Monday, April 14, 2014

Anheuser-Busch's Latest Counteroffensive: Pricing

As craft beer continues to see growth, it's hardly a secret where the increased market share is coming from. Big beer's so-called premium brands continue to take a beating. As documented here and elsewhere, they aren't taking this situation laying down by any means. They want your money.

Indeed, big beer is working against the growth of craft beer in all kinds of creative and not-so-creative ways. They've gone in and manipulated laws in some states...or they've used loopholes in laws to their advantage. They're fighting against growlers in some states. In others, like Oregon, they're buying up distributors.

Then there's brand confusion, where big beer creates fake craft brands, which they then promote as the real thing via spendy marketing campaigns. The beers don't fool knowledgeable craft beer fans, but they do create enough brand confusion to reel in some new drinkers.

Now there's news that Anheuser-Busch, big beer's biggest bully, is launching a new counteroffensive based on price. The story was first reported in the Beer Business Daily the other day. I don't subscribe...too expensive. But I've received several messages from industry sources filling me in on what's happening.

It seems AB distributors in parts of Oregon and Washington (the reach of the campaign is uncertain) have issued updated price lists containing massive price drops on the Shock Top and Goose Island brands. Kegs that were previously selling to retailers for about $110 per half barrel will now be priced at $56. That's not a misprint. No word on pricing for packaged versions of those beers.

Inquiring minds may ask what AB is up to. Well, it appears they will attempt to use loss leader pricing to gain control of tap handles wherever possible. The low hanging fruit likely includes meat markets where the clientele often likes to drink a lot on the cheap. Buffalo Wild Wings and Blitz come instantly to mind, but they aren't alone. These joints could offer $3 pints of Shock Top or Goose Island around the clock and still make money.

What we clearly won't see is Shock Top or Goose Island taking over any handles at aficionado spots like Belmont Station, Saraveza or BeerMongers. Fat chance. The buyers in those bars would rather have their blood drained by vampires than serve charlatan craft brands to customers. It's not gonna happen...though I do like the juxtaposition of vampires and Anheuser-Busch.

Then there's the distributor angle. How could a distributor offer pricing like this? Even with backdoor subsidies in the form of reduced prices, discounts on shipping or increased advertising support, this kind of pricing would put independent distributors in a bind. Of course, many, possibly most of the distributors offering this pricing are wholly owned by Anheuser-Busch. They have to sell this sludge no matter what. So much for the three-tier system.

There is definitely some consternation on the part of MillerCoors distributors, who are independently owned and generally more interested in growing craft brands than in collapsing them, like AB. They wonder what predatory pricing on Shock Top and Goose Island will do to gateway brands like Blue Moon and Third Shift. They don't want a price war. But maybe that's what they have for now.

Look, the obvious goal of AB's initiative is to gobble up as many tap handles in as many places as possible. It's a rear guard action. These handles are apt to be in joints frequented by a lot of gateway drinkers. Hardcore craft bars aren't good targets. Once they have the business, prices of Shock Top and Goose Island will gradually increase.

It's a cynical strategy. What did you expect? It's your money they're after. That's what they've always been after. All that's changed is they've lost control of the narrative.

12 comments:

  1. i don't care who owns goose island, they make great beers. period.

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    1. agreed. not sure why so many people bash it. Goose's wheat and IPA are extremely drinkable, and are priced properly. Would I take Goose over Ommegang, Troegs, or some of my other favorites? No. However, for a cheap session, sign me up.

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    2. Drinkers like myself don't dispute that the beer is good, but we still don't want to support the company because those dollars go toward lobbying state senators for anti-craft beer legislation. That's why I don't buy them, anyway. But I'm not going to pretend like they don't make solid beer.

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    3. Some Goose Island is good, but they make some real crap too. I blind taste tested an Urban Pale Ale from Goose Island, and I thought it was Michelob Ultra or Bud Select 55. Nasty.

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  2. Goose island will be killed off eventually when it has served its purpose, just like most of Bud's side labels. Too bad its purpose is to kill off small brewers around the nation. Support of them, however good, will eventually hurt our selections and kill off competition. I ask you to please reconsider your support of them.

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    1. Served it's purpose? Killed off? Sorry but I don't see Goose Island becoming the next Tequiza

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  3. Sure do dislike overly competitive business practices that are nothing more than deception. What's wrong with standing on the quality of your product? Oh yeah, they can't!

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  4. Fun fact: if the goose island beer is made in new york (it will say on the package) don't get it. The chicago stuff is what you want, or you could just get good beer instead.

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  5. the author of this article seems to think Third Shift is a gateway to craft beer, while Goose Island is a moderate facsimile and I couldn't find this comparison to be more ludicrous. Sure you won't find Bourbon County or Madame Rose at NYC bars like Tørst, but you'll see them at Rattle n Hum and The Pony Bar. AB-inBev also recently bought our local brewery Blue Point and the general consensus of the Long Island craft beer population is happy for the boys. Better health benefits for the employees and the recipies for the beers won't change like people fear they would with Goose Island. If anything it now makes for a lot more distribution and beer making. Thats why this year you saw 312 Urban Pale, Ten Hills Pale Ale (which I loved), and Bourbon County Propeitor's Stout.
    Goose Island was one of the first leading craft breweries in this country before this still budding renaissance. The person who introduced me into craft beer, my father drank Goose Island, Blue Point, Saranac and Samuel Adams (and New Belgium as well when he studied at the University of Colorado on a fellowship.) These breweries created a product that could be sold to the public and appreciated among those who don't prefer the macro brands but don't seek out whales. As for price gouging, well the craft beer bars arent going to offer Honkers Ale because that would just be silly wouldnt it? But Applebees offering Honkers or Fat Tire is good since I obviously dont like drinking Bud Light when I'm there for half off apps. And if theyre going to be offered now as part of those 2-fer beers then thats awesome too. I can't stand having to choose between buy 1/get 1 crap and full price for pretty decent (and especially when it's a local beer like Blue Point or Long Ireland)
    So I disagree with a lot of this article.

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  6. Hipster beer nerds must die. Bahhahahahahahahhahaha

    That is all

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Keep it civil, please.