The biggest, but least known threat to craft beer. The first phase has begun in Europe May 12, 2017
While ABInBev, Constellation, Heineken, etc… buying both US & international craft breweries and the hoarding of certain hops and malt or other resources used in brewing is a cause for concern for the Craft Community and garners the most attention and outcry from industry veterans and consumers alike, there is an even more menacing omen that no one has noticed or really made mention of. This is probably one of the stealthiest maneuvers done by the Macros and if they truly pull it off, will be a game changer in the distribution of beer to consumers.
In various countries, even in the US with the supposed “safe guards” of the 3 Tiered System, the Macros are able to control the distribution of beer which is the true “choke point” for the small independent craft brewery. In the US we all hear the stories of what they are doing to influence distributors, with “performance rebates” and various play to pay schemes to lock out independent craft brands. Also, in countries where vertical integration is allowed like in Europe, truly independent taps only represent 5-10% of all on-premise locations where the rest are “tied-houses”, again restricting consumer choice and variety. But this post isn’t about this, but a more ominous threat which began in 2016 which virtually no consumer is aware of and very few industry people have mentioned and even more surprising to me is no one has “sounded the alarm”.
What seemed like an innocuous and trivial purchase of two European beer internet sellers in 2016 by ABInBev, is really the formation of the next “Death Star” against independent craft brands. When I first heard about these purchases, I was immediately alarmed of the long-term implications if this plays out like I think it will and have negative consequences for my own business as a craft beer exporter to Europe and as a craft beer consumer.
I was surprised that there was no mention in the US craft beer and very little mention in the European craft beer media of ABInBev/ZX Ventures buying BeerHawk in the UK & Saveur Biere(part of Inter Drinks) in France, and earlier this year, Heineken investing in Beerwulf in The Netherlands—more than likely as a response to ABInBev’s acquisitions in the online space. Why is this important? Consumer buying trends/habits are for buying online or via mobile, especially with the Millennials, where they are not setting foot into an actual store—e.g. the recent spate of US retailers closing stores left & right. In Europe and elsewhere, where you do not have a 3 Tiered System, the Macros are looking to bypass “the middleman” in off premise i.e. the grocery/retail chains, c-stores, bottle/liquor shops etc… AND SELL DIRECT to the consumer. This is the long term game plan—and a smart one at that. Just as we have seen the impact of Macros owning or having undue influence on distributors in the US, similarly they will be the “gatekeepers” of online beer purchasing and OVERALL consumer choice. IMO their strategy is two-fold, acquire craft beer brands to build up their craft portfolio and dominate ALL routes of distribution consumer & trade and then you can have massive influence over a consumer’s buying habits & choice especially online. In Europe, the next 3-5 years will be interesting to see how this plays out and the impact it will have.
Some of the reasons they bought Saveur Biere & BeerHawk are 1)they are the dominant online EU sellers of beer with the largest customer list, 2) they are extremely knowledgeable in how to micro target their customers and crunching “data” to find buying habits, preferences, etc… 3) they have widespread distribution and knowledgeable in how to ship beer to all countries in Europe and elsewhere. Now the scary part is combine this with ABInBev money and if they follow the “Amazon model” and put a distribution center & last mile logistics in each key region/city to deliver beer within 2-6 hrs of placing an order online or via mobile, you see just how realistic it is to bypass ALL off-premise channels. They make more profit of course selling direct and there is less regulation in Europe so economically it makes sense and is feasible.
What is foreboding for the US craft beer industry is once they have perfected this model in Europe and elsewhere, and given Macro Beers political influence in getting laws passed in their favor, there is a high likelihood they will be allowed to sell direct to consumers at a national or semi-national level in the US in the near future. Yes, there are many obstacles to overcome in the US due to each state having Byzantine and archaic rules/regulations, the need to file COLAs in each state, and the collection of state/local excise taxes etc…, but with Macro Beers’ deep pockets, it is something they will probably overcome.
I think the industry and craft consumers need to focus attention to what I feel is the true threat to the industry–DISTRIBUTION. XYZ craft brewery being bought by ABC Macro Beer gets all the attention, but is not the real threat. This is just phase one in forming the “Death Star”—building a “craft portfolio”. IMO the Macro Beers would need to own just 35-50 craft breweries globally to give them enough regional coverage and style diversity to “complete their craft portfolio”—ABInBev purchased Wicked Weed because they needed a brewery known for “sours” which are on trend now, and Boxing Cat in Shanghai to give them a presence in the largest beer market in the world. How the beer reaches the consumer is the REAL THREAT and they are laying the groundwork for phase two with their recent online acquisitions. This is the real concern and the biggest threat to the independent Craft Beer Industry globally where the Macros are able to control the routes of distribution and hence limit true consumer choice and variety—we as consumers and trade professionals need to sound the alarm.