Supermarket giants bid to crush micro-breweries

PUBLISHED: 10:24 15 January 2016 | UPDATED: 10:24 15 January 2016

Bud brothers: Goose Island is now in bed with the brewer of Budweiser, the world's biggest beer brand

Bud brothers: Goose Island is now in bed with the brewer of Budweiser, the world's biggest beer brand

Archant

Two American India Pale Ales are widely available in local supermarkets: Goose IPA and Lagunitas IPA. In Morrison’s they cost £1.65 each. That may sound like good news for drinkers but the price comes with a sting in the tail.

They are around 30p cheaper than beers of similar strength. There’s little profit in selling beer at a fraction above the cost of production – unless you can sell a lot of it.

The way in which both beers are disappearing from the shelves of my local branch of Morrison’s shows that customers can spot a bargain and the brewers will watch the money roll in.

That’s bad news for smaller brewers, who cannot match these prices and make a decent return. As a result, they will lose sales and may even be taken off the shelves.

How can the owners of the two American beers afford to sell them so cheaply? The answer lies in their size. Goose IPA is owned by the world’s biggest brewer, AB InBev, best known for Budweiser and Stella Artois, while Lagunitas, based in California, is half-owned by Heineken Internation.

AB InBev, an American, Belgian and Brazilian consortium, is about to get even bigger. It’s taking over the world’s second biggest brewer, SABMiller, whose brands include Grolsch, Miller Lite, Peroni, and Pilsner Urquell. When the dust has settled on the deal the new group will control 30 per cent of world beer production.

But giant brewers have a problem. While they are building sales in Africa, Asia and the former Soviet bloc, their beers are flat-lining in the traditional markets of Europe and the United States.

Drinkers in those countries are turning to better quality products made by smaller craft brewers. There are 1,400 craft breweries in Britain and more than 4,000 in the US – and the big brewers are snapping them up.

Goose Island, as the company was first called, started life as a brewpub in Chicago. Its beers were in great demand and the family owners built a second, stand-alone plant in the city.

Then in 2011, America’s biggest brewer Anheuser-Busch – now the AB of AB InBev –bought the company for $38 million. The founding family are no longer involved and AB has built a new brewery in New York State where it brews the main Goose Island beers, IPA, Honkers Ale and 312 Urban Wheat.

The beers have been rebranded simply Goose and are also brewed at an AB InBev plant in Fort Collins, Colorado, and at two Labatts’ breweries in Canada also owned by the global giant.

Goose IPA is no longer the same beer. The original yeast strain, which accounts for much of the beer’s character, has been replaced and the malts and hops are no longer a blend of American and European varieties but are sourced solely from the U.S.

Several once-independent American family and craft breweries have been bought by AB InBev, Heineken and SABMiller and the global giants have also bought large stakes in others, such as Lagunitas.

The same trend is at work here. Sharp’s Brewery in Cornwall was founded in 1994 and was bought by Molson Coors in 2011.

MC is a Canadian-American group based in Burton-on-Trent and is best known for Carling lager.

It has used its considerable muscle to turn Sharp’s Doom Bar into the country’s number one standard cask bitter, with the bottled version also a major national brand.

In May last year, SABMiller swooped on the fast-growing Meantime Brewery in Greenwich for a reputed £80 million. And just before Christmas, AB InBev bought the Camden Town Brewery, a highly-regarded craft brewery, also for around £80 million.

The group will invest in a bigger brewing plant in Enfield to grow the Camden brands.

Heineken is now Britain’s biggest brewer as a result of buying the Scottish & Newcastle group. This not only gives it ownership of John Smith’s and Newcastle Brown but also the successful Caledonian Brewery in Edinburgh with its Deuchars IPA. The Dutch group could be on the lookout for other craft breweries to buy.

What will the end result be? One American commentator says the aim of the global giants is to “crush the pesky micros”. The likes of AB InBev want to dominate and refashion the beer market. If they are successful, you won’t find Goose and Lagunitas on sale for just £1.65. So hurry while stocks last.

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