Castle Danger Brewery in Two Harbors has made a name for itself crafting locally made beers since 2011 with a commitment to quality ingredients locally sourced as possible and sustainable brewing practices. All that could be put in danger with the Anheuser Busch InBev proposed $107 billion takeover of rival SABMiller.
The proposed merger would give the "megabrewer" control of nearly a third of the global beer market and many are afraid the global dominance could be used to squeeze out smaller craft breweries like Castle Danger.
U.S. Sen. Amy Klobuchar, D-Plymouth, Minn., the ranking member and chairman of the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, held a hearing on the proposal Dec. 8 to examine how the merger would affect more than 4,000 other brewers, mostly small, local operations like Castle Danger. In that hearing, the CEOs of Anheuser Busch, the world's largest brewer, Miller and Molson Coors pledged to do nothing that would hurt the craft beer industry in the U.S. The merger plans call for Miller to be spun off from Anheuser Busch and sold to Molson Coors and continue to compete against each other. If this isn't done, Anheuser Busch would control more than 70 percent of the U.S. beer market, which is illegal, according to Klobuchar.
"We want it in writing, but we have them under oath," Klobuchar said. "That's why we do those hearings, they're not just for a bunch of publicity. We actually get them under oath saying that."
A number of craft brewers were also at the hearing to express their concerns about the impact the proposed takeover would have on the burgeoning industry.
"It certainly hit home how concerned they are about this," Klobuchar said. "They are very concerned and that's why I used Castle Danger as an example because it's been so helpful to Two Harbors. I have personally visited there and I can see that these are not jobs over in Mexico, these are jobs created right in our country and that's what craft brewery is."
Clint MacFarlane, co-owner and CEO of Castle Danger, said the potential impacts are wide ranging and include access to sufficient raw materials, like malted grains and hops, to distribution issues. Since Anheuser Busch has also purchased a number of craft breweries over the past few years, they also find themselves in need of specialty malts and hops already in high demand from the explosion in craft breweries around the U.S. over the past decade. With the demand from such a larger brewer, Castle Danger and others could have less options to purchase from.
MacFarlane said in the immediate future their supply chain is secure, but further into the future is more murky. Castle Danger recently switched from a malt supplier to a direct manufacturer in Chilton, Wis., and has a contract to buy hops for the next five years.
"The best thing that we can do is a lot of that forward planning," he said.
Distribution is another area of concern for Castle Danger, which recently signed its 500th account and is looking for a distributor in the Twin Cities. They hope to have one in place by the end of the first quarter of 2016, but are looking to avoid one affiliated with Anheuser Busch.
"I would say that we've definitely been affected in the fact that we don't want to go through an AB (Anhueser Busch) house because they are basically saying sell all of our beer," McFarlane said.
He went on to say the megabrewer is already giving incentives to their distributors to prioritize Anheuser Busch products and even attempting to put a cap on the size of craft brewers distributors can work with. Anheuser Busch doesn't want its distributors to distribute craft breweries with a capacity of more than 15,000 barrels per year. Currently, this wouldn't apply to Castle Danger, which has a capacity of 5,000 barrels right now. The taproom and brewery they opened in downtown Two Harbors in 2014, however, can be expanded to a 20,000 barrel capacity and there are even plans to build out the current brewery to a 40,000 barrel capacity.
"It's very concerning," Klobuchar said. "What I'll be asking for if they do approve this merger, which could make the situation worse, is that we have those kinds of conditions in there so they can't do that kind of thing."
Quality control has also been a big focus for Castle Danger as it expands and increases production capacity.
"It's always a tricky balance of growth versus trying to stay ahead of the quality," MacFarlane said. "We've got a plan to implement a quality manual so that our processes are the same throughout, no matter who is doing it."
In addition, each time they purchase a tank they add another quality check to the process and with their most recent purchase they also purchased a dissolved oxygen meter. Dissolved oxygen is the number one factor in beer oxidizing or going stale. Getting dissolved oxygen numbers down is critical in making beer more stable the farther Castle Danger's products get away from Two Harbors.
As with any small brewery, sometimes when the quality isn't there, an entire batch is scrapped.
"We've dumped beer down the drain, which is never a fun thing to do, but it's the right thing to do," MacFarlane said. "Things are getting better as we go along, though, because we're all learning still."
Castle Danger recently had to dump a batch of the Ode IPA, one of its four signature brews. The beer wasn't clearing up like it should and ended up with a watermelon taste that was unacceptable to the owners.
Castle Danger also has a commitment to the community in Two Harbors. It charges a fee to tour the brewery, but then donates the money to the local food shelf.
"I think local matters to people and they want to support the communities they are in and the breweries," MacFarlane said. "That's why we're in it, we support the community, the community supports us. It's a good partnership."
With more than 4,000 breweries in the U.S., more than at any time in the nation's history, it's getting more and more difficult to cut through the noise and with at least two more breweries opening in the Twin Cities in the past few weeks, the challenge to create a unique brand has never been more important.
"Being here from the North Shore makes us unique, just our location alone," MacFarlane said. "We get to use Lake Superior water, which a lot of breweries don't. Our Danger Ale is a one-of-a-kind, whether you like it or not, it is."
The Castle Danger taproom has proved to be a boon to tourism in Two Harbors as well, with Two Harbors Chamber of Commerce president Janelle Jones estimating the brewery brings around 1,000 visitors a week to the downtown area. Local beer, too, is maintaining its popularity in the face of competition from megabrewers like Anheuser Busch.
Melissa Clark, a nursing student from Cambridge who also bartends and brews at Fulton Brewery in Minneapolis, said she stops by the Castle Danger taproom almost every time she comes to the North Shore, which she estimated was about seven times a year. She likes the unique specialty beers craft breweries offer all over Minnesota. Castle Danger is one of her favorites on the North Shore because of the taproom's location as well as the quality and variety of the beers available.
"They have really clean, fresh beers," she said. "Their 17-7 pale ale, it's not Budweiser, it's not Miller, it's none of those. It's a fresh, good pale ale. It's excellent and it appeals to a large group of people as well as those that are in the industry. (Castle Danger) is a great place to come."