WSJ article on AB InBev distribution incentives

[Moose_MI]

I didn't see a thread on this but if there is one please let me know.
I thought this was interesting...

http://www.wsj.com/articles/craft-brewers-take-issue-with-ab-inbev-distribution-plan-1449227668

 

[Moose_MI]

...and if not wsj subscriber..

http://www.bizjournals.com/stlouis/...raft-brewers-concerned-over-new-a-b-nbev.html

Or

http://consumerist.com/2015/12/10/a...more-concerns-of-a-stifled-craft-beer-market/

 

[dkeller12]

I guess they had to figure out how to increase the slowing sales and since the crappy beer they produce cannot do it on its own they had to flex their muscle a bit. One would hope that consumers would realize what is happening here but the people who regularly drink their "beer" probably don't know anything. My question is, how is this not a monopoly?

 

[madscientist451]

The ABInBev incentive program is designed to boost their sales by paying for distributors promotional and advertising costs. It doesn't matter, their market share will continue to decline as more and more producers enter the marketplace. What we haven't seen yet in the beer market is much price competition. One of the first things InBev did when they bought Anheiser Busch was to raise prices. This of course helped their competitors, why should I buy Bud when for a few bucks more I can get get some decent craft beer?
ABInBev doesn't want to lower prices, even though their scale and cost of goods gives them room to do so. At some point, basic economics should kick in, as more and more supply comes close to demand. InBev will probably start a price war, which will cause way more problems to highly leveraged producers (Ballast Point $1billion debt?) and could eventually produce a shakeout in the industry.

 

[Moose_MI]

You can buy a case of bud for $16 or a 12 pack founders all day IPA for $15 and it's not hard to spend $10 or more on a 4 pack of a founders stout or something similar. I'm not sure that discounting is a winning strategy for InBev and may be why they're moving to tactics that involve influencing distributors.

 

[specharka]

I'm not confident this is going to reverse the trend away from BMC. Craft sales are going to continue expanding for the foreseeable future. If AB InBev wants to minimize revenue losses they should refocus their efforts on brand acquisition instead of flexing their distribution muscle.

Also, some perspective would be nice; $1.5M is tiny. AB InBev makes that much about every 20 minutes. This is just a drop in the ocean.

 

[Brewernaut51]

I'm not confident this is going to reverse the trend away from BMC. Craft sales are going to continue expanding for the foreseeable future. If AB InBev wants to minimize revenue losses they should refocus their efforts on brand acquisition instead of flexing their distribution muscle.

Also, some perspective would be nice; $1.5M is tiny. AB InBev makes that much about every 20 minutes. This is just a drop in the ocean.

Problem with that is a lot of craft beer drinkers will shun brands associated with InBev just out of principal.

I don't like the aggressive stance they take against the little guys. The overwhelming majority of beer drinkers still drink only light lagers. If some one wants craft beer that's what they'll buy. Generally I'll turn to cocktails before buying Bud if something good isn't available.

Craft breweries compete with each other more than they compete with InBev and for the most part they have nothing but respect for each other.

This distribution thing is one of the weirdest things about the industry. One of the guys in my LHBC brews for a small Brewery in town and he said the distributors do all kinds of annoying stuff like telling stores that there's a shortage on their Helles and it's not available even though it's their flagship and is always available.

 

[ktblunden]

The problem with the distribution incentive plan is it's going to pack shelves full of craft brands owned by ABI at the expense of smaller, independent breweries.

 

[BreezyBrew]

The problem with the distribution incentive plan is it's going to pack shelves full of craft brands owned by ABI at the expense of smaller, independent breweries.

Sounds like exactly what they want. ********.

 

[slym2none]

Generally I'll turn to cocktails before buying Bud if something good isn't available.

Same here.

Strangely enough, I forgot I have family ties (in a way) to A-B. Relatives on my dad's side of the family own a major distributor in the RDU area of NC, Long Beverage. I am cousins to the Longs, and we just had the Long Family Christmas Dinner this afternoon at - where else - the Long Beverage corporate dining room. I wanted to corner my great uncles who own it and ask about if they are taking the incentives offered, but decided not to talk business with them at a family function.

I did find out that the Devil's Brewing Co. (or whatever it's called) is owned by A-B. Not a shock there, another "crafty" beer coming from the big guys trying to push the little guys out.

On a side note - I am STUFFED! *burp*

 

[zmanzorro]

The problem with the distribution incentive plan is it's going to pack shelves full of craft brands owned by ABI at the expense of smaller, independent breweries.

This.

I mostly see this only happening at general grocery stores or other places where their main focus isn't beer. They won't know real craft from ABI craft and will try and get those incentives. Hopefully they realize what their customers really want.

Honestly, I mostly buy my beer at specialty and liquor stores, so this doesn't personally hurt me, unless breweries start going out of business.

 

[Brewernaut51]

This.

I mostly see this only happening at general grocery stores or other places where their main focus isn't beer. They won't know real craft from ABI craft and will try and get those incentives. Hopefully they realize what their customers really want.

Honestly, I mostly buy my beer at specialty and liquor stores, so this doesn't personally hurt me, unless breweries start going out of business.

Ours (Meijer, kind of a regional version of Walmart only a lot better) doesn't have a huge problem with this. They have it ordered from macrobrew at one end to the little guys at the other. The stumbling point is the middle of the aisle. That's where they have the big independents like Sierra Nevada and Boston Beer Co. mixed with the corporate owned companies like Goose Island and Leinenkugels. Gotta be careful if you're the type that strictly buys from independents there.

Michigan's got a pretty healthy craft industry. It's gotten to the point where I rarely even buy out of state anymore. That keeps me pretty safe. I never used to care much but stories like this incentive program or learning about how competitors were stamped out by the big guys in the first place makes me hesitant to give the macrobreweries any money at all.

 

[Geronimo13]

Ours (Meijer, kind of a regional version of Walmart only a lot better) doesn't have a huge problem with this. They have it ordered from macrobrew at one end to the little guys at the other. The stumbling point is the middle of the aisle. That's where they have the big independents like Sierra Nevada and Boston Beer Co. mixed with the corporate owned companies like Goose Island and Leinenkugels. Gotta be careful if you're the type that strictly buys from independents there.

Michigan's got a pretty healthy craft industry. It's gotten to the point where I rarely even buy out of state anymore. That keeps me pretty safe. I never used to care much but stories like this incentive program or learning about how competitors were stamped out by the big guys in the first place makes me hesitant to give the macrobreweries any money at all.

I think you are right about the localized beer. With so many breweries that are local to someone's area, there are usually lots of choices from a good beer store. Perhaps I'll never get Figueroa Mountain (Buellton, CA) out east here in PA but I can easily get Weyerbacher. Gives you lots of reasons to visit breweries when you travel.

 

[fuzzy2133]

With inbev buying up distributors and now this, it might be another good point on how the 3 tier system is flawed and lead to its removal.

 

[GilaMinumBeer]

The problem with the distribution incentive plan is it's going to pack shelves full of craft brands owned by ABI at the expense of smaller, independent breweries.

So then, nothing changes?

 

[BreezyBrew]

So then, nothing changes?

Right but this shouldn't happen given the expansion of craft beer and the demand for it. Since InBev has more money than God they control the market up to the point they will have negative consequences.

 

[Magnus314]

I can't believe they weren't doing this before. Sloppy work AB/Inbev...

 

[Brewernaut51]

I can't believe they weren't doing this before. Sloppy work AB/Inbev...

Now that's funny.

 

[RedlegEd]

I believe the most telling influence/impact of the "big beer" distribution channels to stores around here, is one of the reasons we're seeing a huge surge of growler bars/stores in the Memphis, TN area. Almost all of them provide really good local/regional craft beers (with no BMC on tap.) Other than buying some seasonal "craft" (i.e. Sam Adams) cases of beer at Costco (and brewing my own,) I pretty much get all my "store-bought" beer from local growler shops. Of course, whenever I get to Hershey or New Orleans, I always make sure to visit Troegs or Abita to bring home some of their great beers. My job pretty much keeps me on the road 40+ weeks a year, which really provides a unique opportunity to sample many of the truly wonderful products the local breweries offer. For me, the trick is to go small. If you go to Kroger/Walmart/Target/etc., or another big name store, you're stuck with who can influence/buy the shelf space. A smaller place will often defer to the wants of their customers vs. the directives of the corporate purchasing wonks and therefore have much better offerings. That quality may be more expensive, but then again, a BMW is more expensive than a Kia. Just my $0.02.

 

[mattdee1]

If the strategy is to minimize availability of good beer to increase the sales of swill, I wonder how well that will work.

I know this much: if I walk into a store to grab a few singles of tasty brews, only to find they have been displaced by swill, I will just turn around and leave. If I absolutely must drink something that day, I’ll go somewhere else to shop or find something else to drink. I’m not in that store to buy beer for the sake of buying beer; I need something to compel me to buy it.

 

[bobeer]

If the strategy is to minimize availability of good beer to increase the sales of swill, I wonder how well that will work.

I know this much: if I walk into a store to grab a few singles of tasty brews, only to find they have been displaced by swill, I will just turn around and leave. If I absolutely must drink something that day, I’ll go somewhere else to shop or find something else to drink. I’m not in that store to buy beer for the sake of buying beer; I need something to compel me to buy it.

Totally agree. I've recently stopped buying commercial beer to drink at home altogether. I'd rather spend that money on ingredients to brew what I want to drink.

But when I have to buy beer at the store, and the store doesn't have anything that jumps out at me, I don't buy anything. I'd rather save the money and dig into my cellar stash then buy something I'm not 100% into at the time. Luckily I live in an area where there's a ton of little breweries and bottle shops. So even if I just want to drink a couple beers I can go to a shop and buy "Lucy's" for a couple bucks a bottle.

 

[Brewernaut51]

Totally agree. I've recently stopped buying commercial beer to drink at home altogether. I'd rather spend that money on ingredients to brew what I want to drink.

But when I have to buy beer at the store, and the store doesn't have anything that jumps out at me, I don't buy anything. I'd rather save the money and dig into my cellar stash then buy something I'm not 100% into at the time. Luckily I live in an area where there's a ton of little breweries and bottle shops. So even if I just want to drink a couple beers I can go to a shop and buy "Lucy's" for a couple bucks a bottle.

I used to have time to brew that much. 3 kids in 4 years and now I can barely keep up with my own consumption. Maybe in a few years when the youngest starts preschool I can go back to just drinking my own beer.

 

[bobeer]

I used to have time to brew that much. 3 kids in 4 years and now I can barely keep up with my own consumption. Maybe in a few years when the youngest starts preschool I can go back to just drinking my own beer.

I hear you man... I have a 1 1/2 year old and a pregnant wife. We also just went under contract on a house over the weekend. I've started to brew 2.5 gallon half batches. It costs much less and it takes less time to brew. Plus I can brew inside on the stove while watching the kid and helping the wife with whatever she needs. It's a tough juggle but I can make it happen. I've had to cut back on the beer consumption though to make it work.