tag:theconversation.com,2011:/us/topics/anheuser-busch-inbev-20983/articlesAnheuser-Busch InBev – The Conversation2021-06-10T12:36:52Ztag:theconversation.com,2011:article/1622222021-06-10T12:36:52Z2021-06-10T12:36:52ZAlcohol companies make $17.5 billion a year off of underage drinking, while prevention efforts are starved for cash<figure><img src="https://images.theconversation.com/files/404928/original/file-20210607-10178-1b5bfg2.jpg?ixlib=rb-1.1.0&rect=0%2C14%2C4679%2C2354&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">New research estimates that underage drinkers consume $2.2 billion of Anheuser-Busch InBev drinks – like Budweiser – per year.</span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/EarnsABInBev/177404906dfa4944b17cc3bf5a42442f/photo?Query=ab%20AND%20inbev&mediaType=photo&sortBy=&dateRange=Anytime&totalCount=63&currentItemNo=0">AP Photo/Reed Saxon</a></span></figcaption></figure><figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/405233/original/file-20210609-19-1gvoc6d.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/405233/original/file-20210609-19-1gvoc6d.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=255&fit=crop&dpr=1 600w, https://images.theconversation.com/files/405233/original/file-20210609-19-1gvoc6d.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=255&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/405233/original/file-20210609-19-1gvoc6d.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=255&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/405233/original/file-20210609-19-1gvoc6d.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=321&fit=crop&dpr=1 754w, https://images.theconversation.com/files/405233/original/file-20210609-19-1gvoc6d.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=321&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/405233/original/file-20210609-19-1gvoc6d.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=321&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p>Alcohol is still the <a href="https://www.cdc.gov/mmwr/volumes/69/su/su6901a5.htm">most commonly used</a> drug among high school students. According to the Centers for Disease Control and Prevention, every year approximately <a href="https://nccd.cdc.gov/DPH_ARDI/Default/Report.aspx?T=AAM&P=1A04A664-0244-42C1-91DE-316F3AF6B447&R=B885BD06-13DF-45CD-8DD8-AA6B178C4ECE&M=32B5FFE7-81D2-43C5-A892-9B9B3C4246C7&F=&D=">3,500 people under 21 die because of alcohol use</a>. </p>
<p>I have studied the relationship between alcohol marketing and youth drinking behavior for the past 20 years. In 2011, my colleagues and I performed what to our knowledge was the first and only survey of <a href="https://doi.org/10.1111/acer.12084">what specific brands of alcohol underage people drink</a>. We asked 1,032 young drinkers about 898 brands of alcohol to learn what the underage alcohol market looks like.</p>
<p>In a new paper published on June 9, 2021, my colleagues and I combined our survey data with the latest information available about alcohol consumption among adults to estimate the percent of all alcohol sold in the U.S. <a href="https://doi.org/10.15288/jsad.2021.82.368">that was consumed by young people</a>. Then, we were able to calculate how much money underage drinkers are spending and, importantly, <a href="https://doi.org/10.15288/jsad.2021.82.368">which companies are making this money</a>. </p>
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<a href="https://images.theconversation.com/files/404930/original/file-20210607-27-1lo02iv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Two empty red plastic cups next to tipped over beer bottles." src="https://images.theconversation.com/files/404930/original/file-20210607-27-1lo02iv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/404930/original/file-20210607-27-1lo02iv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/404930/original/file-20210607-27-1lo02iv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/404930/original/file-20210607-27-1lo02iv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/404930/original/file-20210607-27-1lo02iv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=504&fit=crop&dpr=1 754w, https://images.theconversation.com/files/404930/original/file-20210607-27-1lo02iv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=504&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/404930/original/file-20210607-27-1lo02iv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=504&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Just three companies account for nearly half of all alcohol consumed by minors.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/photo-illustration-for-underage-drinking-with-empty-beer-news-photo/1315945612?adppopup=true">MediaNews Group/Reading Eagle via Getty Images</a></span>
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<h2>Who makes money from underage drinking?</h2>
<p>In 2016, the most recent year for which market research and government data were available, the total value of alcoholic beverage sales in the U.S. <a href="https://doi.org/10.15288/jsad.2021.82.368">was around US$237.1 billion</a>. Using our model of the youth market from 2011 and our database of alcohol prices, we were able to estimate the retail sales of youth consumption for 2011 and project it to 2016. In total, we estimate that youth under 21 accounted for <a href="https://doi.org/10.15288/jsad.2021.82.368">8.6% of the drinks consumed and 7.4% of the dollars spent</a>, since young people buy cheaper alcohol. This translates to $17.5 billion. While underage drinking has been <a href="https://www.niaaa.nih.gov/publications/brochures-and-fact-sheets/alcohol-facts-and-statistics">steadily declining since 2002</a>, it is still a substantial source of income for these companies. </p>
<p>According to our <a href="https://doi.org/10.1111/acer.12084">2011 survey</a>, the 10 most popular alcohol brands among underage drinkers were Bud Light, Budweiser, Smirnoff Malt Beverages, Smirnoff Vodkas, Coors Light, Jack Daniel’s Bourbons, Corona Extra, Mike’s, Captain Morgan Rums and Absolut Vodkas.</p>
<p>Three companies own most of these drinks and accounted for nearly half – 44.7% – of the alcoholic drinks consumed by young people. Anheuser-Busch InBev accounted for 21.2% of of these drinks, from which they earned $2.2 billion. MillerCoors sold 11.1% of the booze, earning $1.1 billion. Spirits- and beer-maker Diageo also sold 11.1% of the beverages youth drank – and, since liquor tends to be more expensive per drink compared to beer, earned $2 billion from underage drinking.</p>
<h2>Revenues from underage drinking could be put to good use</h2>
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<a href="https://images.theconversation.com/files/404929/original/file-20210607-80132-1mr4oht.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A sign on a fence saying 'Must be 21 years old to enter.'" src="https://images.theconversation.com/files/404929/original/file-20210607-80132-1mr4oht.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/404929/original/file-20210607-80132-1mr4oht.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=900&fit=crop&dpr=1 600w, https://images.theconversation.com/files/404929/original/file-20210607-80132-1mr4oht.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=900&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/404929/original/file-20210607-80132-1mr4oht.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=900&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/404929/original/file-20210607-80132-1mr4oht.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1131&fit=crop&dpr=1 754w, https://images.theconversation.com/files/404929/original/file-20210607-80132-1mr4oht.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1131&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/404929/original/file-20210607-80132-1mr4oht.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1131&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Alcohol companies claim to be against underage drinking but contribute very little money to effective programs aimed at reducing the large market.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/drinking-age-royalty-free-image/172281583?adppopup=true">Kameleon007/iStock via Getty Images Plus</a></span>
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<p>Brewing industry trade association the Beer Institute says that the “<a href="https://www.beerinstitute.org/wp-content/uploads/2018/12/BI_WhitePaper2018.pdf">U.S. beer industry has dedicated itself to preventing illegal underage drinking for more than three decades</a>.” They go on to say that companies do their part to make sure advertising is aimed at adults, educate parents and college students about underage drinking and encourage stores to not sell alcohol to minors.</p>
<p>However, <a href="https://dx.doi.org/10.1093%2Feurpub%2Fcky065">numerous studies</a> have found that alcohol companies’ actions to prevent alcohol-related harms are ineffective. Our research clearly demonstrates a conflict of interest: These companies are making literally billions of dollars from the very behavior they say they want to prevent. </p>
<p>In response to a request from Congress, in 2003, the National Research Council and Institute of Medicine issued a <a href="https://doi.org/10.17226/10729">major report on reducing underage drinking</a>. They recommended that all segments of the alcohol industry that profit from underage drinking place 0.5% of total company revenues in an independent nonprofit foundation dedicated to reducing and preventing underage drinking. In 2016, this would have amounted, for example, to $78 million from Anheuser-Busch InBev. This money could do a lot to support community groups trying to implement <a href="https://www.thecommunityguide.org/topic/excessive-alcohol-consumption?page=1">evidence-based strategies</a> such as reducing density of stores that sell alcohol, raising alcohol taxes and increasing enforcement around illegal sales to minors. </p>
<p>But no independent fund was ever created, and the alcohol companies themselves continue to control the money they contribute to preventing underage drinking, largely spending it on branded “corporate social responsibility” efforts that do more to <a href="https://dx.doi.org/10.1093%2Feurpub%2Fcky065">promote their products than prevent harmful drinking</a>. </p>
<p>Meanwhile, federal funding specifically dedicated to the prevention of underage drinking is minimal. The <a href="https://www.samhsa.gov/sites/default/files/samhsa-fy-2022-cj.pdf">most recent president’s budget</a> recommended a mere $10 million for grants to community coalitions working on underage drinking. On top of this, as a result of a significant alcohol tax cut passed in 2017 and <a href="https://www.thedrinksbusiness.com/2020/12/us-alcohol-producers-benefit-from-900bn-stimulus-package/">made permanent in 2020</a>, alcohol companies are contributing less to the federal budget than ever.</p>
<p>I believe that, because of their conflict of interest, alcohol companies cannot be trusted to spend prevention dollars effectively. The billions these companies make from underage drinking is money that the prevention field could really use. A system, independent of the industry, that would collect and allocate these unwanted revenues could be a better way to get it to local communities and help reduce and prevent underage drinking.</p>
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<p class="fine-print"><em><span>David H. Jernigan receives funding from the National Institute on Alcohol Abuse and Alcoholism and the de Beaumont Foundation. He also serves as the Scientific Chair of the Global Alcohol Policy Alliance.</span></em></p>In the US, underage drinking accounts for a whopping US$17.5 billion worth of alcohol yearly. New research shows which companies take in most of this money and how little is spent on prevention.David H. Jernigan, Professor of Health Law, Policy & Management, Boston UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1351702020-05-22T12:18:59Z2020-05-22T12:18:59ZWhy Ford, Chanel and other companies pitch in during a crisis – without the government ordering them to<figure><img src="https://images.theconversation.com/files/336859/original/file-20200521-102647-gbww8q.jpg?ixlib=rb-1.1.0&rect=50%2C179%2C3690%2C2311&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Ford employees assemble ventilators. </span> <span class="attribution"><span class="source">AP Photo/Carlos Osorio</span></span></figcaption></figure><p><a href="https://www.who.int/news-room/detail/03-03-2020-shortage-of-personal-protective-equipment-endangering-health-workers-worldwide">Severe shortages of critical medical supplies</a> have prompted governments to compel private companies to fill the gap. In the U.S., President Donald Trump invoked rarely used powers to force <a href="https://www.nytimes.com/2020/03/30/business/gm-ventilators-coronavirus-trump.html">General Motors</a> to make ventilators, while the leaders of <a href="https://www.ft.com/content/42f636be-751d-4ebf-9b55-bf313014769f">France</a>, the <a href="https://www.autocar.co.uk/car-news/industry/government-ask-uk-manufacturers-build-ventilators">U.K.</a> and <a href="https://www.japantimes.co.jp/news/2020/02/28/national/mask-makers-distance-abes-coronavirus-guarantee/#.XsbHpBNKgnc">Japan</a> have put pressure on companies to make more medical supplies. </p>
<p>But, judging by how many non-medical companies have voluntarily stepped up to shift their manufacturing might to produce health care supplies – including GM rival <a href="https://www.businessinsider.com/ford-making-ventilators-to-fight-coronavirus-how-many-when-ge-2020-3">Ford</a> – it seems hardly necessary. </p>
<p>Fashion brands such as <a href="https://www.ft.com/content/e9c2bae4-6909-11ea-800d-da70cff6e4d3">LVMH</a>, <a href="https://www.reuters.com/article/us-health-coronavirus-france-chanel/chanel-turns-its-workshops-to-making-face-masks-as-coronavirus-spreads-idUSKBN21G0JP">Chanel</a> and <a href="https://wwd.com/beauty-industry-news/beauty-features/loreal-launches-sweeping-program-to-combat-covid-1203539626/">L’Oreal</a> <a href="https://www.businessinsider.com/dior-reopens-baby-dior-factory-to-start-making-face-masks-2020-4">are transforming their factories</a> to mass produce face masks. Spirit and beer makers <a href="https://www.nasdaq.com/articles/anheuser-busch-starts-making-hand-sanitizer-alongside-its-beer-2020-03-23">Anheuser-Busch</a>, <a href="https://www.adweek.com/creativity/diageo-and-anheuser-busch-join-alcohol-brands-pivoting-to-free-sanitizer/">Diageo</a>, <a href="https://www.businessinsider.com/coors-beer-company-makes-hand-sanitizer-amid-coronavirus-pandemic-2020-3">Molson Coors</a> and <a href="https://www.bevindustry.com/articles/92934-bacardi-launches-production-of-hand-sanitizer-at-puerto-rico-distillery">Bacardi</a> are shifting some of their production and distribution towards hand sanitizer. And automakers <a href="https://www.bloomberg.com/news/articles/2020-03-27/toyota-shifts-factories-to-face-shields-will-help-device-makers">Toyota</a>, <a href="https://www.reuters.com/article/us-health-coronavirus-volkswagen-ventila/volkswagen-tests-ventilator-output-as-carmakers-join-coronavirus-fight-idUSKBN2172VH">Volkswagen</a> and <a href="https://www.reuters.com/article/us-health-coranavirus-fiat-chrysler-vent/fiat-chrysler-starts-ventilator-component-output-in-italy-idUSKBN21L1FA">Fiat Chrysler</a> are leveraging their 3D printing capabilities to produce face shields and are <a href="https://www.msn.com/en-us/money/companies/ford-partners-with-3m-and-ge-healthcare-to-make-respirators-ventilators-to-fight-coronavirus/ar-BB11DicJ">partnering</a> with other companies to make ventilators.</p>
<p>And that’s just three industries. In all, hundreds of companies across the globe have committed money, supplies and know-how to help with the COVID-19 response, according to the U.S. Chamber of Commerce Foundation’s <a href="https://www.uschamberfoundation.org/aid-event/corporate-aid-tracker-covid-19-business-action">corporate aid tracker</a>. </p>
<p>Why are these companies being so generous? </p>
<p>As <a href="https://kelley.iu.edu/faculty-research/faculty-directory/profile.cshtml?id=EMAFIKRE">scholars</a> of <a href="https://scholar.google.com/citations?user=DFjwsYUAAAAJ&hl=en&oi=ao">corporate social responsibility</a>, we believe altruism certainly plays a role for many of them, but it’s not the only motivator. Research on company behavior points to two others: <a href="https://www.ingentaconnect.com/content/mcb/168/2015/00000020/00000002/art00003">bolstering reputation</a> and <a href="https://www.doi.org/10.1086/467466?mobileUi=0&">avoiding regulation</a>. </p>
<h2>Burnishing the brand</h2>
<p>In normal times, companies often undertake socially responsible initiatives to <a href="https://www.inc.com/maureen-kline/how-to-manage-your-companys-reputation.html">enhance their brand</a> and build a stronger relationship with consumers, investors and employees in order to drive profits. </p>
<p>What’s a socially responsible initiative? <a href="https://www.doi.org/10.1002/csr.132">There are many definitions</a>, but the way scholars like us think of it is it means taking voluntary action that is not prescribed by law or not necessary to comply with a regulation. </p>
<p>Reputation Institute, a management consultancy, found that people’s willingness to buy, recommend, work for or invest in a company <a href="https://www.forbes.com/sites/jacquelynsmith/2012/12/10/the-companies-with-the-best-csr-reputations/#49e60e384404">is significantly influenced</a> by their perceptions of its corporate social responsibility practices. So doing something that benefits people in their community can lead to <a href="http://dx.doi.org/10.2139/ssrn.2062429">higher sales</a>, <a href="https://philpapers.org/rec/SHIEDS">increase the company’s valuation</a> and <a href="https://doi.org/10.1108/14720701011085544">keep good employees around longer</a>. </p>
<p>But these are anything but normal times. Rather, it is a global crisis that has created a need for an <a href="https://unfoundation.org/blog/post/weekly-update-all-hands-on-deck-against-covid-19/">all hands on deck</a> response from everyone, including corporate America. In other words, <a href="https://www.forbes.com/sites/pamdanziger/2017/10/20/fire-floods-hurricanes-how-and-why-corporations-must-help/#10231fb67388">just like during natural disasters</a>, people expect companies to do their part – and not appearing to do so could damage a brand’s reputation. A <a href="https://www.conecomm.com/news-blog/2013-global-csr-study-release">2013 survey of citizens of 10 countries</a> that included the U.S., France, Brazil and China found that 9 in 10 people said they would boycott a company they believed behaved irresponsibly. </p>
<p>And this is especially true of industries that are more directly connected to the crisis. In the current situation, for example, there’s been a shortage of hand sanitizer, which fashion companies that make perfume <a href="https://tanksgoodnews.com/2020/03/17/lvmh-hand-sanitizer/">can easily produce</a>. And manufacturers are, as we’ve seen, <a href="https://www.wsj.com/articles/trump-lashes-out-at-general-motors-over-ventilators-11585327749">capable of repurposing</a> their assembly lines to build ventilators. </p>
<p>Not doing its part, in this environment, could result in a long-term hit to a company’s reputation. </p>
<h2>Eluding onerous regulations</h2>
<p>The other motivator is preempting government regulation, which becomes a greater risk during and after a crisis. </p>
<p>For instance, we saw <a href="https://corpgov.law.harvard.edu/2010/11/20/the-financial-panic-of-2008-and-financial-regulatory-reform/">more financial regulation</a> after Wall Street’s behavior sparked the Great Recession, and lawmakers from districts that suffer from hurricanes <a href="https://www.nber.org/papers/w25835">tend to support bills</a> promoting more environmental regulation. </p>
<p>So companies will often pursue voluntary self-regulation and take other proactive measures during a crisis in hopes of forestalling a more onerous government reaction. A recent <a href="https://web.stanford.edu/%7Etomz/pubs/MMT-APSR-2019.pdf">Stanford study</a> found that even a modest effort can work to effectively preempt regulation. </p>
<p>Furthermore, this allows companies to set the terms and control the agenda, <a href="https://store.hbr.org/product/profiting-from-environmental-regulatory-uncertainty-integrated-strategies-for-competitive-advantage/CMR498">allowing them to choose actions</a> that are in the interest of society, profitable, and avoid the costs and pains of complying with new regulations. </p>
<p>At the moment, companies may be stepping up to avoid a more draconian response from the government, such as when Trump invoked the <a href="https://www.washingtonpost.com/politics/2020/03/19/defense-production-act-trump-coronavirus/">Defense Production Act</a> against GM, which allows him to control and direct corporate resources towards production of critical equipment. This also gives the federal government priority in contracting, limiting a company’s ability to find the most efficient or profitable contracts.</p>
<p>So next time you read about a company doing something for the greater good, applaud the effort. But you could consider its other strategic motivations as well. </p>
<p>[<em>Insight, in your inbox each day.</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=insight">You can get it with The Conversation’s email newsletter</a>.]</p><img src="https://counter.theconversation.com/content/135170/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Ford is assembling ventilators, LVMH is making hand sanitizer, and Chanel is making masks. Here’s why these and dozens of other companies are doing it.Elham Mafi-Kreft, Clinical Associate Professor of Business Economics, Indiana UniversitySteven Kreft, Clinical Professor of Business Economics and Public Policy, Indiana UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1104882019-02-12T11:46:34Z2019-02-12T11:46:34ZDrinkers prefer Big Beer keeps its hands off their local craft brews<p><a href="https://www.theatlantic.com/business/archive/2018/01/craft-beer-industry/550850/">Craft beer’s popularity</a> has exploded in the U.S. in recent decades, leading to <a href="https://www.brewersassociation.org/statistics/national-beer-sales-production-data/">soaring production</a> and the creation of <a href="https://www.craftbeer.com/editors-picks/craft-beer-growth-statistics-for-2017-released-by-the-brewers-association">thousands of new breweries</a>. </p>
<p>Much of that growth <a href="https://www.forbes.com/sites/greatspeculations/2015/06/29/does-the-declining-u-s-beer-trend-spell-doom-for-brewers/#74e4f40a189e">has come at the expense</a> of traditional brewing giants like Anheuser-Busch InBev and MillerCoors. </p>
<p>So, naturally, these macro brewers <a href="https://vinepair.com/craft-beer-sales/">have been trying to get a piece of the action</a> by buying up their craft counterparts. Examples include AB InBev’s 2011 purchase of Goose Island Brewery and Tokyo-based Sapporo’s 2017 acquisition of Anchor Brewing – America’s oldest craft brewery.</p>
<p>But since a <a href="https://theconversation.com/fed-up-with-big-beers-incursion-independent-craft-breweries-push-back-90512">major appeal of craft beer</a> – and a drinker’s willingness to pay a premium for a pint – is its localness and non-bigness, does being what I dub “crafty” beer owned by Big Beer spoil the brew? </p>
<p>That’s a question <a href="https://dx.doi.org/10.2139/ssrn.3244002">I ask in the Ph.D. dissertation</a> I am writing for a degree in agricultural and resource economics. I wanted to know whether drinkers are willing to pay more for beer knowing that it isn’t actually independently and locally produced. </p>
<p>In my <a href="https://doi.org/10.1017/jwe.2018.38">most recent research</a>, I directly tapped consumers for answers by conducted a “choice experiment” at a bar specializing in craft beer.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/258351/original/file-20190211-174864-1nyqlvb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/258351/original/file-20190211-174864-1nyqlvb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/258351/original/file-20190211-174864-1nyqlvb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/258351/original/file-20190211-174864-1nyqlvb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/258351/original/file-20190211-174864-1nyqlvb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/258351/original/file-20190211-174864-1nyqlvb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/258351/original/file-20190211-174864-1nyqlvb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Tokyo-based Sapporo acquired Anchor Brewing in 2017.</span>
<span class="attribution"><a class="source" href="https://de.wikipedia.org/wiki/Anchor_Brewing#/media/File:Anchor_Brewing_Company_brewhouse.jpg">Wikimedia Commons/WolfmanSF</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<h2>Setting the scene</h2>
<p>The scene of my experiment was a bar, University of Beer, in the college town of Davis, California, where I study. Over the course of more than a month, I recruited 301 patrons of the bar for my experiment.</p>
<p>Participants began the experiment by selecting the beer they would most like to order from the venue’s rotating list of 60 brews on tap. Then I presented them with a list of 10 randomly selected beers from the menu. </p>
<p>For each, I asked participants what they’d be willing to pay for the random beer so that they wouldn’t care whether they received it or their original selection – that is, whatever price would make them happy with either choice. </p>
<p>I also randomly gave some participants information about the beer’s brewery location and ownership status – such as “Brewers Association certified craft beer,” “import” or “MillerCoors.” Other participants did not receive this information for some or any of the randomly presented beers.</p>
<p>From here I was able to determine how much consumers were willing to pay for “local” or “craft” beer, but the findings were not as cut-and-dried as hypothesized.</p>
<h2>Defining ‘local’</h2>
<p>First I had to figure out <a href="https://theconversation.com/meet-the-foodies-who-are-changing-the-way-americans-eat-95621">what constitutes</a> “local.”</p>
<p>I asked participants to identify each of the random beers they viewed as local or not local. Later in the experiment, I asked them to define “local.” </p>
<p>Participant responses revealed an array of “local” qualifiers – proximity was included in most definitions but some also cited production size or brewery ownership. </p>
<p>Frequently, a participant’s definition of “local” was inconsistent with the beers they actually deemed “local.” </p>
<p>To circumvent these inconsistencies, I did not adopt a universal definition of the term. Instead, a beer was considered “local” if an individual identified it as such.</p>
<h2>Sorting for snobs</h2>
<p>I also needed to separate “beer geeks” from average consumers.</p>
<p>Not everyone is equally enthusiastic about craft beer. Some care deeply about their beer, such as where it comes from and who produces it. Others simply want something tasty. </p>
<p>I hypothesized that these different types of consumers would likely have distinct preferences for craft versus macro and local versus non-local beer. To identify and sort participants, I administered a quiz at the end of the experiment to test their knowledge of craft brewery locations and ownership.</p>
<h2>Putting a price on local beer</h2>
<p>My findings unequivocally show that consumers prefer local beer – however they define it.</p>
<p>But how much do they prefer it – that is, how much are they willing to pay extra to have a local over a non-local brew?</p>
<p>Unfortunately I have to give a boring economist’s answer: That depends. </p>
<p>On average, the “local” premium is generally worth 25 cents to 54 cents per pint. However, this premium does not apply to every local beer. Consumers have beer styles they prefer – like IPAs, pilsners and stouts – and I find that the “local” premium diminishes for beers within their preferred style. </p>
<p>For example, an IPA lover doesn’t make a distinction between a local and non-local IPA. </p>
<p>However, when she orders a sour beer, she is willing to pay 45 cents – on average – more for a local sour than a non-local sour.</p>
<p>And how about for craft beer? </p>
<p>I found that only beer geeks, and not average consumers, are willing to pay a premium for certified craft beer versus a beer of unknown ownership. The 5 percent of consumers with the most beer knowledge were willing to pay 75 cents more per pint on average, while the top 25 percent offered an extra 47 cents.</p>
<p>And, like the “local” premium, this premium diminishes within the consumer’s preferred beer style.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/258366/original/file-20190211-174894-2tudlf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/258366/original/file-20190211-174894-2tudlf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=421&fit=crop&dpr=1 600w, https://images.theconversation.com/files/258366/original/file-20190211-174894-2tudlf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=421&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/258366/original/file-20190211-174894-2tudlf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=421&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/258366/original/file-20190211-174894-2tudlf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=529&fit=crop&dpr=1 754w, https://images.theconversation.com/files/258366/original/file-20190211-174894-2tudlf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=529&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/258366/original/file-20190211-174894-2tudlf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=529&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A group of birding enthusiasts sample a flight of beers at the Maine Brewing Company.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Birds-and-Brews/67ca66fbf978498ca58c91e3ee178d8d/81/0">AP Photo/Robert F. Bukaty</a></span>
</figcaption>
</figure>
<h2>Are ‘crafty’ beers devalued?</h2>
<p>Finally, do “crafty” beers that are owned by Big Beer fetch the same premium as certified craft beer? Typically, no.</p>
<p>Of the Big Beer companies, I found that only Founders Brewing Company, now partially owned by Mahou San Miguel, was able to extract premiums from consumers similar to the ones independent craft brews obtained.</p>
<p>The other “crafty” beers in my study, however, couldn’t command the same premiums. In fact, I found that consumers wanted to pay $0.72 to $1.04 less per pint for a craft beers owned by other Big Beer companies relative to one owned by an independent brewery. </p>
<p>So unless you’re a beer geek like me, you probably don’t care if your artisanal ale is “Brewer’s Association certified craft.” But beer geek or not, when drinking your favorite type of ale or lager, you probably prefer that Big Beer doesn’t brew it.</p><img src="https://counter.theconversation.com/content/110488/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jarrett Hart does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The likes of AB InBev and MillerCoors have been trying to jump on the craft beer bandwagon by snapping up artisanal breweries. Do consumers care?Jarrett Hart, Ph.D. Student of Agricultural and Resource Economics, University of California, DavisLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/782042017-06-18T09:23:12Z2017-06-18T09:23:12ZHow a South African company turned constraints into global strengths<figure><img src="https://images.theconversation.com/files/173804/original/file-20170614-21910-1d1355i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">SAB’s resilience has allowed it to become a key player globally.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>On 28 September 2016, the shareholders of South African born international brewer, SABMiller, approved the company’s <a href="https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sites/taranurin/2016/10/10/its-final-ab-inbev-closes-on-deal-to-buy-sabmiller/&refURL=https://www.google.co.za/&referrer=https://www.google.co.za/">acquisition</a> by Anheuser-Busch InBev for $104 billion (R1.5 trillion). The deal paved the way for the creation of what is now by far the world’s <a href="http://www.ab-inbev.co.uk/about/about-abinbev/">largest</a> brewing company.</p>
<p>For a company that started out selling beer to miners in Johannesburg during the gold rush of the late 1800s, it’s been quite a journey. But how did a brewing company from a developing country rise to compete with the multinational brewing behemoths from the developed world?</p>
<p>A series of <a href="http://onlinelibrary.wiley.com/doi/10.1002/gsj.1143/full">interviews</a> with senior executives and managers who presided over the growth of what was then South African Breweries’ (SAB) rapid expansion during and after the 1990s are revealing. After building up a monopoly-like position in the beer market in South Africa, the company went in search of new markets. It used its experience in South Africa in its entry strategies abroad.</p>
<p>SAB’s path reflects the differences between multinationals from developed and emerging markets in terms of location choices, sequencing, time horizons and motivation.</p>
<p>A two-phased expansion path emerges to explain the remarkable success story. The first pillar to SAB’s international expansion was a focus on developing markets. Coming from a developing country itself, the company would cope better with emerging market conditions than brewers from the developed world. These ventures became a powerful base for SAB to take on developed markets. </p>
<p>The second was to expand into developed countries. This became necessary as it became clear the company was over exposed to emerging markets.</p>
<h2>The first phase of expansion</h2>
<p>After a few early forays into South Africa’s neighbouring countries prior to 1993, SAB executives realised that the company could exploit its knowledge of institutional shortcomings in its home country. It would use this experience to adapt more easily than its competitors to conditions in developing countries. </p>
<p>And so began the first part of its internationalisation strategy: a rapid expansion into emerging markets worldwide.</p>
<p>Through a series of acquisitions and joint ventures throughout the 1990s, SAB gained a foothold in various countries in Africa, Eastern Europe and Asia. Although many were geographically distant (like Hungary, Czech Republic, China and India), they echoed South Africa in terms of their socioeconomic development. Eastern Europe, for example, was still emerging from political reform in the wake of communism, and infrastructural, institutional and economic weaknesses persisted.</p>
<p>By expanding into countries that shared socioeconomic characteristics with South Africa, SAB was able to make use of its experience to turn a perceived drawback – institutional weakness – into a strength. As one respondent explained:</p>
<blockquote>
<p>To be quite frank, we actually accepted that we would live with the political risk and poor institutions. We didn’t really shy away from high-risk countries unless, of course, there was a raging civil war that we would have to wait to subside.</p>
</blockquote>
<p>Once it had established this expansion plan, SAB diversified into developed markets such as Italy and the US. As one interviewee put it: </p>
<blockquote>
<p>Investors became sceptical of companies whose only business was in emerging markets. </p>
</blockquote>
<p>In 2002 it took a step closer to consolidating its position as a multinational brewing giant when it acquired <a href="http://money.cnn.com/2002/05/30/news/deals/miller_sab/">US-based Miller Brewing Company</a>. It became SABMiller.</p>
<h2>Turning weakness into strength</h2>
<p>The advantages that SAB gained from its experience in its home country are many. One was employee aptitude. </p>
<p>SAB employees had built up an extraordinary resilience, flexibility and entrepreneurial spirit through their exposure to the unsteady South African environment of the 1980s. As one executive said:</p>
<blockquote>
<p>They survived labour trouble, survived interest rates at 25%, inflation at 16% to 17%, survived political disorder, political violence… That toughened you, toughened us.</p>
</blockquote>
<p>This robustness, combined with an ability to connect with many different cultures, gave the company a valuable flexibility in its risk, location and investment choices.</p>
<p>Another strength was its ability to turn around neglected breweries and businesses. The experience it gained in South Africa, with its large rural population and pockets of poor infrastructure, meant that finding innovative ways to overcome challenges was embedded in the company’s DNA. </p>
<p>Another advantage the company gained was brand development and marketing ability. SAB was developed into a major operation without reliance on strong, globally-recognised brands. Using its home experience the company took brands it acquired in distant countries and built them into powerful national brands.</p>
<p>These became a base from which it launched into premium brands such as Grolsch and Peroni through acquisitions. This offset being over-invested in domestic brands.</p>
<p>SAB also had a philosophical edge over many competitors. It’s risk appetite was much bigger. By comparison a company like <a href="http://www.ab-inbev.com/investors/results-center/quarterly-reports.html">Anheuser-Busch </a> had a conservative approach to risk and international expansion. </p>
<p>For example, Anheuser-Busch didn’t react to the rapidly changing global brewer consolidation until it was too late. And when it did, it realised that it had little emerging market experience. </p>
<p>This weakness meant that in 2008 Anheuser-Busch was unable to avoid a <a href="http://www.nytimes.com/2008/07/14/business/worldbusiness/14beer.html">hostile takeover by InBev</a>. This gave rise to AB Inbev, then the world’s largest brewer. AB Inbev, in turn, was compelled to make an offer for SABMiller to acquire complementary emerging market presence.</p>
<p>SABMiller’s long journey from the mine heaps of Johannesburg to global brewing colossus may appear to have come to an abrupt end after its acquisition by Anheuser-Busch InbevAB Inbev in 2016. But what’s clear is that its extraordinarily successful approach continues to hold many lessons for aspiring global companies from the developing world.</p>
<p>_This piece was adapted from an academic <a href="http://onlinelibrary.wiley.com/doi/10.1002/gsj.1143/full">article</a> by John Luiz, Dustin Stringfellow and Anthea Jefthas that first appeared in the February 2017 issue of Global Strategy Journal, Volume 7, Issue 1 (83-103).
_</p><img src="https://counter.theconversation.com/content/78204/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Luiz does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The development trajectory of South African born brewer SABMiller peaked with the 2016 $104 billion merger with Anheuser-Busch InBev. Behind it lies an extraordinary journey.John Luiz, Professor of International Business Strategy & Emerging Markets, Graduate School of Business, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/479082015-09-29T08:40:56Z2015-09-29T08:40:56ZBeer behemoths struggle to fend off craft brew craze<p>Anheuser-Busch InBev, brewer of Budweiser, Stella Artois and more than 200 other brands, is already the largest beer maker in the world, <a href="http://www.stltoday.com/business/local/is-a-b-inbev-brewing-the-next-big-deal/article_781171ab-ac87-5808-b0f8-a2fa67589959.html">controlling</a> more than 20% of global sales. It may soon get a lot bigger: this week it reportedly <a href="http://www.reuters.com/article/2015/09/27/us-sabmiller-m-a-idUSKCN0RR0YY20150927">plans</a> to bid for its closest rival, SABMiller, in a deal that could create a company worth some US$275 billion. </p>
<p>If this transaction were to occur without either party being forced to sell off too many assets to meet the demands of government regulators – not a sure thing – it could create one of the world’s ten largest companies by market value. The resulting “<a href="http://www.stltoday.com/business/local/how-burger-king-public-offering-could-fund-megabrew/article_282d4dd2-7f69-11e1-a65f-0019bb30f31a.html">MegaBrew</a>,” a term coined by Sanford Bernstein analyst Trevor Stirling, would control as much as 30% of total beer sales.</p>
<p>The planned acquisition continues a <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2268705">dramatic trend</a> of fewer and larger brewers dominating the beer industry. Back in 2000, there were 22 major beer makers. A series of mergers, takeovers, joint ventures and majority purchases whittled that down to just four in 2012. These four giants, which also include Heineken and Carlsberg, are all headquartered in Western Europe and currently account for <a href="http://www.beerinsights.com">more than three-quarters</a> of US beer sales. </p>
<p>And soon that could be just three giants. </p>
<p>So what’s driving this intense consolidation in the beer industry? How are these behemoths handling the rapid rise of craft brewing? And what does it all mean for consumers? </p>
<p>The answers to these questions, as I’ve learned over my 17 years exploring food system trends – particularly industry consolidation – and their impact on sustainability, can be as complex as a hoppy IPA.</p>
<h2>The battle for growth</h2>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/96299/original/image-20150926-17729-5ahnoc.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/96299/original/image-20150926-17729-5ahnoc.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/96299/original/image-20150926-17729-5ahnoc.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=764&fit=crop&dpr=1 600w, https://images.theconversation.com/files/96299/original/image-20150926-17729-5ahnoc.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=764&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/96299/original/image-20150926-17729-5ahnoc.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=764&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/96299/original/image-20150926-17729-5ahnoc.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=960&fit=crop&dpr=1 754w, https://images.theconversation.com/files/96299/original/image-20150926-17729-5ahnoc.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=960&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/96299/original/image-20150926-17729-5ahnoc.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=960&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The chart shows the industry’s steady consolidation.</span>
<span class="attribution"><span class="source">Phil Howard</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>AB InBev, which has been <a href="http://adage.com/article/news/a-sabmiller-ab-inbev-merger-u-s/230264/">rumored</a> to be hunting SABMiller for years, is expected to offer $106 billion to buy the maker of Peroni and Grolsch. It would <a href="http://www.reuters.com/article/2015/09/27/us-sabmiller-m-a-idUSKCN0RR0YY20150927">combine</a> AB InBev’s strength in Latin America with SABMiller’s in Africa, where it controls 90% of the market. </p>
<p>Heineken rejected a bid from SABMiller one year ago, a combination that had the potential to stave off acquisition attempts from AB InBev, at least for the near future.</p>
<p>Although all four of the top companies are extremely profitable, they are experiencing <a href="http://www.antitrustinstitute.org/sites/default/files/Global%20Beer%20Road%20to%20Monopoly_0.pdf">flat or declining sales in many of their largest national markets</a>. That has left acquisitions – both of each other and smaller regional breweries – as one of the few options available to continue the rapid rates of growth demanded by their shareholders. </p>
<p>Their other main options for increasing profits include cutting costs and raising prices. And that’s where we get to consolidation’s negative impact on consumers.</p>
<h2>Price fixing and signaling</h2>
<p>In recent years, the prices for beer have <a href="http://blog.wblakegray.com/2013/02/is-budweisercorona-merger-really-bad.html">increased much faster than those for wine and spirits</a>, coinciding with the <a href="http://www.amazon.com/Concentration-Power-Food-System-Contemporary/dp/1472581113">greater market power</a> of the big four brewers. </p>
<p>In Europe, price fixing has often been to blame, while in the US the tactics have been more subtle, though the the result has been the same. </p>
<p>In 2007, for example, Heineken, Grolsch and Bavaria <a href="http://www.nbcnews.com/id/18176660/ns/business-world_business/t/eu-fines-brewers-m-price-fixing-probe/#.VgliK7ThsQ4">were accused</a> of holding secret meetings in the 1990s to divvy up markets and fix prices in the Netherlands, leading to $370 million in fines by European Union regulators. </p>
<p>In the US, no such meetings were even needed. In a classic example of “price signaling,” AB InBev, which <a href="http://www.ab-inbev.com/content/dam/universaltemplate/abinbev/pdf/investors/annual-and-hy-reports/2014/AB_InBev_AR14_EN_full.pdf">controls</a> about half the beer market, would regularly lift its prices, and SABMiller and other brewers <a href="http://www.justice.gov/opa/pr/justice-department-files-antitrust-lawsuit-challenging-anheuser-busch-inbev-s-proposed">quickly matched those increases</a>. </p>
<p>This behavior got the attention of officials at the Department of Justice, which took the rare action of blocking AB InBev’s bid in 2013 to take full control of Mexican brewer Modelo, maker of Corona and Pacifico. A <a href="http://www.bloomberg.com/news/articles/2013-04-19/ab-inbev-u-s-file-agreement-in-court-on-modelo-acquisition">deal later emerged</a> that allowed the acquisition to go through, but Modelo’s business interests in the US had to be sold to a rival company to prevent AB InBev, which <a href="http://www.ab-inbev.com/content/dam/universaltemplate/abinbev/pdf/investors/annual-and-hy-reports/2014/AB_InBev_AR14_EN_full.pdf">reported</a> $47 billion in sales last year, from having even more market power to control prices. </p>
<p><a href="http://www.ft.com/cms/s/0/17eb2264-6066-11e5-a28b-50226830d644.html">Most analysts</a> expect that if the AB InBev-SABMiller deal goes through, regulators in the US and possibly China will require similar selloffs to dilute the combined company’s market dominance. SABMiller controls about a quarter of the US market. </p>
<p>Regardless, the economic power of AB InBev will increase substantially on a global level.</p>
<p>One example of this increased power is the ability to dominate shelf space at retailers. Many retail chains give either AB InBev or SABMiller <a href="http://www.washingtonpost.com/business/beer-merger-would-worsen-existing-duopoly-by-ab-inbev-sabmiller/2013/02/01/efa78ce8-6b1c-11e2-af53-7b2b2a7510a8_story.html">direct control over the placement of all the beer they sell</a>, including competitors’ products. This gives them to power to place their own brands in the most visible locations, and allot them the most space. </p>
<p>This strategy is aided by offering numerous slightly different versions of the same product, such as the dizzying number of varieties of Bud Light that fill the refrigerator cases. The acquisition could leave AB InBev as the only “category captain” left. And that means your impulse choices would be strongly steered toward this firm. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/96542/original/image-20150929-30999-vmzqxv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/96542/original/image-20150929-30999-vmzqxv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/96542/original/image-20150929-30999-vmzqxv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/96542/original/image-20150929-30999-vmzqxv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/96542/original/image-20150929-30999-vmzqxv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/96542/original/image-20150929-30999-vmzqxv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/96542/original/image-20150929-30999-vmzqxv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Craft brewing has exploded in recent years.</span>
<span class="attribution"><span class="source">Craft beer via www.shutterstock.com</span></span>
</figcaption>
</figure>
<h2>The counter-trend of craft brewing</h2>
<p>While the big brewers consolidate, a countervailing trend is happening on the other end of the spectrum and shaking up the beer industry. </p>
<p>Although overall beer sales are leveling off in most industrialized countries, double-digit growth has occurred in the craft segment in recent years. To be <a href="https://www.brewersassociation.org/statistics/craft-brewer-defined/">considered craft</a>, annual production must be six million barrels or fewer, less than a quarter can be controlled by a non-craft brewer and most of its beer must derive from traditional and innovative flavors and ingredients. </p>
<p>US sales of craft brews <a href="https://www.brewersassociation.org/statistics/national-beer-sales-production-data/">surged 22%</a> in 2014, compared with about 1% for the overall market, according to the Brewers Association. As a result, craft beer’s market share doubled to 19% last year from 9% just <a href="http://www.bevindustry.com/articles/85377-craft-brewing-2011-volume-sales-grew-13-percent-">three years earlier</a>. </p>
<p>This means that as ownership has concentrated at one end of the supermarket beer aisle, it has diversified at the other end. Although the prices of craft brews tend to be higher, the number of options for beer drinkers has never been greater. At the end of 2014, there were 3,418 <a href="https://www.brewersassociation.org/statistics/number-of-breweries">craft brewing companies</a>, up 42% since 2012. </p>
<h2>The big brewers respond</h2>
<p>Big brewers have responded to the fast growth of craft with two strategies. The first is their conventional tack of acquiring selected craft brewers to offset the <a href="http://money.cnn.com/2015/07/30/investing/budweiser-bud-light-sales-anheuser-busch-inbev/">falling interest</a> in their own top brands, such as Budweiser. The other involves imitating their smaller rivals’ consumer-winning styles with “crafty” beers that <a href="https://www.msu.edu/%7Ehowardp/beer.html">hide their corporate parentage</a>. </p>
<p>Just this month, for example, AB InBev <a href="http://www.latimes.com/food/dailydish/la-dd-golden-road-brewing-buyout-20150925-story.html">purchased</a> Los Angeles-area brewer Golden Road (news you won’t find on the company’s website), and SABMiller <a href="http://247wallst.com/consumer-products/2015/09/10/millercoors-expands-craft-beer-effort-buying-into-saint-archer-brewing/">acquired</a> a majority interest in San Diego-based Saint Archer Brewing Company. </p>
<p>AB InBev has also created less mainstream brands that include Shock Top, Landshark and Wild Blue, while SABMiller developed Blue Moon, Batch 19 and Third Shift. Even the firm Blue Ribbon Intermediate Holdings, which has a “<a href="http://www.mycentraljersey.com/story/life/food/2015/07/21/draft-picks/30387635/">virtual monopoly on American heritage brands</a>,” such as Pabst, Schlitz, Stroh’s, Old Milwaukee and Heileman’s Old Style, outsources most of the brewing to SABMiller. </p>
<h2>An unstoppable trend?</h2>
<p>AB InBev and SABMiller have found some success with these strategies, but they have so far <a href="http://www.motherjones.com/tom-philpott/2014/07/craft-beer-revival">failed to compensate</a> for declining sales of their more mainstream brands. </p>
<p>The growth in craft and independent brews – and their multitude of distinct flavors and styles – shows no signs of slowing down. Each year, for example, the <a href="http://www.greatamericanbeerfestival.com/brewers/beer-styles/">Great American Beer Festival</a> adds to the number of styles that are judged in its competition – currently 92 plus a number of subcategories. </p>
<p>This trend, toward local and independent and away from mass-produced products, is a challenge the dominant players are facing in other industries as well, such as fast food, groceries and soft drinks. Although these huge companies are unlikely to disappear in the near future, the challenge of continuing to satisfy investors as well as consumers has encouraged defensive strategies that could be viewed as either bold or desperate.</p>
<p>Acquisitions are a temporary means of maintaining growth rates, but the success of smaller firms suggests that the bigger “MegaBrew” gets, the harder it may fall in the future.</p><img src="https://counter.theconversation.com/content/47908/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Phil Howard receives funding from the National Science Foundation and the U.S. Department of Agriculture. He is president of the Agriculture, Food and Human Values Society, and is a member of the International Panel of Experts on Sustainable Food Systems. </span></em></p>AB InBev’s expected bid for SABMiller continues a trend of industry consolidation at the top, but the strong growth in craft brewing is challenging that strategy.Philip H. Howard, Associate Professor of Community Sustainability, Michigan State UniversityLicensed as Creative Commons – attribution, no derivatives.