Looking Back At the Future of Brewing. Part 3 of 5

Part One — Part Two — Part Three — Part Four — Part Five

The scenario I described in my previous entry played out repeatedly between 1950 and 1980.

In theory, that scenario ought to repeat itself now, especially because, as I noted way back at the beginning, A-B’s distributors are restless. And prices for barley and hops are at record high levels. Many brewers are struggling. That means there’s uncertainty in the industry.

The InBev deal adds to that uncertainty, but it also presents opportunities. If InBev succeeds, the value of A-B will likely plunge. After all, InBev will remove the Busch family, and its valuable presence. (I gather that economists can place monetary value on things like family stability.) Also, the A-B distribution system, which is rock solid and even more valuable, may tumble into disarray under InBev.

All of that adds up to opportunities for other beermakers. Miller/Coors may have a chance to grab a larger share of markets. But so will the smaller, more aggressive craft brewers.

Put simply, the weaker position of A-B will translate into opportunity and turmoil among other beermakers.

But what if the InBev takeover attempt fails? What if A-B retains its independence? That, too, will translate into upheaval. A-B will return as a leaner and, dare I say it?, meaner machine. It will work hard to repair bad relations with its distributors. It will do whatever it takes to elevate its stock price. How will it do that? By becoming even more aggressive in the craft brewing segment. It will roll out its own “craft” beers (which it’s been working on for some time).

BUT: It will become more aggressive within the craft segment. Right now, A-B owns shares in four craft breweries (Old Dominion, Goose Island, Widmer, and Redhook). (Unless I’ve lost count and missed one.) It will go after others, and likely buy some outright.

Remember: it’s a good time to do so. Many small brewers are struggling to manage their costs at at time when prices for materials and fuel are in the stratosphere. Not all of them will survive. A weak beermaker represents opportunity. That’s what history tells us OUGHT to happen. Both those scenarios played out repeatedly from about 1960 to 1980.

But this time, history may not repeat itself. Here’s why: the beer itself has changed.

More next time. (No, I’m not trying to drive readers batty by making them return the next day for the next segment. I’m just being sensitive to how busy all of us are. We’ve got ten minutes and then we gotta move on to the next item on the list.)

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