Tuesday, February 26, 2013

What's the Matter with Craft Beer? Cracks in the Foundation

The Craft Beer industry is taking off; sales are rising, approaching 10% of overall beer sales, which interestingly have dropped. Craft Beer is growing, even through Recession. No doubt this is time for rejoicing for craft beer, craft beer geeks and tap rooms. But there are fractures in the foundation that are coming to light. How these are managed can either fix the cracks, or expound them.

It is important to note that craft brewing is a business and must take on certain business responsibilities. One is establishing and protecting a brand. For the most part a brand is a name. To differentiate beers consumers (for the most part) identify with names: Sam Adams (by Boston Beer Company), Budweiser (AB-InBev), Coors (MillerCoors).  If Boston Beer Company labeled one of their beers "Bud", AB-InBev would see this as trademark infringement (and so, too, would a judge).  This blatant example illustrates why trademark laws are in place.

However, in the business world of trademark infringement the devil is in the details. While "Bud" is an obvious example, Righteous is not, nor is Seven Seas. In these cases the breweries involved are geographically separate, their markets do not overlap. Ostensibly the struggle is to keep other craft breweries from copying each other, stealing names and taking advantage of others' successes.
While some of this might be true, we must look at the business side: protecting trademark.  For if a company does not protect its trademark, then it could lose it, if not now then later. So a brewery on the west coast must keep an eye out for similar beer names/labels emerging on the east coast, not for fear of theft of customers, but of losing trademark. If that happens, then larger companies that are closer can start using that same name/label, and no infringement of trademark can be claimed.  

So, to take "Bud" as an example (which was actually contested in court), if Boston Beer Company started using "Bud" to label a product, and AB-InBev did not claim infringement, then anybody could start using "Bud"…even MillerCoors. Brand recognition would be out the window as would fair competition.

While this may sound easy to avoid, it certainly is not. Trademark infringement disputes are going to happen. In a growing industry full of small companies, it is inevitable that names/labels will fly under the radar, only to appear in the form of cease and desist (CD) letters.
And this is how management of these disputes can either fix the cracks, or widen them. Sometimes the business decision is not best for the business, especially in a personal industry like Craft Beer, and with the explosion of social media.  Trademark protection is necessary, but it's not as black and white as a CD letter.