Thursday, November 6, 2014

AB Inbev Buys 10 Barrel Brewing

Every once in a while, the landscape shifts in an industry.  Hybrid cars and Tesla's success indicate a shift that we will see play out over a long period of time in the car industry.  Obviously PC and smartphones have created tectonic shifts in the technology industry that have been playing out over the last three decades.  And this week, we heard about another one of those shifts - not the first indication and far from the last, but the beer giant, AB Inbev, the owner of Budweiser beer (among many, many more), purchased a relatively small, boutique brand in Bend, Oregon called 10 Barrel Brewing.

A few commentators have likened this to the Death Star annexing Luke Skywalker's home planet - that it can't end well and it might well be blown up before it's all over - but I think it shows that AB Inbev just took a really smart step in the vein of "if you can't beat them, join them."  And I don't think it's "if you can't beat them, subvert them" either; I think it's more, along the lines of "the train is pulling out of the station, let's get on and see where it goes."  I'm not an industry expert and can't quote the numbers, but I do know that craft beer continues to pull in customers and that the mainstay brands of prior generations are continuing to lose market share.  Along the way there have been some tone-deaf responses, like one of the Coors family basically saying, "I don't understand why people want to drink beer with all that flavor instead of good old fashioned beer like we've been making for a couple of generations."  On the other hand, Coors was also the creator of that well known microbrew imitator, Blue Moon.

Similarly, the Bud crew has taken some odd steps and I think fundamentally missed the ethos behind the small, local brewery movement at times.  One example, for years the local Budweiser distributors were functionally blocked from carrying the local brands, but that has changed and is changing.  Clearly their investment in Redhook and Widmer showed their interest and opened up their network to craft beers.  I think that the purchase of 10 Barrel is another, and different, step that indicates a long-term shift in the industry that will play out over many years to come.  The small, local brewery isn't going away, but then again, neither is the 800 pound gorilla brewery.  It will be an interesting dance to watch.

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