Monday, August 22, 2011

Beer Consolidation

I ran across this article on Mother Jones about the number of breweries and brands on the market. We all know that number of breweries in the US is skyrocketing. It seems a new one opens up in St. Louis every other week which I think is also going to happen in KC over the next couple of years. This is all a great thing, I can't wait to drink Wilderness, Fountainhead (pineapple blonde ale, yes please) and Belton Brewing beers.

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But, also noted is the loss of market share for the macros. Their business doesn't much concern me, I'm always amused that some of their brands like Bud Ice Light and Bud Dry exist since I never look at that section of the liquor store. We've had some controversy over the fake craft segment with beers like Shock Top and Blue Moon. These beers account for a very small portion of BMC's (Bud, Miller, Coors) sales but require an awful lot of their bandwidth as they are the only segments BMC can grow.

Now, BMC isn't going to take this loss of market share lying down and the way I see it, they have 2 options available to them. The first, as we've seen with the Goose Island purchase, is consolidation. This is a rather benign way to increase their market share. It's controversial of course, many people have stopped drinking Goose Island beers because of their "selling out", but, in my eyes, as long as the beer is the same, it doesn't matter to me who ultimately profits from selling the beer. Ultimately, though, BMC benefits by limiting the number of beers they produce and they're not that interested in producing interesting beers. It's much more profitable selling known quantities like American Lagers and Pale Ales rather than more experimental high alcohol beers. Consolidation will, in the end, dumb down the brands that are purchased.

The second avenue is much more worrisome, regulation. BMC sells a lot of beer and makes a lot of money. They spend that money on marketing and lobbying. You won't see their fingerprints on anything they'll let the politicians do their dirty work. Rather than working to break down post-Prohibition era laws, BMC lobbies to strengthen those laws. They have the distribution in place, they have no problem making 3.2 beer and no one objects much to a standard 5.0% ABV Bud or Coors. But, laws that limit alcohol content or added caffeine or other products only serve to benefit BMC.

The war against Four Loko had nothing to do with safety, Four Loko was eating away at a portion of an important segment, young drinkers. I know when I was an underage drinker very few craft beers touched my lips. My fraternity room fridge was filled with MBL and Coors Light. This is very important to BMC, if consumers first hundred beers are of this little taste, you're not going to like the more expensive, more flavorful beers. Four Loko was a threat, so BMC sent their assassins, the politicians, to kill it.

Another threat was the Brew Masters show. Sam Calagione got a little too big for his britches and broke into the big leagues of television. BMC flexed their advertising budgets to the Discovery Channel's suits and got the show taken off the air.

Just looking at the chart with the number of breweries, it's obvious that allowing homebrewing at the federal level, deregulation, brings more breweries. This is a bad thing for BMC and they're going to do what they can to eliminate the competition, either by buying the competition or outlawing the competition. When you see some law regarding alcohol (or food for that matter, the food industry is the exact same) think about who it benefits. I guarantee that any law that makes it more difficult to sell alcohol or regulates beer in some absurd way, will benefit BMC and BMC is probably behind it.


  1. Interesting take on the reaction to the deaths associated with Four Loko, but I think the media coverage and public reaction was sufficient to drive that legislation without BMC having to lift a claw.

    Hadn't heard the BMC angle on the demise of Brew Masters before. Do you have any links to support it? I just thought making it exclusive to DFH was a flawed concept, plus it was poorly executed.

    I must also point out that you supported this BMC friendly legislation in the face of valid concerns about the detrimental impact on the local economy and the availability of craft brews.

  2. This is what I was referring to with Brew Masters. There is no smoking gun on it, but it is more than plausible. I agree that it wasn't a great show.

    I support the elimination of 3.2 independent of who benefits as I tried to state in that post.

    As for Four Loko, the mindset that we need the government to protect us from a product is something that needs to change. A bad thing happens does not equal we need a law banning something. And as far as I know, mixing rum and Coke is not illegal. Mixing whiskey and coffee is not illegal. Mixing Red Bull and vodka is not illegal. Some kids drank too much and died. While it's tragic, a perfectly legitimate product shouldn't be banned because of it.

  3. Bourdain, right, I remember now. I agree it is plausible. Thanks for the link.

    I think you have a valid argument on the legitimacy of the legislative reaction to the deaths associated with Four Loko, I just didn't think BMC was the villain.

    On changing the KS liquor laws, did they get the law passed? I think it would be a fascinating economic/political study. Ostensibly, the legislation would give consumers more options on where they could purchase beer, but could it result in a smaller product selection and a net loss to the the local economy?

  4. I just linked this article to dogfish head's facebook page, asking if there was any truth to the story. My post on their wall got deleted in less then 5 minutes.

  5. It is popular to demagogue large breweries but I find that whenever I look at a specific law, the anti-small brewery side is always fought by distributors or retailers (specifically their trade groups).

    Missouri SB 64 and HB 258 (not passed in the previous session) are backed by distributors. The Surly Law was opposed by retailers.

    Not saying the big breweries don't throw around their influence and try to mold the law to their benefit (of course, the small brewers do the same with their considerably less influence), but their target is usually larger craft producers or distributors themselves. In fact, the Missouri bills referenced above target AB-Inbev, though they would considerably harm smaller brewers in the progress.

  6. There was a political angle to the Four Loko situation, too--Martha Coakley demagogued that issue for her own political gain (she was the one who said Four Loko was also called "liquid crack," but the only one who ever called it that was one Martha Coakley). So, as usual, there are other agendas at work here too.

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