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September 11-15, 2017

Blog Entries Tagged as beer

The “It” industry

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Category: General Blogs  |  Tags: beer

It made me quite proud the other night to flip on the PBS News Hour and see a report about New Belgium Brewing Co.’s employee stock ownership plan (ESOP). Proud not because I have any personal involvement in it, of course, but because the report was presented as an example of a forward-thinking company doing something that is still relatively cutting edge in the business world: sharing its ownership with all of its employees.

I’ve been covering the beverage industry for a while now and the New Belgium coverage got me thinking about just how much this industry has changed since I first started reporting on it back in 2002. It has really gone from being an industry that was more of a follower, to one that is more of a trendsetter, one that is increasingly exciting to younger people because it is innovative. Agree with the New Belgium ESOP or not, it is an example of this industry shift from following to leading, and I think that only bodes well for the future of the industry.

The PBS report interviewed New Belgium co-founder Kim Jordan about the plan, along with several employees. Asked why she decided to share ownership of her company with her employees, she told the PBS reporter: “You got this one life, right, and you get to think about what am I going to do that makes me sort of joyful and sing? And this makes me joyful.” Hearing that, I thought to myself, ‘wow, this industry really has changed.’

Such forward-thinking companies were hard to come by when I first started covering the industry. But I’ve watched as what was very much a stolid, kind of tired industry, has been reinvigorated by exciting new trends like the craft beer movement, the explosion in healthful, functional liquid refreshment beverages, and a rise in the number and prominence of beverage incubation companies. 

And one of the major results of all this is that the beverage industry has begun attracting an entirely new generation of people into it. The PBS report interviewed several of the employee-owners at New Belgium who could not say enough good things about their company. Said one: “I feel like I have a stake in what happens here and that I play a part in making this awesome place successful.” Wow again.

I think the industry is only at the start of a positive cycle that will only attract more innovation in the coming years. As more beverage companies become innovative, like New Belgium, and new categories continue to emerge, these dual trends are attracting the next generation of young innovative people who want to work in this industry. It feeds on itself. And this will probably continue for a while.

For a long time, it was the tech industry that was attracting all the new young talent. But suddenly it seems like a lot of those younger people are also choosing to enter the beverage arena in droves. Just look at emerging innovative brands like Runa Tea or RawNature5, and the countless craft brewers or distillers, all either founded by or staffed by those in their 20s or 30s. 

With such innovation, naturally follows the great, positive media coverage, like the exposé about New Belgium’s ESOP on the PBS News Hour, which really went into detail about the company. And that only gets consumers more excited about the industry. And those consumers may be the beverage innovators of tomorrow.  

Shape of things to come

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Category: General Blogs  |  Tags: beer

As this issue hits e-mailboxes and desks across the beverage world this month, we may already have had the first glimpse of a brave new world in the beverage business.
 
Anheuser-Busch InBev had until October 14 to make an offer for London-based SABMiller, according to British law following A-B InBev’s formal approach to SABMiller’s board about a merger last month. 
 
Turn the calendar back one year to September 2014: SABMiller had made acquisition overtures to Heineken NV, which turned down the advances outright. Analysts speculated that the move by SABMiller was designed to undermine a potential takeover by A-B InBev. Speculation that a mega merger of the world’s two largest brewers was, well, brewing was further fueled by reports that A-B InBev was speaking to banks to line up financing for a really big deal.
 
All of the chatter led us to produce a cover story in November last year [inset], “What’s the big deal? Mega M&A moves that could shock the industry.” And here we are a year later, a year in which the big brewers continued to see their core markets shrink, even to the point last month when MillerCoors announced that it was closing a U.S. brewery. All of this is leading some in the industry to believe that a merger of the world’s biggest brewers would happen, and perhaps even be necessary.
 
In fact, many observers are looking passed the deal to what the beverage landscape will look like post-merger. After all, most agree that for such a deal to be approved by the U.S. Justice Department (the two companies control 75 percent of the U.S. beer market), not to mention regulators in Europe and China, chunks would have to be unwound and sold off before a deal could get done.
 
In our cover piece last year, Editor at Large Jeff Cioletti wrote: “The consensus among industry experts has been that not only would SABMiller and Molson Coors unwind [their] joint venture [MillerCoors], SABMiller would have to sell most if not all of its U.S. business to avoid being a lightning rod for antitrust scrutiny. ”
 
That thought prevails a year later, with speculation over where those assets would land being a red-hot topic. Some believe that much of  MillerCoors could end up with Molson Coors, though Heineken and even Diageo could be willing buyers. There is global intrigue, too, about SABMiller’s reported 49 percent stake in the CR Snow joint venture that owns Snow, the best-selling beer in China.
 
Our cover story last year also speculated about the potential for a consolidated beer king—whatever the new entity would be called—to flirt with the likes of a Coca-Cola about a hook-up. Observers then and now think the idea has merit—at least from an M&A perspective. For one, Coke (and PepsiCo, too, for that matter) are experiencing the same sales issues the mass brewers are with respect to newer consumers not exactly embracing their core brands. On an operational level, such a merger of beer and soft drinks could present a number of opportunities to combine and reshape distribution channels.
 
A deal between A-B InBev and SABMiller could be the start of a massive reshaping of the beverage world. We’ll keep watching.  
 

Producers Great and Small

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Category: General Blogs  |  Tags: beer

The beer industry is always trying to figure out how it can better emulate the spirits business. After all, distilled spirits volume has been growing steadily, while beer, overall, has been flat to down in most years. 

Last year, for instance, MillerCoors unveiled Miller Fortune, whose marketing directly targeted spirits drinking occasions by playing up its whiskey-like hue.

It’s true that there’s a great deal that macro beer can learn from the distilling community, but it’s got little to do with consumer usage occasions or image advertising. 

It was at the recent American Craft Spirits Association’s (ACSA) second-annual conference where a key difference between the beer and spirits categories became crystal clear to me: collaboration. 

The sometimes uncomfortable relationship that craft and macro beer share seems to make headlines every month. Industry observers may say that big brewers are finally embracing craft by acquiring small brewers. However, as the peach-pumpkin-flavored advertising misstep I referenced in last month’s column proved, the macros’ attitude toward craft is more a grudging acknowledgment than full-fledged respect and admiration. They’re making acquisitions because they feel they have to, not because they want to. 

But when it comes to spirits, there’s more of a cooperative dynamic beginning to play out between the mega-marketers and the burgeoning craft distilling segment. The Distilled Spirits Council’s (DISCUS) presence at ACSA’s conference in the event’s inaugural two editions has reflected that. But this year, a comment DISCUS VP for government affairs Michele Famiglietti made to the audience of artisanal producers perfectly encapsulated the relationship between big (DISCUS member companies) and small: “You are the face of the industry.”  When the DISCUS team meets with members of Congress, the first thing they usually ask is “Do I have any distilleries in my Congressional district?” The crafts are a huge asset in the talking points of an organization whose membership is largely composed of foreign-owned conglomerates. 

It’s odd that crafts don’t get the same recognition from the macro-brewers, which, after all, are predominantly foreign-owned entities. 

When it comes to public policy, Famiglietti noted that DISCUS “actively and aggressively” supports craft distillers’ efforts to get Congress to roll back the excise tax on small producers. Meanwhile, in the beer world, macros and crafts are competing for Congressional attention on the tax front. Craft brewers, led by the Brewers Association, have been lobbying for the Small BREW Act, while the large companies, represented by the Beer Institute, have been pushing the Fair BEER Act. The latter’s tax cuts apply to all brewers, macro and craft, while the former’s only applies to craft. 

The bigger issue is that the beer industry is not speaking with a single voice on Capitol Hill.  Getting on the same page, as the large and small distillers seem to be, enables the industry to present a unified front—which is more likely to generate results favorable to everyone. 

Small beverage producers have different needs than large ones, so it’s unrealistic to think that they’re going to agree on everything. But, as the spirits world already is demonstrating, there’s always some common ground to be found.

Of Bud and mud (slinging)

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Category: General Blogs  |  Tags: beer

We’re already at least six weeks past the Super Bowl, so I’m probably the last person to weigh in on the brew-ha-ha over Budweiser’s “Brewed the Hard Way” ad—you know the one where Bud proudly owns its “macro-beer” cred and gets in a jab about “pumpkin peach ale.” But the ad’s still in fairly heavy rotation as of this writing and the chatter surrounding it seems to be lingering long after the Patriots’ last victory lap. 
 
It was the (some say cheap) shot heard ’round the craft beer world, which was predictably, but understandably up in arms.
 
I completely get where Anheuser-Busch was coming from with the ad’s tone. It was 100 percent in line with the brand’s personality and spoke directly to its target demographic. Bud drinkers are unapologetic about being Bud drinkers even when they’ve got a growing number of friends and acquaintances who make a sport out of bashing the brand and try to get them to drink craft (many brewers of which AB InBev now owns). The ad reinforces their Bud-loyalty and keeps them from straying outside the trademark. In politics, they’d call that “playing to the base,” which is exactly what A-B needs to do for a brand that continues to hemorrhage volume in the low single digits each year. 
 
The spot does make its share of missteps however—and, to be fair, it’s a tall order for all 60 seconds of any minute-long ad to be perfect. 
 
The obvious component, and the one that I am by no means the first person to highlight, is the “pumpkin peach ale” slam. While I’m sure it wasn’t the company’s intention, it comes off as a dig at a craft brewer it just acquired barely a week prior to the ad’s debut: Elysian Brewing Co. Elysian is well known for its diverse array of pumpkin beers (sans peach). 
 
And I’m not even going to get into the subtext embedded in “pumpkin peach ale.” Tonally, it equates such a style with being a “girlie” beer, which does little to reverse the generations-long trend of alienating women from the category.
 
The spot also does somewhat of a disservice to the brewers and QC staff of Budweiser itself. Saying the brand is not to be “fussed over” is probably news to the production team. The production team fusses over it plenty to make sure it is of consistent quality and flavor, batch after batch, year after year. It also contradicts the “Brewed the Hard Way” mantra. People should make a fuss over the end product of so much hard work. 
 
Oh, and one more thing about making things the hard way. Get any 100 craft brewers in a room and I’d be willing to bet that not one of them characterizes what they do as “easy”—especially when they’ve got a fraction of the operations staff that the King of Beers has on the payroll.  
 
To A-B’s credit, it’s a brilliant marketer and knows exactly who’s drinking and whom it expects to drink each product in an increasingly diverse portfolio. The company will do well to continue to play to those bases. However, to use another political analogy, the path without so much mud slung on and around it is the clearer path to victory. BW
 

Semper fidelis

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Category: General Blogs  |  Tags: beer

A couple of months ago I noted that the breadth of available choices is what makes the U.S. beverage market—especially beer and spirits—the envy of the rest of the world. I witness this as a consumer, as much as I do as an industry observer. I frequent a lot of bars that boast, 25, 50, even 100 tap handles. Their whiskey lists are intimidatingly robust; I don’t think I’ll get to try half of the items on the menu in this lifetime. 

But is such on-premise abundance always a good thing? 

At many of my local haunts, it’s not uncommon for Monday’s chalkboard list of what’s on tap to look nothing like the one on Thursday. There’s a complete turnover. If you happened to like something you tried Monday night, you’re out of luck if you want to drink it again later in the week. And I’m as guilty of enabling this as anyone. My M.O., more often than not, is to try something new rather than default to the familiar. When there’s wait service, the server returns to my table and usually asks, “Could I get you another X?” My response tends to be, “No, this time I’ll have Y.” 

More than a few distributor reps with whom I’ve spoken have admitted that while it’s great that their on-premise accounts are eager to buy so many small, up-and-coming brands, it stresses their entire system to fulfill such variable demands so frequently. It’s not just a huge order of a handful of high-velocity SKUs anymore. It’s an epic series of micro-orders of much lower-volume products. 

Distributors, to their credit, have adapted fairly well to this new normal. 

The real potential casualty in all this, however, is brand loyalty. I know, I know, marketers always tell me “On-premise is where consumers experiment and off-premise is where they’ll buy the six-pack of the beer or a bottle of the bourbon they discovered during the course of their experimentation.” 

But shouldn’t we be worried that, essentially, on-premise is completely ceding any notion of brand allegiance to the off-premise? 

The craft beer world and now, to some extent, the craft spirits talk about the “wine-ification” of their products. The dark side of that dynamic is that when menus turn over so quickly to keep up with consumers’ brand A.D.D. (again, guilty as charged), bar and restaurant patrons are just going to order by style, not brand, as is often the case with wine. I.P.A. will be the new Cabernet. And don’t think that this behavior won’t spill over into the off-premise as well. It already happens off-premise with wine and I have witnessed it on occasion with beer and spirits. Consumer: “Do you have Russian River Pliny the Elder?” Retailer: “No, but we just got a couple of bomber bottles of this double IPA from a new brewery that just opened in Virginia.” Consumer: “Great, what brewery?” Retailer: “I don’t remember.” Consumer: “Whatever, I’ll take it.” 

And with that brief commercial exchange, another tiny nail is driven in the coffin of brand loyalty.