Category Archives: beer news

Yes, Anheuser-Busch InBev Hates Your Beer.

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.

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Interesting Numbers from the World of Beer

Item 1: People keep asking me why I see a bright future for craft beer in Brazil despite all the significant obstacles – lack of distribution infrastructure, high prices, no “cold chain” of delivery in which the beer is kept cold from brewery to consumer – and sometimes I wonder about it myself.

Then I come across an article like this one in The Globe and Mail newspaper and it all comes together. In case you don’t want to read the whole story, or the link breaks because the Globe puts the story behind their pay wall, here’s the gist: With 50 million Brazilians joining the middle class in the last decade, that segment of the population is now about equal to the percentage that is poor, about 30% each.

This new middle class is aspirational, and they want to spend their money on items to which they previously had not enjoyed access – the story highlights perfume and cell phones – like craft beer. I’ve seen the gestation of this at bars like Melograno and FrangÓ in São Paulo and I expect to see a lot more of it on my next visit, whenever that might be.

Item 2: I continue to hear American brewers fret about the number of breweries popping up in their country, worried about the so-called “bust” that they think must surely follow the boom. Too many breweries, too many SKUs (brands listed with distributors) and too confusing for beer drinkers are a few of the concerns I regularly hear voiced.

Umm, folks, ever heard of the United Kingdom? It’s a land of about 62 million people, where the total number of breweries just surpassed 1,000! And while they have their own issues to deal with over there, I’ve not yet heard much in the way of griping about the number of breweries and possible saturation of the market.

To put that in perspective, to achieve the same ratio of breweries per capita, the United States would have to add about 2,900 breweries to their existing total, more than doubling the number in place today.

Item 3: This is not so much a numbers thing as it is a bit of a rant. Although it does relate to Item 2 above.

Yesterday’s Shanken News Daily carried a story headlined “Craft Controversy: Rotating Drafts Spark Concern Among Brewers,” in which it was suggested that “some craft brewers are beginning to show concern that the very diversity that they have long promoted…may actually be damaging to their companies and the craft beer category.”

The piece goes on to quote Bob Sullivan, vice president of sales and marketing at Kansas city’s Boulevard Brewing – a craft brewery I know and quite like and the tenth largest craft producer by volume in the U.S. – as saying that bars which rotate their draft taps rather than sticking with a specific line-up of brands are hurting the industry by not giving breweries an opportunity to build their brands.

More egregiously, the story quotes Jim Gray, national draft director at the beer importer Crown Imports, purveyors of Corona and Tsingtao, among other brands, as complaining that “retailers who are focused on rotating draft handles aren’t focused on building brands” and that these beer sellers are only interested in “the shiny new toy that is offered to them each month.”

Here’s a piece of advice for you, Jim and Bob and any other salesperson out there trying to flog draft beer: The job of the licensee is to keep their customers happy, not to build brands. (Ahem, that’s YOUR job.) And if customers want variety in their beer selection, as a vastly growing contingent of beers drinkers do, well, that’s just the new playing field. Get used to it!

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Global Craft Beer Future – India

During the beery explorations that resulted in The World Atlas of Beer, Tim Webb and I hit upon the two markets we consider most important to the future of brewing world-wide. Not craft brewing, mind, but brewing in general. They are China and India.

Neither has high per capita consumption levels – China drinks about 34 litres per person per year, while India languishes around one, yes, one litre per head annually – but both are growing markets and one, China, already produces more than twice as much beer as the second largest brewing nation in the world. India’s production sits at a very modest 26th place globally.

But beer consumption is growing, slowly, in both markets, partly because increased affluence allows for greater purchasing power among the middle class.

India, however, is primarily a spirits market, as evidenced by the fact that United Spirits, the country’s top distiller, is also the number two spirits company in the world when measured by volume of product sold. And now Diageo is poised to take control of it.

With an offer of $1.8 billion on the table, Diageo is expected to assume majority control of United Spirits and thus gain ownership of a vast portfolio of brands and, perhaps more importantly, access to an expansive distribution network for its own global brands. This will place the world’s largest drinks company in a steel cage match for market presence with its chief rival, Pernod Ricard.

It will also likely put on hold for possibly several years any significant growth in the Indian beer market. Why? Because with two spirits behemoths going head-to-head in what is primarily a spirits marketplace, there is likely to be little room left over for beer growth, especially when the inevitable marketing and price wars heat up.

The good news in all this is that I’m told reliably that a small but enthusiastic craft beer market is just beginning to develop in India, the existence of which will probably not even be noticed by the two Goliaths hammering each other for market share. Bad news for A-B InBev, SABMiller, Heineken and the rest, but good news for the small minority of Indians thirsting for good beer.

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Craft Beer Up Again, Mainstream Beer Down Again

More good news for craft beer brewers and fans, courtesy of Shanken News Daily:

The U.S. beer market continues to struggle, according to the latest numbers from Nielsen. Off-premise volumes declined 1.9% in the most recent 52-week period (ending November 12) to 1.38 billion cases. The outlook appeared brighter on a value basis, as dollar sales inched up 0.6% to $28.6 billion during the same time period. The average price of beer in the off-premise increased 2.4% to $19.82 a case.

Craft and specialty brews continue to be the most vibrant segment in the beer category, surging 16.6% by volume in the 52-week period, with even stronger value growth (+17.8%) on an average price of $31.80 a case. The craft/microbrew segment is priced higher, on average, than imported brands ($27.59), yet imports fell 0.6% by volume during the same time span. Mexico continues to be the largest-selling origin for imported brews off-premise, at 78.7 million cases (+0.4%), but the fastest-growing source was Belgium (+28.9%).

Domestic beer sales posted a 2.1% decline in the 52-week period, with the super-premium ($24.12 a case) and below-premium ($14.71) segments falling 4.5% and 4.2% by volume, respectively. Even domestic light beers fared worse than the industry average, down 2.9% during the same period.

Nielsen tracks beer sales in food/drug/liquor/convenience stores and other channels, with volumes accounting for just over half the size of the total U.S. beer market, as measured by Impact Databank.

Over 16.5% volume growth in the middle of an overall 1.9% volume decline tells you that this shit is for real!

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Interesting News From Brazil and the Netherlands

Just as I prepare to fly south to Argentina for the Great South Beer Cup and on to São Paulo for a couple of beer dinners comes word from Reuters that Heineken is seeking a second entry to the Brazilian beer market.

Already in bed with Cervejarias Kaiser, which it picked up from Molson after that latter’s disastrous foray into South America, Heineken is now reportedly mulling over the purchase of Brazil’s number two brewing company, Schincariol. If pursued, the purchase will reportedly cost in the area of $2 billion.

Even with Kaiser AND Schincariol, Heineken would still be trailing Anheuser-Busch InBev by a considerable margin in the rapidly developing market. But I’m betting the world’s largest brewing concern is paying very close attention to these developments nonetheless.

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Out of the Mouths of Financial Experts

Industry analysts more concerned with stock prices than flavour have not traditionally be the best of friends to craft brewers. (Remember the Wall Street Journal’s memorable mid-1990’s prediction that the whole microbrewery fad was over?) So when the likes of Goldman Sachs attends a brewing industry conference and walks away singing the praises of craft beer, it’s worthy of note.

After attending the 17th Annual Beer Insights Seminar, the financial mavens at Sachs reported five “key takeaways,” including the following at numero uno:

(1) The solid growth in the craft category was a main topic at the event with smaller craft brewers growing sales double-digits. Industry participants expect this trend to continue as the category is winning the “hearts and minds” of consumers by offering them innovation, choice, and high quality products at an affordable price.

But you already knew that…

 

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That Would be the B in BRIC

By now, I expect most people have heard of the BRIC countries – Brazil, Russia, India and China – which are cited regularly as the emerging economies that will power the global financial world further into this century. And here’s proof positive that for at least one international brewer, one of those nations is proving to be most vital to its bottom line.

Judging by several reports in the international media, just-drinks.com and the Wall Street Journal included, the global brewing leviathan Anheuser-Busch InBev has strong reason to be grateful to one of their three home markets, Brazil. According to the WSJ story, “a strong performance in Brazil offset weakness in the U.S. and Europe” lead to an increase in third quarter profits for ABIB, prompting optimism also for the fourth quarter. And exactly how strong was that performance? How about a 12.5% growth in volumes?!

Now here’s what interests me about all this. I couldn’t care less how Brahma and Antarctica are doing in Brazil, where ABIB controls an astounding 70% of the market, but I am fascinated with how overall volumes are growing in South America in general and Brazil in particular. Because last summer I discovered that there is a relatively small but thriving craft brewing scene in Brazil and elsewhere in the southern American hemisphere, and my sources there tell me that demand for premium beer is growing as fast or faster than they can manage.

Think about it: A still-growing major brewery market feeding off tremendous economic growth, a small but enthusiastic cadre of craft brewers, and growing demand for beers “outside the norm.” Remind you of anything, like North America a few decades ago?

Okay, so the majors in the 1980’s weren’t posting double digit growth, but still, there are parallels. Exactly to what degree I intend to find out later this month when I travel to Sao Paulo and elsewhere to host a few beer dinners, culminating in an all-Brazil beer festival in Blumenau. I’ll let you all know in December.

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