We are currently in a period where macro brewers are buying craft brewers in an attempt to capture some portion of that market. Heineken becoming the sole owner of Lagunitas is a recent example. Heineken is the second largest brewer in the world. In 2014, when Lagunitas was still independently owned, it was the sixth largest craft brewer.
To reflect on what macro ownership of craft brewers means, I am reposting an entry that discussed the merger of InBev and Anheuser Busch.
July 14, 2008
Are We Rome?
I was browsing in one of my local bookstores and came across a book entitled, Are We Rome?: The Fall of an Empire and the Fate of America by Cullen Murphy. It occurred to me that this concept could be applied to Anheuser-Busch and it’s sale to InBev. When I was in junior high school my history teacher showed us a chart of world civilizations which depicted their rise and fall. Looking at the chart, I had the, somewhat inevitable, realization that even America could not stay ascendant forever. This insight is even more applicable for economic institutions.
In the 1950s, consensus historians, firmly believing in the uniqueness and permanence of the dominant American state, wrote business history from this perspective. If a company followed good business practices and integrated fully both horizontally and vertically, they would inevitably rise to the top and stay there. Pabst Brewing was a prime example of this for Thomas Cochran. However the subsequent course of events for Pabst as well as other companies including U.S. Steel and General Motors exposed the flaws in this approach to American history.
Anheuser-Busch is noteworthy for having survived and prospered through several waves of mergers, consolidation, and cost-cutting while retaining both its independent status and its family heritage. Yet to have expected that it could continue to maintain its position indefinitely was unrealistic. In a global market threats to a large company’s stability can come from various directions. ABInBev may very well continue its dominance in the United States but the increased cost of grains and hops as well as the flat market share which made Anheuser-Busch vulnerable in the first place has not changed.
Macro brewers have also faced increased competition from craft beers and imports. Jay Brooks, in the Brookston Beer Bulletin, makes the very interesting point that foreign ownership of A-B and MillerCoors means that Boston Beer, Yuengling, and Sierra Nevada are now the largest “American” brewers. Pabst is disqualified since it is essentially a virtual brewer and primarily a marketing company. Returning to the Roman Empire analogy, these craft brewers would then be playing the role of barbarian invaders of the late Roman Empire. Of course InBev is also playing that role. If we look at this whole issue through the lens of taste, then craft brewers are a civilizing force.