This blog post is sort of a “part II” to my May 12, 2017 post.
All the fuss over ABInBev investing in RateBeer and the quick backlash from the Craft Beer community and certain breweries demanding they de-list any reference to their brewery and beers, and then RateBeer/Joe Tucker’s response makes for great polemics and histrionics, but does not touch upon the real threat to the Craft Community. I don’t want to really delve into if ABInBev will or will not bias reviews or alter them as this is not why this investment in RateBeer concerns me. I’m more concerned of the “big picture” strategic reason for them wanting RateBeer or more succinctly RateBeer’s information/Big Data. ABInBev actually wants the most accurate data and reviews it can get, so they are the last ones who will want to bias/alter the data as that is what they are after, but the real question is why—there is the easy to figure out “simple why”, but then there is the “real why why”.
I’m obviously in the craft beer industry where I export several US craft beer brands to Europe, so I do have “skin in the game” and critics can say a biased point of view—you can decide for yourself if this makes the following post relevant or not, but that is why we have free will. Also, you can debate on other forums or posts as to who is right and who is wrong, RateBeer sold out, Joe T did the right thing, still support RateBeer or delete your RateBeer account etc…
The “simple why” is this investment is a strategic play where the value to them is access to the user base and all the Big Data it generates for marketing and M&A purposes on what beers people like/drink, trending beer styles, breweries, & areas for craft beer etc… If ABInBev knows what styles or breweries are trending, they can either acquire them or copy their beer styles to get in early on a new style trend. RateBeer has 4million + user base and more international users than Beer Advocate & Untappd and hence the better investment for a global company. Also, they have more synergies, as they own two of the largest craft beer online sites Beer Hawk in the UK & Saveur Biere in France. Big Data is what they are after, and not too difficult as to why they want it, but the real question you need to ask is “why why“, what are they going to strategically use the data for, not just tactical uses which are easy enough to deduce.
Combining all three of these companies’ (I’ll add a 4th & 5th companies later on) Big Data you have the ability to tailor specific/individual offers and discounts to people knowing what they like—this is the tactical use of Big Data. This is “manna from heaven” for a marketer knowing what you want and when you want it. ABInBev is one of the best marketing organizations in the world, whatever they paid they’ll get the ROI on all the data & aggregate user info they will mine from RateBeer’s servers even if they supposedly will not have access to individual acct info. Let’s see how long this lasts as I’m sure the user agreement will change and even if there is a massive backlash against RateBeer & a mass exodus, they will have gained access to some very valuable marketing data nonetheless.
All of their recent M&A activity in particular in the non-brewery space plays to the “why why” in their overall strategic direction on controlling distribution/routes to markets and dominating “direct to consumer“selling which will change the beer retail landscape in the next 10yrs—this is why I am concerned both as someone in the business and also as a craft beer consumer and if you care about Craft Beer why you should also be afraid.
They are about 20 steps ahead of the competition in formulating ways to sell beer to the next two generations of beer drinkers (with the newest generation dubbed the “iGeneration” as they are digital natives who are not even old enough to drink yet) who have different buying habits & like the convenience/simplicity of buying via mobile & at home delivery which differs from previous generations buying habits. The retail landscape is changing where Millennials and the succeeding generations are not and will not be going into physical stores. The proliferation of various at home delivery options for food, home supplies, houseware/electronics, pet supplies, and yes even alcohol/beer is accelerating the demise of most brick and mortar store concepts. The “Amazon effect” and Social Media are changing our shopping habits where online sales and direct to consumer businesses/brands are growing at exponential rates year after year and do not show any signs of slowing down. You have new brands launching that are only online from artisanal food products, clothing, eyewear, jewelry, razors, watches etc… Why not alcohol/beer. This is the real end game and the next craft beer battle ground “direct to consumer selling” and is the “why why”. Combined with the “one two punch” of controlling distribution and also creating their own “craft portfolio” with their numerous US & international brewery acquisitions allows ABInBev to control consumer choice and variety.
ABInBev buying Northern Brewer/Midwest Brewing Supplies (the 4th company) the US home brew supply company is similarly a play on gathering Big Data as to what people are brewing, hop/barley trends and hence new emerging beer styles. However, the long play is to eventually use them as a platform for direct to consumer selling of beer online in the US. Yes, there are a lot of legal issues to do this in the US because of the 3 Tiered Distribution system. However, just as they somehow got the FTC & anti-monopoly regulators in other countries to allow the #1 & 2 beer companies to merge & in some countries they now have over 95% market share, I’m not betting against ABInBev. Also, remember outside the US there is no 3 Tiered Distribution system and Europe will be the first testing ground for their direct to consumer strategy.
Given ABInBev’s deep pockets and legal/lobbying efforts in the US, it is not a far-fetched idea of seeing them selling direct nationally or semi-nationally in the near future. They have somehow found loop holes in the 3 Tiered system in separation of brewery from dispensing outlets in opening their own brewpubs under their craft brands. These loop holes were meant for small breweries producing under 20-60,000 bbls and not 100 billion dollar breweries producing over 100 million bbls. Who says “vertical integration” is not allowed in the US as ABInBev owns a chain of Belgian beer cafes eponymously named Belgian Beer Café worldwide and is run under a franchise model by Creneau International for them in the US–as I mentioned they are good at finding loop holes.
Northern Brewer is a great acquisition as they have the logistical infrastructure and an 1million + customer base whose beer preferences they know & hence easy to micro-target with enticing customized offers once they can bend the rules to sell beer direct. It makes for a natural platform to sell beer online—buy a pound of Pilgrim hops with a case of Goose Island IPA. This is the scary part as they will now be the gatekeeper of distribution/route to market direct to the consumer and we have seen what they have done in states where they can own or have undue influence with beer distributors where they are the de facto “gatekeeper” of what gets on the store shelf or tap. You don’t think they won’t favor their beers and in particular, their “craft beers” over others online, just see what is happening in stadium and music venue concession stands.
ABInBev is very strategic about their acquisitions like the Be Hoppy app(5th company)—because Brazil is only the 3rd largest beer market in the world, so probably a country you want to start mining Big Data sooner than later. RateBeer and some of the previous investments are just all little cogs in the machine and part of their end goal of direct to consumer distribution. My next non-brewery acquisition prediction will be a company in at home alcohol delivery like a Drizly, DoorDash, Saucey, or myriad of regional and international variants, another international online beer site especially in China, some beer of the month club or a concept like Tavour, consumer logistics distribution company, or tech start up related to logistics/distribution/data mining & analysis.
The final end game and “Bigger Why” for ABInBev is to make themselves attractive for a merger with another beverage megatron like Coca Cola or Pepsi Co and if they pull off their direct to consumer strategy they will find many suitors. Some in the M&A community say that the real merger partner they wanted was Coca Cola, not MillerCoors and with this thought I’ll let you think of the consequences if this should happen.