Have we taken our eyes off the ball? Beer lovers spent most of 2015 rejoicing at the surge in sales of quality beer and the unstoppable rise of small independent breweries. And yet, quietly and stealthily, giant global brewers have been moving into the craft beer sector.
Within a few weeks, the merger of AB InBev and SABMiller will create a corporation of frightening size. It will account for 30% of all the beer brewed around the world.
But the new conglomerate will not rest on its oars. It is crucially aware that its big bucks brands are flat-lining. It has not only witnessed the rise of craft beer and brewing but is taking urgent steps to address the situation by muscling in on this vibrant sector of the beer market.
Writing in the American journal Money last month, business commentator Brad Tuttle said: “Big Beer’s strategy is to put the pesky craft category in its place — or even destroy it, if possible. Craft’s portion of overall sales has doubled over the past five years while ‘macro’ beers like Budweiser and Miller have gone flat or declined.”
The first warning shots were fired last year when SABMiller bought the Meantime Brewing Company in south-east London. That takeover has quickly turned sour. AB InBev says it will dispose of Meantime, which puts the Greenwich brewery “in play” as they say in City circles.
The sale doesn’t mean AB InBev has no interest in the British craft sector. On the contrary, just before Christmas it swooped and bought the Camden Town Brewery in north London for an estimated £85m. Unlike Meantime, which has grown so fast it scarcely qualifies as a “small craft brewer”, Camden is small and bullish about its craft credentials.
I was present at a meeting at the Beavertown Brewery in north London last summer when Jasper Cuppaidge of Camden and Logan Plant of Beavertown announced they were creating a craft brewers’ alliance along with BrewDog and other producers of modern keg beers. The plan was to cut a decisive new image in the industry, putting themselves outside the ranks of SIBA (the Society of Independent Brewers).
But that alliance is now stillborn, with BrewDog removing all Camden beers from its pubs while Cuppaidge says the takeover will enable Camden Town to build a bigger plant in Enfield where he will “continue to make great beer”.
Time will tell but the omens are not good. Global brewers not only think big and want to centralise production in large brewing plants but they also have a long track record of cutting costs by using cheaper ingredients.
In the 1990s, when I visited Chicago, I went to a brewpub called Goose Island, founded by father and son John and Greg Hall. The beers, Goose Island IPA in particular, were excellent and demand encouraged the Halls to build a bigger, stand-alone brewery at Wrigley Field in Chicago. In 2011, Anheuser-Busch, now the AB of AB InBev, bought Goose Island for $38m. Greg Hall left and John Hall has now retired.
What has happened to Goose Island gives a frighten-ing insight into the way in which global brewers think and operate.
The Chicago brewery still operates and produces small-run specialist beers. But the main brands — Goose Island IPA, Honkers Ale and 312 Urban Wheat Ale — are produced at a new brewery built by AB in Baldwinsville, New York State, and have been relabelled simply Goose. IPA is also brewed at a major AB brewery in Fort Collins, Colorado, and at two Labatt’s plants in Canada.
Goose IPA has been turned into a major brand, on sale in the UK as well as the US. A spokesman has admitted that the original yeast
culture used to make the beer has been dumped because it wasn’t suitable for big-batch brewing. The Chicago beer used a blend of American hops with varieties from Slovenia and the Czech Republic, but all the hops are now sourced from AB’s Elk Mountain Farms in Idaho.
You can buy Goose IPA in most British supermarkets for £1.65 a bottle. You will also find Lagunitas IPA on sale at the same price. Lagunitas was a highly regarded craft brewery in California but Heineken has taken a 50% stake in the company and is using its marketing clout to ramp up sales at home and abroad.
The profit on a beer sold for £1.65 is marginal but there’s money to be made if you sell a lot of it. The speed at which Lagunitas IPA is moving off the shelves in my local supermarket suggests Heineken will be well pleased with its investment. Genuine craft brewers can’t possibly sell beer for such low prices and will find themselves driven off the shelves.
AB InBev, SABMiller and Heineken have either taken over or bought stakes in an alarming number of American microbreweries. They
are now turning their attention to the UK.
If you think I’m crying wolf, remember: in the end the wolf got the sheep.