AB-InBev: Craft beer’s biggest threat

This article was originally published in the Windsor Independent in April 2015. In light of the debate surrounding AB-InBev’s acquisition of Wicked Weed, I’m re-sharing it here. In my view. The problem with this sale is not that Wicked Weed “sold out”, it’s that they sold specifically to AB-InBev.

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AB-InBev: Craft beer’s biggest threat
By Derek Harrison – April, 2015

The latest chapter in the unfolding drama of beer sales in Ontario is the provincial government’s announcement that beer and wine will be sold in supermarkets. Enough writers and bloggers have weighed the pros and cons of this announcement already, so I’m not going to go into it. The real news here is that the government is finally relaxing the Beer Store’s stranglehold on Ontario’s retail landscape, and maybe that means we can stop seeing the Beer Store as the villain and look more closely at craft beer’s real enemy, Anheuser Busch-InBev.

AB-InBev is the largest brewing company in the world, responsible for one out of every four beers sold. They co-own the Beer Store along with Molson-Coors and Sapporo and produce a dizzying amount of the highest-selling beers including Budweiser, Labatt, Keith’s, Corona, Stella, Rolling Rock, and many more.

Craft is often touted as an alternative to the “big guys” – microbreweries as opposed to macro-breweries. The conventional wisdom is that the big guys, like AB-InBev, Molson-Coors, Heineken, SABMiller, Sapporo (owners of Sleeman), are bad and the little guys are good. But not all corporate-brewed beer is bad and certainly not all of what we call craft beer is good.

But AB-InBev’s case it doesn’t matter if the beer is good or not. Their end-game is the systematic destruction of small, independent breweries, and buying their products (or buying anything from the Beer Store, which they profit from) contributes to their campaign to put an end to craft beer.

Us vs. them?

For anyone who’s been interested in craft beer long enough for their starry-eyed wonder to wear off, it’s clear that the term has no easy definition and that the line between craft and not-craft is blurry at best, especially now that some craft breweries have gotten so big they’re becoming more and more like their “macro” competitors.

Still, many craft beer drinkers cling to the David vs. Goliath interpretation of the beer industry, and AB-InBev now seems to agree. Budweiser, one of their leading brands, released a Superbowl ad this year called “Brewed the Hard Way” which, aside from the laughably false title includes the following claims:

  • “It’s not brewed to be fussed over.”
  • “It’s brewed for drinking not dissecting.”
  • “The people who drink our beer are people who like to drink beer.”

With this ad, Budweiser embraced their “proudly macro” status and openly positioned themselves as the enemy of craft beer. (Admittedly, I laughed out loud at the clip of the moustachioed caricature of a beer snob, though some were offended by it.)

Ironically, this ad comes at the same time as AB-InBev is buying up American craft breweries in the face of dwindling marketshare and spending a planned $2.7 million to deliberately misrepresent their brand Shock Top as brewed by a small independent brewer in order to cash in on the craft beer crowd.

Normally I avoid falling into an us-vs-them rhetoric when talking about the beer industry, but this ad got me thinking. Obviously AB-InBev is scared – they’ve spent millions of dollars to both paint craft beer drinkers as the villain and to market directly to them – and what happens when an animal as big and powerful as AB-InBev is cornered? They fight back, and they fight dirty.

Why ownership matters

One of their most powerful tools is their money, which they use to buy up as much of their competition as possible, craft or not. Most recently in the US they purchased award-winning craft breweries Goose Island and Elysian, and rumour has it they’re looking at purchasing SABMiller, the second largest brewing company in the world.

It will come as no surprise to readers that locality isn’t the most important thing to me, I’m much more concerned with beer quality than with where it comes from. But I do believe that it matters who owns the brewery, and in the case of AB-InBev it matters a lot. Now, I’m not trying to defend Molson-Coors and the other big guys, but compared to AB-InBev, they look harmless.

AB-InBev doesn’t care about beer. Stuart Macfarlane, former CEO of AB-InBev UK, once said that he worked not for a brewer, but for an FMCG marketing company that happens to sell beer. It’s too soon to say for Goose Island or Elysian whether the quality of beer is going to suffer, but that has been the case in every other acquisition they’ve made.

  • Stella Artois, though still marketed as a premium brand elsewhere, is now considered a characterless shadow of its former self in its native Belgium.
  • When production of Beck’s, once imported from Germany, was moved to the Budweiser plant in St. Louis, sales dropped by 14% as former fans abandoned the brand.
  • Boddington’s, a storied Manchester brewery with a long local history, was purchased by AB-InBev in 2000, closed in 2005 and demolished in 2007, despite their admission that the brewery was profitable.
  • Belgium’s Hoegaarden was next in line, until massive local protests forced them to leave the brewery open.

Under the stewardship of Carlos Brito, who took the reins in 2005, AB-InBev has cut costs across the board. Brito cut expenses by $55 million per year by switching to cheaper hops and had made the company $50 billion by 2011 by raising prices and laying off over 1,500 employees in North America alone.

Where does the money go?

Now AB-InBev is on a shopping spree. When they purchase regional distributors, they invariably shed competitors’ brands, limiting their ability to compete. When they purchase breweries, it allows them buy up more shelf space at the LCBO and in the soon-to-be beer sections in our supermarkets, making it that much harder for independent craft brewers to reach consumers. Every time an AB-InBev brand goes on tap at a bar, that’s one less tap available for a local alternative.

Then they turn around and use that money to lobby the government to create a favourable landscape for AB-InBev and an unfavourable landscape for local independent business.

Case in point: the beer retail landscape in Ontario is a perfect example of a pro-macro, anti-craft environment. In addition to benefitting from a government that restricts the ability of local businesses to compete with their importation and distribution systems, the owners of the Beer Store directly profit from 80% of all beer sold in Ontario, whether or not it’s their own product.

In order to maintain such a blatantly unfair system, they lobbied the Harris government to pressure the LCBO to sign a non-competitive agreement with the Beer Store in 2000, preventing LCBO stores from carrying anything larger than a six-pack and restricting their sales territories.

And in 2013 and 2014, AB-InBev and the Beer Store contributed nearly $400,000 to the three main political parties as well as donating the rental of the Labatt House in Queen’s Quay Terminal for political fundraisers, free beer included.

Shitting on craft

Dean, the owner and editor of the Windsor Independent, often pressures me to be topical. As a result, topics that I really want to talk about often get put on hold in favour of more current, time-sensitive stuff, which has been the case for the last few articles I’ve written.

The problem is that I don’t want to write topical stuff. I’m a columnist not a journalist, and besides, because of the lead time of this magazine any real beer news has been discussed to death in the blogosphere by the time my articles get published.

But this topic, one I’ve wanted to cover for a long time, is an easy one to tie into something current because AB-InBev manages to make the news at least once a month with their latest publicity stunt, takeover bid or (preferably) some kind of scandal.

Their most recent stunt was to stage a blind beer tasting in a bar (not a bar that’s known for its beer, mind you) in Brooklyn. They gave people free samples of Budweiser, without telling them what it was, and according to the video at least 10 or so people actually liked it.

It reminds me of Pepsi’s marketing campaign from when I was a kid, where they’d go to some boardwalk and have people blind-taste Pepsi and Coke side-by-side and choose which one they preferred. These stunts are great because you can spend all day doing it and even if 95% of the people dislike your product, you’ll still have enough footage to make a commercial that makes you look good.

But the point is, in AB-InBev’s case it really doesn’t matter whether the beer is any good or not. Goose Island is still good beer (for now) but every dollar you spend on it, or on Boddington’s, or Shock Top, or Labatt Blue is a dollar that will go towards maintaining the Beer Store’s near-monopoly, to purchasing and dismantling another independent brewery, or to keeping locally-produced craft beer off of the shelves and out of the bars.

Craft beer as we know it began in the 70s as a response to the extremely limited variety of beer available in North America. This lack of variety was a result of the conglomeration after Prohibition of many local, regional and national breweries into just a handful of international corporations who cut costs by lowering the ABV, substituting corn and rise for barley, and dropping most of the hops. AB-InBev’s endgame is to return to those glory days, and I certainly won’t help them succeed.

 

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