Sunday, June 15, 2008

Will InBev's Bud hurt craft brewers?

From Jeff Alworth at Beervana come these observations about international conglomerate InBev's $46 billion bid for Anheuser-Busch, the third-largest foreign purchase of a U.S. company but the biggest all-cash deal.

As the hops and barley crisis have shown, small breweries can be seriously affected by brands against whom they don't compete. The hops markets, in particular, are global, so the Lucky Labs [brewery/pub in Portland, Oregon] of the world have a stake in this thing. Craft breweries have little juice to swing deals for hops, and many of the little guys are left on the outside. With InBev controlling some massive percentage of the world's beer production, this seems like a scary proposal.

Then there's the institutional advantages afforded by having such a huge stake in the market. Recall my recent post on distributors--InBev's bid would make A-B distribution deals all that much sweeter. In markets on the West Coast this won't be as big a deal as it will in smaller markets.

Finally, what about breweries in other countries? If InBev is trying to increas Bud's reach internationally, that means aggressive marketing that will overwhelm many small, venerable national brands elsewhere.

The rapacious tendencies of InBev might become very much in evidence at the wholesale/retail level. Overt and covert pressures might force many craft beers off the shelves, especially in supermarkets. Independent wholesalers could be hurt in much the same way.

1 comment:

  1. American Budweiser* has already been so heavily promoted in so many major markets, I can't see how InBev will be able to increase its reach. For example, in Britain it enjoys a decent market share (~3%?), but there's no real scope for growth - savvy people are wise to how poor a product it is taste-wise, and don't like the brand. You only see it in dodgy pubs and in supermarkets for low prices. In Germany, it seems to be utterly loathed - witness the response to the attempts to force it on football fans at the last World Cup.

    Moreover, despite their might, InBev are proving very poor when placed on the back foot. They've scrambled around desperately to preserve Stella Artois' top dog status in the UK - surely the biggest market for that beer - in face of the "wife beater" tag, yet have met with ridicule and a continued slide.

    On that basis, I can't see that they'd want to promote the American Bud brand more heavily outside of the US - and if they do, I think they'll fail. Presumably they just want to reap the benefits of its commanding market share in your country.

    * note that here in the UK, and indeed pretty much throughout Europe, Budvar is labelled as "Budweiser Budvar", so the "American" prefix is necessary.


Comment here ...