AB InBev and Northern Brewer

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Images courtesy of Northern Brewer and ZX Ventures

AB InBev Enters the Homebrewing Industry

This past week, Anheuser-Busch InBev announced its plans to purchase one of the largest online homebrew supply companies in the country. AB Inbev is buying the Northern Brewer, which also own Midwest Homebrew Supply, another large force in the homebrewing industry.

The purchase is being made through ZX Ventures, AB InBev’s strategic ventures division which targets new growth and investment opportunities for the brewing giant. ZX Ventures is dubbed as the conglomerate’s “disruptive growth organization,” and is focused on 3 general areas of growth, craft/specialty beverages, e-commerce, and exploration. We’ve seen their impact on the craft space with purchases like Elysian and Goose Island, and now they’re branching out with their first significant step into the e-commerce space.

There are a ton of questions to go along with this announcement, the biggest of which being why is such a huge company even bothering with the relatively niche homebrewing industry.

AB InBev and the Potential of E-Commerce

AB InBev began purchasing craft breweries because they were losing market share to the growing number of small player in the overall beer industry. Through the growth of the craft beer specialty market, more consumers became enthusiasts and stopped purchasing macro-brewery beer in favor of more flavorful craft offerings. AB InBev’s solution has been to buy up some of the most successful entries in the craft space in order to profit off that growth while enabling them to grow even faster.

They probably have the same idea with the homebrewing supply industry, spurning their purchase of Northern Brewer.

The homebrewing market is still growing. Along with losing money to the growth of independent craft breweries,  AB InBev probably doesn’t see many sales from consumers who are passionate enough beer to make their own. Seeing the related industry as a potential growth opportunity, AB InBev had enough capital to purchase one of the markets biggest players. Just like with craft breweries, they’re looking to help the supplier reach their potential faster and profit off the industry’s growth.

This acquisition could play out a little differently than brewery purchases though. There has been some backlash against the breweries they own from enthusiasts devoted to a vision of small and independent craft beer, but big marketing budgets have allowed them to profit from less discerning craft beer drinkers.

Homebrewers Vs. the Big Beer Business

The issue that could arise with the Northern Brewer purchase is that homebrewers are some of the most adamant enthusiasts of high quality beer. I listened to a Q&A with Charlie Papazian at this year’s GABF and he said that he likely wouldn’t be a beer drinker today if he hadn’t discover homebrewing, he just couldn’t stand any of the offerings when he was young. That was a while ago, but the main players in the macro-brewing industry are largely unchanged. He’s assuredly not the only one who feels this way, and homebrewers are passionate about the craft of beer if they are anything. There aren’t nearly as many less discerning homebrewers for AB InBev to make a profit off. Homebrewing, as compared to just drinking beer, is obivously much more niche. The American Homebrewers Association already posted a survey on their members’ opinions on supporting small and local homebrewing supply shops versus a mega store with lower prices across the board. I’m curious to see their results.

Therein lies another possible issue for Northern Brewer’s new owners. Not only are homebrewers more likely to be concerned about supporting a small and independent versus the 5th largest consumer goods company in the world, they are also less price conscious consumers. According to a survey taken by the AHA in late 2013, the vast majority of American homebrewers are highly educated and affluent, with over 60% having a household income of over $75,000 annually.

This could spell some problems for AB InBev that purchasing well regarded craft breweries did not. Craft beer is exploding, and there are plenty of excited consumers who don’t care to do the research as to where their dollars are going. I meet people at the brewery all the time who are just trying out craft beer for the first time, it’s an amazing time for the industry. Homebrewers are more historically established, and as shown by that AHA survey, highly educated and less price sensitive. It’s going to be much harder to find a significant number of new homebrewers than it was to find new craft drinkers, it is always a possibility though.

The Northern Brewer hopes that one day homebrewing will be as common in households as cooking, no doubt that AB InBev is getting in early and hoping for the same.

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