A-B InBev, History, and American Brewing. Part 4

Part 1 --- Part 2 --- Part 3 --- Part 4 --- Part 5 --- Part 6 As I noted last time, for decades American mainstream brewers have targeted their beers/marketing/advertising at a narrow slice of the consumer market: young men.

Every beermaker, regardless of size, has paid a price for that decision, although it's been especially problematic for the mainstream brewers: The strategy works if the core demographic is large, as it was while the baby boomers were young. If that core shrinks in size, as it has since about 1990, brewers are in trouble.

There's also another problem with targeting beer as the young-guy-beverage -- well, there are two problems, now that I think about it.

First, mainstream brewers have, whether inadvertently or not, infantalized beer and beer drinking. Think about popular beer commercials over the past thirty years: they're nearly all humorous, but the humor has a . . . locker-room, boys-in-the-schoolyard quality to them. I mean, we all laughed about the farting Clydesdales and the guy with the beer-fridge-hidden-behind-a-revolving-wall commercials. But they were guy-gags. (Not mind you, that I have anything against guys. I'm married to one.)

The result was that brewers endowed beer with a silly, it's-for-kids reputation. The vast majority of Americans treat beer as a trivial, almost frivolous beverage. Yes, I know that the beer geeks who support craft brewing take beer seriously, but those people are in a decided minority. Most Americans, a majority of Americans, haven't heard of craft beer and don't drink craft beer, and all they know about beer is that, well, it's a kids' drink. (*1)

Second, the more beer is infantalized (and frankly, Americans infantalize not just beer but drinking in general), the less seriously it's taken, and the more impact the mainstream brewers' target message has, and the more Americans are inclined to dismiss beer as a serious beverage, and the narrower the audience for beer and the more inclined mainstream brewers are to target their core audience of young men, and . . . .

You get my drift. The result is a vicious cycle.

So, you ask, what's all this got to do with A-B InBev or history? Good question. The core demographic for beer -- young men -- is still relatively small. Over the next five years, it will grow as the Echo Boom hits age 21.

BUT: The Two Big Guys need to do something now. Their moment for attack is now. MillerCoors has the advantage because The Other Guy is in disarray (more disarray than MC, which, you remember, also just merged. But MC has had time to get its act together.) The Other Guy knows MC will strike and wants to do something now to fend off an attack on its market share.

What will they do? As I noted earlier, they'll spend more money on ads and probably engage in some price cutting. But they'll both turn their attention to the one beer segment that is healthy, fat, and thriving: the craft beer segment. Remember: since c. 1990, American beer sales overall have been flat. But during that period, CRAFT beer sales have risen every year, and often by double digits.

Why? Because the craft brewing industry avoided the "let's target young men" trap. They've always promoted beer as an "adult" beverage. They've focused on the beer itself, rather than a narrow audience. As a result, their "target" audience cuts across a broad swath of the American consumer audience. Yes, the market for craft brewing is minuscule, but the market is broad rather than narrow. So craft brewers haven't been hurt as badly by the shrinking of the young-man-demographic.

Moreover, young people who adopted craft beer as a "hip" back in the 1990s are now well into adulthood and typically have more money to spend and they're still buying craft beer. So the aging of the consumer market has not hit craft brewers as hard as it does mainstream brewers.

Result: even as overall beer consumption and sales slump, craft brewers are doing pretty well and craft beer sales are rising. And that means they're perfect targets for the Two Big Guys. A-BInB and MillerCoors will begin making aggressive moves in the craft segment. There are two routes they can take.

One, they can introduce their own beers (more on that later), or two, they can start buying shares of craft brewers, or, what is more likely, they can start making offers to buy companies outright.

You're shuddering at the idea. Never, you say. The pure-and-noble craft brewers will NEVER sell out to the Nasty Big Boys. Oh? Don't be too sure.

More next time. (Really, I'm trying to make these pieces short so that you can read an installment and move on to the next item on your endless list of Things to Do Before the Day Ends. I'm assuming your list is endless. Mine sure as hell is.)


*1: Notice I said "majority." I didn't say "all" Americans. Beer geeks, the very people most likely to read this blog and other beer blogs, take beer seriously. But those people -- you -- are in a distinct minority. The craft brewers and the beer geeks spend a lot of time preaching to the converted, to highly receptive audiences, so they -- you -- get fooled into thinking "everyone" drinks craft beer and "everyone" takes beer seriously. Every time a beer geek says to me "Oh, no one drinks Bud anymore. Everyone drinks craft beer," I can't decide whether to escort them to a hospital until the delusions go away, or whether to shake them silly and then show them the numbers. Because "everyone" most decidedly does NOT drink craft beer. Alas.