Hop Talk

You don’t need to have your finger on the pulse of the beer industry to have heard the continuing rumors of the two largest beer producers in the world (one by sales, the other by volume) in merger talks. Their recent mutual distribution agreement is widely seen as a precursor to a full-fledged merger. Profits for A-B were up in the 4th quarter of 2007, but the large jump on February 1 is attributed to these InBev merger rumors. (CNN Money: Anheuser-Busch Shares Up on InBev Report)

I’m no pundit, and certainly you can get more coverage from mainstream media sources (CNN, Bloomberg, Reuters, New York Times) and the beer blogosphere (Jay Brooks, and more), but I would be remiss if I didn’t bring it to your attention. Of course, around this time last year the same rumors were circulating, but they seem more strident this time.

There won’t be any in-depth analysis here, but I do wonder what will happen. Assuming the rumors are true, who benefits? The stockholders in the two companies, obviously. The workers at the companies? Generally not. Employees who hold company stock in their retirement plans count as stockholders, of course, but then there’s all the employees who will lose their jobs as the merged company gets rid of “redundancies”. Executives will do well, if only with golden parachutes.

Of course, that’s not the focus of this blog either. We’re about the beer, here. So what about it? I expect there will continue to be experimentation with products in the “craft” space. If only because craft beer is still, at least for the time being, growing at a double-digit rate. Really, though, I expect more of the same. I expect the companies to realize cost-savings by brewing far-away recipes closer to home. Why ship all that beer across the Atlantic when you can brew it at a regional A-B facility and slap the “exotic” label on it?

But, honestly, do I expect any new, interesting, good beers to be produced by this new company? No.

What really concerns me is the smaller brewers; the ones whose beers I love. Instead of dealing with a couple of industry giants and working to find their own niche (and distribution), they’ll now have to compete with a Ginormous Behemoth. Will any niches be left and will they be big enough to sustain the “real” craft brewers? I wonder if we’ll see a contraction in the craft beer space similar to what we saw after the go-go eighties.

I wish I knew what it all means. I can’t ignore it.

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European and American stock markets were abuzz today about a possible merger between Anheuser Busch and InBev.

InBev is the world’s largest brewer by volume. Anheuser Busch is the largest by sales.

Their markets don’t overlap much, with InBev primarily outside of North America.

This is not one of the scenarios I imagined when I talked about their distribution agreement.

Is there anything to worry about? At least, from a craft beer fan’s perspective?

I don’t know. I’m not a big fan of giant consolidations like this. InBev, at least, has let the breweries they’ve brought under their umbrella stay true to their product. I have even enjoyed a few of their brands, such as Bass Ale.

Even as big as this company would be I think there’s still room for craft brewers. However, A-B has been for several years now trying to sneak into the craft beer space, by creating beers with different brand names and trying to hide their affiliation. Wild Hop Lager is the latest. (Ron’s review.) They’re not the only ones, of course. SABMiller and Molsen Coors do the same thing.

On the one hand, this isn’t a terrible thing. My wife is a fan of Coors’ Blue Moon Belgian White. I’ve had it and it’s not bad. Not generally what I drink but certainly different than say, Coors Light. I can even see where this might even be necessary. If they called it “Coors Belgian White” the people who think Coors is cheap beer will avoid it, and Coors fans would try it and probably not like. Either way, it’s a loss. People’s long-standing perceptions of a brand are hard to get over. The Japanese car makers understood this. That’s why when they wanted to start selling luxury cars in the U.S., they created Acura, Lexus, and Infiniti. They don’t hide the fact that each is owned by Honda, Toyota, and Nissan, but they don’t scream it from the hilltop either. And, it makes sense. People at that time had a perception of Toyota cars: reliable, fairly inexpensive, and good gas mileage. And there was no way any of them were going to pony up $70,000 for a Toyota. But a Lexus…

So, the big American brewers’ “craft” beers are in a similar situation. I just have two problems with this: They often go to great lengths to disguise who the actual brewer is. This is disingenuous at best, downright fraudulent at worst. Not everyone is savvy enough to figure out who is really behind a brand. Further, I want to support my small, local brewer. He (or she) is a normal person with a family and a passion for good beer. Sure, he’s making some money but he’s not filthy rich. He’s a part of the community. He’s not some faceless corporation looking only at the bottom line and Wall Street.

My fear is that a merger like this would allow the larger company to spend even more money fooling people looking to try something beyond the King of Beers, the Silver Bullet, and the High Life. And, yeah, they might put together a decent product. Maybe. And their pockets are so deep that they could sell it at a loss for years and force smaller brewers out of business. And there goes the wonderful variety we’ve come to appreciate.

I don’t really know what’s going to happen, but it’s a story I’m going to keep an eye on.

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Saw this over at Realbeer.com. Apparently, the two largest brewers in the world, Anheuser-Busch and InBev (owner of such brands as Bass, Stella Artois, Beck’s and Hoegaarden) have struck a deal that will have A-B as the exclusive importer of several InBev brands.

This puts a huge amount of beer under the control of Anheuser-Busch’s wholesaler network. Now, I don’t have any great love for beer distributors, but they are a vital part of the business. I can’t help but think that one of two things will happen: Either A-B and InBev brands will start taking up more shelf space as A-B distributors make exclusive deals with retailers or, I hope, distributors shut out of this deal will look to other, smaller, brewers to make up the slack and that more interesting craft brews will be available on retailer shelves.

The agreement begins February 1.

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