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Saturday, August 11, 2018

The King of Crap

Anheuser-Busch isn't a craft beer company. It's famous mostly for brewing up swill that's barely fit for consumption and conjuring up brands that have shelf lives of roughly a nanosecond. Ironically, now comes news that AB is on the verge of becoming the king of craft beer.

That news was reported most prominently by Josh Noel in the Chicago Tribune. Noel, you may recall, is the author of "Barrel-Aged Stout and Selling Out," released earlier this summer. The book explores the transformation of Goose Island Brewing to Gooseweiser. It's great reading and recommended.

The heart of the king of craft story is that industry newsletter Beer Marketer’s Insights just reported that AB surpassed Boston Beer and Sierra Nevada in 2018 to become the nation’s top craft beer company in dollar sales. It's a fairly shocking development because AB had no presence in the craft beer space as recently as 10 years ago. Now this.

There's a catch, though. AB's standing is based on IRI data, which tracks sales in grocery, big box, drug and convenience stores. If you factor in draft and liquor store sales, Boston Beer is still ahead of Anheuser-Busch in volume and dollar sales. But the changing of the guard is inevitable and will happen in the next year or so, evidently.

Anheuser-Busch obviously didn't put itself in the position it's in via organic growth. These dunces made countless attempts to enter the craft space over the years and the best they could come up with was the dreadful Shock Top. Culturally, AB's mantra has always been to brew tepid sludge and shove it down consumer throats by way of its massive distribution network and hard core advertising.

Instead of continuing to pursue a failed strategy, AB changed course and started buying up craft breweries, the first of which was Goose Island in 2011. Today, they have 10 former craft breweries more or less scattered around the country, including Wicked Weed, 10 Barrel, Devil's Backbone, Elysian, Golden Road, Four Peaks, Breckenridge, Karbach and Blue Point.

As documented in Noel's book, the acquisition of Goose Island did not get off to a promising start. Anheuser-Busch had been absorbed by InBev prior to the buyout and the Brazilians running the show had no idea how to manage a craft brewery. They bungled marketing efforts, bullied employees and made a mess of things.

But Goose Island provided a nice learning platform. As Anheuser-Busch bought more craft breweries, its experience at Goose was significant. Lo and behold, it turned out the Brazilians were pretty good learners. They've modified and refined their approach with the acquired brands. To a significant extent, they actually know what they're doing now.

Many were skeptical of what would happen with the acquisitions. But the strategy has been a huge success. The acquired brands continue to act like local and regional players close to home, while some of their most marketable brands are brewed in giant factory breweries and peddled via the AB network in remote markets, helping make up for disastrous declines of Bud and Bud Light.

One of the reasons the strategy has been such a big success is a lack of transparency on the part of Anheuser-Busch and a lack of knowledge on the part of consumers. People who buy their beer in grocery and convenience stores typically don't have as much brand knowledge as folks who frequent beer bars and related craft beer outlets. AB does nothing to help with honest labeling.
Hoping to make it easier for consumers to identify independent beer, the Brewers Association, a trade group representing independent brewers, last summer unveiled a logo that signifies independent status. Adopted by more than 3,600 breweries, the logo isn't available to the Baby Buds or breweries that have been acquired by Constellation, MillerCoors or Heineken.

There are differing opinions on the threat posed by AB's impending dominance of the craft segment. Some highly knowledgeable people in and around the industry have no problem with the Anheuser-Busch game plan, which includes brewing some of the former craft beers in giant factory breweries and using mafia-like distribution tactics to bully retailers and independent brewers.

Needless to say, I do have a problem with AB's strategy. Don't get caught up in the local strategy, in which a brewery, such as Portland's 10 Barrel, makes great beer. That's a diversion. The larger plan is to attain a position of dominance nationally with factory-made beer and strong-armed distribution tactics. Once that's accomplished, the former craft beers will be dumbed down further.

The fact is, the people at AB have never given a shit about good beer. They care only about money. And they'd like to get back to collecting that money with the tasteless swill they're so famous for. Anheuser-Busch truly is the King of Crap, not craft.

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