InBev/AB Deal = Brewing Industry Tipping Point?

InBev will likely succeed in buying Anheuser-Busch. (*1) So -- what's next?

As always, I view that question from my perspective as a historian, which is to say I take the Long View of the Big Picture. In the short run (say, the next year or so), the takeover won't make much difference: Sales of A-B's products will slide as the distributors scramble to find a more secure bet in what will feel, to them, like an uncertain market. Miller/Coors may benefit temporarily as well. (By the way, over the past year or so, many A-B distributors have engaged in various acts of rebellion. The sale to InBev will accelerate that trend.)

But the greatest impact will unfold over the long haul and will likely have the greatest impact on the craft brewing segment of the industry. (*2) Why? Two reasons.

First, much of the hoo-ha unfolding over the sale of A-B comes from people who resent the "loss" of an "American icon." (*3) Let's call this the "we don't need no stinkin' foreigners" element of this drama. (The idea, by the way, is, um, a bit unrealistic. We live in a global economy. We all need to accept that fact.)

How will "no stinkin' foreigners" play out? Beer drinkers may start asking questions about the origins of the beer they drink. Something along the lines of: "Damn it! I'm not gonna drink Bud if it's owned by a foreign company. So what should I drink? What beers are American?" If craft brewers are smart, they'll seize that sentiment and use it to launch an industry campaign promoting craft brewing as an "American" industry, and craft beer as "American." That kind of campaign requires big bucks, of course, and I'm not sure how the craft brewers could pay for it.

The second reason stems from the first: The InBev deal coincides with what appears to be a tipping point in American consumer habits. People who never thought about that box of Cheerios before are now thinking about organic alternatives or are trying to "eat local." (*4)

The tipping point isn't solid yet; not quite mainstream -- not everyone hangs on every word of the Bobos (see David Brooks' book Bobos in Paradise) or the New York Times. But in the past year, I've been surprised at how many people I know are talking about what they eat and where they buy it. Lots of other factors play into this, of course: E-coli scares. Deadly tomatoes. Slaughterhouse horror stories. Concern about global warming. And of course, the real biggie: gas prices that are forcing millions to think about how they move from Point A to Point B on a daily basis.

Those concerns may prompt many beer drinkers to deposit "beer" into the mental same category as other food items, like meat, milk, and bread. (Beer isn't in that category now.)

Put briefly, because I'm likely testing your patience and attention span (I HATE reading stuff on a computer screen) (thank you for reading this far): The InBev deal may push craft brewing to the place that has otherwise eluded it for the past thirty years: the mainstream, where it can command more like forty percent of the market instead of the seven or eight percent it has now. I also think that over the long run, the InBev deal will (inadvertently) foster and enourage another positive and historically significant trend: what I call the "Dick Yuengling model of brewing."

But that's for another blog entry. You've put up with enough for today!


*1: More accurately, InBev will get Budweiser. That's what it yearns for. Not the buildings in St. Louis. Not the tradition, the history, the blah blah blah. It wants Budweiser.

*2: American brewing consists of two "arms": A relatively few but gigantic mainstream brewers like Anheuser-Busch, Miller/Coors, and Pabst who account for something like 93% of American beer sales; and the "craft brewers," whose numbers are larger but who brew smaller quantities of beer for a (mostly) local market. (For more information, visit the website of the Brewers Association.)

*3: I'm sad about this sale, but not because of the "stinkin' foreigners" factor. A-B and Bud have been global entities for decades. I'm bereft over the demise of Busch family stewardship. Love the Busch family or hate it, you gotta admire the way they've stuck to their legacy.

*4: Well, it's not exactly a coincidence: American properties like A-B are bargain basement opportunities for foreign investors. That's in part because Americans and the US government have gone deeply in debt to support our car-based, petrochemically dependent economy and lifestyle.