Decisions, decisions

There’s a lot going on in beer at the moment: there’s a daily news narrative on craft beers; stories about old names being revived; people setting up breweries in shipping containers. Proportionately, there’s less about the corporate side: the 90% if you will. But it deserves some attention, particularly at this time. Particularly with the biggest deal in brewing ever being slated. Particularly with one of the biggest corporate deals ever, in fact.

That craft beer narrative is immensely strong. It is more than a story though; it is creating reverberations not just within beer, but across alcoholic drinks, across non-alcoholic drinks and beyond. The craft beer ‘revolution’ is the poster boy of reactionary consumerism; the proof that you can change the food industry not just from within but from the outside too. It is the manifestation of a growing consumer desire for authenticity, transparency, of personal stories over fabricated myths, or small over large – right across the food and drink industry.   There’s a clear argument to be made that ABI buying SAB is a consequence of the rise of craft beer. Certainly if you look at their outputs it is supported: over the last few years ABI have bought ‘breakthrough’ craft breweries: Widmer, Kona, Goose Island amongst others; elsewhere they’ve been copying the rules of craft with brands like ‘Shock Top’. SAB have been concentrating more on strengthening their own brands and now have an incredible portfolio, with brands like Pilsner Urquell, Peroni and Grolsch. They too have bought into craft with the acquisition of London’s Meantime Brewery.

Let’s push beyond the “eazey-news” headlines though. What’s really going on here is polarisation. Yes, craft is growing but it’s growing disproportionately quickly in mature beer markets. Large scale, low growth markets; markets where consumers have had mass marketing rammed down their gullets for decades. But ABI and SAB have their focus elsewhere: to the places and the brands that they can drive long-term shareholder value growth. They’re focus is on central and southern America, India, Asia and Africa. ABI are clear that they want to be the first ‘global brewer’ and this deal gives them an incredible beachhead to push for conquest. As a deal, it will make South America a fortress; it will revolutionise their position in Africa; it will strengthen their footprint in Asia, in particular China, where they will acquire the World’s biggest beer brand, Snow.

Watching this form the side lines, what’s impressive about ABI is their utter commitment to the goal. The newswires yesterday were humming with the revelation that they would be prepared to sell off SAB’s prime assets, notably Peroni and it’s Nastro Azzurro brand. Grolsch too, was mooted as a candidate for sale. They have form here: when InBev acquired Anheuser-Busch they sold off Tsingtao in China – one of the few successful Sino-Anglo Saxon partnerships and a real crown jewel. This tells us a number of things about ABI.  It tells us that they have a clear focus for growth outside North America and Europe where Peroni is notably strong – Peroni is a great brand but in the short term the only thing it is likely to do is give them issues with regulators (plus, the US rights stay with MillerCoors should the deal go ahead).  It tells us that they have a purpose that is unifying and guiding their decisions. It tells us that they are willing to make not just choices but sacrifices – big sacrifices – in order to achieve their vision.  And it tells us too that they believe in their brands – brands that craft beer lovers are generally scathing of (Bud Light, Budweiser, Stella Artois as well as an army of local brands – and they will back them to the hilt in markets outside our (European / North American) frame of daily reference.    Whether you’re comfortable about the size of this deal and the global market share it will leave ABI with, it will be churlish – no, foolish – to ignore the business and brand building lessons that they teach us, again and again.

As the big get bigger, what do the small get?

The potential acquisition of South African Breweries (SAB) by their larger rival Anheuser Busch Inbev (ABI) has got many commentators gasping for breath: not at the audacity of it – that was reserved for when InBev (as was) took down Anheuser Busch – but rather the implications of the sheer scale. The scale, both of the deal (the fourth biggest corporate takeover) and the ultimate beast it will become (who we shall call ABSAB).

Interestingly, a stock response of commentators is ‘Don’t Panic Mr Mainwaring!’ The deal, as these deals do, will create opportunities for smaller operators. Drinkers, reviled by the deal and the inevitable consolidation / loss of brands in the shake-up, will vote with their wallets and support the little guy. New market niches will open up, too small for a goliath like ABSAB to spot, yet alone exploit. David will win the day! Fleet of footedness, quick decision-making will out!

And there will be some of this. Of course there will. But on balance, it’s a romantic notion and one that, in truth, isn’t borne out by precedent.

The first issue is growth. In most western, mature consumer markets beer is flat-lining or declining. Drinkers are drinking less. This pressure rolls through to licensees: what to stock; how much space they can give to beer and ultimately what brands end up on the bar. What licensees want is a range of guaranteed strong sellers and a ‘something interesting’ selection. ABSAB (Stella, Peroni, Budweiser) can fulfil one side, craft can fulfil the other (in fact, increasingly, ABSAB can fulfil this other side too). In less mature markets, there is underlying growth in beer consumption – in central and South America for example – and that growth is driven by brands. Big brands; famous brands, foreign brands; often American or European: brands that are a status symbol. ABI and SAB are getting together because growth in their core markets is slowing (or has stopped). They’re getting together because in emerging markets it’s about brands. The deal allows more consumers to access their brands in more markets, efficiently and cost effectively. And most consumers won’t react negatively. They won’t even think about it.

The second issue is craft. Craft beer, however you define it, is exciting, interesting and inspiring. It’s been brilliant for beer in many markets. But craft beer is, what? At best 10 – 15% of market volume. Most of us, most consumers, simply aren’t in the franchise or drink it infrequently. Most of us, in short, drink the sorts of beers that ABI and SAB make.   Now, clearly there is growth and clearly craft is slowly, steadily impacting consumer perceptions of the market. But if we assume that the basis of the ‘Innovation-Adoption Curve’ is correct, then most of us are fairly unadventurous. We’ll follow. And what will this mean in terms of brands? It won’t mean opportunities for spontaneous fermented wild beers hitting the mainstream. It will mean the likes of Blue Moon, Goose Island, Meantime, Lagunitas, Kona becoming more widely available, and if we’re lucky the larger – independent – craft brewers – Sierra Nevada, Brooklyn, Boston Beer will be available too. But the real opportunity if for the crafty beers under the umbrella of brewers like ABSAB. They offer the rationale of differentiated choice, with the convenience of a single and efficient point of supply.

What ABSAB appreciate is that currently global brewing is over-supplied. There are two responses. One, consolidate to ensure supply over time reduces and is done cost effectively. Two, build brands. This deal does both and will be successful.

For smaller brewers, given that they can’t consolidate to the same level, the real opportunity is the second option. To build brands. Take the UK beer market. There are now 1,700 breweries. The UK is the most breweried-per-head country in the world. Yet the beer market has been declining at about 4% a year since 2005. Per capita consumption of beer is falling, despite the noise of craft. There will be a fall out, even with the UK Government’s small brewer duty relief (perhaps because of it). Now is the time to build brands not supply product. Look at Camden Town, only three years old, but already widely available throughout the capital. Why? Good beers (with broad appeal); tremendous branding. Look at Beavertown. Good beers (with more challenge to them), impactful branding.

No, the opportunities presented by ABSAB getting together are twofold. For consumers, it’s in the truly niche operators, who make more complex, highly differentiated and challenging beer styles that they can supply effectively to the market. For small brewers who don’t, the real opportunity is to build your brand. And the real money is to be made when the likes of ABSAB buy them from you.

Lost Blogs #5: Abbey Days

Beer Tinted Spectacles was originally posted to Posterous, which closed suddenly and made life irritating for a while. Some of the blogs were lost, recently found and are republished here.

There’s a strange conundrum sitting at the heart of beer. For the most part, it’s a drink best served fresh; many drinkers believe it, many brewers market to it (millions of ‘marketing dollars’ were thrown at the empty vessel of “Born On” dates for example); even smaller scale brewers refer in hushed tones to ‘lager fresh from the conditioning tank’, or cask beer only lasting for days after broaching. Wine on the other hand is, for the most part, a drink best served old, or at least middle aged, with a bit of age, ripening, maturity reflecting the refinement, patience and sophistication of the drinker.

There’s much to it. I have been lucky enough to drink Czech beer straight from the aforementioned lagering tanks. And there really is little to match the softness, smoothness, rich creaminess of it. The same is true of great cask ale – conditioned properly, served fresh from the cask, it is one of the great world beer experiences.

Ironically, what connects these experiences is aging…and a little care. It’s simply that the timeframe is months not years, as it is for wines, but the impact of the time invested is the same. Rounding out rough edges, softening the palate, completing the natural carbonation. And you get to drink the fruit of the brewer’s – and your – labours a lot sooner. Of course, there are plenty of beers that can stand a few years of age. I’ve written before about some English ales (‘Extra Mature’, but it’s interesting to see a beer brand actively marketing itself around the impact of age on the taste of the beer.

The beer in question is a Belgian Abbey beer from South African Brewers (SAB), which goes to show that you can’t be too snooty about what you drink or what you write about just because it’s ‘Big Beer’. Funnily enough, SAB have transformed themselves from a company with no brands to speak of ten years ago, to a company with a remarkably deft touch around brands and an interesting, developing portfolio. It’s mostly local ones, but topped off with the likes of Pilsner Urquell, Peroni Nastro Azzurro and now this abbey beer – St Stefanus- as their consistent global offer.


I approached SAB to get some sample bottles and was delighted to receive a trade pack – boxed and ready to go so to speak, with background information on the brand, a beautiful high stemmed, bowled chalice glass and two bottles of the ‘Blonde’ version, one from January 2012, the other from July 2013. The Blonde is a feisty 7%, a higher strength (9%), ‘Grand Cru’ is available too. Trappist¹ and Abbey share a common, religious root. Brewed originally by monks within the specific guiderails of their Orders, like the Cistercian order itself the beers have undergone ups and downs over time. 100 years ago, the beers were rarely seen outside the cloisters of their Abbey, until the travails of two wars and economic destitution were behind them. The common root then branched: those beers still brewed within the Abbey grounds, by the Monks directly became known as ‘Trappist’ after the order of monks who took their name from La Trappe Abbey in Normandy, a breakaway wing from the Cistercian Order. The second branch were those beers that were brewed in commercial breweries under the supervision of Monks and in the style of Trappist beers. These are termed the Abbey Beers. There are more of them – there are only 7 Trappist monasteries in the Low Countries brewing beer – and the styles and quality are more diverse and variable.

To my palate, St Stefanus is a great example. The beer is a complex beast – the malt bill sees pilsner and pale malts, plus some candi sugar, typical of the Trappist tradition, to give a richly sweet wort capable of punchy beers of substantial alcohol content. The hops feature less in the end result but are significant in the recipe: Hallertau and Saaz / Zatec aroma hops receive top billing. An initial fermentation is followed by a settling period of conditioning, before another strain of yeast with its own saintly sounding name – Jerumanus – is added. It is this strain that matures and develops over time; it is this strain that gives the beer its distinctive Abbey Habit.

The literature says, ‘Brewed to mature in the bottle… so you can choose how you want your beer to taste’. I also had a copy of the tasting notes, but I put them to one side, unread, to ensure my personal judgement wasn’t clouded. Rather than specific taste characteristics in fact, I was more interested in whether there really was a difference with 18 months separating them². There was: the younger of the two released a new baked bready aroma on opening, and I poured two thirds clear before mixing in the yeast and completing the pour. A billowing, tight bubbly head with a layered creamy stratification was the result – it was like the ice cream man topping off a Mr Whippy with a final wristy flourish. In the glass, the beer was a ripe lemon rind shade with an aroma that’s part grassy, part fruity, part herby. The flavours were consistent with this, plus a touch of that pear drop like, warming alcohol ‘taste’ (sensation? I’m never quite sure).

The older brother had the confident swagger you’d expect of an elder sibling. He’s been through the hoops, got a bit street, knows the score. And it came through in the colour – I was genuinely staggered by the amount of difference. Here was a brazen, bold, walnutty brown beer, still with an angelic afterglow. The head was creamier still but a little less sparky, less whippy – bored of earlier feistiness, he’s moved on. The aroma was peachy and malt accented, any tang of hops was now a mere shadow; and the taste had more caramel Quality Streets and plump toffee, if you know what I mean – more homemade than Werther’s Originals. I got a taste of pear skin too, like the aroma you get from the skin left on the plate if you’ve ever peeled pears for poaching. As I drank, the lacing was fancy and elaborate; a spider spinning its web on E.

Yet it’s the presentation that tops it all off. The glass is a delight – I hope retailers have got the sense to let the brand use it rather than complaining that they don’t stack or fit in the dishwasher. St Stefanus may not be a Trappist beer, but it’s a damn fine one. It’s a damn fine example too a great beer brand done well: a terrific liquid, a beautiful look and a legend to make you want to talk about it. Perhaps, like the Trappists after all, this Abbey Beer with its strict observance and simplicity will win the day.

¹ The Order of Cistercians of the Strict Observance, an order of monks and nuns. The 48th Chapter of the Rule of St Benedict says, “for then are they monks in truth, if they live by the work of their hands” – beer is brewed to raise money for the monastery.

² The beer is given ‘Cellar Release’ after 3 months, so the beers were closer to six months and two years old in absolute terms.

© David Preston, Beer Tinted Spectacles, 2013