The emergence of craft beer is, foremost, a reaction against the excessive dominance of mass-market lager. If one believes a state of harmony is achieved with the mean, then this is but a natural reaction to restore balance with a greater degree of diversity.
While local conditions and histories differ, this only affects the characteristics and pace of change, not the fact that the appeal of craft beer is growing around the world. We can see from examples in Canada and China, the similarities in how the development of craft beer not only transforms the business of brewing but also the culture of drinking.
Race to the Bottom
In North America, Prohibition, the Great Depression, and rationing during World War II served to concentrate the beer industry into the hands of a few corporations. In Canada, this reached an extreme by the 1970s when 96% of the country’s beer market was dominated by The Big Three – Labatt, Molson, and Carling O’Keefe.
Although Canadian brewing stemmed from the British tradition, by this time there were no more Porters. There were no more Bitters. You couldn’t even buy a Pale Ale. There was just “beer” – a light, bland version of Central European lager made with barley malt diluted by up to 50% rice or corn and a minimal amount hops.
China’s modern brewing industry was established in Harbin and Qingdao in the early 1900s by ethnic Germans and Czechs whose clean, golden lagers were becoming a global phenomenon. When the Japanese took over German possessions in Shandong during World War I, then large parts of China in World War II, this had little effect on the country’s beer culture since the Japanese had learned to brew beer from the Germans.
The establishment of the People’s Republic of China and the war in Korea caused Western countries to impose a trade embargo, forcing a reliance on locally-produced malt and hops. Little changed in the country’s fragmented brewing industry until China’s economic opening under Chairman Deng Xiaoping. Then came a rapid growth in people’s incomes and a growing popularity for drinking beer.
In the 1990s, China’s double-digit economic growth and low level of beer consumption attracted the attention of multinational breweries. Seeing a large growth opportunity, they invested substantial amounts of capital and technology through acquisitions and partnerships. Intense competition, fragmented markets, and slim profit margins led to significant consolidation. In the mid-1990s, there were more than 800 competitors. Today, five brewery groups control 80% of the market. As in Canada before the rise of microbreweries, beer had become a commodity.
Craft brewing in Canada and China began with expatriates, immigrants, or locals who had experienced abroad, beer styles other than light adjunct lager. They typically lived in the larger population centres on the coasts which are more exposed to outside influences – Vancouver, Toronto, and Montreal, Hong Kong, Beijing and Shanghai. Frustrated with the bland uniformity of the beer found at home, they resolved to brew something with more flavour and variety.
Two factors that helped spawn the craft beer revolution in North America were the legalization of homebrewing and brewpubs. This happened simultaneously in the United States in 1978. That same year, Charlie Papazian founded the Association of Brewers and the American Homebrewers Association. Not only were these organizations influential in the United States, Canadians were also inspired by this fledgling microbrewery movement. In 1984, Papazian published The Complete Joy of Home Brewing, which has since set many budding homebrewers on the path to becoming full-fledged craft brewers.
Initially, these non-conformists were guided by either the Real Ales of Britain or the Reinheitsgebot beer of Germany. Canada’s first post-Prohibition “cottage brewery” was started in West Vancouver in 1981 by two Englishmen using second-hand dairy equipment. Their first beer was an English bitter inspired by Fuller’s London Pride. In 1984, they went on to set up Spinnakers in Victoria, Canada’s first brewpub. Granville Island Brewing also opened in Vancouver that year, brewing beer conforming to the Bavarian Purity Law.
In China, one of the first “house breweries” was the Paulaner Bräuhaus that opened in the Kempinski Lufthansa Center Beijing in 1992. This was the first time since 1949 that Beijingers could choose to drink a Helles, Dunkles, or Hefeweizen from beer brewed in-house. It was a great success! Three years later, China’s first American-style brewpub also opened in Beijing. San Francisco Brewing Company was the brainchild of Alex Wong, a transplant from San Francisco who thought that if the Hard Rock Cafe and Kentucky Fried Chicken can make it in Beijing, why can’t he?
The mid-1990s saw a flurry of brewpub openings in China since the state did not yet have the means to collect excise taxes on brewpub beer. The most successful ones, like The Bund Brewery in Shanghai, followed the Paulaner model which did not challenge Chinese palates with bold, hoppy flavours. Those that tried to push the bar or failed to meet basic quality standards did not last long. A second wave of brewpub openings began with Henry’s Brewery & Grill in Shanghai in 2006, followed by Boxing Cat, Oktoberfest (Master Gao), and Reberg in 2008, then Great Leap, Chengdu Harvest, and Shanghai Brewery in 2010. That same year, Gao Yan published Drink Your Own Brewed Beer (喝自己酿的啤酒) and China’s own homebrewing movement was inspired.
A Matter of Taste
When people have been conditioned to food or drink of standard characteristics, most are hesitant to try those that are significantly different. Canadians used to a meat and potatoes diet stemming from an English cultural tradition will often not like authentic Chinese food the first time they taste it. Similarly, many Chinese do not like Indian cuisine. It takes time and an open mind to acquire an appreciation for a broad variety of flavours. This is also true of beer.
The West Coast of North America is known for its love of hops, but the popularity of bold-flavoured India Pale Ales didn’t emerge overnight. The origin of the style has been traced back to Anchor Brewing’s Liberty Ale, released on April 18, 1975, in San Francisco. It was the first beer to lighten the malt, accentuate the hops, and dry-hop with a West Coast varietal. When Sierra Nevada’s Pale Ale came out five years later, it then set the standard for ever hoppier ales. What followed can be likened to a hops arms race.
In British Columbia, the first West Coast IPAs were brewed by Bill Herdman at Tall Ship Ales in 1993 and by his friend, Gary Lohin, at Sailor Hagar’s Brewpub in 1994. Yet, it wasn’t until the third wave of craft beer exploded in 2010, that the popularity of IPA began its rapid rise to prominence as the province’s leading beer style. Before then, few packaging breweries would think of selling an IPA, never mind mentioning the term, “bitter”, even for labelling that style of beer. In 1999, when Tree Brewing launched their Hop Head IPA, it was still considered risky. Granville Island Brewing deemed it safe enough to release a year-round IPA only in 2009, 25 years after they began brewing!
The past seven years have seen an acceleration in Canadians’ willingness to explore different beer styles, driven by the younger generation’s quest for variety and novelty. Pushing the IBU barrier led to a phase of creating highly-hopped and “Imperial” versions of various beer styles, followed by oaked or barrel-aged beer. The current rage is sour beers. Some, however, are coming full circle and going back to enjoying the simplicity of a clean, crisp Pilsner.
It’s at this point that the beer drinker’s palate becomes whole. One can draw from a wide range of beer styles to suit a given moment, be it pairing with a particular food or satisfying a certain thirst for a given season. Do you really want an ice cold lager in winter? This represents a fundamental change in beer culture from the days of the lager oligopoly. Now more and more people drink beer for flavour, not volume. Many who are of Generation X and older still think beer should be cold, clear, and carbonated. Millennials experience no such limitations. Creating a fancy brand for a lager and calling it “premium” is not good enough.
One would think that with Chinese being accustomed to bitter and sour flavours in their food that they would readily take to ESBs, IPAs, and Berliner Weisse. This is often not the case. Lighter, sweeter, and fruity beer styles seem to be the most popular points of departure from mass-produced lager. As with the Canadian experience, it takes time for people to become comfortable with new, bold flavours when they are used to the opposite. Likely, we’ll see a similar cycle of beer palate development in China, but at an accelerated pace, as young Chinese beer drinkers are more willing to buy something different to show their friends that they are more sophisticated.
Craft beer appreciation, however, requires knowledge of beer styles, ingredients, proper service, evaluation, and food pairing. Breweries must find ways to pass along this knowledge to the public in order to increase the number of customers. They do this through their staff, via media, and at beer events. A single prominent news event can have a significant impact on generating Chinese public interest. For example, when Chairman Xi visited a pub in England with British Prime Minister David Cameron where he drank a pint of Greene King IPA, the Chinese interest in IPA exploded overnight.
Hand in hand with education is product availability. You can’t understand all there is to know about beer if you aren’t able to experience its full variety. If bars, pubs, stores, and restaurants don’t want to carry craft beer, development of craft beer culture is held back. This has been a challenge in North America where the dominance of the multinational corporations over the beer market has seen them attempt to keep craft beer from store shelves and pub taps.
The Beer Store in Ontario, which is responsible for most of the province’s beer sales, is dominated by foreign multinational brewers. Until 2015, more than 90% of the brands they sold were owned by Anheuser-Busch InBev, Molson-Coors, and Sapporo. This was because they charged higher fees to breweries that were not part of The Beer Store’s ownership structure. For small craft brewers, the cost was prohibitive. This forced them to rely on sales through draught accounts and their own brewery retail outlet, or via very limited and restricted distribution in government liquor stores.
The market share of craft beer in British Columbia, by contrast, is much higher because of its mixed government-private retail model where hundreds of independent liquor stores are free to stock any brand of their choosing. Government liquor stores, on the other hand, set a relatively high sales threshold to maintain a store listing. Therefore, their craft beer selection is much less than what specialty liquor stores may carry.
China’s craft breweries are also limited in building public awareness of beer. One of the main barriers is an arbitrary government restriction on distribution licensing. In order for a brewery to even qualify for the necessary “Quality-Safety” certification, it must produce a minimum of 12,000 bottles of beer per hour. This is the equivalent of nearly 40 hectolitres, which is what very few craft breweries even in Canada can produce in a day. Not being able to sell packaged beer to stores even in your own city means a lot less people are exposed to your brand.
British Columbia’s well-funded wine industry trade association has been very successful in lobbying provincial governments over the years to promote BC wines in government liquor stores, allow specialty BC VQA wine stores to operate, support wine tourism marketing, and even help persuade the federal government to change laws restricting the inter-provincial wine trade. Until very recently, the BC government had not extended this preferential treatment to local producers of other alcoholic beverages.
Before the provincial election in 2013, when I was president of the Vancouver branch of the Campaign for Real Ale Society of British Columbia, I and two of my colleagues met with representatives from the New Democratic Party, the official government opposition party, to solicit their support for the province’s craft beer industry should they form the next government. We knew that if craft beer could receive the same degree of government support as had the wine industry, it would similarly flourish. The governing BC Liberal Party, on the other hand, had already made it clear that they did not place beer in the same category as wine.
During the election campaign, the NDP announced their intention to review British Columbia’s archaic liquor laws. Not to be outdone on a popular public issue, the BC Liberal Party, too, said they would undertake a liquor law review. When they won the election, the Liberals promptly announced the appointment of John Yap as Parliamentary Secretary for Liquor Policy Reform to oversee the process.
Over the course of a number of weeks, Yap met with various stakeholders while citizens were encouraged to submit their comments. Fortunately, the BC Craft Brewers Guild had been revived that year, so was able to present the industry’s views for consideration. I was part of a CAMRA BC delegation that met with Mr. Yap as the only consumer organization representing the interests of the province’s craft beer drinkers. As a result of the review, the government committed to implementing Yap’s 73 recommendations.
In order for industry to successfully lobby government to overcome barriers to growth, it must first have a strong enough sense of its collective self-interest. This leads to the formation of a trade association, like the BC Craft Brewers Guild, to represent these interests. Since 2013, steady progress has been made in BC to raise the level of government support for craft beer to a similar level as wine. One of the most beneficial changes that has helped drive the astonishing growth of craft beer in BC over the last five years was allowing breweries to have their own tasting lounges. As a result, new communities have formed around these breweries.
China’s craft beer industry is currently at a transitional stage where collective action is needed to persuade government of the widespread benefits that come once regulations are modified to help advance, or even encourage, craft beer. Louis Liu (刘俊杰), CEO of The Beer Link, made that call to action on May 17 at the 2017 Craft Brewers Conference and Exhibition in Shanghai after US Brewers Association CEO, Bob Pease, gave the keynote address. He encouraged all stakeholders to work more closely together towards advancing craft beer culture in China. Subsequently, on June 8, the Craft Brewers Association of China officially declared its formation with 39 founding members. Much work remains ahead, but the experiences of those abroad offer a useful reference point to accelerate change in China.
This article was first published in Chinese in the Autumn 2017 edition of The Beer Link Magazine.