What does Budweiser want with craft beer?
BE Ab Inbev logos final

Budweiser caused much controversy launching a commercial at the Super Bowl, stating themselves as "macro" and scorning craft breweries.

The market got furious and found it ironic at the same time, since the giant brewery owns some craft breweries in the US. Everyone thought it very strange that the brewery criticizes one Pumpkin Ale Peach in the commercial, because one of its new acquisitions produces exactly this product!

This week they appeared again in the media (at least in South America) due to a purchase of another craft brewery, this time it was Wals, of Belo Horizonte, Brazil.

I say purchase because the company merged its assets with Bohemia (AB Inbev’s company for special beers in Brazil) and the owners of the previous breweries has stakes in the new company. But because of Bohemia’s size, AB InBev’s participation will be bigger and therefore their culture should be the one that prevails at the end of the process.

Now that everyone is calmer, lets look a little deeper into this relationship to try to understand the company’s strategy.

First, nowadays Budweiser (Anheuser-Busch) is no longer an independent company. It was purchased by the Brazilian/Belgian group InBev, (now called AB InBev), the largest beer conglomerate in the world, owners of large global brands such as Leffe, Stella Artois, Corona and Becks, but also leading local brands in other countries such as Skol and Brahma, in Brazil, Quilmes, in Argentina and Cass, in Korea.

This giant is moving to the North American market for craft beers, buying craft breweries, like Elysian (Seatlle), Goose Island (Chicago), Blue Point (Long Island) and 10 Barrel (Oregon).

The group has been following a sistematic fall in Budweiser sales for the last 25 years, leaving a level of 50 million barrels in 1988 to only 16 million in 2014.

Another disturbing fact for the brand is that, according to studies, 44% of the American population between 21 and 27 years old have never tasted a Budweiser.

The companys current situation is not good, leading to the sale to AB InBev. But the owners of AB InBev are known around the world to buy companies with great potential brands and notoriety, give them a shock in culture and management to dramatically reduce costs and enhance the brand to generate more sales.

The group began with a Brazilian brewery called Brahma and through acquisitions and mergers became this monster of the beer world. But even before this group of shareholders had a great track record in other areas: they created their first millions in the financial market and have one of the largest e-retail operation in Brazil.

Today these executives still seek new challenges, new brands with great potential to receive this shock management treatment, making its potential become sales and profit for shareholders.

They own two other major global brands that are going through this process right now: the famous hamburger chain Burger King and probably the best-known brand in the ketchup world, Heinz!

Lookiing from their management model, with excellent financial results in the past, the next steps of AB InBev should not be much different of what we are witnessing in the market.

The group found in the craft beer, a market growing double digits every year, taking space of giant commercial beers, which had almost no growth in the same period.

Between 2010 and 2013, 836 new breweries were created in the United States, totaling more than 2,800 active!

Therefore the probably will continue to invest to put your foot in this market through acquisitions that will shake the market.

I believe that in the short term, we will see more acquisitions in the craft market. It is inevitable.

The big question is whether the new breweries will be free to maintain their creativity and their niche products, so important to obtain success in this market.

Or if they will be forced to optimize profit instead of optimize the quality of their creations!

12/02/2015 17:21:11
Merlin U Ward
Great points, although the macro beer category will likely still prevail for a long while. The macro market is more than 1.5x larger than the craft beer market! A diversified portfolio of AB InBev is certainly their strategy, as it is with any giant. Its why GE, P&G, Sony and Samsung all develop products in different verticals.

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