Tippling with the devil
Corporates think there’s something tantalisingly juicy about small ‘craft’ brands — as long as we can still pretend they’re independent
In 2009 Coca-Cola bought an 18% stake in a “craft” fruit juice start-up in London called Innocent. Within four years, Coke had gobbled up more than 90% of Innocent. It made millions of pounds for the founders, who started out as friends at Cambridge University and then famously quit their city jobs in 1999 to start the business.
In 2001, after 10 years’ working in Big Corporate, I helped a friend start a fresh fruit juice business in London. I was curious, and it was exciting to be part of a start-up culture.
Sure, Innocent was a direct competitor, but in truth we felt as though we were allies in the crusade to get fresh juice to the public, when most people guzzled nutrition-free fizzy drinks. We’d banter with the Innocent guys and frequently see them pitching to the same distributors we were trying to sign-up.
Predictably, a lot of the media didn’t like the Innocent/Coke deal. Some said Innocent had done a deal with the devil. For me, I was just annoyed that Coke approached them, not us.
A similar dynamic is developing in the craft beer market. Secretly, I’m sure, many of the “independent” brewers are hoping for some Goliath — AB InBev, SABMiller or even a private equity house — to come knocking with an enticing offer.
Publicly, the small guys will say they aren’t competing with other craft brewers, but rather with the mighty brands, like Castle, Budweiser and Heineken.
I don’t buy that. In the US there are more than 4,000 craft brewers — more than double the number that existed in 2010. By 2015 craft beer accounted for 18% of beer volumes sold.
So if the industry is this big, does it even fit the definition of “craft beer” any more?
The Brewers Association of America defines craft beer as small (less than 3% market share or 6m barrels/year), independent (not more than 25% owned by a “big guy”) and traditional (no flavouring).
In SA there is no legal definition of craft. To most, it simply means anybody but SAB or Heineken. Still, there are more than 170 craft breweries in SA, according to craftbru.com.
But in the US, we’ve seen beverage giants and venture capitalists falling over themselves to buy controlling interests in the best craft brewers.
In one week last year, for example, AB InBev bought three craft breweries. Then, the big one: Constellation Brands (the distributor of Corona) bought Ballast Point of San Diego for US$1bn. Constellation was lured by Ballast’s growth (+100% yearon-year) and profitability (a gross margin of more than 50%).
It’s a beauty pageant, with craft brewers on the catwalk and Big Corporate as judges.
The thing is, can a beer that is owned but not started by the likes of AB InBev still be “craft”?
The Brewers Association clearly thinks not, but the likes of SABMiller, Heineken and AB InBev beg to differ.
One of the best craft brands is Blue Moon, now owned by MillerCoors. Intriguingly, its story is proudly displayed on the MillerCoors website, but there’s zero reference to MillerCoors on the Blue Moon website.
So does this amount to active deception? The plaintiff in a class action legal filing against MillerCoors clearly thinks so.
And what happens once a “craft” brand has been bought? Does it lose its attraction?
Well, the evidence suggests these brands are only enhanced in consumers’ eyes — provided buyers don’t mess with the “brand promise”, quality or “customer experience”.
Customers get better quality and availability, while brewers get access to wider distribution, capital for growth, and a more reliable supply base.
This is why we’re likely to see a quickening in the scramble to buy the best craft brands.
For the true craft snob, it may be a turn-off. But, personally, I would park my concerns about ownership if I could buy Blue Moon in my local liquor store — or even in a small coastal village like Kenton-on-Sea.