A-B InBev, History, and American Brewing, Part 2 of 6

Part 1 --- Part 2 --- Part 3 --- Part 4 --- Part 5 --- Part 6 The past fifty years of American brewing is littered with the remains of other, similar deals in which a large corporation with no particular interest in beermaking acquired a family-owned/operated brewing company.

The most notable example is that of Philip Morris, which acquired Miller Brewing in 1969 and 1970. PM was a global conglomerate that manufactured/distributed/marketed many products (including cigarettes). It was not a "brewing company." As far as PM was concerned, the beer was just another commodity, and Miller was just another appendage with which to make profit. (*1) But there are other examples: Rheingold. Ruppert. Schaefer. (You can find more details in my book, especially in chapters six and seven.) (*2)

Historically, such deals have not had happy endings. The acquired company regarded beer as beer and as something special. To the acquiring company, beer was just a thing, something to be bought and sold; interchangeable with widgets, shoes, or cattle.

But, you say, Miller is the second largest beer company in the U.S. (*3) Surely things worked out just fine!

Not exactly. The full story is too long to recount here, but the short version is that PM spent billions to expanding and streamlining Miller's operations. (It also slashed costs by altering the recipe of Miller High Life). It spent huge sums on marketing. It introduced Miller Lite. And then set out on its stated objective: to destroy Anheuser-Busch.

In that task, the company failed miserably. Since the 1980s, Miller has existed in what I call the dead man's land of American brewing: a distant second to the giant. (Quick numbers: A-B makes about 100 million barrels of beer a year. Miller makes --- about forty.) As Gus Busch, who ran A-B from the late 1940s to the mid-1970s, once said, "being second isn't worth anything." (*4)

What made the difference -- what took the zip out of Miller (and Rheingold and Ruppert and Schaefer, etc.) -- was the removal of the family presence. Because the family members regarded themselves as BEERMAKERS. The new corporate owners did not.

So as a historian, I don't see any happy ending to this InBev/A-B story. Over the next few years, the loss of the Busch patina -- the Busch edge -- will result in a gradual erosion of A-B's power and clout. Sure, InBev is huge and can spend zillions on advertising. Sure, it will try to grab a larger share of the US import market by bringing in more of its global brands. (I predict that Stella Artois will be the new Starbucks: there'll be a bottle on every corner.)

But A-B itself, as I noted in my earlier five-part series, will experience disarray. The InBev slash-the-costs culture will collide with the A-B "spend money to make money" culture. Distributors, already uneasy and discontent, may become more so.

Turmoil, in short, lies in the company's future. A-B will lose its otherwise (giant-sized) sure footing. It will stumble. And as it does, its only remaining "mainstream" rival, MillerCoors, will finally enjoy something like a level playing field. The people at MillerCoors will grab that opportunity. The result? A beer war of the sort that has not ocurred since the 1970s.

More next time.


*1: Miller's current parent company is SABMiller, based in London. A few months ago, SABMiller and MolsonCoors (a Candian company) merged their North American operations into a new venture, MillerCoors.

*2: And you're gonna buy NEW copies of the book, right??? Because, ya know, authors make ZERO dollars on the sale of used books...

*3: "Large" is relative. A-B makes around 100 million barrels of beer a year. Miller makes about 40 million; Coors about 20 million.

*4: Quoted in Ambitious Brew, p. 234.