David with Goliath: How Craft Beer Can Benefit from Acquisition by Megabrewers

*Image courtesy of Bloomberg Businessweek

Most craft beer brewers have long considered mainstream beer producers the enemy, with one brewery going so far as to label one of its beers with, “Corporate beer still sucks.” The general attitude across the craft beer industry is that many craft brewers would “never, never sell to AB InBev, even if they were offered a gazillion dollars” (Townsend Ziebold, First Beverage Group). However, the reality is that many craft brewers are in fact selling out to macrobrewers, like “ABMiller,” that are seeking to benefit from the craft beer segment’s growth (Craft beer was up 17.6% in 2014, compared to the 0.5% growth of beer overall according to Brewers Association). Examples of craft breweries that have already succumbed to megabrewers include Goose Island, Blue Point, 10 Barrel, and Elysian, all of which were acquired by AB Inbev, and Meantime, acquired by SAB Miller.

Here are 5 reasons why more craft brewers should consider joining a macrobrewer.

  1. No loss in quality:

Many craft brewers consider acquisition by a macrobrewer to be a non-starter due to the assumption that macrobrewers will harm the craft beer’s product quality. However, contrary to that assumption, AB InBev is known to take a laissez-faire approach to its craft beer acquisitions. Years after the macrobrewer acquired Goose Island, even the harshest critics conceded that there was no decline in product quality. According to Maureen Ogle, author of Ambitious Brews, “As near as I can tell, AB InBev is just leaving those guys alone.”

  1. Greater distribution:

Given the geographic presence and distribution networks of macrobrewers, craft beers would gain the advantage of reach in order to access previously distant consumers. Macrobrewers’ extensive distribution networks could enable local craft breweries to sell nationally and possibly globally, increasing the variety of craft beer in any given area, while also expanding the craft brewer’s footprint.

  1. Greater profitability:

Macrobrewers’ scale and internal efficiencies have the potential to increase the profitability of craft brewers. Also, due to the buying power of large entities like ABMiller, craft brewers could benefit from lower raw material costs or merchandising and distribution contracts.

  1. Access to marketing know-how:

Craft brewers are typically too small to afford significant media and marketing resources. A macrobrewer like ABMiller could provide access to otherwise inaccessible creative agencies and internal marketing expertise. By employing these agencies and marketing know-how, craft brewers could more effectively communicate their brand to an even wider audience without detracting from their grassroots foundation. Who knows, a craft beer brand might even get its own Super Bowl ad.

  1. More variety:

Finally, craft brewers’ being part of a broader brand portfolio raises an interesting opportunity around product offering: variety packs. In 2013, sales of variety packs grew 19% and accounted for roughly 8% of dollar sales in the craft beer category in the U.S. according to The Denver Post. These variety packs typically consisted of different beers from the same brand, with some packs tailored to specific occasions, such as the holiday season. With the creation of a craft beer brand portfolio comes variety packs of beers from different brands, giving consumers an even greater variety and the opportunity to sample different styles and tastes per purchase. The same opportunity would apply to events, where the variety of craft beers could be highlighted and presented to consumers looking to enjoy the artisanal beer experience.

These potential advantages for craft brewers understandably also come with risks. But for craft brewers who are looking to grow their brand and offer their product to more consumers, it’s time to see through thier beer goggles and realize these potential advantages.

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