Bud Light

Why Is A-B Buying Craft Breweries?

hris Herron, the CEO of Creature Comforts Brewing Company, has an explanation for why Anheuser-Busch is acquiring craft breweries.

Herron, who worked in finance in the beverage industry, starts by explaining that goodwill—the value of a brand above its physical assets—makes up more than 50 percent of A-B’s assets, $136.5 billion to be exact. However, if A-B’s flagship brands, Budweiser and Bud Light, continue to lose market share, A-B will have to take an “impairment charge” to reflect the brands’ loss of value. That charge would amount to tens of billions of dollars, which would clobber the company’s stock price.

Impairment charges are looming because A-B positioned Bud and Bud Light as “premium” brands, which commanded a higher price and were perceived as superior to competing brands. However, with the growth of the craft beer sector, Bud and Bud Light are no longer considered “premium”. Nor can A-B restore those brands to premium status by raising prices, because doing so would cause them to lose even more market share, this time to Miller and Coors.

Back to the craft brewery acquisitions. Herron believes that A-B bought them for two reasons. The first is to capture some of craft beer’s growth and, at the same time, slow it down. The acquisitions help capture growth; meanwhile, A-B’s sheer size allows gives it an advantage over independent craft breweries. It can use its buying power to secure raw materials, push its craft brands through its distribution network, and spend heavily to market those brands. A-B’s second objective is to regain the goodwill associated with the Bud and Bud Light brands. Aggressive competition by A-B’s craft breweries will force independent craft brewers to cut prices; that, in turn, would narrow the price gap between craft and A-B’s brands, and diminish the perception that those brands are no longer premium.

Herron sums up A-B’s strategy:

The impairment charges AB InBev could face are worth billions more than any craft brand they have purchased, and those purchases would be a small price to pay to save a legacy brand. These craft brands, whether they realize it or not, may just be pawns in the AB InBev game of chess. AB InBev is not a collaborator, they are a competitor, and a damn smart one. If one of these craft brands they buy is a successful long-term brand, great, but more important to AB InBev, is the vital role they play in the short-term of ensuring that their premium brands retain long-term value.

The Friday Mash (Get Vaccinated! Edition)

Sixty years ago today, Elvis Presley received a polio vaccination on national television. That single event is credited with raising immunization levels in the United States from 0.6% to over 80% in just six months.

And now…The Mash!

We begin on the Formula 1 racing circuit, where in the early 1980s, Gordon Murray’s inventive pit crew rigged up a fuel system using pressurized beer kegs that could pump 30 gallons of fuel into a car in just three seconds.

A North Carolina judge was convicted of bribery after offering a deputy sheriff two cases of Bud Light in exchange for his wife’s text messages. The judge later upped his offer to $100.

Two employee-owned breweries, Harpoon Brewery and Odell Brewing Company, have collaborated to brew a beer called EHOP. It’s an oatmeal pale ale.

Vietnam’s government will sell off two state-owned breweries which have a 60-plus-percent market share. Vietnam, with 93 million people, is one of Asia’s top beer-drinking countries.

This week, Britain’s smallest pub—which has room for just three—is offering free beer, but there’s a catch: you can’t use your mobile phones inside the pub.

Indianapolis-based Central State Brewing has something for Harry Potter fans: a sour ale called “Polyjuice Potion”. Its ingredients include plums, elderberries, and “magical bits and bobbles”.

Finally, Brooklyn’s Sixpoint Brewery is making two beers to be enjoyed with single-malt scotches from Highland Park, a distillery in the Orkney Islands. The beers are Rune, a golden oat ale; and Sköll, a roasty ale.

The Friday Mash (James Dean Edition)

Sixty-one years ago today, James Dean was killed in a traffic crash in California. He was 24 years old. Dean became the first actor to earn posthumous Academy Award nominations for Best Actor, for playing Cal Trask in East of Eden and Jett Rink in Giant.

And now…The Mash!

We begin in Denver, where Brent Doeden aka “Captain Earthman” suffers from inoperable brain cancer. Doeden, who’s been vending beer at Colorado Rockies baseball games since the franchise’s inception, is a cult figure at Coors Field.

Wil Fulton of Thrillist.com makes the case for why flip cup is a better drinking game than beer pong. One advantage: it’s easier to cheat, which—like in Monopoly—is an integral part of the game.

The Michelada is one of Mexico’s popular new drinks. It consists of beer, lime juice, spices, sauces, and other ingredients in a salt-lined glass. It has some similarity to a margarita.

To combat “flagship fatigue”, Sierra Nevada Brewing Company will release three new ales next year: Sidecar Orange Pale Ale, Tropical Torpedo, and Golden IPA.

Los Angeles has light rail transportation, and you can spend a day pub-crawling along the Red Line, which runs from Union Station to North Hollywood.

Candidates aren’t the only ones running negative ads this fall. Miller Lite responded to a Bud Light spot with this slogan: “Bud Light says raise one to right now so why not raise the right one?”

Finally, ultra-runner Karl Meltzer set a new record for running the length of the 2,190-mile Appalachian Trail: 44.9 days, 22 hours 38 minutes. His routine on the AT included ending the day with a couple of brews. Meltzer celebrated the end of his trek with a pepperoni pizza and—you guessed it—a beer.

Beer…By the Numbers

  • Average price of a 1/3-liter draft beer in Lausanne, Switzerland: $17.60 (highest in the world).
  • Average price of a 1/3-liter draft beer in New York City: $9.22.
  • Average price of a 1/3-liter draft beer in Bratislava, Slovakia: $2.80.
  • Average cost of a pint of beer in 2016: $3.99.
  • Average cost (adjusted for inflation) of a pint of beer in 1952: $5.93.
  • Craft beer’s sales growth in the first half of 2016: 6 percent.
  • Imported beer’s sales growth in the first half of 2016: 6.7 percent.
  • Grams of carbohydrates in a bottle of Michelob Ultra: 2.6.
  • Grams of carbohydrates in a bottle of Bud Light: 6.6.
  • Pounds of spent grain produced by New Belgium Brewing at its Fort Collins, Colorado, brewery: 73 million.
  • Spent grain’s share of brewery by-products: 85 percent.
  • Style categories in this year’s Great American Beer Festival competition: 96.
  • Estimated number of beers expected to be entered in this year’s GABF competition: 7,000.
  • Beers to be poured at this weekend’s Michigan Brewers Guild Summer Beer Festival: 1,107.
  • Breweries that will pour at the MBG Summer Beer Festival: 125.
  • Beer…By the Numbers

  • U.S. federal excise tax on a pint of craft beer: 3 cents.
  • UK excise tax on a pint of craft beer: 50 pence (67 U.S. cents).
  • Paid attendance at “10 Cent Beer Night” at Cleveland Municipal Stadium, 1974: 25,134.
  • Estimated number of 10-cent beers consumed by fans that night: 60,000.
  • Regular price of a beer at Cleveland Municipal Stadium in 1974: 65 cents.
  • Football Bowl Subdivision schools that will sell beer stadium-wide in 2016: 36.
  • Percentage of FBS schools that sell beer stadium wide: 28.
  • Estimated value of Budweiser’s brand: $14.73 billion (world’s most valuable beer brand).
  • Estimated value of Bud Light’s brand: $13.92 billion (world’s second most-valuable beer brand).
  • Average price of a bushel of U.S. malting barley in 2013: $6.58.
  • Average price in 2016: $5.75.
  • Capacity of a Game of Thrones-themed “Drankgon” beer bong: 64+ ounces.
  • Retail price of a Drankgon: $27.
  • Suggested retail price of the BeerDroid personal brewing system: 799 Australian dollars ($595 U.S.)
  • Size of one batch of BeerDroid beer: 10 liters.
  • Beer…By the Numbers

  • Top ten brewers’ share of the craft beer market in 2015: 3.8 percent.
  • Their share of the craft beer market in 2009: 5 percent.
  • People employed by Ohio craft breweries: 2,500.
  • Ohio’s current craft brewery count: 190.
  • New York State’s brewery count in 2015: 240.
  • Its brewery count in 2012: 95.
  • Craft brewing’s impact on New York State’s economy: $3.5 billion (fourth-highest in the U.S.).
  • Boston Beer Company’s (ticker symbol: SAM) closing price on May 13: $150.04 a share.
  • SAM’s highest price during the past 52 weeks: $266.62.
  • Calories in a 12-ounce can of Budweiser: 145.
  • Calories in a 12-ounce can of Bud Light: 110.
  • Bud Light’s share of the world beer market: 2.5 percent (third overall).
  • Snow beer’s share of the world beer market: 5.4 percent (first overall).
  • Cost of a liter of Snow beer in China, its home country: $1.
  • Growth in Snow’s sales volume since 2005: 573 percent.
  • Meet the “Bud-E Fridge”

    Emily Price, the assistant drinks editor at Paste magazine, shelled out $299 for a Bud-E-Fridge. The fridge is intended to store Bud Light, but Price discovered it also holds the many craft beers she buys (“an occupational hazard”, she calls it).

    The Bud-E-Fridge holds 78 bottles or cans. It isn’t equipped to store bombers but other than that, its functionality is “insane”. The fridge’s outside displays the number of beers inside, and a smartphone app allows Price to access that information on the go. If she adds warm beers to the fridge, she gets a push notification on the phone when the beers are cold. It also has an alarm that goes off if someone removes a bottle with permission—and allows her to e-scold the culprit. (The app also notifies her when “the beer fairy” drops by and adds bottles to the fridge.) And if the fridge is low on beer, Price can order more with the Saucy app.

    Price adds that the Bud-E-Fridge costs “roughly what you would for a standard fridge that won’t hold nearly as many beers.”

    The Wednesday Mash (Year-End Clearance Edition)

    Ludwig is on Christmas break, and won’t be back until January 4. In the meantime, Maryanne and Paul are filling in for him.

    And now….The Mash!

    We begin in Richmond, Virginia, where it’s been a banner year for craft beer. Four new breweries and a meadery have opened their doors; and Stone Brewing Company will start up next spring.

    Anheuser-Busch is giving Bud Light cans a makeover. Alissa Walker of Gizmodo.com says the can’s new design signals an end to the brand’s frat-boyish “Whatever” campaign.

    Responding to a new Indonesian law banning beer sales in convenience stores, Diageo is brewing a non-alcoholic version of Guinness to be sold in that country. It’s called “Guinness Zero.”

    More than 30 Arizona breweries are collaborating on an all-female-brewed beer. It’s a red IPA, and proceeds from its sale will go to Go Red for Women, an American Heart Association charity.

    Despite Zimbabwe’s economic collapse, people are finding solace in beer. Observers say that bars in the capital city, Harare, are packed with holiday revelers.

    Manhattan resident Leif Nelson has sued Miller Brewing Company for falsely representing that Foster’s is brewed in Australia. Brewing operations were moved to Texas in 2011.

    Finally, scientists at the University of Pennsylvania found that people drink more on days when they exercise more. Perhaps they’re drinking to extend the “buzz” that physical activity brings.

    The Friday Mash (Jam Session Edition)

    On this day in 1956, The Million Dollar Quartet—Elvis Presley, Jerry Lee Lewis, Carl Perkins, and Johnny Cash—got together at Sun Studio in Memphis. Years later, tracks from of this impromptu jam session were released as albums in the UK and, later, in the U.S.

    And now…The Mash! 

    We begin in London, Ontario, where Lewis Kent has become the first Beer Miler competitor to turn pro. The 22-year-old University of Western Ontario student signed a deal with Brooks, a shoe company.

    Good news for Star Trek fans. Shmaltz Brewery is releasing the latest beer in the officially-licensed Vulcan Ale series. It’s a red session IPA called The Genesis Effect, and unlike Romulan Ale, it’s legal.

    Stung by feminists’ reaction to Bud Light’s #UpForWhatever ad campaign, Anheuser-Busch InBev plans to air woman-friendly spots for its beer during next year’s Super Bowl.

    George Washington loved his beer—porter, in particular, and occasionally brewed his own. A notebook Washington kept while he was a 25-year-old officer in the Virginia militia contains a recipe for “small beer”.

    Journalist Dina Mishev got over her aversion to beer, at least for the time being, after hitting the Bend Ale Trail. The Trail has 16 breweries, all within walking or biking distance from one another.

    In Milwaukee, Pabst Brewing Company’s 126-year-old bottling plant is being converted into apartments for college students. Unfortunately, the amenities won’t include free Blue Ribbon.

    Finally, Dogfish Head Brewery claims the distinction of having brewed the hoppiest beer on record. Hoo Lawd, an India pale ale, checks in at 658 International Bittering Units. Most IPAs fall in the 40-60 IBU range.

    The Friday Mash (Fantasia Edition)

    Seventy-five years ago today marked the premiere of Walt Disney’s Fantasia. The animated film opened to mixed reviews, but it is now considered one of the classic animated films of all time.

    And now….The Mash! 

    We begin in Great Britain, where a 2002 law granting excise tax breaks caused a proliferation of breweries. The country has more than 1,300, and ranks first world-wide in breweries per capita.

    Football fans will soon see something new in Bud Light commercials. The National Football League has changed its rules to allow the use of game footage involving active players.

    In Oregon, the craft brewing and newly-legalized marijuana industries have something in common: a proliferation of start-up businesses.

    Guinness will soon become an all-vegan beer. The brewery will stop using isinglass, a by-product of the fishing industry that’s used to clarify the beer and make yeast settle faster.

    Boston-area entrepreneur Adam Oliveri has started a boutique beer distribution business. His Craft Collective has already signed distribution contracts with 16 craft breweries from the Northeast.

    How dangerous is a “beer belly”? Depends on one’s fat distribution. Otherwise slim people with a beer belly run a much greater risk of serious health problems than obese people with one.

    Finally, San Diego Beer Week isn’t just an opportunity to taste great beer. It also gives new breweries a chance to introduce themselves. More than half of San Diego County’s 115 breweries are less than three years old.

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