Have you heard–ABI may buy SAB? The resulting company, which could have an alphabet soup of a name, would be the biggest brewer in the world, combining the make of Stella and Budweiser (Belgium-based AB InBev) with the brewer of Miller and 200 other beers, including Peroni, Grolsch, and Pilsner Urquell.
The combined company (MegaBeer Corp?) would have an estimated market capitalization of $250 billion, putting it on par with GE. According to a terrifically detailed WSJ story on the rumored merger, AB InBev dominates 45% of the American beer market. Miller Coors, which is controlled by SAB Miller, takes another 25% of the market. If they were combined, they would control a lot of taps in bars across the country, possibly elbowing out smaller producers and turning bars into essentially branded bars, the equivalent of branded gas stations. But, since this could be construed as antithetical to “tied house” laws, the potential behemoth might just be too much to swallow for regulators: The WSJ suggests that SAB would likely have to sell their 58% stake in MillerCoors probably to Molson Coors, which owns the rest. Still, globally, the merged company would control about 30% of the world’s beer sales.
What’s driving the possible merger? Slowing growth. AB InBev’s second quarter profits fell 32%–with declines in four of six markets, including a 1.7% sales slowdown in the US. While suds have been flat, craft beer has been surging in sales and profitability. Craft beer has something MegaBeer lacks…flavor. Oh, and a good backstory, often locally brewed–all things that sell well with millennials.
So it would be a defensive merger, one driven by the cost-cutting that has become the signature move of 3G Capital, the mover behind the merger. Moreover, their reliance on huge ad budgets seems out of step with the more bottom-up discussion of social media today.
Revenues, cost-cutting, global brands…snooze. Pass me a nice cold Sierra Nevada and wake me when this merger talk is over.
The King of Beers has a problem: Growth. Or, the lack of it. It’s pretty obvious that Bud is in decline. But a chart in the WSJ, reproduced above, shows the scale and speed of that of that collapse, as Bud sales have cratered, falling by 50% over the last decade to 16 million barrels. In 1988, they sold 50 million barrels.
The main reason Bud’s suds have turned flat is the stunning rise of craft beer. In fact, last year was the first year that craft beers, taken together, edged out Bud in total sales with 16.1 million barrels.
The WSJ piece indicates that Bud will be putting the famed Clydesdales out to pasture, rolling out new ads to try to woo younger drinkers. The piece also says that AB InBev will flex its muscles and try to get Bud on tap in bars where it isn’t already flowing. While both of these strategies may get younger drinkers to try a Bud, will they ever go back for a second round? The brewer overlooking what has attracted younger drinkers to craft beer: flavor, something Bud is distinctly short on.
The surging popularity of craft beer also holds a challenge for wine, largely based on price (even though some craft beers are getting pricey). Fortunately though, wine has plenty of flavor. And there even are bubbles too, the Champagne of craft beers, if you will.
“Bud Crowded Out by Craft Beer Craze” [WSJ]
While I like hops, there are a ton of hoppy and overly hopped beers in the market today as well as high-alcohol beers. But that’s okay. It’s probably a phase akin to liking high-alcohol, fruity wines dripping with 200% new oak. They’re obvious and almost everybody gloms on to them at some point, usually the beginning, of their enjoyment of wine.
But there will likely be a backlash against big beers. As opposed to wine, where wineries can be locked into one style thanks in large part to location and grapes planted, breweries can pursue various styles at once, meaning the backlash could come to fruition quicker than wine. In part, that’s what pils and session beers are all about, which are lower in alcohol and refreshing. I had the Tank 7 Farmhouse ale the other evening, which, at 38 IBUs, was not too hoppy (though 8% alc is getting up there but the beer has good balance).
What’s your take on hops–the secret to good beer or too much of a good thing?
“Craft beer is overtaking wine as San Francisco’s beverage of choice,” writes Jordan Mackay in San Francisco magazine’s lengthy spread on the topic.
It’s no surprise: the craft beer story in America is wonderfully exciting, a grass-roots story of bubbling worts in basements, with the rewards of many shades relatively easy to find in the glass. Last year, while beer sales sagged overall, craft beer was up 18% according to Nielsen data and craft beers sell for a 60% premium to mass-market beer (not bad since they have 100% more taste). It’s still a niche market with just 8% of beer sales in 2011, but the core consumer are 21-34 higher income males, a crucial demographic for wine too.
Frankly, the headline that craft beer is overtaking wine in select markets is not surprising. Once you find one that you like, craft beer offers relatively more consistency (no TCA) than wine and a good amount of complexity especially given the value. Sure, given my druthers, I’d have wine. But a good bottle of wine for a weeknight might be $15-$20 for two people while a couple of good beers would be $3-$5. Repeat that most nights for a month and, in an economy that has yet to find a firm footing, it’s not surprising on that calculus alone that craft beer is having its moment. I know that I have reached for some suds from Bavaria, Belgium, Brooklyn and other places that don’t start with B in the past few months.
What do you think: is craft beer a big threat to wine? Is it an either/or proposition? (While wine drinkers might try beer, I’d be interested to know how much “hop heads” experiment with wine.) How often do you crack open a nice cold one?
Eric Asimov tastes through some domestic hefe weissbiers in an article for the NYT. If you haven’t discovered this category of summer refreshment, go straight for the Bavarian choice: track down some of the Weihenstephaner hefe weissbier. Weihenstephaner actually makes a range of beers, including dark and light (Kristall) weissbiers, but the hefeweizen is where the money is, imho, bottle-conditioned and slightly cloudy in the glass with classic banana/clove notes. At the end of a hot summer day, it’s hard to think of a more refreshing beer (though a Reissdorf Koelsch comes close).
As to domestic hefeweizen selections, I agree that they vary frustratingly widely. But Apollo from Brooklyn’s Sixpoint is also a good one.
Which are your faves? And do you add lemon or not?
It’s time for the Big Game. Or, actually, the last three Big Games of the NFL season. And no drink says “football” like wine! Actually, although Sunday’s NY-SF game could be framed as something of a sommelier showdown between two of the highest wine-consuming cities, I’m fine to cede the discussion of the day to football’s natural advertising companion, beer.
The question on my mind: how did light beer come to be the choice of NFL viewers? Fully one out of every two beers sold in America today is a light (or “lite,” if you prefer) beer. It didn’t always used to be this way as light beers were a relative niche marketed for women or people interested in watching calories. Somehow, gazing over the five-layer dip at the displays of modern machismo onscreen (or sporting a beer guzzling helmet, as above), NFL viewers don’t strike me as the most likely demographic to be counting calories.
The easy answer is Read more…