It’s been a busy year for beer and things are coming to (ahem) a head this week.
After months of dickering, the world’s largest beer maker, Anheuser-Busch InBev, is buying the world’s second-largest beer maker, SABMiller for about $104 billion. That’s greater than the GDP of Ecuador and the single biggest deal in the history of beer. Assuming the deal clears all the regulatory hurdles, the new company would own about one of every three beers in the world, not to mention fat stacks of capital and unprecedented access to supply and distribution chains.
And that’s making a lot of small-time brewers and craft beer purists very nervous.
‘How does that impact the ability for a small brewer to get their hands on certain hops or aluminum cans or literally anything?’ Chris Furnari, Brewhound
“They’re going to have billions and billions of dollars,” says Chris Furnari, who edits Brewbound, a suds industry trade publication. “The question really is: How does that impact the ability for a small brewer to get their hands on certain hops or aluminum cans or literally anything that is required to get their product to market?”
Assuming the deal goes through, an enormous reshuffling of major beer brands is coming. Among other things, that means you, the indie craft beer connoisseur, may find your favorite brews going corporate. Of course, that’s already been happening, you beer snob. As craft beer has skyrocketed in AB InBev has been buying up independent breweries like Elysian Brewing, Blue Point Brewing, and Golden Road Brewing. Meanwhile, SABMiller has cashed in on the craze by launching pseudo-craft labels like Blue Moon, Leinenkugel, and Batch 19. Together, they’re going to have boatloads of cash to buy even more microbrews and create even more pseudo-hipster brands.
Not that you’d know. In most cases, the owners change but the labels stay the same. “You can’t even find their name on the label,” says Furnari, in the interest of keeping that “sense of mystery.” Big Beer is eager to cash in on the success of microbrews, but knows slapping its name on the label would be a major buzzkill in the target demographic. “It just wouldn’t work,” says Furnari.
Not that AB InBev is eager to kill the golden geese. It’s happy to let its craft brewers running things as the see fit, while giving them expanded distribution channels, access to capital, and economies of scale. By keeping the breweries semi-independent, Big Beer allows them to maintain a sheen of anti-establishment attitudes that attracted their customers. And that keeps profits flowing to shareholders like 3G Capital, the Brazilian investment firm responsible for making AB InBev the conglomerate it is today and a key driving force behind the pending AB InBev/SAB Miller deal.
It’s a brilliant business move. The market share for craft beer has more than doubled in the past five years, even as demand for Big Beer has slowed. The big win here for AB InBev is SABMiller’s strength in some of the developing world’s fastest-growing markets and its line of in-house “craft” labels like Blue Moon.
Selling out to Big Beer helps relatively small companies distribute their product across mass markets.
The big advantage of selling out to Big Beer is it provides relatively small craft brewers with greater distribution. Someone in San Diego can buy a craft beer from New York or vice versa. Of course, that worries the truly independent brewers, who aren’t invited to that party.
The little guys aren’t the only ones worried about it, either. The Department of Justice and the California Attorney General suspect AB InBev has been buying distributors in California with the intention of edging out smaller breweries. The company denies any wrongdoing, of course, and says in a statement that it is cooperating with the ongoing investigation. “It is a misconception that craft growth is being inhibited in the marketplace,” the statement reads.
Whatever the outcome of that investigation, Furnari says the issue of distribution will be foremost on the minds of independent brewers as details of the possible merger come to light in the next few weeks.
“Everyone is holding their breath to see what ramifications come from this,” says Furnari. “How will they deploy that capital?”