Are Austin's two new chain breweries a threat to local craft beer?
By Eric Puga, Fri., May 13, 2016
By now, local beer fans have surely heard that two out-of-towners are setting up full brewing operations in town: Colorado's Oskar Blues and Michigan's Atwater. Both have intentions of packaging their beer regionally as a distribution cost saver and quality control measure, but also as a means of capitalizing on the successful taproom momentum achieved by the city's indigenous beermakers.
Those in the know may also be aware that those plans haven't been greeted with universal acclaim. As the city generally nettles to preserve its awkwardly insular "Keep It Weird, Don't Move Here" culture, the phrase "buy local" among Austin craftsmen and -women has traditionally been a call to preserve small, independently owned, hometown breweries. Atwater and Oskar Blues' plans raise questions about whether the move is just an evolution of the small beer movement, or an encroachment on the backbreaking achievement of a local market on an incredible hot streak.
"I think anyone opening a new brewery these days needs to ask themselves, 'What am I contributing to this market? Am I adding something new and unique or supplying an underserved area? Or am I just cannibalizing another brewery's tap handles and shelf space?'" asks Jeff Stuffings, founder/owner of Jester King Brewery. "I'd encourage any brewery opening today to lean toward the former. I support a competitive beer market and don't begrudge Oskar Blues' decision to build in Austin. Beer drinkers will ultimately decide for themselves who they wish to support."
While many Austin brewers emphasize the benefit of healthy competition within the industry, it is easy to categorize the influx, albeit narrowly, as that typical declarative, "Holy shit, everyone! Have you noticed how amazing this particular thing is doing in Austin right now?" It's a moment that everyone here realized at some point in their life. Then they rented a U-Haul. Or in this case, a warehouse in North Austin.
But just because something exists in Austin doesn't make it local – especially for an industry as self-preserving as craft beer. "Buy local" is a complicated phrase, and it extends to terroir, sustainability, endurance, and perhaps even friendship in the small beer industry; its meaning is much more than a quaint marketing suggestion. Hell, one intention of buying the damn stuff in the first place is to genuinely support people who you know and like and who are really trying to accomplish a civic duty beyond just selling beer. It's about establishing a culture of high expectations.
"Expansion [to Austin] was more fun than just building a huge beer factory in Longmont, so when it came up as a possibility to build a brewery, everyone got excited," says Chad Melis, marketing director at Oskar Blues. "We love the energy that is in the Austin craft beer movement right now. We love the outdoor culture. We have a handful of restaurants, and the food scene down [in Austin] is great. We are inspired by hanging out here, and we want to help contribute to the great things going on down here."
Founded by Dale Katechis in Lyons, Colo., in 1997, Oskar Blues coaxed craft beer into aluminum cans back in the era when such an idea would fill drinkers with a special kind of horror. The idea eventually took off. Once Oskar Blues outgrew its original facility in Lyons, they expanded to Longmont, Colo., in 2008, then Brevard, N.C., in 2013, satisfying the high demand in their East Coast market. A number of extracurriculars came with increased production, like a chain of restaurants, a coffee roaster, a NASCAR sponsorship, the Burning Can beer & music festival, and a philanthropic outreach program called the Can'd Aid Foundation, to name a few. In a recent briefing by the Brewers Association, Oskar Blues was reported to have exploded into the top 15 of the nation's largest craft breweries by volume sold.
In contrast, most local independent brewers' retail reach barely nudges the outskirts of Travis County. With dwindling tap wall and shelf space, the influx of national brewers is an economic squeeze for smaller and newer breweries. Local breweries are also heavily dependent on the supplemental sales from their tasting rooms in order to maximize economic viability. The arrival of slick, heavily financed, and nationally recognized taprooms raises a valid concern in a cramped market.
"We've been paying very close attention to the beer shelves [around Austin]," one local brewery founder notes. "Oskar Blues seems to have tripled inventory in stores. They have been muscling in for way more shelf space in the last few months and seem to have had a much bigger retail push in the last few months in what I can only see as anticipation of launching a brewery and getting people drinking their beer again."
He continues, "You can take the production of every brewery in the city, combine it all, and [Oskar Blues] will still be able to make more beer in that one facility alone. I have a hard time comparing what they are doing to what we are trying to do. If I walk into an H-E-B and I start seeing Oskar Blues in the local craft brewery section, I think that's pretty fucked up."
Currently in their eighth year of Austin distribution, Oskar Blues has the unusual burden of re-engaging a once-loyal congregation of Austin craft beer drinkers who have since moved on from the brewery's core lineup of approachable, easy-drinking styles. But since their original arrival, Austin taps have moved from Oskar Blues to a similar, albeit much more complex (and, most importantly, homegrown) set of options. To some local beer drinkers, Oskar Blues beers are simply karaoke covers of Austin's favorite smash hits: Slow Ride, Pearl Snap, Hans' Pils, Zoe, and so on. According to Oskar Blues' brewery reps, there are currently no special beers planned for the Austin market or for the Texas market overall.
But Melis expects a second coming of people to re-establish with their brand: "We want to continue to source ingredients from a local radius, adding to the uniqueness of the flavors from the raw ingredients, to be able to take those subtle ingredients to a national scale. We are ... demonstrating parts of our culture [that we] want to contribute [to the local scene]. We are creating events like Burning Can where we can showcase good bands, support the local music scene, while also bringing in the national [music] scene."
Atwater comparatively plans to bring its core beers to the state, but also brew "some unique flavors for Texas only," according to Atwater owner Mark Rieth. "We will have an initial 50,000 barrel capacity with the ability to expand, an indoor taproom, and an outdoor beer garden with live music and food trucks," he says. Atwater also intends to share space with the legendary Austin-based Celis family under their own brewing banner, Flemish Fox. The North Austin facility (coincidentally nearby the new Oskar Blues spot) expects to host a "Pierre Celis museum that will house the original copper kettles from Belgium," Rieth adds. "We also intend to do collaborations with other local breweries as well."
While Oskar Blues plans to incorporate a 5,000-square-foot tasting room, a 2,000-square-foot outdoor patio, and according to Jim Weatherwax, Oskar Blues' brewery plant manager, "a hell of a bumpin' sound system" into their 50,000-square-foot facility, there is a general vagueness on how they will achieve coherence with their brand and Austin's indigenous beer industry.
A local brewer/founder who wished to remain anonymous says, "I've received unsolicited warnings from two Colorado breweries about Oskar Blues coming to town. The concern is that Oskar Blues is owned and controlled by a private equity firm who is growing them as quickly as possible in order to sell them off for a huge return in the next few years. There are only a few groups big enough or interested enough to make that purchase, and they are not friends of craft beer," he speculates.
While Atwater Brewery remains independently owned, Oskar Blues is, indeed, owned by Boston-based holding company Fireman Capital, which acts as an investment fund for breweries, including Perrin, a small Michigan brewery that Oskar Blues bought in March 2015 to expand their portfolio. This past March, the same equity fund purchased one of Florida's largest independent craft breweries, Cigar City, adding to Oskar Blues' roster. While the intentions of Oskar Blues in relation to Cigar City are unclear, some brewery representatives vocalized concerns about the strategic advantage it gives the company over other breweries competing for a bar's wall space. One sales tactic is to entice an establishment owner to carry a less-desired product from the brewery's portfolio by ensuring access to a more coveted beer or set of beers in the future – in this case, Cigar City, which has a passionate national following despite seeing only limited distribution to a few East Coast states.
Still others in the local beer industry feel that the conflict isn't necessarily economic in nature, but cultural and political. "I have absolutely no problems with private equity money owning a brewery," another owner/brewer states. "But the one thing that we [have to] rally behind is our absolute distaste of the stifling regulations that each of us has to deal with on a day-to-day basis when navigating the Texas Alcoholic Beverage Commission code. We all submitted our application paperwork and still talked shit about the TABC and how arcane their operations are. But [this] brewery decides to open their third-largest production operation [and] decides to take the high road on getting involved with our fight. They didn't do it in North Carolina, and they claim that they're not going to get involved in Texas because they're in the middle of permit paperwork and don't want to ruffle any feathers."
He continues, "If you want to wave the flag as a local brewery, then you better be willing to step up to the plate when it comes to fighting for our rights as brewers. Join the Texas Craft Brewers Guild and get involved in legislative efforts. Just offering live music in your gigantic taproom near the Domain isn't going to win [people] over."
Oskar Blues has often repeated that they aren't currently interested in getting into the politics of Texas beer laws. "The conversation continues, but we're just getting our feet under us," says Melis. "We didn't come here with a preprogrammed agenda. As we get comfortable we'll see ways we can help contribute. But we don't have a board strategy at this time. We'll just contribute to it when we can." When pressed on the issue of joining the Texas Craft Brewers Guild, which serves as an advocate for brewers' rights in Texas, Melis responded, "We've shared beers [and] conversation about our role in tossing gas on the already roaring Texas craft beer scene."
Texas is notorious for its stringent beer laws, beginning from the earliest iterations when even operating a brewpub in the state was illegal as recently as 1992. And even after its most recent legislative session, brewpubs and package breweries still have limitations imposed on them that others in the alcohol and spirits industry are unbeholden to. Package breweries and brewpubs are still unable to sell their own territorial distribution rights, and instead, fully relinquish them at no cost to their distributors for the lifetime of the brewery. Those distributors may then distribute the beer to retail outlets or sell those rights to other beer distributors for large profits.
It is also illegal for full-production breweries to sell their in-house beers for off-site consumption, which is of particular importance for a company so heavily invested in a Texas-based taproom – especially Oskar Blues, which pioneered and market its own brand of "Crowler" machines, an aluminum can version of a traditional glass bottle growler. Should the current law be preserved, Oskar Blues' license as a package brewery prohibits them from selling Crowlers to-go.
Currently, only brewpub license holders in Texas are able to sell beer to-go, a regulation that prompted Jester King to switch from a traditional production brewery to brewpub in 2013.
"This [issue] bothers me quite a bit. State beer law is the number one thing holding back craft beer in Texas," says Stuffings. "Oskar Blues would not even be able to operate a taproom in our state were it not for the collective efforts of Texas craft brewers during the 2013 legislative session. Since they're benefiting from our hard work, at least some recognition of this coupled with a willingness to help the struggle would be appreciated, to say the least."
"I sincerely hope Oskar Blues will reconsider their position to not get involved with local politics," adds Austin Beerworks co-founder Michael Graham. "A brewery with their resources could be a great help in getting legislation passed that would allow Texas craft beer producers and consumers to enjoy the same liberties as those in Oskar Blues' home state of Colorado (and second home in North Carolina). I would personally love to go the few blocks from our brewery to their new space and buy a Crowler of Ten Fidy to-go. But, we need their help to change the laws for that to be legal."
"As a reluctant participant in craft beer legislative efforts," says Spencer Tielkemeier, head brewer of Oasis, Texas Brewing Company, "I can certainly relate to the idea of being disinterested in the politics of beer. I think the duty to fight for craft beer laws falls into that category of 'things I never imagined I'd be doing when I set out to make beer.' The fact remains, however, that being active participants within the legislative process is not only effective, but essential. It keeps the process honest, or at least as honest as it can be."
When asked if Atwater plans to be a part of the political action of small brewers in Texas, and Austin in particular, Rieth states, "Absolutely. We want to be a big part of bringing the local craft beer industry forward. We are very active across Michigan communities and plan to do the same in Texas. In fact, it's a big part of our strategy."
One shouldn't get the sense that the Austin beer scene isn't incredibly receptive and open to fair competition. In the last half decade, the Austin area has welcomed over a dozen spare-bedroom brewers into the professional ranks as fair market competition, while beer drinkers have maintained loyalty to formerly independent megabrands in Texas, like Ballast Point (which sold for $1 billion to publicly traded drinks marketer Constellation Brands in 2015), Founders (which sold a 30% share of the brewery to Spain's leading beer brand, Mahou San Miguel, in 2014), and Goose Island (which was bought out by craft beer's biggest rival, Anheuser-Busch InBev, in 2011). Goose Island maintains a feverish following for their limited Bourbon County Brand Stout.
There is certainly something of a community feel to the Austin beer scene, especially for the owners, brewers, and staff. But to some, Oskar Blues' self-identifying drum-circle vibe comes off as snare and cymbals, a graceless and disingenuous effort into the Austin market. The prevailing worry is this: How is Oskar Blues opening up a new brewery and taproom in Austin beneficial to anyone other than Oskar Blues?
"The amount of money they have and will put forward is a little intimidating, and I do feel like some of the little guys who still make great beer may lose out on a lot of great events to showcase their beers because money talks," says Ben Sabin, co-founder of Austin's newborn Friends & Allies Brewing. "As smaller local breweries get bigger, there is generally some more money to spend on marketing and advertising, but it becomes difficult if Oskar Blues chooses to plaster themselves as a local brewery and gets a "Go Texan" approval because their product is actually made in the state."
"I think Oskar Blues will likely be regarded with some suspicion at first, given this city's fierce loyalty to local brands," says Tielkemeier, "but in the end it seems there will always be room for quality beer that's genuinely local. The trick for any brewery, Texas-born or otherwise, is to be a part of the community. It will be a challenge for smaller breweries to compete, but that is just the direction an increasingly crowded beer market goes."
"I'm excited they're coming in, I've had their beers for a long time," says John Stecker, president and co-founder of 4th Tap Brewing Co-op. "It's cool to see something of that scale come into Austin, and ultimately I think it's going to be great for Austin, helping it become a destination beer city."
If you look really, really carefully, you'll find that Oskar Blues does align with the sensibilities of the craft beer scene in Austin: culturally as a progressive-minded, easy-spirited company; politically as an industry leader with massive bureaucratic influence; professionally as a brewery that makes dependable beers; and economically as the contributor of a landmark brewery in a great city. But ultimately it is their obligation to choose the correct course of action in Austin. They can't be everything to everyone, but they can definitely add to the city's global brewing cache by giving back to the community they are benefiting from.
"We are looking to continue to grow without losing that grassroots appeal," Melis states. "The biggest fear of Oskar Blues is becoming a beer factory and losing its original passion."