Craft beer purists would be expected to be worried upon hearing about the acquisition of the oldest craft brewer in Long Island, the US, earlier this month. Blue Point Brewing Company, famous for its Toasted Lager brand, has been purchased for a reported US$24 million by Anheuser-Busch InBev. Thus, there will be concern among craft enthusiasts that some of their favourite tipples could become mass-market and ‘watered’ down versions.
The purchase of over a 25% stake in a craft brewer by a non-craft brewer means that Blue Point now falls outside the Brewers Association’s definition of an independent craft beer maker. The general definition of the Brewers Association stipulates three main characteristics - small, independent and traditional. This acquisition will put an end to the brewer’s independence but how much of an impact will it have on its volume sales?
How Important is it to A-B InBev for Blue Point to be Defined as Craft?
The Brewers Association’s fairly brief definition of what constitutes a craft brewer is not a ‘legal’ definition but rather a guideline. This guideline holds sway mostly within the craft beer industry, a relatively small but growing affair when compared to the multinational arena. The change in Blue Point’s independence will primarily upset craft beer purists and their blogosphere audience, thus impacting a relatively small pool of consumers in a relatively small market.
Any damage faced by Blue Point due to loss of the craft ‘classification’ is likely to be countered by A-B InBev’s strategy to expand production volumes and distribution. Lost sales would be expected to be recouped within the following year.
A-B InBev will have to be aware that what might hamper sales of a craft beer brand is not its definition but its perception and the quality of its content – the beer itself. A-B InBev’s decision to keep on the founders of the company is an indication of its mindfulness of the value of the perceived craft labelling among consumers. This perceived craft labelling is primarily derived from the relatively fuller flavours provided by craft beers when compared to light-tasting, mass-produced brands.
What Will This Mean for the Rest of the Industry?
The craft beer movement has been through similar motions before. After its revival in the 1990s and the later oversaturation of brands in the market, the industry then faced a slight slump in the 2000s. Now, as the craft beer movement is facing another revival in demand, in the US at least, it is starting to become oversaturated in terms of brand range. However, unlike last time, multinational brewers are paying attention to this small but thriving industry, and they are acting with their pockets.
So far, there have been two strategies used by multinationals to enter the craft brew market. One has been to buy into the industry, as is the case here, while the other has been to create a craft-like brand such as MillerCoors’ Blue Moon. Following significant consolidation in the beer industry over the last five years there are limited options for acquisitions amongst the major brewers, also with the attractive high single-digit growth the craft beer industry is currently achieving, the big brewers will continue to want a piece of the pie.
The potential impact of this kind of acquisition is that the boundaries of the craft movement will continue to be blurred by aforementioned initiatives from the big brewers to enter the category. The craft definition will not limit big brewers from making and selling the craft image. The craft beer industry will have to safeguard its image of uniqueness, independence and tradition via other means. One possible way is the use of a craft brew label, akin to that of the fairtrade label. Nonetheless, if multinational brewers purchase craft brewers and choose to preserve the craft image, mostly by maintaining the beers’ original flavour and quality, then they will be able to sell their brands on the back of the craft movement.