ABI Acquisition vs. PE Firm

Please provide a link to data in opposition to my point, even if you consider both sets invalid I ask because my point is that there is not data in support of that side of the argument. You may call my data invalid, I call the other side's data you speak of not in existence. I don't know who is right, I do know whose opinion has data in support, and whose doesn't. I will be happy to revise my claim in the face of any link(s) you provide. Happy to provide sales and growth figures in support of my opinion

And please the semantic games you try to play in paragraph 2 (iin guise of devil's advocate) are unworthy of you.

 

So what is your exact prediction and data, I ask in retort? All I have quoted so far from you is you predict craft will not "be destroyed." And your data is... (I can guess, but I don't want to put words in your mouth).

Also, I feel there will be a push to move this to a private conversation...

 

Craig, Dave is perfectly able to provide the information here but it is pretty clear that over the last couple (few) decades that BIG BEER has had declining business (as measured by volume) while the craft portion of the beer market has had rapid and continuous business growth (as measured by volume). There is zero doubt in my mind that BIG BEER has been taking business steps to reverse both of these movements: the decline of BIG BEER and the rise of craft beer. Despite the efforts of BIG BEER craft beer has had increasing business gains and BIG BEER has been declining. So what data do you have to present that next year (or the following year or...) that BIG BEER will be successful at stopping the growth of craft beer and just as importantly to stop their decline in beer volume. This specific data (information) would be extremely useful in this discussion.

Cheers!

 

I agree that such companies as ABInBev do indeed want to halt the decline in their sales, however I'd suggest that the goal of ABInBev is much more about learning to be able to learn to surf and to ride of the wave created by Craft Breweries than it is to stop the rise of craft beer as such. This wave is a phenomenon which they have been too late to lead so they are trying to join.

A number of their recent acquisitions, initiatives and investments suggest they have developed an interest in new technologies and in potentially disruptive innovations that will enable them to regain market share or to acquire expertise in dealing with new things. In a very real sense of the word Craft Breweries have proven able to provide them souces of new brands and an example of a successful disruptive innovation. So long before they can consider out competing Craft Breweries they must learn to be as flexible and nimble as their competition. The old dog may indeed be trying to learn new tricks.

 

One dimension your thinking leaves out is that one source of funds (ABI) is interested in building something, or increasing it's value and then keeping it. The other, a typical Venture Capital firm, is interested in building something of increase value and selling it to others, sometimes even the original owners. So profit in the case of ABI might well be measured by things other than just money.

 

Ok, since unanswered, I will postulate...

So, back in 2008, using the same type data I assume we are using at this point, everyone was predicting the number of breweries would be under 10 and Anheuser Busch would have over 50% market share. Right? I mean, what data did we have to the contrary??

So maybe an individual had other data? Maybe an individual chose to ignore this specific long term trend? Could someone have argued with that person then that they had no data to back up what they though? Did it end up mattering??

To the point I bolded in your quote. You, in particular, happen to believe ABI is actively involved in preventing the growth. Let's assume that's true. Most recently, we probably agree that they have been mostly unsuccessful. Laws that allow self-distribution, laws that increase ABV limits, etc. have all generally helped craft beer - and ABI has either not tried or been unsuccessful at stopping them, individually.

Is that guaranteed to continue? If they are fighting will they continue to lose? If they actually are not fighting, will they start? Or will they give up/continue not fighting? Laws against anti-competitive behaviors have been broken (or settled), were the penalties enough to dissuade the practices in the future?

To use another industry - the current trend is that more and more states are legalizing marijuana. That's a nice recent trend for those who are in favor of legalized pot. There is no "data" the trend will reverse, I might argue. However, there is known opposition to the current trend, and you have a new push by our justice department against drug offenses. Does the data of recent successes the only valid data? Is the known opposition "data" or "not data?" Is it "information?"

To my end, I think both are "information" and some could probably be called "data"; my original posts equated the two (and I am not sure that is incorrect). Perhaps that was my flaw in this side debate - that others find the two things different, and weight one more. If I do break up these two concepts as attempted, then to me, when predicting the future, "information" is more important than "data." To this specific discussion, I do not have any "information" that ABI is lobbying for laws beneficial to them. Is it legitimate to ask for this information? Sure. It just seems that people are looking for "data" that they have been successful, or it's "by definition" not useful.

At this point, I feel I have either been successful at making my point or haven't or will just confuse it even more, so I will stop at give the debate back to you guys.

 

How do you know the shareholders are not beer drinkers?

 

My source of data is not just looking at the short term growth of just a couple of decades in a small part of a market. I am trying to look at the long term. Sure there has been growth for Craft Beer... But ABI and the other conglomerates showed in the beginning that they truly did not understand what was driving the rise of craft beer. They thought that they could fight this trend by doing what they always did... But they are learning, they are getting better at their acquisitions. They now understand that they won't succeed by buying out breweries and cutting corners. They realize that they have to foster the driving force behind the craft beer market in order to be successful. They are buying out breweries that have a foot in the door on experimental/extreme beers. They already are showing focus on acting more local through their proxies. What has you so convinced that the big breweries are now magnanimous and don't want to control the entire market like they did throughout the 20th century?

https://eh.net/encyclopedia/a-concise-history-of-americas-brewing-industry/

What data do you have that gives you hope that this will continue? Look at the history shown with Shiner... They started out being most successful by brewing bolder, stronger european style beers... But the population that wanted those started dying off and the younger generation just wanted lighter blander beers... Then as that generation started getting older their younger generation started wanting more flavorful beers and Shiner Bock rose to prominence.

Craft Beer is currently growing... But that doesn't mean that it'll always be the case, and I don't care about the current trend... I am caring about trying to make sure that going forward into the future with changing trends that the local/regional breweries will be successful.

Sticking your head in the sand saying that nothing will change does nothing but blind you to what is actually happening, and allowing history (the entire 20th century) to repeat itself.

I'm sure that from 1870-1960 people that loved their local/regional breweries making bocks, IPAs, and such always told each other , "There's no way that BIG BEER will be able to take over the market as long as our local/regional breweries focus on us and making what we want." Then what do you see... Virtually all of those local/regional breweries closed down and the only thing that was left was the Big 3.

I won't buy BIG BEER's beers not because I think that I'm going to be able to take money out of their pocket... But that I hope if I can give enough money to my local breweries that they will be able to weather the eventual storm... It won't be this year, or next year, or the year after.

It may be 10, 20, 30, 40, or 50 or more years down the road... But shoving your fingers in your ears won't matter.

 

I'm noticing something odd though... Why are virtually all of the people here that are throwing their support behind ABI and the other conglomerates from Pennsylvania?

Is there something different about that state that gives them such a different perspective on this than the rest of the US?

I don't know... Maybe the states strong control of the retail/distribution there means that the big companies don't have the leeway to exert their control as much.

 

I'm sure if they purchase a different license type that problem would evaporate.

 

What MNAle was saying is true. Restrictions on on-premise sales are common and becoming even more common... There was the article posted recently about it.

https://www.beeradvocate.com/commun...ck-against-tasting-rooms.516067/#post-5482843

Listed in the artice:
-Interestingly actually Texas' recent law is a bit more lax. Breweries are able to sell 40,000 cases of beer on-premise before having to pay distributors to do nothing.

-Maryland has a bill(or law) where breweries can only sell 2,000 cases on-premise per year before having to sell to a distributor and buy it back.

-New Jersey doesn't really have sales caps but they did put a lot of other restrictions on what brewery taprooms can do for selling on-premise (Required tour, No food even food trucks/snacks discouraged, restricted entertainment options)

This is seemingly a trend that's increasing.

PA may be the exception instead of the norm like you and others seem to think.

 

PA laws aren't as bad as they were only a few years ago.

 

Agreed on all of this, but I don't think anyone is saying that ABI is somehow looking out for the best interests of all of craft beer. That said, they are certainly doing FAR more to improve craft beer than any PE firm.

Unless you're going to make the assertion that Big Beer initiated Prohibition to put their competitors out of business (I like to see you do that, btw), then your argument does not have any legs.

 

Conjectures all are good. There are educated ones with no data to back them up, like yours above, and uneducated ones, like mine, but with data to back them up. Time will tell who's right, but I have been saying this for years to folks saying what you are saying. Who's been right and who wrong so far is definitely a fair question to ask, even though it means nothing in terms of the future. Cheers!.

 

No. I am not trying to blame Prohibition on Big Beer... I am saying that the brewery closures and consolidations weren't affected by Prohibition... in the 5 Myths thread a couple of pages back the history people brought out the data in nice and pretty graphs showing it. The number of breweries at the end of prohibition just continued the decreasing trend in number of breweries before it.

Five myths about beer

And another article with a similar chart. https://www.brewersassociation.org/statistics/number-of-breweries/

On your first point. ABI has tried to hold craft beer back. Craft Beer has succeeded by providing something to consumers that Big Beer didn't understand in the beginning... But they are learning and the recent acquisitions are giving them much more data to understand our practices and behaviors.

PE firms have not had a negative impact on the Craft Beer market even if they may have a negative long term impact on individual breweries... But they have also given those breweries the ability to grow and expand... Is Oskar Blue's expansion good or bad? Up until now most people would say it's good but we have not seen the negative impact of their investors yet... But even if Oskar Blues bombs it won't really matter for Craft Beer... But the buyouts, attempts at controlling retail space, and more can definitely hold Craft Beer back.

 

The NJ licensing requirements are actually heading in the right direction. They were much more restrictive previously- such that one was either a production brewery, or a brewpub that doesn't distribute. As a result, we had precious few entrepreneurs interested in locating their business in the state. After relaxing the restrictions in the past 4 to 5 years, the brewing industry has exploded.

 

If you're saying that Prohibition was only one variable, then I can get on board with that. If you're saying that Prohibition had nothing to do with breweries closing, then I'm going to object to that line of reasoning.

Change "craft beer" to "their competitors" and I'd agree with you.

 

I'm somewhere in the middle on this since I think both "sides" have been making reasonable points in this discussion.

But one thing I'd throw out there as an additional source of data is that it hasn't just been the beer industry that has been steadily moving away from homogeneity (to oversimplify the change). Food, both from the grocery store and in terms of restaurants has as well to perhaps an even greater degree. And just more generally U.S. culture is less inclined to default towards mass produced items than they were in the 50s through the 70s when industrialized production was a bragging point rather than something you tried to downplay.

Short of a Mad Max style civilization changing event I don't think that genie's going back in the bottle any time soon. Now, I think we're closer to that Mad Max event than we've been in a long time but that's another topic entirely...

Again, I'm not someone who thinks it's wrong to be concerned about these things. I just think that the worst-case scenario is likely off the table due to cultural changes that are beyond the control of even entities the size of InBev.

 

Like you mentioned earlier, food, and in specific the "fine dining" industry, is a great example of this. Used to be that you couldn't get creative dishes unless you went to a "jacket required" establishment. Now great food is ubiquitous. That's a very good thing for the consumer. I think that same thing is happening with beer. Actually, in a rather hand-in-hand kind of way. I also think that ABI is in the business of helping the trend, not hindering it. PE firms . . . not so much.