DOJ OK WITH SABMILLER & A-B INBEV MERGER

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DOJ OK WITH SABMILLER & A-B INBEV MERGER

Postby Maltose Parrot on Mon Jul 25, 2016 9:14 am

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Re: DOJ OK WITH SABMILLER & A-B INBEV MERGER

Postby BrewMasterBrad on Mon Jul 25, 2016 11:12 am

The fallout from this will be interesting to watch. I think, from the small craft brewers perspective, the main concern is that access to distribution channels and shelf space will be limited as a result of the "mega brew" merger.

On the other hand, I have seen that several craft breweries are actually stopping their distribution activities altogether. Instead, they are concentrating on selling directly to customers in their tasting rooms. Direct sales to customers means higher margins and the costs of packaging are reduced. This could be a trend that really benefits the growth of small, local breweries. Time will tell.
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Re: DOJ OK WITH SABMILLER & A-B INBEV MERGER

Postby bwarbiany on Mon Jul 25, 2016 12:11 pm

BrewMasterBrad wrote:On the other hand, I have seen that several craft breweries are actually stopping their distribution activities altogether. Instead, they are concentrating on selling directly to customers in their tasting rooms. Direct sales to customers means higher margins and the costs of packaging are reduced. This could be a trend that really benefits the growth of small, local breweries. Time will tell.


It makes for a VERY interesting growth of the brewing industry going forward. I've long argued that we might be in another "craft beer bubble" like the micro bubble in the 1990s. And a lot of it is for exactly the reason you discuss above. The grocery store and liquor store shelves are simply not big enough to support 4,000+ packaging breweries. Especially when the bigger craft brands like Lagunitas, Ballast Point, Sierra Nevada, Stone, etc are getting large enough to have robust national distribution and take up a lot of space on store shelves.

So there are only two options. The US can certainly support 4,000+ breweries (there are probably 8,000 wineries in the US), but only if those breweries are smaller and more modest. If they are seen as local hang-outs rather than even regionally powerful, and if they are owned by people who treat them as a lifestyle business rather than having goals to be the next billion-dollar acquisition target, they can survive.

I suspect, however, that we have one more big contraction in the industry before we get there. "Craft Beer" has now become the in thing, and I think the fickle fad-chasing public will move on to something else at that time. The result has been an explosion in the number of breweries but not necessarily enough quality in some of these breweries. I think the response to that will be a winnowing of the lower quality breweries, which frankly needs to happen anyway. If you can't brew good beer, you shouldn't be making profits selling bad beer.

That said, I think some of the restrictions put on the merger were good, and I don't think that it'll materially change the trajectory of craft in the long haul. What worries me is that if my predictions of a craft beer bubble bursting come to pass, and if they come to pass at the same time as this merger goes into effect (say anytime between now and ~2018), people will misattribute cause and effect and say that it was the merger that caused the craft contraction.
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