10 November 2012

Some Beer Industry Thoughts

I was sitting at my dining table, enjoying a Saint Arnold Endeavour, bemoaning what it took to get a solitary case of this Ambrosia to Paradise half a year after finding it in Dallas.

As my thoughts began to drift, I began to think about the megalithic sizes of ABInBev and MillerCoors, and how silly their names looked with random capital letters, and then chalked that last bit up to how much Endeavour I'd had.

Ahem.

Brewing Industry Rule #3: Breweries Always Consolidate

Back in the first Robber Baron days (We are entering the second Robber Baron days, thanks to Citizens United.), an entrepreneur would buy up competing companies and fold them into the purchaser's brand. So if Carnegie bought Jeff's Steel Plant, Jeff's Steel plant became U.S. Steel. If JPMorgan Chase bought Jeff's Bank, it would become Chase Bank.

In pre-Prohibition days in San Antonio, Pearl Brewing and Lone Star Brewing bought out smaller breweries like the Borg assimilating a planet, adding the smaller breweries biological and technological distinctiveness to their own. Resistance was futile. All those old brands disappeared to make way for Pearl and Lone Star.

After Prohibition, the same trend continued. Bigger breweries assimilated smaller breweries, killing off the assimilated's brands to focus on the bigger brands. This lasted until the turn of this century, when Miller Brewing (pre-MillerCoors) bought Celis Brewing, then killed the brand to create more shelf space for Miller Lite. (See my book for details. A new edition is coming soon.) It was a perfect arrangement: Buy out your competitor, then put your beer in his space.

See? Simple.

Today, however, as the Big Two are buying smaller breweries and keeping their brands, trying to convince you and me that, for example, new Rolling Rock was as good as pre-acquisition Rolling Rock produced in another brewery.  They are trying to cash in on the Craft Beer cachet, giving us Blue Moon, Shock Top, and the various Michelob brands.

I recently saw an article that said that as Budweiser sales dipped, ABInBev responded by cutting jobs to keep the brand profitable. Meanwhile, the brewery is going to introduce Black Crown, a higher alcohol version of Budweiser to try to shore up sales.

And when Bud and Bud Light sales fall again, they will lay off more people.

If Carlos Brito, CEO of ABInBev, is so smart, why doesn't he eliminate brands?

Because he wants us confused. He's hoping we'll keep buying the beer we're familiar with, and the beer that is new, and the beer he's gonna come up with next so he can keep market share.

Carlos, just make better beer.

posted by Jeff Holt at 08:00

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