Anheuser-Busch on its way to becoming king of craft beer, too
A decade ago, Anheuser-Busch made no beer that could legitimately be called "craft."
The nation’s largest beer company dabbled at the edges of the burgeoning craft beer movement, but its backbone remained the brands to which craft beer was largely a reaction — Bud and Bud Light, Natural Light and Michelob Ultra, and whatever odd innovations might tempt a new generation of consumers, be it Lime-a-Rita (a hit) or Tequiza (a miss).
But this summer, a torch has quietly been passed: By at least one metric, Anheuser-Busch — the same Anheuser-Busch that made no authentic craft beer a decade ago — is now the nation’s largest craft beer company.
How did a company that made no craft beer a decade ago become the nation’s top manufacturer within a mere seven years?
It opened its wallet.
Between 2011 and 2017, Anheuser-Busch bought 10 breweries from coast to coast, beginning with Chicago’s Goose Island Beer Co. and ending (for now) with Wicked Weed Brewing of Asheville, N.C. In between, it picked up breweries in Oregon (10 Barrel), Virginia (Devils Backbone), Seattle (Elysian), Los Angeles (Golden Road), Houston (Karbach) and the metro areas of Phoenix (Four Peaks), Denver (Breckenridge) and New York City (Blue Point).
Anheuser-Busch’s shopping spree appears to have paid off. Last month, industry newsletter Beer Marketer’s Insights reported that the beer giant has surged past Boston Beer and Sierra Nevada in 2018 to become the nation’s top craft beer company in terms of dollar sales. The numbers were crunched from data provided by Chicago-based market research firm IRI Worldwide.
In year-to-date sales through June 3, Beer Marketer’s Insights reported, Anheuser-Busch’s acquired craft brands grew 20 percent to $107.3 million of sales. Sierra Nevada was up 2 percent to $100.7 million, and Boston Beer was down 6.5 percent to $94.4 million.
While Boston Beer clings to a tenuous lead in terms of the amount of craft beer sold, it likely won’t for long. Anheuser-Busch’s portfolio of acquired breweries is poised for years of growth. Boston Beer, meanwhile, has declined in recent years as the overall beer industry struggles against wine, spirits and legal marijuana.
In other words, the company behind the King of Beers is also on its way to becoming the King of Craft Beers.
"It is a bit of a moment that this is the year it’s happening," said David Steinman, senior editor of Beer Marketer’s Insights’ Craft Brew News, which calculated the data and first reported the findings. "It seems like they’re positioned to hold this spot for the foreseeable future."
An Anheuser-Busch spokeswoman did not respond to a request for comment.
To be clear, Anheuser-Busch’s craft beer supremacy exists in one very specific metric at the moment; IRI tracks sales in grocery, big box, drug and convenience stores. When factoring in draft and liquor store sales, Beer Marketer’s Insights estimates that Boston Beer remains ahead of Anheuser-Busch in terms of both volume and dollar sales. But the passing of that torch is all but an inevitability during the next year or so.
"It’s still a little bit of shock to the system for most craft brewers — everyone’s getting used to it," Steinman said. "It’s definitely a new way to think about the business."
Indeed, 10 years ago, craft brewers could largely sell themselves as the antidote to Big Beer. Now they’re battling Big Beer. MillerCoors, Constellation Brands and Heineken have all bought American craft breweries, too, but no large beer company has made a more forceful entry into the business than Anheuser-Busch. Its 10 acquisitions allow it to compete as a local, regional and national player from coast to coast, sending beer into the market though a loyal and powerful distribution network.
"It’s brought a new challenge that’s not that different than what even Boston Beer presents because they’re a very sophisticated company with a lot of resources," said Scott Metzger, founder of Freetail Brewing in San Antonio. "But with Anheuser-Busch, it’s magnified."
It became particularly magnified for Metzger when Anheuser-Busch bought its ninth craft brewery: Houston’s Karbach Brewing, in 2016. The strategy had crept into his backyard.
He acknowledges that Anheuser-Busch has undertaken a smart, aggressive strategy. He said he doesn’t begrudge the brewery founders who have sold. But Karbach’s presence in San Antonio has intensified since its sale — a reflection of what Anheuser-Busch is doing with its craft brands across the country. In a blog post, Metzger called Anheuser-Busch’s approach a "scorched earth acquisition strategy."
"If they’re gaining, then somebody’s got to be losing," Metzger said.
Before its shopping spree, Anheuser-Busch did attempt various versions of craft beer, most notably under its Michelob banner: Michelob HefeWeizen, Michelob Pale Ale, Michelob Hop Hound, Michelob Ginger Wheat and Michelob Winter’s Bourbon Cask Ale, among them. It also used craft beer to attempt to confuse the marketplace, such as introducing Pacific Ridge Pale Ale in 1996 as a thinly veiled copy of Sierra Nevada Pale Ale. Its biggest success was Spring Heat Spiced Wheat, later rebranded Shock Top.
But such brands have never been considered actual craft beer by Beer Marketer’s Insights (or many beer drinkers) because they largely competed as Big Beer brands — made in larger batches and distributed far more widely and aggressively — than most craft beers.
As classic macro brands lost share and craft beer continued to grow, Anheuser-Busch eschewed its half-baked efforts and started buying the brands it could never create, starting with Goose Island (a story recounted in my book, "Barrel-Aged Stout and Selling Out," released earlier this summer). It also launched a division to manage its craft portfolio, The High End, and declared a goal of building the nation’s top-selling craft portfolio.
Beer Marketer’s Insights has continued to analyze sales from Anheuser-Busch’s 10 acquisitions as part of the craft industry, and it is those sales that have collectively claimed the top spot based on the IRI data.
However, it’s not all good news for Anheuser-Busch’s craft effort.
Its lead horse, Goose Island, had a rough 2017, and 2018 is proving just as difficult. In early August, the Goose Island portfolio was down double digits across the previous three months, according to Beer Marketer’s Insights. Sales were down for several of Goose Island’s major brands — IPA (down 0.3 percent), 312 Urban Wheat Ale (down 11 percent), Green Line (down 35 percent) and Four Star Pils (down 41 percent). Sales for Blue Point and Devils Backbone have also been down from a year ago, Steinman said.
But here’s where the power of Anheuser-Busch’s aggressive strategy pays off: When some brands suffer, others soar. Elysian’s Space Dust IPA continues to be a rocket and even surpassed sales of Goose Island’s IPA as Anheuser-Busch’s top-selling IPA, according to IRI data. (Goose Island IPA continues to enjoy nationwide dominance on draft, however, due to the powerful Anheuser-Busch distribution network.) Karbach is also growing rapidly.
The Brewers Association, a Colorado-based trade organization, has spent recent years drawing attention to Anheuser-Busch’s entry into craft beer, including "Take Craft Back," a mock effort to crowd-source $213 billion to buy Anheuser-Busch’s parent company, Anheuser-Busch InBev.
Julia Herz, director of the Brewers Association’s craft beer program, called the IRI data "a very telling and timely snapshot."
"It definitely gets at the question, ‘Is the marketplace fair?’" Herz said. "We think if there was more transparency, it would be easier for beer lovers to discern when they’re purchasing beer from a Big Beer conglomerate or not."
Craft brands owned by Anheuser-Busch feature little-to-no acknowledgement of their corporate roots. Herz said Anheuser-Busch likely wouldn’t have had such an easy march to the top of IRI sales data if consumers had more awareness of who owned the brands.
Last summer, the Brewers Association unveiled a seal — an upside-down beer bottle to signify craft’s upending of the beer industry — that affirms a brewery’s "independence" and whether the brewery meets the Brewers Association’s definition of "craft."
The logo has been adopted by more than 3,600 craft beer companies, Herz said, including on packaging and in brewery taprooms. Among the breweries unable to use the logo are the 10 bought by Anheuser-Busch; they’re ineligible due to their ownership.