Bill Parcells, the head coach of the Dallas Cowboys, was asked about the mid-season record of the team, which was at 500, said, “you are what you are!”.\u00a0 In this case, an average team.<\/p>\n
In the last 50 years our industry has seen a number of dramatic mergers and acquisitions, some good, some bad but none as dramatic and game changing as the coming of InBev.\u00a0 Since its creation less than 10 years ago InBev has altered the landscape of the global beer industry and specifically in the US.\u00a0 In 2008 we saw InBev take over AB in a well thought out and strategic plan.\u00a0 Now we see that they, ABI now known, have acquired Modelo.\u00a0 Their portfolio consists of #1 Bud Light, #1 import Corona, Stella, Modelo Especial, Beck’s, etc…… on and on.\u00a0 They hold the dominate position in the US – period.\u00a0 Now let’s think about the “what if’s” and “what’s it really mean?”<\/p>\n
Only the three-tier system now stands in ABI’s way now of more control over the industry as they continue to acquire the brands that hold share.\u00a0 As we know there are many blue\/silver distributors that have the Modelo brands.\u00a0 This is beginning to mirror the old Russ Cleary G. Heileman business model of acquiring brands (regional) and then pitting Heileman wholesaler against Heileman wholesaler, however those brands, for the most part, had very small market share.\u00a0 ABI has the dominate position, now approaching 60% of the US market.<\/p>\n
So now what?\u00a0 Can they buy more share?\u00a0 Probably not, at least in the short-term.\u00a0 Can they get to the wholesaler middle tier?\u00a0 Probably not, at least in the short-term.\u00a0 So what can they do?\u00a0 First start with pricing.\u00a0 By controlling AB and Modelo ABI can control more of the pricing, which in turn, can control the middle tier.\u00a0 They can’t get at the wholesaler GP due to the franchise laws but now they can get a larger piece of the wholesaler GP through controlling pricing.\u00a0 This won’t happen immediately but understand it will happen quicker then you think.\u00a0 We are all hearing that the upcoming increases could be substantial in some markets.\u00a0 Consider that, craft beers, for the most part, will support the initial increases as many already do, European imports, as their business models are not revenue or share focused but cost and margin focused, will also be open to this.\u00a0 The winners?\u00a0 Spirits and some wines.\u00a0 The losers?\u00a0 Well, it’s not ABI.\u00a0 From 11 million hects to now over 331 million hects since 2000 is remarkable and they won’t stop now.\u00a0 They are like a shark, devouring everything in that gets in its way.<\/p>\n
So what is the answer as ABI isn’t going away?\u00a0 The model may exist in the Northwest.\u00a0 Crafts are over 30 share of the market and growing so as an industry we need to support and do whatever we can to ensure that we create an environment where they have a chance to establish themselves.\u00a0 That would cover all segments of our industry and the sooner the better.\u00a0 Can we really say that the environment exists for these crafts to grow today?\u00a0 We need this to happen or our business will mirror countries like Brazil where ABI controls over 90% share.<\/p>\n
Remember, “You are what you are!” so are you listening or still drinking the koolaid?<\/p>\n
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