Budweiser embarks on a losing strategy

We have a lot of experience in the microbrew category. Over the years, we have worked with some small microbrews and some of the largest. At the time, they were all interested in growing their market share. Today, the battle has gotten more difficult.

I read an article just this morning that A-B InBev purchased 10 Barrel, a small craft brewer out west. In recent times, A-B InBev has purchased Goose Island and Blue Point. Why, you might ask?

Because the craft brew market in the US is growing, accounting for 17.2% of the US beer market. That’s the good news. The bad news is that the beer market as a whole has declined 1.9% in the last 12 months. That hurts A-B InBev’s Budweiser franchise in important ways because the sales of its flagship brand are off.

But buying small craft breweries is a losing game for InBev – because of the craft brew drinker rather than the beers themselves. You see, creating brand preference in craft beers has proven to be a slippery slope. The craft drinker is simply a fickle customer.

Here is a story to explain just what I mean.

The person who drinks Bud is different than the microbrew drinker.
The person who drinks Bud is different than the microbrew drinker.

A Budweiser drinker goes into a bar (I know this sounds like a joke but it is not). He bellies up to the bar and says to the bartender “I’ll have a Bud.” The bartender answers, “Sorry, we don’t have Budweiser.” And the customer leaves. Bud drinkers, you see, are brand loyal and have told us that Miller or Coors “would never cross these lips unless they are cold, blue, and dead.”

Another customer, a craft brew drinker, goes into the same bar. He asks the bartender, “Give me a Fat Tire.” The bartender responds, “Sorry, we don’t carry Fat Tire” to which the customer responds, “Well, what do you have?” The bartender responds, “We have Moose Drool.” The customer responds, “Great, give me one of those.”

You see, craft beer drinkers treasure the brand values of new and different. They will try anything, prefer new to old and develop few specific favorites. They prefer hundreds of brews. There are ways to benefit from that tendency but no one has adopted any of those strategies yet.

Unless Bud, Miller, Coors or the Sam Adams’ of the world start to reinvest in a brand that represents the highest emotional intensity, you can expect sales of the big three to continue retreating, craft brews to grow only when they expand into new markets and the craft market to become more and more diluted by an ever increasing influx of new makers.

What will A-B InBev do then? I guess buy more and more of an ever-increasing fragmented market.


(Read my blog on the InBev purchase of SABMiller here)