Crafty business: 'Independent' seal causes controversy

By Kathleen Spero
In June 2017, the Brewers Association -- a non-profit trade association representing the craft beer industry -- launched a new "Independent Craft" seal, available for free use by any brewery meeting certain criteria. In addition to having a valid federal Tax and Trade Bureau (TTB) notice and a signed licensing agreement with the Brewers Association, breweries wishing to use the label designator must also meet the trade association's definition of a "small, independent, and traditional" craft brewery.

Specifically, breweries must produce 6 million barrels (or less) of beer per year; utilize brewing methods that derive flavor from brewing ingredients and fermentation (rather than a flavored malt beverage); and have no more than 25% of its ownership or control by an alcohol industry member that is not itself a craft brewer.

The seal is one of many steps the Brewers Association has taken to promote transparency and consumer understanding about brewery ownership. As stated by the group, "Many beer drinkers want to know who makes their beer. The independent craft brewer seal is a handy tool for enthusiasts to easily differentiate beer from craft brewers and beer produced by other, non-craft companies."

The label, which can be licensed for use on packaging, menus, tap handles, and event promotional materials, allows for easy identification that the beer comes from small and independent manufacturers, rather than from "Big Beer." In his statement to the Brewers Association board of directors, board chair Rob Tod (founder of Allagash Brewing Company) stated, "When beer lovers buy independent craft beer, they are supporting American entrepreneurs and the risk takers who have long strived not just to be innovative and make truly great beer, but to also build culture and community in the process."

The move was largely applauded within the craft beer community, and within days of the label's release more than 800 breweries submitted requests for licensing agreements. Stone Brewing Company's co-founder and executive chairman Greg Koch is quoted as stating, "Our fans tell us all the time how important it is to them to know that Stone is steadfastly independent."

Anheuser-Busch InBev ("AB InBev") -- home to Budweiser brands -- took the unusual step of responding to the new Brewer's Association seal. Six of its breweries in "The High End" division created a video to respond to allegations that small and independent beer is somehow "better" beer.

Representatives for Elysian, Wicked Weed, 10 Barrel, Four Peaks, The High End, and Devil's Backbone argue that they continue to make the same beer as they made before their purchase by AB InBev, and should not suffer industry pushback because they are no longer "independent" or "indie." In addition, the brewer's highlight their continued commitment to creating local jobs, maintaining high-quality alcohol manufacturing practices, and promoting the beer industry. The battle, they argue, is not with the breweries that sell to larger manufacturers like AB InBev, but with other alcohol manufacturers like liquor and wine producers.

Notably, the video and responses from "The High End" do not discuss the business practices of large beer manufacturers that many cite as the source of tension between craft beer and "Big Beer." The monopolization of distribution networks and fast-paced expansion of its craft division have pushed many small producers out of the market, not because of the lack of quality beer but because of lack of access to the consumer marketplace.

Whether the label will translate into increased beer sales remains to be seen. Nielsen's Craft Beer Category Design Audit for 2017 found that 66% of American craft beer buyers rate the package or label as "very" or "extremely" important in their purchase decision, showing that label design can influence purchasing and decision-making. Beer consumers may in the end care more about what it is in their glass, rather than how it got it there.

Kathleen Spero is of counsel for the Craft Beer Attorney, APC, a boutique law firm based in San Diego.