The Longneck Tail
A revolution in American beer
While you were sleeping one off, a national crisis in drinking was averted. In 1980, good American beer was on the brink of extinction. Our most popular brands—Bud, Miller, Coors—were the laughingstocks of the world. Our brewing heritage had been all but stamped out, with hundreds of formerly thriving regional breweries gone. There were a few pockets of resistance, such as Anchor Brewing in San Francisco, but the days of decent American beer seemed to be over.
Then a backlash began. Over the past 25 years the microbrewery revolution has created a beer culture that is the envy of the world. More styles of suds are now brewed in America than in any other place. Along with the light-tasting lagers that still dominate the market, the new offerings include porters, stouts, barley wines, bocks, hefeweizens, pale ales, bitters, and Belgian-style farmhouse ales. American beers consistently win the highest proportion of awards in international competitions. Local and regional beer has re-emerged: There are more than 1,400 breweries in the United States, up from only a few dozen at the start of the 1980s. By any measure, this is an amazing achievement.
Even more amazing: The vast majority of Americans are scarcely aware of this. All those wonderful craft beers account for a mere 3.5 percent of total U.S.beer sales. They are able to thrive nonetheless, thanks in part to a phenomenon Wired editor Chris Anderson calls "the Long Tail" in a book by the same name. In a nutshell, small niche products are having a big impact on overall sales, especially online.
Beer has been with us for millennia. Bland brands aimed at the lowest common denominator are a more recent development. In 1870, when commercial refrigeration began to allow regional brewers to expand their reach, there were more than 4,000 breweries in America. As the technology spread, the increased competition caused the number of beer makers to decline, so that by 1910 there were only about 1,500.
That much could be attributed to good beer driving out bad. But then the government entered the picture, crushing quality brew like a frat boy crushing Budweiser cans on his forehead. Prohibition decimated the industry, and in World War II the military requested watered-down drinks so soldiers wouldn't be too inebriated to fight. The upside: They won the war. The downside: Many came home with a taste for milder beers.
With the advent of the Interstate Highway System, and of TV as a nationwide advertising medium, national breweries became possible for the first time. To appeal to a much wider consumer base, beer—like other products—was retooled to appeal to the lowest common denominator. Brewing history is littered with the losers of this period. In 1950, 400 breweries were left. By 1960 that number dropped to 230, only 140 of which were run independently. In 1980, fewer than 50 remained.
There's a business maxim that says 80 percent of sales comes from 20 percent of available products. That is certainly true for beer, where sales are overwhelmingly dominated by three domestic brewers. But in recent years, the Internet has changed the way we do business, reversing the trend toward bigger and fewer brands.
That's where the Long Tail comes in. Unlike conventional brick-and-mortar retailers, online companies such as iTunes and Amazon can offer a limitless number of products. They thus get revenue from the non-mainstream 80 percent of products that, although their sales are small individually, might one day add up to equal, or in some cases more than, the revenue from the most popular 20 percent. Anderson believes that for years "we've been suffering the tyranny of lowest-common-denominator fare. Why? Economics. Many of our assumptions about popular taste are actually artifacts of poor supply-and-demand matching—a market response to inefficient distribution." Most people want something beyond the hits, even if only once in a while.
The relationship between mainstream and craft beer roughly follows the same model. Big brewery beers are available literally everywhere beer is sold. As in a record shop, everybody stocks the "hits" while few carry "deep catalog" drinks. Yet hundreds of local markets now exist for quality niche beers, often sold only in their local communities.
There is no iBeer with unlimited shelf space to carry all of these smaller brands. But that may be changing, as sites such as bevmo.com and liquidsolutions.biz begin to find success with online beer sales. This distribution model has been hindered by laws restricting interstate shipping, but that too is beginning to change. Recent bills have brought the number of states now accepting shipments of alcoholic beverages to 25, plus the District of Columbia.
We're also seeing the sudsy equivalents to superstores like Borders and to high-quality independent book and record shops. Most good beer communities now have at least one dedicated beer store: Shangy's in eastern Pennsylvania, City Beer Store in San Francisco, Bottleworks in Seattle, Belmont Station in Portland, Oregon. Several large liquor chains—Beverages & More in California, Sam's in the Chicago area, ABC throughout Florida—have found that carrying a wider selection brings them more customers looking for the non-mainstream products that supermarkets and convenience stores don't carry. And alternative grocers such as Whole Foods and Wild Oats use craft beers to differentiate themselves from the competition. Wherever more selection is offered, customers find them. Those retailers willing to embrace long-tail products find that they can and do make a profit on almost everything they put on their shelves.
This trend is beginning to have an effect on the big breweries. Their sales, though still prodigious, have recently declined somewhat, while craft beer continues to show healthy growth. So the big players are test-marketing dozens of new products —energy drinks, "malternatives" such as BE and Tilt, organic beers such as Wild Hop Lager, craft-like beers (often called "stealth micros"), even spirits—in order to protect their market share. Meanwhile, in its third decade, the craft beer industry is showing signs of maturing into a viable, stable segment of the business. It has returned well-made, unique artisan products to local communities all over the country, and they are finding an audience. In Anderson's words, "As they wander further from the beaten path, [people] discover their taste is not as mainstream as they thought (or as they had been led to believe by marketing, a lack of alternatives, and a hit-driven culture)."
In the age of craft brewing, we can think globally and drink locally. Call it the longneck tail.