Portland, Oregon-based writer Jeff Alworth reports on a disturbing trend in beer retailing. Fred Meyer, his state’s dominant grocery store chain, is scaling back the craft beer selection and giving more shelf space to macro brews and “crafty” beers, the latter being craft labels acquired by big breweries.
On the surface, Fred Meyer’s decision doesn’t make sense. The chain stands to lose business to competing stores that offer a wide selection of local craft products. However, there are fewer alternatives outside Oregon’s larger cities. Alworth adds that Fred Meyer’s parent, Kroger Company, can improve its profit margin by using its buying power to negotiate low prices and cutting costs by paring its beer inventory.
Alworth warns that in localities where the big grocery chains dominate and the public isn’t as attuned to craft beer, “crafty” beers such as Goose Island—or even the big national brands—will become customers’ default choice. That’s bad news for small breweries, especially the newer ones.
The mega-merger between Anheuser-Busch InBev and SABMiller will give the combined business a 30-percent share of the world’s beer market and control of eight of America’s top ten brands. And, according to Time magazine correspondent Brad Tuttle, it will pose a serious threat to the growing craft beer sector. The big brewers’ campaign against craft is being waged on several fronts.
Big Beer’s first line of attack on craft brewers is “crafty” beers such as Blue Moon and Shock Top. Critics call these products “crafty” because many, if not most, consumers are unaware that they’re made by big breweries.
The big breweries are also buying craft breweries whose products have a following, such as Goose Island, Elysian, 10 Barrel, Golden Road, and Blue Point. Even though there are 4,000 breweries in the U.S., Tuttle points out that strategic acquisitions of key craft breweries make it much more difficult for other craft brewers to succeed.
Advertising is another weapon in the mega-brewers’ arsenal. The craft-bashing Budweiser commercial that ran during the last Super Bowl, poking fun at hipsters who fuss over pumpkin peach ale, is the most notorious.
The big brands still dominate distribution, and the three-tier system isn’t going away anytime soon. In some states, such as Colorado, A-B InBev has bought distributors outright—a practice that may lead to antitrust investigation by the Justice Department.
Finally, consolidation helps offset the big brands’ sagging sales growth by cutting costs. Advertising is one such cost. A-B InBev and SABMiller spend billions on sports sponsorships to promote their brands. Now that the two companies are no longer competing, they’ll have more negotiating power with the sports industry and will demand lower fees for their “official sponsorship” status.