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Thursday, February 22, 2018

Golden Road and the Abyss Ahead

It's funny how dots sometimes connect themselves when thinking about beer and, more specifically, the beer business. Thinking up things to write about isn't always easy. Then you get slapped in the face and a point comes instantly into focus.

Long ago, I set up a Google alert that funnels beer industry news into my inbox. That intel is typically pretty light compared to the pro newsletter stuff I occasionally receive and read thanks to generous "friends" in the business. But sometimes the Google bots surprise.

The other day, into my inbox came a Sacramento Bee article outlining Golden Road Brewery's plan to open a brewpub in Sacramento. You may be aware that Sacramento is somewhat behind the craft beer growth curve in California. The state has more than 900 breweries, but just 58 of those reside in the Sacramento area and roughly 50 of those have opened since 2009.

If you pay attention, you likely know Golden Road does not exist, at least not in its original independent form. Just as 10 Barrel, Elysian and Goose Island no longer exist. All of these breweries were subjugated by Anheuser-Busch in recent years and are, in effect, baby Buds, members of the High End portfolio. Denials are alternative facts.

It's not hard to figure out why Golden Road is opening in Sacramento. It's an underserved market with a lot of low hanging fruit. Golden Road, which originated in LA, is arguably a better fit for Sacramento than 10 Barrel or Elysian, both founded in the Northwest. They'll go in there and market themselves as a California brand. Consumers will descend like swarms of locusts.

Pubs are just one prong of Anheuser-Busch's strategy to shove independent craft brewers into the shadows. With its mainstream brands mostly in freefall, AB had to come up with a viable survival strategy. The strategy, which came into focus over a period of several years, was to partner with and, eventually, buy a collection of craft brands.

By the way, AB now owns enough craft brands to create significant disruption in the market. It need not buy any more, though I continue to believe it will buy the Craft Brew Alliance, of which it is already a partner, before late summer. As discussed here more than once, that is strictly about Kona, which has huge national and international potential. But never mind.

The primary reason AB wants pubs is to establish strategic outposts in areas where the captured brands are not readily known. That's why 10 Barrel has pubs in Denver, Boise and San Diego. Pubs help lend local legitimacy to brands. Consumers in many cases don't know or don't care that 10 Barrel or Golden Road are part of big beer.

Of course, the pubs are largely a sideshow. The main thrust of AB's strategy is being played in retail, primarily grocery stores. That's where the majority of beer is sold in this country and that's where Anheuser-Busch is diligently working to reduce independent craft brands to secondary, redheaded stepchild status. And the strategy is unfolding nicely, unfortunately.

I got a nice reminder of that in the beer aisle on a recent trip to Fred Meyer. What's occupying
the prime shelf space? Golden Road, 10 Barrel, Elysian and other zombie AB brands. Beer from independent craft breweries was relegated to a small area off the beaten path, where it's less likely to be seen or grabbed impulsively.

Sad to say, this is the future of retail beer. With its High End brands and the power it wields in grocery via distribution, pricing, etc., Anheuser-Busch aims to gradually squeeze independents out. Except for beer specialty stores, this is the emerging reality.

Otherwise known as the abyss ahead.


2 comments:

  1. I believe you, grudgingly, but I'm also rooting for the redheads. I believe in a strength and ability to speak to enough of the right consumers for the faithful to hang in there.

    ReplyDelete
  2. We're all rooting for the redheads. Well, most of us.

    ReplyDelete

Keep it civil, please.