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.

 

Bringing Back LCBO Alcohol?

I like the LCBO. It’s not without its flaws, but living in Montreal has really made me appreciate the LCBO’s attitude toward beer. Quebec is 99% devoid of any non-Quebecois craft beer. For 360 days per year the beer culture is isolated, the 5-day Mondial de la Biere festival being the one and only time local drinkers can expand their horizons.

Having said that, a recent suggestion that the LCBO should resume distilling their own spirits, a practice that ended in 1996, strikes me as laughable. Folded into an article filled with Orwellian language and a curious amount of righteous indignation, the suggestion seems to be at odds with the writer’s poor opinion of the LCBO, described as “our humble and benevolent alcohol overlords”.

If you really hate the LCBO so much why would you want them distilling their own spirits? It seems to me that liquor control and liquor production are best kept separate. LCBO producing their own beverages would cause the same conflict of interest that I have vocally decried about the Beer Store.

If you think Ontario’s alcohol retail is bad now, just imagine if the LCBO were operated like the Beer Store. Since they discontinued their line of spirits almost 20 years ago, the LCBO has only gotten better at serving the discening drinker. The one thing they do best, their selection, is the one thing that LCBO alcohol would put into jeopardy.

Today in Beer Laws: No Contract Brewers at Beer Festivals

For a variety of reasons, brewers rarely participate in political discussions, and I respect the attitude of just getting on with making (hopefully) good beer. But Left Field Brewery, which opened last year in Toronto, has piped up to call everyone’s attention to another absurd piece of legislation with is stiffling the growth potential of small start-up craft brewers.

Left Field Brewery: Why we won’t be serving beer at festivals this summer

It’s a good time too. The Beer Store debate is as heated as ever and the amount of people who are going to pay attention to beer politics in Ontario is probably at an all-time high. And this latest tidbit is news to me:

It’s recently been brought to our attention by the AGCO that as a contract brewer, we’re only allowed to sell beer to three parties; The LCBO, The Beer Store and Licensed bars & restaurants. That list specifically excludes Special Occasion Permit (SOP) holders … including beer festival organizers.” – Mark & Mandie of Left Field Brewery.

The irony is that even Left Field Brewery is an SOP holder, since they’re co-hosting the dim sum festival YumCha! this weekend – meaning that they can’t serve their own beers at their own festival.

SOP holders would also cover any markets and private events on top of major beer festivals like Cask Days, which in this market of near-monopolistic beer sales are one of few ways that new breweries can get their beer into the hands of potential customers.

“Events and festivals are the single best way for us to sample our beers with the public and are one of our few opportunities to interact directly with beer drinkers.”

So what is this all about? Left Field Brewery is (for the time being) a contract brewer, which means they make their beer at somebody else’s brewery. This is actually pretty common. When I volunteered with a brewing company in Melbourne, Australia, there were at least four breweries that worked out of the same facility. It’s a reality and it’s a necessity in the craft beer world.

The cost of opening a brewery is somewhere in the $1 million area. That’s a big investment to make before you can even test out your first product. That’s why most small breweries start their lives either as contract brewers – since only the largest of brewers actually keep their brewhouse at capacity 7 days a week – or as nanobreweries like Motor Craft Ales.

For some reason it seems there’s a stigma against contract brewing. Left Field’s beer is “brewed at licensed breweries, has been lab tested by the LCBO and is consumed safely at over 60 bars and restaurants every day,” why should they be treated any differently than other brewers?

The law only serves to hurt the smallest of Ontario’s brewing companies, which seems to be a trait shared by most of Ontario’s beer laws.

Follow-Up: Long Live the Beer Store

I have this sinking feeling that the March issue of my beer column in The Windsor Independent is going to be the most widely-read thing I’ve ever done. That being likely, I want to clarify something: The Beer Store is not the villain of the piece.

Even in the short amount of time since my article made the rounds, it has become increasingly obvious that the Beer Store is a heartless, fear-mongering enterprise that will stop at nothing to maintain its monopoly on private alcohol sales in Ontario. Case in point, the new Beer Store-managed Twitter feed “Ontario Beer Facts” (@ONBeerFacts), where they play fast and loose with the definition of “Facts”.

2014415-beer-store-adWorse yet is their 80s PSA-inspired TV ad in which they suggest that convenience store clerks are evil, pedophilic incompetents.

This contrasts with my experience in Vancouver last week at the (privately owned) Brewery Creek Liquor Store. I asked a staff member which beers were must-trys for somebody only in town for a couple days and he basically gave me a crash-course in BC beer. He was passionate, articulate, and really knew his shit.

Would you get that kind of treatment from a Beer Store clerk? No chance. That kind of behaviour could get them fired – no joke! Beer Store employees are prohibited from recommending anything, probably because the owners, Molson and Labatt, know that no educated beer drinker would ever recommend their products in good faith.

Keep reading…