Since its emergence on the North American beer scene in the 1980s and, in force, in the 1990s, what is commonly called ‘craft beer’ has cost the big breweries millions upon millions of dollars in revenue from lost sales. They do not like this.
Sales of Budweiser in particular have fallen precipitously, declining from 50 million barrels in 1988 to only 18 million in 2013. Some of that volume has simply been transferred to Bud Light, for years now the best-selling beer in the United States, while large volumes have also been lost to Coors Light, but some has also gone over to craft beer. Anheuser-Busch InBev definitely does not like this.
Since almost the very start of the craft beer renaissance, brewers and beer marketers have been taking pot shots at the big breweries and their beers, often aided and abetted by the media. While initially it must have been easy for pre-InBev Anheuser-Busch to shrug these insults off, the volume of such criticism now, coupled with the recent boom in the growth of craft beer, must certainly be getting up their corporate nose.
In order to stay relevant, Anheuser-Busch InBev has been forced to spend tens of millions of dollars on brewery purchases, only to have every buy followed by loud and prolonged condemnations. Would they rather have spent this money on increasing sales of their existing brands? You bet your ass they would!
Anheuser-Busch InBev has also spent tens of millions of dollars, if not hundreds of millions, on new product development and marketing in order to have what are, for them, fringe brands that can play in the specialty beer market (which did not even exist as such forty years ago). It’s not hard to imagine they would have rather spent this money on growing their existing portfolio of brands or perhaps developing more logical and demographically-focused line extensions.
So yes, if you drink craft beer, Anheuser-Busch InBev does indeed hate your beer. And if they could end the craft beer segment tomorrow by taking a loss on all the brewery purchases they have made and craft beer-style brands they have developed, I firmly believe they would do so in an instant.
Blogging at World of Beer 
But they can’t actually afford to do that, right? It’s a game of whack-a-mole if the plan is to buy then close breweries to erode smaller breweries market share. At the end of the day – won’t they need an actual strategy to make money in the environment as it exists, rather than how they’d like it to be? Perhaps there just isn’t as much profit on the table for them as there used to be?
I wrote very specifically “if,” Joe. Of course they can’t, but if they could, they would.
The whole piece is not about what ABI is planning to do, but how they feel about the whole situation. It’s intended to make people better understand where things like the Super Bowl ad stem from.
Agree with Joe. The board game is finite and the market is zero sum. Every move they make is scrutinized and the scale of their operation prohibits quick response to anything. They’re sort of an evolutionary failure. They got too big.
Disagree. Budweiser (the brand) hates your beer. Anheuser-Busch InBev (the company) looks at your beer as an emerging profit center with higher margins than most of its portfolio.
Not if you look closely at the numbers, Ben. Budweiser still sold 18 millions barrels in 2013; Elysian sold about 50,000 in 2014, or 0.2% of Bud’s total. There’s not enough profit margin in the world to make those anywhere close to as significant.
Actually, it’s both the numbers and it’s not. First off, the purchase of Elysian made the co-owners enough money that they could build a new brewery right next door, call it “We stole In-Bevs money and they still can’t brew decent beer!” and make out like bandits.
But it gives In-Bev a foot in the door (and since they’d previously purchased three, they are now on all fours, heh-heh). And that’s how they start controlling the craft market, brewery by brewery.
The only thing that matters profit-wise is if each individual brewery can stand on it’s own, or if it cannot, can it be joined with one or more other breweries in a conglomeration that is attractive in a tax or profit/loss statement to give a huge corporation a way to pay less taxes.
It is EXACTLY that 0.2% of Bud’s total that makes it a good target for InBev to buy them up.
What gets me is that large breweries did not, in general, seek to develop major craft type brands of their own in the ferment years of the 80’s and 90’s. Blue Moon is an exception, maybe because a Belgian wit-style was so left field to begin with. (I’d think its growth was probably a surprise to Miller Coors). Had this model been followed by the large brewers, they could have had between them a nationally-selling group of pale ales, IPAs, porters, Imperial stouts, a helles style, etc., a decent portfolio anyway with good margins and material sales, that might have kept the small guys seriously at bay, maybe permanently under five percent of the market. This might have precluded the spend necessary to make the recent buy-outs with the money being directed to support the core of new brands. I’ve never understood why this did not occur, maybe the people calling shots in the 80’s or early 90’s were simply too far removed from viewing beer as an artisan product, in effect too far away from the distant origins of these companies? Hard to say.
Gary
In-Bev makes beer for people who hate the taste of beer. The sole focus was making a drink with certain stable, predictable qualities and selling the public that their dreck beer was better and worth more money than any other generic dreck beer producer. With all the Celebrity and Sports and whatnot sponsorships, the public bought it for decades. Then (thanks to President Carter making home brewing legal) we woke up and started realizing that the stuff passing through the Clydesdale’s digestive and waste system wasn’t really beer anymore. For several years though, it was cheaper for them to increase the advertising budget to increase/maintain sales than it was to do product development. It is no longer, so expect to see this more and more. More buyouts, more forced closures (when InBev owns enough breweries, get ready for the law suits on brewing competing beers that may be brewed with similar products – i.e. even though Terrapin’s Hopsecutioner and Bell’s Hopslam and Ithaca’s Flower Power as vastly different brews, may get targeted because of similar recipe components). Once they have purchased enough breweries, expect InBev to tie up competing breweries in the court system, putting many out of business.
Can you elaborate on the points you are making, how are you projecting AB InBev might do this exactly? Do you mean through trade marks, that it might try to prevent competition from small breweries using somewhat similar brand names? Many of those trade marks surely are registered now though and will stand up to a challenge whether from a small competitor or larger one. Or did you have another point in mind?
Your point about putting money into advertising vs. product development is one I partly agree with only. There was product development, except in the “wrong” direction, e.g. dry, light, ice beers and so forth. My view is the big brewers were, by then, so far from their roots that they couldn’t see what real beer tasted like.
Gary
I just got back from the Craft Brewers Conference in Portland, where I had an opportunity to talk with the head brewer for AB. It’s my belief that their position is to give the consumer what the consumer wants. Very many consumers want Bud, so that is the majority of what they make. They also understand that there is a growing segment of the market that wants something more complex and interesting than Bud, and that it behooves them to seek to serve that market as it is growing and the mainstream segment is not.
Robert Rivelle George
Well, it’s always a fine line between what people want and what is offered/promoted to them.
Gary