Big Beer Ramps Up Its Efforts to Take Over the Craft World

If you missed the Budweiser commercial during the 2015 Super Bowl, you’ve undoubtedly at least heard some of the fallout. The spot featured Budweiser hating on craft beer, proclaiming their own beer is “brewed the hard way”. It was an unabashed proclamation of the AB brand’s claim to the title “King of Beers”, as well as a nod to their staunch supporters – those who have never and probably never will try a craft beer.

It’s also a bit misleading. For all the negativity Budweiser spouts about craft beer, they’re got more than one hand in the cookie jar here. In fact, AB InBev is snapping up craft breweries around the country with abandon. If they’re so staunchly anti-craft, what’s behind the spate of purchases, and what does the trend mean for the future?

A Look at the Purchases

Every time Big Beer buys up another craft brewer, the indie world rocks. When Goose Island was bought in 2011, headlines reading, “Goose Island Is Cooked” spread around the country and the world. When Blue Point was bought in 2014, similar headlines proclaimed the brewery’s demise. A little later in 2104, AB InBev snapped up Oregon’s 10 Barrel Brewing Company. 2015 has already been marked by its first major buyout – Elysian Brewing of Washington is now part of the AB family, and the fallout still hasn’t settled.

The Anatomy of a Buyout

There are two major factors in most buyouts (most, but not all). You have to have a willing buyer (Budweiser is perhaps the most important player here, but there are others). You also have to have a willing seller (willing doesn’t necessarily mean they want to sell out – sometimes they have no choice). The employees sometimes have a say in the sale, but that certainly wasn’t the case with the Elysian buyout, which saw tweets from employees stating their shock, horror and frustration with the situation.

What would make such a buyout appealing to the founders of a craft brewery, though? It’s all about distribution, really. Of course, the money doesn’t hurt, either. With a partnership via AB InBev, Elysian now has the ability to sell its beers throughout the country. Compare that to some of the larger craft breweries like Left Hand or New Belgium, which still don’t have a national presence despite amazing beers and lots of distribution and you can see why someone might be tempted to sell their soul (brewery, we mean brewery).

Want proof from the founders of Elysian? Here’s what co-founder and head brewer Dick Cantwell said in the AB press release announcing the purchase: “Throughout our journey, we’ve been focused on brewing a portfolio of both classic and groundbreaking beers and supporting innovation and camaraderie in the beer industry through collaboration and experimentation. By joining with Anheuser-Busch, we’ll be able to take the next steps to bring that energy and commitment to a larger audience.” There you go – breadth of distribution.

What Does Bud Gain?

So, little breweries get massive distribution networks to build their success, but what does AB InBev get out of the deal? They already control 25% of the world’s beer supply, so what’s the benefit for them here? They get to be on the winning side in the beer wars for one thing. Craft beer is steadily gaining ground, while Big Beer is posting quarter after quarter of falling sales.

Want proof? Here are some figures to help explain things. Granted, these are from 2013, the most recent year released by Brewers Association out of Colorado.

·      Craft Beer: Up 17.2%

·      Beer Market (Big Beer): Down 1.9%

·      Import Beer: Down 0.6%

·      Craft Beer Market: $14.3 billion

·      Craft Beer Market Share: 7.8%

·      Craft Beer Exports: Up 49%

So, it’s certainly about building profitability and satisfying shareholders, but there’s more to it than that. It’s about control, ultimately. Once AB InBev buys a craft brewery, they own it, no matter how much they try to obfuscate and claim that the little guy will be free to operate as they see fit under their own management. It only works that way when things are going well. When things get tight and Big Beer continues to lose money, the first place cuts will take place will be within these smaller outfits – ingredient changes, downsizing, production cuts and distribution limitations.

Not All Craft Breweries Bow to Pressure

Elysian wanted to get their beers into more hands, so they inked a deal with AB InBev. That’s not true for all craft breweries, though. Take Florida’s Due South Brewing for example. The brewery has been approached multiple times by Big Beer representatives scenting out a quick, profitable sale. Owner and head brewer Mike Halker has been approached many times but he’s turned down all such offers. According to Harker, he’d rather make good beer than walk away with a big paycheck, although he doesn’t rule out such a sale sometime down the road.

This comes amidst rumors (now confirmed) that Budweiser is interested in buying up Florida’s largest craft brewery, Cigar City Brewing (which, amusingly enough, came right after Bud’s Super Bowl ad poking fun at craft beer and craft beer drinkers).

The Drinkers’ Take

While sales and buyouts might make good financial sense for both craft brewery owners and Big Beer executives, it’s a different story with most craft beer drinkers. The sale of 10 Barrel garnered over 800 comments on the company’s Facebook page, all universally against the sale. Elysian encountered even stiffer resistance from the sale, from both their patrons and their employees. Goose Island ran into the same problem back in 2011.

Craft beer drinkers love to support the little guy. It’s not necessarily about being able to pick up a six-pack of New Belgium’s 1554 in California, New York and Florida. It’s about supporting craftsmen and creators, about throwing your support behind a small company that’s doing cool things because they love what they do, not because they’re after the money in your wallet.

Poto Cervesia,
Dustin Canestorp

Source:

http://www.marketwatch.com/story/small-craft-beer-buyouts-face-big-problems-2014-11-07
http://feastpb.blog.palmbeachpost.com/2015/02/09/due-south-brewing-declines-several-buyout-offers/
http://www.argusleader.com/story/beerblog/2014/11/12/craft-beer-buyout/18912261/
http://newschoolbeer.com/2014/11/anheuser-buschs-purchase-10-barrel-can-ruin-industry.html
http://blogs.denverpost.com/beer/2015/02/15/colorado-craft-brewery-sell/14643/
http://www.beervanabuzz.com/2015/01/elysian-is-space-dust-in-wind.html
http://www.capitolhillseattle.com/2015/01/anheuser-busch-acquires-elysian-brewing-company-including-e-pike-brewery/

Posted on March 1, 2015 and filed under 2015, The Business of Beer.