AB-InBev-NB: The Devil In Detail
'Capital has its rights, which are as worthy of protection as any other right.'
The Post-Honeymoon Analysis
Ever since AB-InBev stirred our kettles last year with its acquisition of NB, brewers have been shuffling their game theories on the future of homebrewing. Are local and regional homebrewing supply stores in the crosshairs? Is homebrewing as we know it doomed to beechwood lagers? Or was the news just red herrings masquerading as a meme?
This could be far more simple than it seems. And it probably is. So as the honeymoon winds to an end we at BrewersXchange thought we'd peel away some layers on the subject.
One observation that should be mentioned is that while there is concern over "motives" in the acquisition, no one questions the "merit" of the acquisition. NB has earned the respect of vendors and brewers alike, not to mention building a sizable market share. We all salute NB’s growth and dedication to homemade brew, burning the path for future homebrewed moguls. But let it be said that NB could not achieve such status and respect without healthy competition and comradery among its peers. That dedication-to-craft we see in local retailers will more than likely assure their survival.
So why the big fuss? Perhaps this anxiety could be rooted in AB-InBev's acquisition roster, an endless record longer than history itself. In addition, AB-InBev's anti-trust practices and intergalactic mergers are routinely investigated by the US Justice Department, and for good reason. Most of these conflicts were eventually resolved through "negotiation" with President Obama's Department of Justice, but the stigma put on every new AB-InBev deal still remains. If any of you brewers believe in the "everything is political" theory, then you may enjoy this link or this one.
New Kid on the Block: "Shop & Save at Budweiser's"
The harsh reality of AB-InBev buying-in to a ‘smaller stakes’ table may be true, but the premise of it bullying the players is probably unlikely and surely unproductive. Similar fear rippled through the craft brew industry a few years ago, which some could say exacerbated conflict in the distribution networks.
The underlying motive most palatable to us is that AB-InBev sought out a link in the homebrewing sector, and in their traditional fashion acquired one of the leaders in the market-- NB. Let's get real brewers. A local homebrew store is nothing more than a grocery store carrying specialty items with a trained chef working behind the register. Is that really NB's end game here? More storefronts? That modus operandi isn't supported by AB-InBev's business model, branding, nor investment style.
Instead, we paint a picture with a different outcome-- A positive one. Acquiring NB presents AB-InBev with a multitude of opportunities-- Some being;
Cash. AB-InBev could just be interested in adding to their bottom line. Sit on NB’s cash and inventory, and show little or no change to the industry.
Expansion. Expanding NB's brand to other cities by opening new stores. This outcome is probably unlikely due to cost-cutting trends in the global retail sectors. Big Retailers are actually closing stores, forced to tighten their belts.
Management. AB-InBev could oversee NB's operations with a higher level of involvement between NB and AB Brewers. Streamlining of inventory and fulfillment, which could include opening new warehouses or regional shipping hubs. National advertising/educational campaigns could also emerge attracting new NB customers in underserved regions.
New Revenue. Another avenue NB can take, which is very likely, is to develop new revenue streams for new and existing products. AB-InBev is coming off a rough year (2016) and has restructured its management which included middle management lay offs. Any investment in NB will probably go towards lower costs and stronger profit margins, more likely coming from new consumer products, not brick-and-mortar retail expansion.
More insight into what the future might hold could be found here.
The biggest innovations that lead us into the future always start with a simple question requiring a reasonable answer. So we propose the question of what is possible. How can the average homebrew store take advantage of NB’s acquisition?
Packaging branded beers in recipe form is a "niche" play for AB-InBev, which could lead every BudLight drinker to the nearest LHBS. "Niche" is good. Niche is in fashion. If you put the acquisition under a microscope, NB would be an ideal place to incubate new product lines. And if such products were to come to fruition, then one should expect AB-InBev to advertise in blitzes, directing potential BudLight customers to a "homebrew store near you". All remote possibilities.
The general public can only speculate what the future holds for AB-InBev-NB. Newer innovation in homebrewing has been leaning towards automation. Automating the brewing process seems to be on everyone’s drawing board, aimed mainly at saving time or labor. From the perspective of AB-InBev, packaging branded beer recipes with an appliance item could garner recurring revenue on single sales. AB-InBev positioning itself in homebrew product development is quite plausible, if not hopeful.
Or maybe NB will disprove our predictions and become the "Home Depot" of Homebrewing, putting every competitor in peril. We will have to wait and see. The nearest "Budweiser Store Near You” may never open, but if it does that would be the only time to worry. The marriage of AB-InBev and NB obviously makes an odd couple that just so happens to get along. More obvious is Big Business came and they liked what they saw.