• About Tom Dougherty

    Tom Dougherty CEO, Stealing Share

    Tom Dougherty is the President and CEO of Stealing Share, Inc., and has helped national and global brands such as Lexus, IKEA and Tide steal market share over his 25-year career.

    An often-quoted source on business and brands, he has been featured recently by the New York Times and CNN, discussing topics ranging from television to Apple to airlines.

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Craft beer. Is More Always better? Ask AB InBev.

AB InBev's answer to craft beerIt 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.

SAB Miller is not craft beerCraft Beer may be increasing. But…

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.
Moose Drool is craft beerFor 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

Guinness is not a craft beerThings 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.

Fat Tire is a craft beerThis 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.

Becks is not a craft beerWhat 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.

(Read our Market Study of the beer industry including craft beer here)

(Read another broad look at the beer category here)

(Read my earlier blog on Budweiser here)

5 thoughts on “Craft beer. Is More Always better? Ask AB InBev.

  1. There is not an exact parallel between the decline of the economy and the rise of “craft breweries” but the concept of inexpensive entertainment for the consumer is definitely a factor. Like many other people – I love looking at the labels and trying to decide if somehow the designer “visually matched the flavor” of the beer inside and if I should take the risk and purchase a “new” package?
    Most of the time I am disappointed but that doesn’t keep me from trying again. It’s FUN and most consumer products that are fun are also expensive. Even a Super Soaker water gun goes for $19 something. A 6 pack of craft brew goes for about $11 and I am willing to bet a lot of the same people who drink beer buy Super Soakers.

    There is an excellent craft brewery (Cricket Hill) that’s close enough to me to make the short drive worth the effort. Every Friday evening they host a tasting event for their latest flavors and sell 6 fl. oz. for 25 cents. Those are 1970’s prices. It also has the charm of being a local business that provides an alternative venue to the bar scene. It’s very much a warehouse atmosphere with committed beer drinkers. The male to female ratio is usually about 3-M to 2-FM. The women there love beer and they can drink – period.

    I think this is a trend that has no perfect answer for the mega-breweries. You pretty much said that in your essay. However – even with all the trying and tasting I do sometimes find a brand that I won’t stray from. I will go back to that brew pubs product – even if local pubs that carry Cricket Hill, disguise it with their own moniker. In other words I know enough about Cricket Hill’s business practices to be aware of the fact they brew special batches for a local pub that sells it as their own. It’s the best lager beer on tap in that place. So in my opinion Cricket Hill is making the concept work by producing a unique, local, drinkable product. I can’t be certain if it’s because they do it in small batches or it’s just a quality draft that would taste the same even if AB produced it in grain silos. However – I also don’t really care who makes it – I just want it to taste the same and stay affordable. If someday I look at one of Cricket Hills labels and the fine print says “brewed by AB” – I am fine with that knowledge.

    1. That is an interesting insight David. We found the idea of trying a new thing, as an inexpensive form of entertainment, to be even more pronounced in bars. The risk of a bad choice is reduced even more when the risk is only one beer rather than a six pack.

  2. A super article but ruined just a TINY bit for me due to the lack of you having forgotten to add the last word in the entire article above.
    … It might be made there, but authenticity is more than just where the factory site (notice, I did not say brewery) IS.

    … or

    maybe two words? …

    … It might be made there, but authenticity is more than just where the factory site (notice, I did not say brewery) IS LOCATED.

    I am not trying to be picky but, rather, simply pointing out how a TINY bit of polish could be added to a great piece.


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