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AB InBev may craft new strategy for CUB

September 9, 2016
Richard Oppy

Richard Oppy

Carlton & United Breweries will likely approach craft beer differently under the ownership of Anheuser-Busch InBev, if the brewing giant’s overseas track record is anything to go by.

AB InBev takes control of CUB on October 10. CUB marketing director Richard Oppy told Australian Brews News the companies are at arm’s length in the meantime.

“We’ve been very strict with correspondence with Anheuser-Busch InBev. They’re definitely a competitor of ours right up until change of control. We can’t share any confidential information,” he said.

Oppy said discussion of future strategies and new product development is certainly off limits, so he does not yet have any direct sense of how AB InBev plans to approach craft beer in this market.

“In terms of the craft range and whether that will change or not – from what I’ve read and understand of ABI, they’ve been very active in this space in the US, in particular,” he said.

“I think there’s a lot of learnings that they’ll bring to the Australian marketplace. Without having spoken to them directly about it… I think they’ll be more active in this space.”

Two different strategies
Since March 2011, AB InBev has acquired eight craft breweries in the US. In contrast, MillerCoors – the SABMiller-controlled joint venture with Molson Coors – made only two US acquisitions over the same period.

That is, up until July 2016, by which time it had become clear that Molson Coors would acquire SABMiller’s 58 per cent stake in MillerCoors, as a knock-on effect of the AB InBev takeover.

Ahead of its integration into Molson Coors, MillerCoors has since snapped up three more breweries: Revolver in Texas (August 11), Hop Valley in Oregon (July 29) and Terrapin Beer Co in Georgia (July 20).

That’s more deals in three weeks, than in the previous five years SABMiller helmed the joint venture.

SABMiller’s global priorities appear to have laid somewhere other than craft, an approach that clearly permeated its Australian subsidiary CUB.

“The reality is that craft is less than three per cent of total beer consumed in Australia, so while it makes a lot of noise, it tends to be very small volume,” outgoing CUB CEO Ari Mervis said in August 2013.

Focusing on mainstream beer does not appear to have hurt the company’s financials, with Richard Oppy this week declaring the company had just enjoyed its best year in a decade.

“I think SABMiller has been fantastic for the CUB business over the last five years. The focus on the quality of our products, restoring our core brands and being brave with innovation has turned our business around,” he told Australian Brews News.

“Now I think a lot of people are excited about the next chapter – being part of the biggest brewer in the world, in Anheuser-Busch InBev.”

AB InBev’s approach

In March, German beer journalist Dr Ina Verstl analysed AB InBev’s recent US acquisitions, in a presentation at The Institute of Brewing and Distilling Convention 2016 in Sydney.

“It follows a very clear pattern. There’s a geographical pattern to it – one craft brewer per state,” she said.

AB InBev acquisitions as at March 2016, prior to its April purchase of Devils Backbone in Virginia

AB InBev acquisitions as at March 2016, prior to its April purchase of Devils Backbone in Virginia

“Also, a brewer with a good brand, a cult following and an output of about 70,000 barrels.”

But CUB’s Oppy believes such a strategy is not easily transferrable to the Australian market.

“From what I’ve seen in the US, those states are massive with big population and you can launch a craft brewery in a state and commercialise it and still make very good money out of it,” he said.

“In Australia, obviously there’s less population and smaller states. We’ll be looking more at a national play as opposed to a local state play.”

Goose Island: Coming soon?

Goose Island: Coming soon?

Changing landscape
As well as its acquisitive demeanour, AB InBev also brings with it a host of international craft brands not currently available in Australia.

The trade mark for Chicago’s Goose Island Beer Co was lodged with Australian authorities in May, suggesting it may be first cab off the rank.

Whatever its approach, CUB looks likely to increase its exposure to the fast growing craft segment in the AB InBev era. There look to be other drivers for this, beyond simply ownership.

The country’s largest non-gaming publican, Dixon Hospitality, recently blamed CUB’s inadequate craft offering for moving to a tap contract with rival Lion.

“CUB only has a handful of products that everyone’s had before,” was Mike Dixon’s blunt assessment.

So a limited craft offering has cost CUB potential tap points for its mainstream beers in Dixon’s 37 venues, a footprint already earmarked for dramatic further expansion.

Surely this is something AB InBev would want to address, when change of control happens on October 10.

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