AB acquires Four Peaks, looks to New Belgium next

"Craft" is however the Brewer's Association decides to define it that year.

 

Not really sure where you're seeing that bias. I'm not familiar with Sandlot so I can't speak to them. But if they are anything like Surly then that viewpoint is ridiculous and no one would seriously think Surly isn't craft beer. They've grown a huge amount the last few years and no one is complaining. As I said previously, most people don't define "craft" by adhering to strict numbers.

 

So how do WE define craft beer?

 

My personal definition is an independently or employee owned brewery. Not publicly traded, not owned my a mega Corp.
Most importantly to me, not a part of ABI. Anyone else, but not ABI.

 

The other side of that coin....

The "little guy" started a brewery and sold for a $B. Isn't that the American Dream?

 

I don't think anyone blames the little guy who sells out for a fortune - good for them.

What I have issue with is that AB is buying up all these small craft breweries, and then providing very lucrative incentives to the distributors to sell 98% of their product. That only leaves 2% shelf space for the small guys if they are successful.

Say 'craft' beer has 17% of the market (I don't know what it actually is), if only 2% is available for the independents, then AB will be providing the other 15% of the craft beer, (or ~95% of the craft beer market).

Once they have established brands, and a lock on the market, what would a big shareholder owned conglomerate do to increase profits? If I were them I would look at every possible means of reducing costs and increasing profits. This will mean ingredients will change, processes will change, and most probably the resulting beer will change. I'm sure they will keep small batch 'Flagship' beers unchanged, but you will also pay for them, the rest will be 'diluted'.

AB's primary business is to make money, and as much as it can from it's resources. Always looking to increase ROI. If it doesn't, then it's share value will fall. It just happens that the way it makes it's money is thru making and selling beer.

I suspect how good the beer tastes is NOT a metric within the company. Sure good product helps to retain customers and sales, but it is the sales that count, not how good the product is.

 

I don't know....how or why would they change the beer? I agree that they could potentially change it to save money. But here is where the economy of scale factors in. Your small to medium sized brewery is woefully inefficient (labor) compared to large scale breweries(automation). I am sure AB can brew an IPA much cheaper than almost any other brewery just based on the cost of labor. Now factor in their buying power for ingredients. Changing recipes would only hurt them and would have a negligible affect on their ROI. I see a price war coming where a "big beer" craft beer six packs is several dollars cheaper than a true craft beer six pack. The whole goal being to eliminate as much competition as possible.
I rarely buy commercial beer anymore and I was SHOCKED to see what a six pack goes for. So I went with what I knew was going to be good and was also one of the cheapest craft sixpacks Sierra Nevada HopHunter (7.99). It was almost half the price of BP Sculpin.

 

Craft beer has only ~10-15% market share, yet makes up ~50% of the shelf space at my standard grocery store.

More breweries now than ever in the U.S., and ~2000 more in the planning the planning stages.

Sorry, I'm just not buying the conspiracy....

 

"Craft beer" takes up between 30% and 50% of the shelf space, depending on the store. Now, take out some of those "craft beers" because they are owned by AB/InBev or some other large conglomerate, and you are talking 20-35% of the shelf space dedicated to actual craft beer.

That's what ticks me off.

 

My concern is that the 50% of shelf space that is now "craft" beer at your local store will be 90-95% beer made/owned by one of two conglomerates in June near future. That makes it very difficult for smaller breweries to survive if their profits are based at all on selling packaged beers. I would imagine that the successful business model in the future will be more based on brewpubs and not packaged beers.

Really it's a very smart tactic by ABInbev and others. But I'm not of the opinion it's a good thing for the craft beer world in general, including consumers.

 

Well said!

 

I think it's a great sign of the times that craft beer is finally big enough that mainstream, "regular" people know and like it.

If anyone thought that was going to happen WITHOUT big brewing conglomerates with nationwide or even international distribution in place getting involved, well, I guess that's where the disappointment comes in.

And there's more than just Inbev and M/C in on this. Didn't the Sculpin IPA guys just get bought by the company that makes Modelo? And isn't there a group out of Belgium buying up breweries? I see Chimay and Duvel all over the place now.

 

Who knows what the future holds. Whether the credit goes to the likes of AB and MillerCoors, or just the small guys + SN and SA, beer with decent flavor is here to stay in the USA. I give the credit to SN and SA.

Everyone has their own opinion of what is going to happen. My personal opinion is that unless the Government changes the 3-tier law and allows breweries to distribute their own beer, I think BMC will essentially own the market, 'dilute' their beer offerings for the sake of profits, and 'Great' beer will once again be localized to small brewpubs and small local distribution. All you will find in the stores will be the BMC owned names, with recipes re-created to maximize profits. I hope I am wrong, but BMC is a shareholder company, where profits is the only priority (not beer).

Chimay and Duvel are independent companies, although Duvel seems to be buying up other breweries. Constellation bought Ballast Point (Sculpin).

 

Duvel has owned Ommegang for quite some time (late-90's?). Duvel also bought D'achouffe and De Coninck in Belgium. In 2014, Duvel bought Boulevard Brewing in Kansas City. This purchase hasn't seemed to do anything but help Boulevard... They're going great-guns, expanding and producing some pretty great beers and are starting to distribute them to a much wider area. This year Duvel has announced an investment in and partnership with Firestone Walker Brewing.

Duvel is a family-owned business.

 

THIS!

The local grocery store has 75% BMC beers and 25% dedicated to `craft` brews....that are about 90% owned by AB/InBev.

Sure it would be great to get rid of the 3 tier system.
HOWEVER, being something introduced by govt, well....
When in history can you think of when govt said "Hey, we were wrong and we admit it. So all those laws we made, they are all null and void now."
Prohibitions end wass about the only time i could think of and it took how many years?/ Had allready damaged most places out of business.
Govt isn't known for relinquishing power. I'd be pretty suprised if they dropped the 3 tier system. Especially with InBev happily controlling it.

 

This is just my opinion: but to suggest that where craft brewing is where it is at today because of the involvement of conglomerates such as INBev is a horrible insult to the pioneers of this industry (for example SN) as well as the hundreds of family owned breweries that followed their example and through sweat equity and dedication grew the craft beer industry to what it is today.

That's not to say that any of the macro breweries also haven't worked hard, and that they don't put out quality products. THAT's just not this discussion.

But honestly, we are to thank the big conglomerates for where craft beer is today? Flocc that.

 

Actually? You bet! If the big conglomerates weren't producing "beer" that falls from the sky as in that famous, "It's raining beer!" ad, we would not be having this conversation. Home brewing would not have taken hold across the world and the entire craft brew movement would not have happened. Personally, I do not drink all that much, but when I drink, I want it to be tasty, memorable and awesome. BMC has never been any of those things in my lifetime. If the doomsayers are correct and BIG BEER changes all of the recipes and dumbs down the beer again, the cycle will repeat. People will be drinking tasty, memorable and awesome beer even if they have to make it themselves.

 

You mean pioneers like Eberhard Anheuser and Adolphus Busch back in 1852?

And who also innovated pasteurization in the brewery and refrigerated distribution?

Yeah, you are right, they did set the example of sweat equity and dedication that grew the industry to where it is today.

 

Sure. That's really not the discussion here though. But yes, hats off to them for completely different reasons.

 

Conglomerates started somewhere. But sure, they should be burned at the stake for surviving the last 163 years on such a horrible product.

 

1933 with the repeal of the 18th amendment?

And lest you forget, distribution laws ARE slowly changing with wine setting the precedence for direct to consumer self distribution within state bounds.

 

Sounds like a state derived issue.

Here you have two distinct points of sale. Refrigerated (Grocers, Conv Stores) that are 100% macro. And non-refrigerated (bottle shops/liquor stores) where up until very recently (through the founders deal) were 100% "craft"/imports.

It will be interesting to see what the effects to this will be when/if we abolish our current "two strength" system.

 

Thank you! That is exactly what I was thinking. This is about the antiquated, and ill advised, phony 3 tier system. The system is total BS!

I say LFB! LaissezFaireBaby

 

I disagree. With 3-tier gone, the incentives will be made directly to the retailer who doesn't give two sh!ts who makes a product so long as it is profitable to the retailer. And despite the many criticisms about Budweiser, it does sell.

I, again, disagree. You cannot realize a statement like;

"Net profit at the brewer of Budweiser, Stella Artois and Corona was $2.50 billion, compared with $2.37 billion in the same period a year earlier. Revenues were up 2.3 percent to $12.2 billion, as volumes fell 2.6 percent, but the company's revenue per beer increased by 4.9 percent. Oct 31, 2014"

without successful product.

 

It says profits went up, while volumes fell. That means they are selling less product while making more money, either; they increased prices, or they reduced the production costs. Profits, not the beer is the bottom line.

I agree you cannot sustain a profit if you don't have a product that sells, but I'll bet they are doing everything they can to make the product cheaper while also trying to maintain sales.

Your response seems to support my original comment.

 

This is the same for every brewery business, though; regardless of size.

Show me one, just one, brewery that opens with the business model to lose money in order to stay true to the "craft" (whatever the hell that means).

 

What thread are you reading? I'm being critical of the conglomerate tactics, yeah. Not sure how that translates to "burning them to the ground". To be honest I could care less how they started in relation to how they operate today. Those are two different things. I don't care for their products, but also care less if millions of others do. I'm in favor of breweries who put great beer above profits in their bottom line, in general. (That's not as simple as I state it, of course). And I'm in favor of choice. The tactics being employed by them right now are great business choices, but I don't like them and don't support them because I believe its detrimental to smaller craft breweries.

 

I never disputed that a production industry has concern for profits. ALL industries have concern for profit, except a non-profit of course.

But you elude that it is all about profit and that is my dispute to your statement. An entity cannot realize profits that large without caring about their product. Conglomerates may be able to muscle their profits into a huge percent of the market but if the product is sub-par it will not be profitable.

 

Grocery store around here are close to 80%+ macro and convenience store more like 95% macro ( you can always find Sam and Sierra in the convenience stores). Liquor stores are all over the board and now we have a smattering of tap and bottle shops around town that are mostly craft (most of them still carry GI and other names that have sold to ABI). Then there's the 2 Walmart of Booze stores in town, BevMo and Total Wine. They have it all and in equal share.

 

I agree. I think the 3 tier system is the biggest reason craft has spread beyond it's local market. Without distributors, how many craft breweries would have the ability to push their product beyond their local region?

 

I could ask the same question of you, honestly.

Who are these breweries that foresake profits in the name of "great beer"?

Ballast Point?

I guarantee you that even Russian River would sell the Pliney family for a profitable price. ABInbev just happen to have a model profitable enough to be able to consider such a purchase.

 

But that's an interesting question! How does one define a product being sub-par, especially in the beer world? Because INBev and The Alchemist have VERY different standards for what a sub-par product is.

 

The consumer defines the product. Because regardless of how much shelf space a product occupies, the consumer can still choose to not buy.

It's not like the insurance industry where you pay at the risk of being denied a product. But that is a different topic.

 

Ok. But in that case I'm the consumer and I define the product of Budweiser as subpar. Problem is, millions of others don't. (That's my problem, not theirs). Related to this is that advertising can appeal to the lowest common denominator and still make a buck. So they CAN make a sub-par product and still remain profitable. Perhaps be MORE profitable because they've saved money in the process.

 

Excellent marketing makes the initial sale. Definitely. But it can not generate 12.2 billion in annual revenue of a sub-par product.

I just don't see any justification/validity in your statements of saved money profitability to the detriment of product.

They most certainly save money where they can. But they do this by brokering deals with supply chains, not by cutting corners on product.

ESPECIALLY one that has survived 168 years to develop a reputation based on consistency.

 

Like the tactics of Stone suing The Kettle and Stone Brewing Co., Bell's Brewery suing Innovation Brewery, Lagunitas suing Sierra Nevada, Fate Brewing Company in Arizona suing Fate Brewing Company in Colorado (and vice versa), Dogfish Head suing Namaste, etc. etc. etc....?

(okay, most of these were cease and desists, not actually lawsuits; but my point stands...)

 

Every Nano ever?

 

I'm not actually sure what point you're trying to make. That because some breweries sued others I should be ok with INBev buying up as many craft breweries as possible?

I don't know enough about the specific law suits in question, so I can't really speak to them. But to me it has no bearing on my take whatsoever as its unrelated.

 

You said InBev is using tactics that are detrimental to small brewers.

Well, small brewers are also using tactics that are detrimental to small brewers.

Okay for one, but not the other?

 

Why shouldn't/aren't you?

Haven't they earned the right?