19 Oct 2015 Big Beer’s 5-point plan to crush the craft beer revolution
When the massive Anheuser-Busch InBev-SABMiller merger is complete, the resulting company will own over 400 beer labels, including 8 out of America’s top 10 brands. Right away, the new Bud-Coors-Miller-Stella-Molson conglomerate will be responsible for producing roughly 30% of all the suds on earth.
And if the corporate overlords have their way, the company will gain even more market share down the line. To do so, it’ll have to expand into more regions and/or reverse the trend that’s most visible in the US: the rise of small, independent craft labels.
According to the Brewers Association, which represents the craft segment, the number of breweries and craft beer’s portion of overall beer sales have both doubled over the past five years. At the same time, sales of “macro” beers like Budweiser and Miller have gone flat or declined.
While the $104-billion merger of the world’s #1 and #2 beer companies is intended to assure Big Beer’s dominance in the global marketplace, it’s actually but one of several strategies being employed to put the pesky craft category in its place—or even destroy it, if possible. Here are a handful of tactics Big Beer is using to try to keep its brands on top.
#1. Create your own quasi-craft brands. Read Blue Moon Brewing’s history on the brand’s website and you’ll learn that the Belgian-style wheat ale was created by beer-loving visionaries two decades ago in Denver. What you won’t see anywhere is mention of the fact that the brand has always fallen under the domain of Coors, the Colorado-based brewer that’s now owned by MillerCoors, which is itself a subsidiary of SABMiller.
Blue Moon was ahead of its time in what’s become known as the “crafty” beer category—brands that seem like small indie labels that are actually owned by the world’s biggest beer companies.
Shock Top is AB InBev’s best-known faux craft beer, and according to one source, “75% of consumers believe Shock Top is from a small/unknown brewer.”
Clearly, these brands hope to win sales by creating the appearance of indie craft authenticity, all while using the production and marketing advantages of a global corporation. But they might not be able to blur the lines indefinitely…..
#2. Snatch up craft brews that’ll sell out. If you can’t beat them, buy them. That seems to be the philosophy behind AB’s strategy for purchasing popular craft labels such as Goose Island, Elysian, 10 Barrel, Golden Road, and Blue Point.
Generally speaking, these brands vigorously proclaim that their quality and dedication to customers won’t diminish after the change in ownership, and they say they still deserve to call themselves craft beers. Purists who believe only small, independently owned operations merit the “craft” label obviously disagree…..
#3. Defend macro brews, bash craft snobs. This part of the plan is probably the most bizarre, and perhaps has backfired on Big Beer. On the one hand, the beer giants have purchased several prominent craft labels and created their own faux craft brands. On the other, AB InBev decided it was wise to run with an ad campaign mocking craft beer that theoretically supports its struggling Budweiser label.
The commercial, first aired during the 2015 Super Bowl, called Bud “Proudly a Macro Beer”, while making fun of hipsters who “fussed over” flavours like pumpkin peach ale. (Budweiser sales, it should be noted, have been falling for roughly a quarter of a century as drinkers increasingly turn to light beers and craft brews.)
For what it’s worth, after the Budweiser commercial aired MillerCoors released a statement defending all kinds of beer, including the craft category: “We believe each and every style of beer is worth fussing over … Quality isn’t something that belongs to a single style of beer or a single brewer.”
#4. Control distribution. For better or worse, America’s alcohol selection is the result of three-tier system, in which brewers and importers (tier #1) must use distributors (tier #2) to place their beverages in the stores and restaurants that ultimately sell them (tier #3). “Independent beer distributors,” the National Beer Wholesalers Association states, “work to help new brands get to market and to ensure that consumers can choose from a vast selection of beer.”
The problem is that not all distributors are independent. AB InBev has been purchasing distributors around the country—including two recently in Colorado, one of the nation’s craft beer strongholds. Critics say that there’s an imbalance when one company owns two of the three tiers for distribution….
#5. Merge and overwhelm the marketplace. “At some point, weak growth prospects can’t be concealed or offset,” Tara Lachapelle wrote this week in a Bloomberg column about why mega-mergers happen. “Mainstream brands such as AB InBev’s Bud Light and Coors Light, part of a joint venture between SABMiller and Molson Coors, have been losing share in the US as the craft names gain.”
Because increasing sales of Budweiser and Coors Light seems impossible given changing consumer tastes, the companies seem to be trying to please shareholders by choosing consolidation—which at least looks like growth on paper.
There are many competitive advantages to creating one gigantic beer company too. Namely, advertising….