Get crafty: How craft breweries can compete with ‘Big Beer’
AB InBev’s sale of Carlton & United Breweries to Japanese giant, Asahi, for $16 billion has reignited concerns over the number of independent breweries being taken over by big corporations and smaller brewers being muscled out of the game.
It’s a familiar scene after independent brewers are bought out by big beer corporations: hopped-up drinkers will suggest that the recipe will be changed in favour of maximising value and cutting costs. Whereas the companies involved will pledge to keep the same brewers and recipes and remain true to their roots.
Like it or not, this sale is part of a global trend of big beverage companies acquiring independent breweries. Here’s how the acquisition reflects bigger trends happening in the wider craft beer industry.
Joining hands with Big Beer
There is a general feeling among many Australian craft beer brewers that “Big Beer” is trying to cut their lunch. Despite big players like Kirin or Asahi not traditionally fitting into the craft beer narrative, they have been taking to craft breweries like a legal office does to the beer fridge at 5 pm. And for good reason too – Australian beer consumption may be at a 65-year low, but craft beer is flourishing despite its small proportion of the market.
As the collective palette of Australian consumers gets more and more sophisticated, the market has been responding in turn. The land of the hopping roo has become land of the hoppy beer, with a staggering 400 craft brewers currently selling their adult fizz across Australia. Huge players like Lion and SAB have recognised the growing thirst for the crafty, and now control over half of the craft beer market
The duopoly has put huge pressure on the little guys, most of whom are operating on tight margins, to try and compete with the abundant resources of large corporate operations. And despite challenging rhetoric around never “selling out”, when push comes to shove the prospect of a buyout from one of the big corporates is simply too tasty to turn down.
Business benefits of a buyout
Craft beer businesses that sell their business find they can make more gains through added investment in ingredients and equipment, economies of scale and a bigger distribution network. From hop procurement, consistency and wastewater treatment, there are some things that big beer corporations simply do better. Acquisitions provide the resources to help independent brewers achieve just that.
For craft breweries with a dream to grow, selling to multinational beer corporations provides great access to distribution channels, better resources and global expansion opportunities. The economics of brewing often set independent brewers back; joining a large corporation allows them to maintain market share in a highly competitive market.
A crafty identity crisis
The craft movement started out as a mission for great tasting beer but corporate mistrust and disdain for mainstream tastes have come to form part of its identity.
Whenever an independent brewery sells their company to a large beer company, social media and message boards often echo the same tired line about the brewery abandoning their craftsmanship and morals for the bottom line. This reaction has to do with loss of balance in a brand’s congruence, or the idea that a brand’s message, story, production and ownership must all align. When consumers realise they’re not drinking artisanal craft beer owned by an Australian brewer they can become disillusioned, and tend to think that the focus is now about profit margins instead of product innovation and quality beer.
CUB is Australia’s largest brewer, holding an almost 50 per cent share of the Aussie beer market. With the Asahi takeover, the Japanese conglomerate will control over half of the market. The obvious and immediate loss of customers to CUB’s brand will come from beer geeks and disappointed brand advocates suffering from brand incongruency – they’ll turn their backs on CUB because it no longer has independence or local pride.
The counter-movement of impassioned localists has spawned the Independent Brewers Association’s Independence Seal, a badge of honour to help consumers identify independent craft breweries. This was seen as a means to weed out Big Beer dressed in a crafty cloak, and inspire greater transparency in the industry.
However, the true consumer benefits of complete independence are still somewhat hazy. When a powerful beer company buys a brewery, it can offer the same or better quality of craft beer under an established brand, and supply to more distributors at a lower price point.
As the market gets more competitive, medium-sized independent brewers will find themselves unable to compete with Big Beer, and at the same time, struggle to stay nimble in the face of smaller, more agile craft brewers.
Selling the business to an international conglomerate can benefit the independent brewery that’s selling, the purchaser of the company, and even craft beer fans. On the other hand, it can cause a strain for the other medium-sized brewers and reduce the options available to consumers as a result.
What’s in store for the future of craft beer?
In response to dissent about a change in ownership, brands should place more emphasis on the brewer, not on who owns the brand.
Consumers should care less about who owns the company but rather, who is behind each brew. Beyond the small minority of dogmatic drinkers, the mainstream population who are just after good-tasting beer will be the judge.
The takeover by Asahi will make smaller breweries think twice about expanding but will highlight the importance of independence and responding to the niche market a brewer services. Independent brewers should focus on the fun, innovative, experimental brews instead of expanding reach. While big brewers can’t brew experimental beers because it doesn’t make sense for their bottom line, independent breweries don’t have the same constraints and can afford to work in a nimble way.
True craft refers to craft brewers who remain authentic by being small, creative and fiercely independent. On the other hand, mass craft refers to craft breweries that have become so big and widely available that they can no longer truly be classified as a craft brewery. Breweries will have to be clear which camp they fall into, and which strategy to follow for their own brewing success.
Gareth Berry is CEO of Unleashed Software. This article first appeared in Inside FMCG magazine. Subscribe to the print or digital edition here.