft with crowdfunding opportunities means that this generation will be able to actually have a hand in keeping the craft movement strong and out of the reaches of the big players. Instead of just buying a beer to support their favourite brewer, they will now be able to buy a piece of the company, this being a classic example of ‘united we stand, divided we fall’.