In an article by Devin Leonard in Business Week (part of the Bloomberg media empire) entitled “The Plot to Destroy America’s Beer“, Mr. Leonard lays out a compelling argument that beer giant AB InBev is on a mission to swallow up breweries, choke down costs by eliminating expensive ingredients, and swamp the competition with cheap beer. As background, InBev was born from a 1999 merger between two Brazilian beer companies that created ABV. It next merged with a Belgian company that sold Beck’s and Stella Artois to creat InBev. The company followed up with the purchase of Anheuser-Busch in a $52 billion hostile takeover in 2008. InBev now controls just under half of the U.S. market and large percentages of many foreign markets. By cutting costs, InBev has proven to be very good at generating increased profits, even at the expense of losing sales as the resulting beer becomes increasingly weak and generic.
The list of charges leveled by Mr. Leonard:
- Shipments of InBev beer in the US have declined 8 percent from 2008.
- Bud Light is down 3 percent from 2009
- Bud has dropped 13 percent from 2009
- Shutting down British brewery Boddingtons
- Shutting down Hoegaarden and then after protests, restarting production but with cheaper ingredients
- Thinner glass, smaller labels, and waker cardboard for packs and cases
- Switching to broken grain instead of whole grains for rice beer
- Abandoning the use of Hallertauer Mittelfrüh hops in Budweiser
- Shifting production of U.S. market Becks and Bass to InBev facilities in the U.S. and substituting cheaper ingredients
Introducing crap beer like Michelob Ultra Dragon Fruit Peach Beer
- Reducing the alcohol content of Stella Artois, Bud and Becks to 4.8 percent.
- Moving much of Goose Island’s production to many different InBev facilities
None of this is surprising to me. First, consolidation in all industries is the norm and always has been. Anheuser Busch became as large as it did through consolidation. Also, large companies have always tried to cheapen the product in a search for higher profits. The result is usually the same: consumer rebellion. Ultimately, it is up to each drinker to decide if they like their beer. If they don’t, then they will move on. I personally don’t know how a Bud drinker could tell the difference between a Bud and donkey piss, but that is just me. Maybe there is yet some quality that can be wrung out of a Bud in the search for even more profit.
In other news, InBev announced that it is beginning production of a new line of premium beers made entirely of water. Mr. Pure Sarcasm, marketing manager for InBev announced that “This new beer will significantly drive down our costs and allow us to provide a lower-cost product for our consumers. In addition, the simple recipe will allow us to set up production plants all over the world at any location where there is clean water available. The customer will know it is an InBev product because it will taste the same no matter what the label or origin and it will be sold at a price that they can still afford.”