Hugh Sisson - Managing Partner
InBev vs AB - Who Wins?
Anybody paying attention to business in the last few weeks - beer business or no - has certainly seen a lot of attention focused on InBev's offer for Anheuser-Busch. It is symptomatic of today's global economy that the big keep getting bigger - whether it makes economic sense or not. At the end of the day, I think the consumer pays a high price.
Let me clarify. I do not know whether the AB/InBev deal makes sense for either AB or InBev. There are the standard arguments of economy of scale, global market share, improved efficiencies, etc. There are probably some benefits, but are they enough to deliver a return on investment for InBev's proposed 56 billion dollar cost of acquisition? I don't know - they didn't consult me.
I wonder if Bud is suddenly not American owned will it weaken the brand, possibly creating opportunities for smaller American brewers? Or does it just strengthen the newly joint ventured MillerCoors?
I do know that, after a certain difficult to define point, as entities get larger the variety and choice available to the consumer gets smaller. Large entities weed out "non-performing" products that may have a following in one market but do not fit the "global" strategy. It makes business sense but the consumer takes a hit.
Large entities - and this proposed InBev/AB one would be huge - can also almost control certain supply sources: in this case barley/malt, hops and potentially some packaging materials. This can seriously affect pricing and availability, potentially making it challenging for smaller breweries to source some of what they need.
Time will tell if the deal goes thru, and if it does, what effect it will have. Regardless, it makes for interesting times and I will be curious to see the landscape after the dust settles.
We will be moving this blog to a different site effective August 1, 2008. After that date you can subscribe to the blog by going to www.ccbeer.com, clicking on one of the blogs, and clicking on RSS feeds. To comment please click below or email me directly at hugh@ccbeer.com To forward to a friend click on the envelope below
Hugh Sisson
General Partner for Clipper City Brewing Co, LP
Co-host of Cellar Notes on WYPR 88.1 FM
When I heard about the
When I heard about the AB/InBev deal, I thought to myself, Oh God, what have they done? Have they no respect for consumer trust, for American symbolism or for good old fashioned Sunday barbecues? But then I conceded in acknowledging it was good old fashioned American capitalism at its best.
But I truly think that this deal opens a flood gate of opportunities for craft brewers for a number of reasons. First, limiting the consumers on choice with regular beers will no doubt cause some to experiment with smaller, less known brews. As with any market, the more you "corporatize" a product, the more the consumer will flock towards less-known products, making them feel and assume that they are not a part of the flock. It's the classic elitist social status that can be seen anywhere in business and society, and InBev has made it more possible for craft beers to experience this phenomenon.
Secondly, much like my previous point, ad agencies and marketing gurus will see the craft beer enthusiasts as a way to market something fresh and new. Think of craft beer as Pokemon, Texas Hold 'Em, Mixed Martial Arts and comic books-turned movies. While not do diminish the craft beer industry by comparing them to fads, these example fads have matured into multi-million dollar conglomerates because of their staying power. Because InBev has watered-down the "regular beer" market, craft beer is now the hip, fresh beverage even though the industry has been around for decades.
Finally, loyalty will play a huge part. I was talking to some of my fellow Soldiers a few nights ago. Among other things, we discussed drinking our first beer after months away from home and what it would be like. Many of them said they would touch a Budweiser! For the majority of them, this was their staple beer, and yet in their minds, the InBev deal was nothing more than a sellout and a slap in the face to loyal customers. Being the every-vigilant Clipper City ambassador, I asked if they would be more likely to try beer made in smaller batches, with a higher price tag but a better overall taste and experience. There was a unanimous and resounding yes from my battle buddies!
Case in point: InBev's deal has reduced AB's loyal customer base (at least, it has from my direct perspective) and left them to wander into the open, loving arms of craft brews.
I know my diatribe has been long-winded and certainly unworthy of a simply reply comment, but I want you and other small batch brewers to know that loyal beer enthusiasts like myself will always support your product and that brave, new beer experimenters are on their way!
Took me a long time to reply
Took me a long time to reply - mostly because we migrated the blog site and I fell behind. Anyway, I think your points are basically well taken. Even though craft beer has certainly become much more main stream than it once was, it is still a long way from the AB's of the world. And if AB loses its All-American position, well that hopefully just presents opportunities for guys like me. And I am ok with that too!