Texas Tech University

Craft Beer Industry Faces Multiple Challenges, Issues in Marketing and Public Relations

George Watson

May 14, 2018

Craft Beer

Texas Tech professors Coy Callison and Trent Seltzer have conducted extensive research into public relations and water issues surrounding this growing movement in the U.S.

Coy Callison has been known to spend a half-hour or more at a local liquor store just going back and forth at the beer cooler, trying to figure out what he wants to drink that day.

It's not that he's worried about price. No, the professor in the Department of Public Relations and associate dean of graduate programs in the College of Media & Communication at Texas Tech University is a fan, more of a connoisseur perhaps, of craft beer. And along with Nicole Lee, an assistant professor of public relations at North Carolina State University, and Trent Seltzer, an associate professor of public relations and assistant dean for graduate studies in the College of Media & Communication, the three are putting a great deal of focus on researching everything they can about the growing craft beer movement in the U.S.

Coy Callison
Coy Callison

They are more than just colleagues. They are friends who enjoy sampling craft beers of all kinds, from India Pale Ale's (IPA) to stouts, and researching both the public relations aspects of the craft beer industry and the issues the industry faces as it evolves as part of the overall growth of the artisanal/locavore (eat local) movement.

With that growth, though, craft breweries face a myriad of issues, from marketing and public relations to producing a product that is not always eco-friendly, which can be a contentious issue with an environmentally conscious fan base. Those are the issues that intrigue Callison, Lee and Seltzer.

“We all like beer, but we're all public relations people, and Nicole is particularly knowledgeable about the craft beer scene,” Seltzer said. “So, in talking among the three of us, that's how the project got started. But as we got into it, we realized what we're researching has an application beyond just the craft beer industry. The industry is like a canary in a coal mine for how Millennials process public relations messaging and how public relations practitioners respond to what they do. It's a good indicator of the locavore/artisan movement to show what is increasingly popular.”

The trio recently published a paper that examined the public relations challenges and tactics craft brewers deal with in trying to promote their product that not only competes against hundreds of other craft beers but also against the big brewers like Budweiser, Miller and Coors. They found a surprising amount of cooperation among the craft brewers, almost like a rebellion against the big brewers, all wanting to see their fellow craft brewers succeed.

Trent Seltzer
Trent Seltzer

At the same time, craft brewers must balance the public relations initiative with their audience in that it takes large amounts of water to make craft beer, something that could be a sticking point with an audience that is concerned about the environment.

“You get to this point where you picture a typical craft-beer consumer as someone who is plugged in and is more eco-friendly, then you bounce off of them the idea that the thing craft brewers are doing is kind of counter to that whole scene,” Callison said. “A craft brewery moving into your town is going to get people fired up, and people want a local business that is plugged in and that has concerns for local issues. But the other side of that coin is that it is going to tax water resources in a way they have not been taxed previously. So how do you square that in your head?”

What is a craft beer?

Defining what exactly constitutes a craft beer can be difficult. After all, Callison said, the Boston Beer Company, brewer of Samuel Adams, considers itself a craft beer even though it's one of the largest brewers in the U.S outside of the majors who brew big national beers such as Budweiser, Miller and Coors.

But, according to the Brewers Association, a nonprofit trade group that promotes small, independent brewers in the U.S., an American craft brewery:

  • Produces 6 million barrels or less annually, accounting for approximately 3 percent of U.S. annual sales;
  • Has a majority of its total alcoholic beverage volume in beers whose flavor comes from traditional or innovative brewing ingredients and their fermentation; and
  • Fewer than 25 percent of the brewery is owned or controlled by an alcoholic beverage industry member that is not a craft brewer itself.

Last year, the Brewers Association developed a seal for independent craft brewers designed to distinguish a craft brewery product to drinkers.

Craft beers come in a variety of styles, from ales, lagers and stouts to IPAs, pilsners and wheat beers. According to Callison, what beer a brewery produces is related to its location in the country due to the mineral content of the water in that region.

For example, IPAs sprung up mostly on the West Coast because the water in that part of the country is conducive to producing that type of beer, but the water in West Texas is not, so making an IPA in Lubbock can be difficult or impossible. Lubbock craft brewers produce more ales and wheats because that's what the water profile in West Texas supports.

Even a popular beer like Guinness, which is made in Ireland, can't be produced anywhere else in the country to a high-quality level because of the location of the water where it is made.

But that has not stopped the craft beer movement from growing. According to craftbeer.com, as of early 2018, there are more than 6,000 breweries responsible for all the beer brands in the U.S. with more than 150 styles and 20,000 brands to choose from. Craft breweries accounted for $26 billion in retail dollar growth value and employed more than 135,000 people.

But there is a market factor involved, not only in production costs but also with what consumers are willing to pay for a six-pack of craft beer. Some areas may have good water for producing beer but not the economy to support buying it, so the corporate breweries, which can produce beer much cheaper, are more popular.

“Truth is, you look at a map where craft breweries have sprung up and it's like one of those virus outbreak maps,” Callison said. “They're all over. Texas has had a huge boom. Ten years ago we had five craft breweries, and now we have just over 200.”

Public relations challenges

That growth, however, has not come without its share of challenges. A growing market also means growing competition among craft brewers to garner and hold the drinking attention of the consuming public.

But unlike the major breweries, where people show loyalty to one particular type of mass-produced beer, the craft beer crowd is more interested in trying several different types of craft beer or sampling the latest thing to hit the market than they are aligning themselves to a particular brewery or beer.

So breweries have to balance that with trying to get the drinking public to not only try their beers but also not drive them away by denigrating a competitor.

“It is a sense of community, not just in your local community but a sense of the community of beer drinkers,” Callison said. “These guys are somewhat like an artist community where they support each other. They'll tell you they got into it to brew beer and learn the craft and not necessarily to sell beer, and learn from each other. It did surprise me because at the end of the day I'm a capitalist guy who wonders how you're getting ahead of the other guys, and you never know how much of this is true or is just what they told us.”

What the initial study by Callison, Seltzer and Lee found was there was a sense of cooperation among craft brewers not just in encouraging one another but actually joining forces to promote the craft beer industry as a whole. Callison and Seltzer said it is not uncommon for craft brewers to share expenses on things like ingredients or help out a fellow craft brewer in a time of need.

Seltzer likened it to the small restaurant his mother owned in Florida that sat across the street from a larger restaurant “that cranks out fried shrimp and cheap beer just to get you in the door.” When a fellow small restauranteur was having problems with their freezer and could possibly lose thousands of dollars in food, Seltzer's mother cleared room in her freezer for the other small restaurant to store their food in there, something that likely wouldn't have happened with the big restaurant across the street.

“I think among that type of business, the little guys who all care about the quality of the product and the craft, whether it's brewing beer or fileting fish, that care and focus on the state of the industry trumps someone else's need to turn a buck,” Seltzer said. “They've got bigger enemies anyway. They may not like each other one-on-one all the time, but they all dislike Budweiser and Anheuser-Busch.”

There's also the cost and experience factors craft brewers have to deal with.

Most people who open a craft brewery are not steeped in the art of marketing and public relations. Plus, craft brewers are so busy producing the product or maintaining the brewery that they don't have time to commit to marketing and public relations.

So, they rely on the consumer to spread the word about their beer, either through social media or word of mouth. Social media seems to be crucial because, first of all, it is free, and secondly, the craft brewer doesn't have to do the work. Getting the consumer to brag about a certain beer they just tried is immensely effective in a craft-beer audience that is constantly searching for the next good beer.

“Which is why, not the media relations part of public relations, but the one-on-one, interpersonal-oriented relationship component of this is very important,” Seltzer said. “It feeds into the local, artisanal movement and the culture, but they rely on that to spur other people to have goodwill toward the beer and the brewery. The industry advocates for it.”

Seltzer said the Texas Craft Brewers Guild helps promote craft breweries in Texas and has been a presence at events like South by Southwest in Austin, but the most important component is still word of mouth.

Getting too big?

While craft breweries work to not only produce quality beers but also grow their product, there is a fine line between being successful and being too successful. Being successful enough to buy television advertising time or pay for national ads is a sign that a craft brewery is becoming too big and moving more into the realm of a corporate brewery.

Plus, the corporate breweries like Budweiser have realized that the craft beer movement is not going away, and instead of fighting them or attacking craft beers in recent Super Bowl advertisements, they've gotten on board and joined craft beer by buying some of the more successful ones.

In doing so, craft breweries die in the eyes of the craft beer audience, which despises corporate breweries more than anything. Callison said a perfect example of this is Karbach Brewery in Houston. Karbach did everything right, Callison said, from the beginning, even bringing in a brewer from Germany, and the company grew to become one of the top brewers in the country.

After years of seeing craft breweries take marketshare, however, Anheuser-Busch InBev gave in and bought Karbach. This upset a sizable portion of their loyal drinkers because they felt Karbach went mainstream, and some of those left, even though the new parent company interfered little with the production or operation of Karbach. Some fans didn't care, feeling Karbach had sold out. Craft brewers being bought up by the big brewers is not uncommon, but it takes some effort to keep the customers that were fans of the original small brewery to not move on, Callison said.

“So there's this idea that you can be successful enough, but if you end up being too good, it will kill you,” Callison said. “You see it happen all the time with local bands, they're great until they sign a record deal. They're super popular until they are too popular outside the community, and now I hate them.”

Seltzer said there is a certain faction of craft beer drinkers that don't care about those things, and even some breweries are OK with losing that segment of consumers as long as the average beer drinker still hangs around, and the brewery is successful enough where the owner can afford to put his kids through college.

Another factor of public relations perception is distribution. While a craft brewer may contract with bigger breweries to help distribute their product and get it into more stores, the craft brewers have to be careful the paying public doesn't find out. Thus, you won't see many craft brewers with logos on the sides of beer trucks outside the 7-11, and even then it's just a few cases inside the truck hidden well behind the other, brand names.

“They have to stay beneath that,” Callison said.

Water issues

While certain areas are able to produce certain craft beers due to the mineral content of the local water, the amount of water that has to be used to create craft beers is another issue altogether.

Surprisingly, it's also the one issue that craft beer drinkers seem to be OK with in most cases. Ultimately, Callison and Seltzer said, taste trumps waste.

Callison said that for every gallon of craft beer made, up to seven gallons of water is used. For a craft beer fan base that is considered to be more of an environmental watchdog, this can be a significant issue to have to reconcile.

“It's a necessary evil, maybe, that people get,” Callison said. “I love this company and if they were producing widgets, I'd be over there protesting because they are cutting down trees. But because I love beer, do I let them off the hook for being heavy water consumers? If you are a marketer for one of these craft breweries, is it in your best interest to come out and say we're doing all these things to conserve water, or do people really care?”

In addition to the amount of water used, craft breweries also have to try to manipulate the water to produce certain kinds of beers unless they want to stick to just what their local water table will allow. Callison said some local craft breweries in Houston have a system that strips the water in that area of all its minerals to produce perfect, reverse osmosis water, and then the minerals are added back into that water at certain levels depending on the type of beer that will be made from it. That process, however, is expensive.

Then there is the expense for using the water. Callison said the city water that comes out of the tap in Lubbock is some of the most expensive in the state of Texas, mainly because there is so little of it compared to other areas of the state, even though there is no water usage mandate other than with lawns. That high water cost and the minerals in it both limit what types of beers can be produced in the Hub City.

“It's an economy of scale,” Callison said. “But the water profile is still a bigger issue than most people realize. How you deal with that is that you're either constrained to selling one type of beer or you've got to put a lot of money into building your water profile.”

Future research

Truth is, Callison and Seltzer feel like they're just getting started examining all the aspects of the craft beer industry.

Callison said he's interested in doing research on the marketing and labeling side of the industry, looking into whether the movement toward labeling a product as organic has the same negative effects as it does with others. The wine industry, he said, has shown that labeling something as organic has a negative effect because organic wine is not considered to have the same quality taste by its consumers as non-organic wine.

Along those lines, he also wants to look into label design of craft beer, which can get quite wild sometimes. How much is too much, and how far can you go?

And while they will continue researching the water issues related with craft beers, they also are interested in examining point of purchase and what goes into how people select what craft beer to buy. Maybe, just maybe, that will help Callison get in and out of the liquor store a little quicker.

“And that all relates back to the public relations and marketing mix of this,” Callison said.