Acquisitions, Mergers, Solar Power, and Marzens - The Future of Great Beer
I took a few coffee-fueled moments on Sunday to peruse the blogs and news media, and I've come to the conclusion that, similar to most industries out there, no one really has any idea what American beer will look like in 10 years time. It'll probably still be delicious, and for that I'm thankful, but the business itself might be operating under a significantly different paradigm. Perspectives on craft, the evolution of the beer consumer, and an obtuse number of other factors (environmental, regulatory, economic, demographic) will all chip in to stir the the collective pot in such a way that few can accurately predict what will happen. I have compiled a list of factors (and a few predictions) that I think will contribute to major changes. Some of these are obvious, and some may come as a surprise to you.
- It's been said too many times at this point, but ABInbev/SABMiller are combining their collective market shares and bank accounts, and that's a big deal. They have a LOT of money folks (This cannot be emphasized enough), and they've got hundreds of years of growth under their belt. While they've been losing market share in the U.S, you cannot remotely count them out. They've got a fresh batch of craft breweries in their portfolio now, and you can bet they're going to ride that learning curve as fast as possible, putting together a huge team of craft experts from across the country to help them strategize, visualize, and build a future where they're relevant and profitable. 2025 AB/Inbev/SABMiller could look significantly different than the current version, but they'll be there.
- Beer is getting more authentic in its approach. Like food, it's now artisanal, creative, and increasingly focused on the local scene. We had less than 2000 breweries in the country in 2011. We now have something close to 4300 breweries. Economic realities dictate that we probably cannot handle 4300 craft breweries that are all the size of Sierra Nevada (unless AB/Inbev totally vanishes), so more likely is the idea that we're going to increase our support for the small brewery down the road from our house. I've discussed this before, and it holds true that our natural inclination to "buy local" and support community businesses has only gotten stronger in the past 10 years. Coffee, once a commodity product dominated by Maxwell House and Folgers, has been experiencing an extreme evolution for quite a while now, positioning itself as a third-wave product with gourmet roots and local roasters. Beer is the same way, and we'll see smaller footprints, and more of them, as we continue down the road.
- Environmental factors are going to clamp down on production. Breweries access to resources will change, and our consumption patterns will be affected. Don't worry, because there will be plenty of beer in the future. The end-consumer will feel the effects less, but the people in the beer business will have to cope with a different environment. Brewing is a resource-heavy industry (very resource heavy, from raw ingredients, to production, to distribution), and as such they'll need to be cognizant of their impact. Large breweries like Sierra Nevada, New Belgium, etc are doing a great job implementing sustainable practices into their business model (renewable energy using solar/wind power, efficient use of water, local purchasing when possible) because they can afford it, and smaller breweries will need to start incorporating these practices now in order to sustain themselves in the future.
- The last 10 years have shined a significant spotlight on the regulatory environment around beer, both nationally and at the state level. You could literally teach a college course (or two) on the ridiculously complex and just plain ridiculous evolution of beer laws, regulations, distribution models, and governmental oversight. As consumers, it's easy to take it all for granted. For the most part, we just walk into a local package store or bar and there's the beer. But breweries have to deal with a laundry list of restrictions and legal battles around distribution, taxes, and pretty much everything else they do. In Mississippi, breweries can't sell beer from their brewery. Same thing in Georgia, where you also can't sell beer on Sundays, and you can't sell anything above 14% ABV, and you have to use a distributor...the list goes on. It's a battle fought on a conspicuously silent front, but lawmakers can make significantly beneficial changes to help support the growth of great beer in many states as we continue to see industry growth.
- Imported beer brands, once seen as the authentic alternative to domestic producers like Budweiser, are going to have an uphill battle in the states. I don't mean all imported beer brands. Import variety has, on balance, gone up in the past few years. More of Europe's best Belgian, German, British, and Czech styles (to name a few) have made it to our shores, and for this I'm grateful. We're seeing massive influence cross the Atlantic in both directions, with American beer producers going to school on traditional European brewing tactics, and Europeans doing the same thing on our pioneering craft beer industry. I'm more referring to the idea that significant market share can be had here in the states by foreign brands looking to grab a larger chunk of the pie. Entrenched brands like Guinness, Stella Artois, Corona, etc have massive mindshare amongst their consumer base, but they are already fully aware that their not really gaining ground on our shores. Craft beer hasn't just slammed the door on domestic producers, and as a result of this, you'll see more innovation from these import brands, trying to remain relevant amongst a changing demographic.
- Technology will have a noticeable impact on our consumption habits. The changing consumer landscape is mostly due to education and access to information. As more people drink great beer, more folks start to talk about it. Blogs, news media, and the like have exploded in the past 5 years, fueling the fire to be a more informed drinker.
There are more things happening, but this rounds out a short list.