How Big Beer Brands Are Capturing Craft Beer Market Share

By Bill Sysak, Foodable Industry Expert

Part Two of a Three-Part Series on the State of the Craft Beer Industry in America
Read Part One here.

In today’s report, I’m going to tackle what the big boys of the American brewing industry are doing to combat the rise of craft beer. You know, the ones that make fizzy yellow beer, otherwise known as “American Light Adjunct Lager.” The ones that have their cans turn blue when almost frozen so you can’t taste the missing flavor, or that have big furry horses kick field goals during the Super Bowl commercials to entice you to help them regain their brand’s lost market share. 

Who Are the Big Boys?

Actually I’m going to focus on the biggest, baddest one of the bunch: A-B InBev! Who is A-B InBev? They are a Belgian company run by Brazilians whose biggest brands prior to their hostile $52 Billion takeover of Anheuser-Busch were Stella Artois and Germany’s Beck's beer. They have a proven track record of maximizing profit for their shareholders with the minimum outlay of money and effort. Great investment, if not necessarily great beer. 

They do this not through creating new and better beer brands but by acquiring brands and making them a lowest common denominator product. They continue to acquire brands from around the world, and have become the largest brewing concern in history. They control 48% of the U.S. market, are the 2nd largest in Russia and the 3rd largest in China. They control over 200 brands and want more! 

I wouldn’t have a problem with that if the beer produced from the breweries they purchased stayed the same, but it doesn’t. Take Beck’s beer for example. In 2012, A-B InBev chose to brew Beck’s in Missouri for the U.S. market. Loyal followers tasted the difference, and Beck’s sales in off-premise accounts dropped by 14%. They did the same thing to Bass and it lost 17%.

A Change in the Market

Now they have set their sights on the booming craft beer industry in America. The U.S. beer market as a whole has shown virtually no growth in volume over the last 5 years. In stark contrast, the craft beer segment has grown every year and grew 17.6% by volume and 22% by dollars in 2014. During the 3 year period of 2009-2011, Bud Light lost 3% of its market share and Budweiser a whopping 13%. Gone are the days of walking into your local grocery store and seeing a few imported pilsners and 11 different SKU’s of Natty Ice. Now it is commonplace to have over 50 breweries each with multiple SKU’s available to the average consumer.

Breaking Off a Piece of the Craft Beer Pie

So what are the big guys doing to recapture market share here at home? How are they trying to catch up to the awakening of the American palate that has slowly been taking place over the last three decades? By buying craft breweries of course! A-B InBev is systematically purchasing craft breweries. 

Since 2011, they have acquired Goose Island out of Chicago, Blue Point in New York, and most recently two Pacific Northwest breweries: 10 Barrel out of Bend, Oregon and Elysian from Seattle. They are actively looking to purchase breweries in Florida & central California, L.A., and San Diego will be next. 

Of course, it is their right to grow their business, and acquisition is an accepted business practice, but why have they spent close to $200 Million to acquire four little craft breweries that account for less than 1% of their annual production? It is cheaper than creating quality beer at their own breweries. 

By purchasing breweries in major craft beer markets, they not only get to reacquire more SKU’s for the 13 distributorships they own and their 500 distributor partners in off-premise locations, they can now find their way into on-premise accounts with tap handle placements of their newly acquired brands when they couldn’t gain entry before with their fizzy yellow brands. How else can they get into the Oregon market where 60% of all draft beer consumed in Oregon is craft beer? Buy a brewery, that’s how. 

I chose to enlighten you about A-B InBev instead of SAB Miller or Molson Coors today, but rest assured they all want a piece of the Craft Beer pie. Stay tuned for the third and final part of the series, where I will talk about the future of craft beer.

 Cheers!