As the KLF said in 1987, "What The Fuck Is Going On?".
I saw ABInBev's two recent acquisitions described as a rampage on Facebook - it's hardly a rampage, but it is significant. And it's also unlikely to be the end of it - more acquisitions (or mergers, if you prefer) will come, that's for sure. But what's really going on here?
Much has been made of the big players suddenly realising that they have been left behind, but left behind in what sense? Craft beer has finally become cool, but the big brewers don't care about that. They genuinely have no desire for craft beer credibility, what they want is to somehow revive their falling market share and hard pressed margins.
It's true that the more craft breweries that are acquired by the big players, the less route to market there is for anyone else. There is only a finite (and shrinking) amount of bar space, and no matter how many craft bars open, the linear mileage of bar top is shrinking, getting more crowded.
It's also true that, historically, great beers have been ruined by accountants gradually cutting corners, reducing the quality of the ingredients, dropping %abv to pay less duty but not passing the saving on - all tiny things that gradually add up to royally bastardise a once great beer. Ask Pete Brown about Stella Artois. I'm not so sure that this is the particular tactic with this round of acquisitions, and we'll return to why shortly.
I also made a throwaway comment on the back of the Ballast Point acquisition that (a) they'd overpaid massively (recouping in 30 years or so at current size) and following on from that (b) how's everyone's hop contracts looking? Because the thing is, Ballast Point aren't going to remain static, they are going to grow hugely. Maybe the quality will stay the same, maybe it won't - that's not the issue right now. Ballast Point - and Goose Island, and Camden, and whoever else gets hovered up - will grow massively, and will need lots of hops to do that. Lots of hops grown expensively under license, that will only get more expensive, even as more acreage is planted.
Ironically, this could be the thing that sees Big Craft prosper. Big Craft wants to acquire small breweries with big ideas, big reputations and crucially, big margins. I'm guessing that a tipping point has been reached in the boardrooms where no more savings can be made, products cannot be squeezed any further to reveal greater margins. One of my mantras as a retailer was don't cut costs, add value. If people can taste that a product is superior, they will happily pay more for it. Sure, in global terms, that's a niche market, but that's where the growth is, and that's what Big Craft is all about.
So my prediction is that breweries aren't being bought up to be dumbed down, run down and closed down, but are genuinely being bought to grow and produce flavourful craft beer on an industrial scale. Sure, there will be a monopoly created as Big Craft takes up more of the available bar space, and swallows up all the hops that little craft needs. But Big Craft is storming the barricades and launching a counter-attack on the revolution.
And what do we think about that?
so it’s 1849.
ReplyDeleteBut tonight I'm gonna party like it's 1899
DeleteBeen spending most our lives living in an Amish paradise...
DeleteBeen spending most our lives living in an Amish paradise...
Deleteeh, what happened in 1899 apart from the Boer War and IPA being invented by Martians in HG Wells’ story? All this frenzy is more a case of those who like to micro-manage their thoughts on beer falling prey to a version of Saint Anthony's Fire. If the beer is good it will be good, if it’s not it won’t be.
ReplyDeleteRight, like how when bands sign to major labels, they always stay great and true to their founding principles? Puh-lease!
DeleteClash, CBS?
DeleteBTW Zak, the 1849 comment referred to ‘Big Craft is storming the barricades and launching a counter-attack on the revolution’, which as you probably know 1848 was the Springtime of Nations with national revolutions across Europe, which were then supressed in the following year (probably by members of the Busch family before they went to the US).
ReplyDeleteas eny fule kno
DeleteOn the one hand I seriously fear that there's no intention to remain 'niche'. On the other hand I remember that, as well as banging out vast quantities of white rum, Bacardi owns five distilleries in Scotland that are all about quality. We can only hope that the brewers manage something similar.
ReplyDeleteThat's a good analogy. Here's hoping....
DeleteThe point about hops is very well made. For some time now I've been saying that 2016 and 2017 will be big crunch years for hops. Could well see the wheels fall of the wagon of brewery expansion perhaps. In addition some existing breweries may seriously struggle.
ReplyDeleteThanks John. Interesting times ahead, for sure.
DeleteI think it is all quite complex. It perturbs me though the thoughts along the lines that "if the beer tastes good, who cares who makes it?" - on a superficial level, OK, perhaps. But, it WILL get dumbed down. It will. Those of us who strive to not dumb down beer will be pushed aside. Contracted hop supplies, deals done in the routes to market, and just the space on the bar thing.
ReplyDeleteAlso, beer BRANDS, and I almost hate even using that word to describe my favourites, but brands they are, become known as worthy of those with a little more finesses. The general punter in the street doesn't care who makes them, and will buy into the apparently small brands, like Meantime and Camden. They will appear on bars of my customers outlets and it will be harder for me to get in. And then once I've given up on the whole job as a lost cause, these big multinationals, that do not care how good the beer tastes will be in a position to cut the costs of the ingredients and so the favours of the beer. Once it is known as a premium, sought after brand it'll be dumbed down when us, the little guy who creates the interest and competition is crushed out of existence.
Yeah, I'm always amazed that apparently sensible, concerned members of society will countenance such ultimately destructive choices like shopping on Amazon, eating at MacD's, and so on. I've no doubt the independent sector will carry on, but it's going to be a rocky few years while it finds its place again now a lot of it has crossed over and gone big/mainstream
DeleteMight have a point there Davey. "Don't give up on cask then" might be worth a thought?
ReplyDeleteI'm still confused about how championing a means of dispense is going to change anything. Were you cheering Molson Coors on when they bought Sharp's, as that would increase cask beer's market penetration?
DeleteNice summary Zak – I like the music analogy. In many ways, I'd liken the whole scenario to the vinyl record revival. Similarly to how major labels have begun jumping on the band waggon and strangling the route to market by clogging up the few remaining record plants world wide – we could now see the major brewers depleting limited hop acreage.
ReplyDeleteSo perhaps, just as we're now seeing some independent labels open their own pressing plants, perhaps we need independent only hops? Just a thought.
You might be right, but of course Citra (for example) is a commercially very valuable licensed crop. In the decade that saw Martin Shkreli break into big pharma and hike the price of an antimalarial drug by over 5000%, I can't see that happening any time soon.
DeleteI think my point is that for a cutting edge brewer like Dave, he might not wish to give up the traction that cask might bring him in certain outlets. Not suggesting anything wider, nor suggesting he should produce cask only.
ReplyDeleteMind you Zak, cask penetration is one thing, Doom Bar another, but Doom Bar can lead to better things once cask is on the bar. We've seen it happen here in my neck of the woods.