Who cares who makes your beer? So long as it tastes good, that's what's important. That's pretty much the argument Anheuser-Busch InBev (BUD 1.43%) makes when scooping up a craft brewery, and it's the case being made by analysts at UBS (UBS -0.21%) following a survey of 1,200 beer drinkers.
According to Business Insider, "Craft beer's argument for not selling out is totally flawed," and after reviewing the UBS survey's results, it says mega brewers like Anheuser-Busch and Heineken (HEINY 1.21%) "can win in craft with M&A." The problem is, the takeaway by the analysts and BI is completely wrong.
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A mighty thirst for beer
Big Beer has been on a crusade to buy its way into virtually the only sector of the beer industry that's shown real, consistent growth. Anheuser-Busch is the most obvious example of it, buying 10 craft brewers over the past year, but Heineken also bought Lagunitas, Constellation Brands (STZ 0.78%) bought Ballast Point Brewing for a shocking $1 billion and then just doled out a presumably much smaller sum for Funky Buddha Brewing, and recently Japanese beer giant Sapporo bought original craft brewer Anchor Brewing.
After years and years of enjoying double-digit growth rates, the craft beer segment saw growth shrivel to 6% as millions of barrels of beer were removed from the equation. To be considered craft, the Brewers Association requires a brewery produce 6 million barrels a year or less, be independent, and use only traditional ingredients and adjuncts in the brewing process. Once A-B or Constellation acquires you, your production is no longer counted toward the total.
Craft brewers have long been a tight-knit group that has fought alongside one another to get distribution and has their beers showcased on store shelves or on tap at bars and restaurants. But what was once a unified front has become frayed as the biggest brewers in the industry began writing checks with lots of zeros on them.
Suddenly, once stalwart opponents of Big Beer buyouts were now signing away their breweries in a bid to cash in.
There is certainly nothing wrong with these brewers selling out to their big rivals. They've put plenty of financial and sweat equity into their labor of love, and now they have a chance to profit handsomely and bring their beer to more people.
But that's a far cry from saying beer drinkers don't care who makes their beer. In fact, the UBS survey proves just the opposite.
Image source: Getty Images.
It really is more than just about taste
The figure UBS and Business Insider touted was that 45% of the respondents didn't think it mattered who made their beer, which was then ratcheted up to "In other words, almost half of Americans don't care at all if a trendy craft beer is owned and produced by AB InBev, the maker of Bud Light, or a small craft brewer completely independent from industry giants."
However, what they're ignoring is a majority of beer drinkers do care who makes their beer, with 30% actually passionate about it, saying it was an extremely important issue.
That's what the Brewers Association is tapping into with its new label program to help craft brewers identify themselves to the 56% of beer drinkers who say it's at least somewhat essential that a beer purported to be craft actually be made by a craft brewer.
In fact, Anheuser-Busch InBev is beginning to recognize that who owns the brewery does matter. After having bought out so many craft brewers, the beer giant just reorganized its high-end craft beer division and fired 90% of the sales force. Ostensibly some of that is the result of having acquired so many sales people from so many brewers that they became redundant, but it also stems in part from the blowback being received by the very beer drinkers who supposedly don't care.
On the outs
Bars and restaurants are removing labels of brewers who sell out, festivals are dropping sponsorships from breweries that were once mainstays of the circuit, and people are switching beers to those that remain true craft. Constellation Brands recently had to write down the value of its Ballast Point acquisition after realizing negative trends in the beer.
Indeed, the reverberations have been such that Anheuser-Busch says it's not going to be buying any more craft breweries and will instead work on achieving organic growth with the portfolio it's assembled.
Forty-five percent of beer drinkers not caring who makes their beer is a large percentage, but it's not half, and saying AB or Heineken won't suffer if they ignore what the majority of beer lovers are saying certainly seems a misguided and dangerous takeaway.
