Big Beer’s 5-Point Plan to Crush the Craft Beer Revolution
time.com
time.com
First, it's not possible: it's too easy to start new breweries, and too easy to get local distribution to bars and the kinds of stores that already do a good job of stocking craft beer. The capital costs to start a new craft brewery are small. There are tens of new brewery starts in major metros every year (we're flooded with them in Chicago). So AB InBev takes out Goose Island. Who cares? For every Goose Island, there's a dozen Half Acres.
Second, it doesn't make economic sense. Macrobrews and tiny local craft brews are not substitutable products. Macrobrews are defined not by quality but by availability: they're produced in enough quantity and their logistics are managed competently enough to be reliably available in the places where people who buy macrobrews shop. The same is absolutely not the case for craft beer; even the best-run largest-scale craft breweries are often on allocation systems with retailers.
By the way, AB InBev's customers generally aren't trying to maximize IBUs, don't give a shit which hop varietals got used, and would probably assume a brett beer had somehow gone bad. Again: not substitutable products.
Meanwhile: on the off chance that a Three Floyds or Bruery "graduates" to real nationwide distribution, in 6-pack/case format, Big Beer will simply buy them. They can, in effect, use craft breweries as laboratory for product development: the products that succeed in the market get acquired, and AB InBev supplies its logistics and distribution to milk profits from the acquisition. It's a very old, very effective business model (see, for instance, Cisco).
Finally: I call BS on the idea that Big Beer somehow ruins acquired craft breweries. Goose Island is if anything doing a more consistent and competent job now than they were prior to the acquisition.
[1] 8% in 2013 to 11% in 2014 http://www.bizjournals.com/albany/news/2015/03/18/craft-beer...
Hey, store operator. It's clear that staple beers like Coors and Bud Lite are 50+% of your beer sales and a significant portion of your whole store's margin. So, we declaring that we won't ship you any Bud Lite unless you also stock 3 of our new, wacky, nobody-thinks-its-gonna-sell variants like "Bud Lite n Salsa". The only purpose of even making BLnS is to make it harder for you to have shelf space left over for upstart smaller brews. Have a nice day.
If their plan to buy up the distributors succeeds, you should assume the breweries will wind up ruined.
Specifically: if a company doesn't have to compete because it has monopoly power, it stops making much sense for them to spend extra money on competent employees and expensive raw materials for no economic gain.
Once they stop having to compete, expect quality to drop. That's obviously not limited to beer. But it happens time and time again.
Not so. Macrobrews are extremely consisten, a quality which makes availability a viable reason to drink it. Customers know exactly what they're getting every time they open a Bud Light.
Your points focus on how craft beers are flourishing now, without looking at the implications of the recent developments: mergers that take over distribution, conglomerates that have the power to lobby for laws that are in their favor.
Beer snobs just can't comprehend why anyone would prefer, say, Miller over Bud, or that it's even possible to differentiate between the two.
From our side of the fence, all craft beer enthusiasts seem to care about is disgustingly ever-higher levels of hops.
And yet, AB-InBev and SABMiller lobby against laws which make it easier for craft beer to be sold. They fight against self-distribution and for small distributors and for the dissolution of the 3-tier system, so that they can run the One Tied House to Rule Them All. They're happy to buy craft breweries with established names and products, but loathe to compete with them on fair terms.
> Finally: I call BS on the idea that Big Beer somehow ruins acquired craft breweries. Goose Island is if anything doing a more consistent and competent job now than they were prior to the acquisition.
1) Any time a brewery gets further from the drinkers its hop-forward beers suffer. Goose IPA being made in New York adds like a week to the time it takes to hit shelves, and for most hop-forward beers, that's a notable amount of time. (Goose, pre-buyout had very few hop-forward beers, and has more now. The focus of the brewery has changed. Many breweries will not scale, because they can't ship fresh enough beer to compete with the local breweries. Even Three Floyds, distributing across state lines can't compete with Revolution, Half Acre, Pipeworks, or Spiteful on freshness)
2) Look at this year's bourbon county release where consumers will be paying drastically more money for less beer, with their money paying for increased marketing and advertising.
3) Goose's other world-class beers are all but forgotten. While Bourbon County has risen to become a status symbol, written about in "What to buy for the man who has everything" articles, the Sisters, Juliet, Lolita, etc., are essentially gone. When they do show up, it's at much higher price points.
Goose Island has lowered the quality of its top-line while increasing the availability of its less interesting flagship fare.
Your assessment of AB-InBev customers doesn't hold going forward. AB-InBev wants as many customers as they can get, hence their purchase of Goose and so many more. They'd be happy to sell beer to anyone, and they're also happy to sell beer to people who don't realize they're buying from AB-InBev, hence the proliferation of brands.
#1. Create your own quasi-craft brands.
This seems reasonable. If the taste sucks, the brand won't do well. If it doesn't, using a different brand is legitimate.
#2. Snatch up craft brews that’ll sell out.
Again, a fair strategy.
#3. Defend macro brews, bash craft snobs.
I'm not for attacking anyone, but certainly people have been attacking drinkers of macro brews for ages. In the circles I move in, Bud drinkers are openly stereotyped as ignorant and racist.
#4. Control distribution. #5. Merge and overwhelm the marketplace.
Vertical and horizontal integration for the sake of reducing competition is a bad thing, luckily we have laws to prevent this.
Though we have managed to produce quite a few world-class breweries. I'm fortunate to have Founders just a short walk away from my office.
There are many people out there who have heard about the craft beer revolution, don't know any better and will grab the first thing they see. Sure, if they like the product that's AOK. But the effect is that would have been money going to one of the smaller breweries. What do we think will happen once those breweries are extinguished?
I agree that the original piece seems overblown. In my experience, even the "craft brands" of the big brewers cater to pretty mass market tastes and aren't really that interesting.
Along w/ your last sentence I'd also say that most craft brewers' flagships can be pretty plain jane as well for the same reason.
I would go as far as call it false advertising. Especially when 10 brands are created that actually contain the same product.
Even more, the mere fact that this merger is sought after shows that there is actually need to divide both companies.
I disagree that branding the same product differently is false advertising. As long as the product lives up to the claims made in each case, I don't see what is false. I think you are trying to elevate what you think is important (being made by a small company) to a category that is given special treatment when it comes to advertising. It's like the equivalent of mandatory GMO labeling, but with GMO replaced by being made by a big company.
For legitimate reasons to have the same product with different brands, consider programming languages. If Haskell had a fancy web 2.0 website, some people might go there and think "this is probably a stable, production ready language with good documentation". Others might think "this language has probably made too many compromises with the corporate world, and won't be a principled and elegant language". If it was possible to market the language in both ways to both people, wouldn't that be reasonable? Namely, to let the corporate users know that it is production ready, and let the purists know that it is not corporate bloatware?
>Even more, the mere fact that this merger is sought after shows that there is actually need to divide both companies.
I don't understand this point, can you explain it?
Lets imagine that there are group of customers of Z who buy product W only because they oppose to the company X.
When now company X creates a product A and tries to make impression that product A is from company B and not from company X, then they are making false claims to reduce the market share of company Z by making group of customers of Z to believe that product A is not from company X and is a fair alternative to the product W.
Second point. I am just supporting more actual competition on the market.
Exactly. You get the point. This should be used to reduce the impression of false diversity.
Edit:
Lets expand this example even further. Lets say that there is company X with one baby formula and company Y with another baby formula. Company X has created 9 different brands to sell its baby formula but company Y has only one.
For a customer of baby formulas it would create an impression that there is wide diversity of baby formulas when in fact there are only two.
You are asking what is wrong with lying. How should I answer to this?
Helping local business and the festival scene is a big plus too. (The festival's are where the major beer vendors really seem out of place, they are loud, abnoxious and they give bigger glasses, thus helping those who are only there to drink get drunk faster)
So I guess that make's me a beer snob, but whatever, I'm in Quebec, we won most of the prizes in last year's world beer festival (along with brazil, which is damn good), so I'm in the right place to be a beer snob.
As I grew up I steadily shifted from # 1 to only drinking # 4 and # 5 (with the occasional # 3 or # 2, but only if there is nothing else). So I doubt that we will be seeing our favorite beers go away, the market if just too diversified!
In Philly, there's been a surge of popup beer gardens over the past few years that usually serve craft beers. I'm not sure about other cities, but I do know craft beers are exploding here.
http://www.visitphilly.com/articles/philadelphia/top-10-reas...
The situation reminds me a lot of the current tech climate, where the startup ecosystem serves as outsourced R&D to the big tech companies. Google / Microsoft don't want to kill startups, they want to put them in their place.
Country of origin tells you nothing about a beer.
Compliance costs usually scale in a way that's favorable for large manufacturers.
I don't think macros could ever really touch those aspects of the scene.
However I think what the big companies are more worried about is mass-market settings, like restaurants, "normal" bars, and six packs in the local liquor store / supermarket. Craft beer has been making some inroads there, vs. being restricted to only people willing to explicitly seek out craft beer. Those account for higher volume, and threaten the big companies' market share, so they'd like to develop some alternatives for those settings to counter it. I think the small-volume local brewer who's only found in one shop doesn'd really threaten them. But they're very worried about the amount of sales national players like Lagunitas, Sierra Nevada, New Belgium, etc. are getting. Plus higher-volume regional companies like Goose Island (Chicago, bought by InBev), St. Arnold (Houston), Sweetwater (Atlanta), Brooklyn (NYC), Green Flash (San Diego), etc.
#1. Create your own quasi-craft brands.
Definitely the worst. I actually don't mind getting an 8-pack of Coors from time to time for parties but I will not touch Blue Moon or Shock Top now because it always sparks off that awful "You know this is fake craft beer right?" conversation.
#2. Snatch up craft brews that’ll sell out.
Not bad, especially if you can keep them mostly the same and avoid plastering your name anywhere on the bottle. Runs the same risks as #1 otherwise.
#3. Defend macro brews, bash craft snobs. Mostly neutral or high risk. First of all people who are into craft beer don't give a shit about Anheuser-Busch ads during the super bowl. Secondly craft beer has nothing to do with pumpkins.
#4. Control distribution.
This could actually work in the short term, but has high risk of antitrust action.
#5. Merge and overwhelm the marketplace.
I don't know enough about the market to say whether this would work – but I suspect they will blow a lot of money on advertising and not attract enough people.
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I would like to suggest #6 to these companies:
#6. Draw consumers into your beer
Make a documentary about how it is made. Say the stuff that goes into it (https://en.wikipedia.org/wiki/Budweiser#The_beer). A Bud Light can be pretty refreshing during summer. Basically try and do something akin to what PBR did (http://worksdesigngroup.com/pbr-brand-repositioning/).
- Does it tastes good?
- Yes.
- So it doesn't matter the origin.
Here, solved that problem for you.
Discovery Channel used to have a show named Brewmasters, which followed Dog Fish Head through a large part of their process, showed what happened when things went bad, etc. However the show was canceled midseason because of pressure from an unnamed "big beer" manufacturer; at the time Budweiser was a major sponsor of Discovery Channel. A shame really, I very much enjoyed that show.
All of them brew at least one light American pilsner to appeal to newcomers and also offer a decent food menu and regular special events. I don't think these kinds of places are going away any time soon. They offer an ambience and clientele that's distinct from a regular restaurant or bar, and I've found myself visiting them more frequently as they continually experiment and improve their beers.
Having big exits makes it easier for new breweries to get investors.
Having Google, Facebook, and others buying tech startups doesn't kill the startup ecosystem, it's the fuel.
The most disappointing thing to me is that Time magazine goes back to 1923. Henry Luce would have never stood for such gross mis-reporting. But I guess there's no money any more to pay competent people.