It looks like Anheuser-Busch InBev (AB InBev) has successfully taken over SABMiller in the biggest beer deal ever. As a brand guy, it is not my place to talk about the many tastes and styles of craft beer but rather to reflect on this merger/acquisition in terms of the bigger brand message. In so many ways, this feels counterintuitive.
The fastest growing segment in the beer market is craft beer. While sales of beer stalwarts like Budweiser and Bud Light have remained flat, the seeming unending number of craft and micro breweries are taking share away from the mega brands that have dominated beer sales for so long.
The beer category is not in the best of health. The sale of beer (not craft beer) has remained relatively flat over the last half a dozen years. Unlike the beer heyday of the 80s, 90s and early 2,000s, when beer ales were escalating, the category is now trying to figure out how to get more alcohol drinkers into the category.
For many an entrepreneur, that riddle seemed to be solved by opening a craft brewery, giving the craft beer a clever name and then producing a dozen styles of craft beer all aimed at enticing an increasingly discerning beer drinker into the fold. However, things have not worked out quite as planned.
While the category of craft beer seems to be leaning toward BETTER beers (in the US, you can lump imports into this group of craft beer as well), the growth has not come from new drinkers but instead through the cannibalization of American lager drinkers (Coors, Bud, Miller and the like). For a while, it seemed that all you needed was an arresting label, a claim to authenticity and a smart alecky brand name and you were all set. The battle was not over having a better tasting beer but rather over the fight for distribution and shelf space. If there was ever an example of if you build it, they will come, it was the craft beer market.
Craft beer did not go according to plan
Things did not work out as the craft breweries had hoped, however. They soon discovered that the craft beer market was fickle, to understate the obvious.
Introductory sales and the winning of industry taste awards does not seem to be the engine of long term growth that it once seemed to promise. The reason for this can be found in the brand anthropology of the craft beer drinker. They have almost no brand loyalty.
They covet whatever is new on the shelf. This could be a new brand, a new style, a new point of origin or a new flavor (the latest craze is dry hopped IPA styles that pack such a floral wallop that drinking more than one makes you feel as though you have just swallowed a florist shop). In the industry jargon, these over-hopped IPAs are known as BIG Beers. So named because they satiate the crave for the style very quickly. And, just like prunes, two may be too much.
This is the rub. The micro-drinker’s brand can be summed up in a word— NEW. They crave it and they will put aside their personal craft beer taste favorite for the excitement of a new brew or brand. Trial does not make a convert in this marketspace that way it does in packaged goods for example. You might get your brew into the rotation of brands but few seem to dominate that rotation. The result? A fragmented market where success comes by being 1,000 miles wide and ¼ of an inch deep. Every new arrival eats everyone else’s lunch.
A world of mergers and acquisitions in craft beer.
What I find so interesting in this mega-merger is the loss of brand equity. One of the selling points, a pivotal one for micro-brews, is the origin and the resulting authenticity it brings to the craft beer itself. So being a Belgium beer or a Boston Beer or a Portland beer has some allure… at least for a short time. But the merger of huge players and their constant gobbling up of micros is the antithesis of authentic. When InBev buys Beck’s, it is no longer looked at with authenticity. It’s not unique or rare. It’s run of the mill and everyday.
The problem is that no one has a REAL brand strategy. Without one, the answer is simply to buy up the competition. Funny that. Soon everyone will figure out that even Corona is no longer Mexican. It might be made there, but authenticity is more than just where the factory site (notice, I did not say brewery) is located.