Big beer and small beer - part 2
We just wrote about the battle between the big multinational beer oligopoly and the movement to drinking craft beer, when we came across a very perceptive Wall Street Journal article ("To Trump Small Brewers, Beer Makers Get Crafty', 10/26/07). That article details the way in which the big three US brewers (Soon to be two) are fighting back against the pesky craft brewers that are nipping at their heels.
The trick is an obvious one- to give drinks the illusion that they are sticking it t the big companies by buying the craft beer. As the article notes:
The major brewers generally avoid using the parent company's name on the labels for their craft beers. Anheuser-Busch Co., for example, lists Green Valley Brewing Co. as the maker of its Wild Hop Lager, an organic beer. Sunset Wheat from Jacob Leinenkugel Brewing Co., is owned by SABMiller PLC. Blue Moon Brewing Co. is a 100%-owned subsidiary of Molson Coors Brewing Co., but the parent company isn't mentioned on its beer labels.
And the tactic seems to be working. "Through the first eight months of this year, retail sales of craft beers made by those companies or their affiliates grew at nearly three times the rate of independent craft brews, according to market-research firm Nielsen Co." The reason is the access of the big brewers to grocery, drug, convenience and major-market liquor stores, where they can squeeze their rivals off the shelves, thanks to raw distribution muscle power. The retails simply have to please the big beer distributors, or risk running out of Bud Light or Coors Lite at a crucial time.
The reason the bigs are pursuing this market is threefold.
- Although only 55 of the overall market, it is growing while other beer sales are declining or plateauing.
- The profits per bottle are far higher
- Big Beer is wary of being outflanked by changes in customer taste and the emergence of a new rivals.
While some craft brewers are hurting from competition with the bigs, the article notes, others "say the giants' move into the category is a good thing because they're bringing new legions of craft drinkers into the fold. Even if the independent brewers' market share falls, they may enjoy higher sales and profits as the category grows."
Whatever the upshot (and I belive that some of theose craft brewers will come to regret their confidence), it's another example of oligopolies adapting to the innovations of others by copying them and confusing the market and watering-down (double meaning intended) the competition.
