December 20, 2017 by IDW

The global beer industry has experienced significant growth within the last five years.  This is particularly true of the craft beer industry, which has resulted in an explosion of craft beer brands occupying a niche in the beer industry.  The growth that has been seen in the beer industry over the last five years has also brought with it volatility for established brands in the industry.  The response of the biggest industry players has been to aggressively acquire a number of craft beer brands.  The largest global beer brand, Anheuser-Busch InBev has expanded their reach through the acquisition of SABMiller.  In this article, we’ll discuss how the scale of acquisitions occurring between established brands and smaller craft brewers is influencing the beer industry globally.  At the same time, large acquisitions such as the consolidation of AB InBev and SABMiller, are forming the foundation of the global beer industry for years to come.

A Surge in Craft Beer

The explosive growth of the craft beer industry has upset the status quo that existed in the global beverage industry for decades.  Prior to the emergence of the craft beer industry that is seen today, the beer industry was dominated by large multinational distributors.  The craft beer industry emerged on a local level, where brands worked to build a grassroots following from a physical tap house or location.  The popularity of the craft beer industry ensured that this became a widespread trend of explosive growth from the bottom up in the global beer industry.  Rather than compete directly with smaller craft beer brands, the biggest industry players leveraged the scale of their operations to acquire key brands within the craft beer industry.  This allowed the largest brands, such as AB InBev, to acquire established brands with a local following and a wide market appeal.  Importantly, acquiring craft beer brands with popular products was also seen advantageous because it reduced the research and development costs associated with opening new product lines.  Lastly, the acquisition of key brands in the craft beer market has allowed the established beer industry brands to maintain a foothold with the millennial market, which lean towards a craft experience when making a purchasing decision.

Consolidation and Emerging Markets

The acquisition of SABMiller by AB InBev has fundamentally changed the landscape of the global beer industry.  Although significant consolidation has been a feature of the global beer industry over the past decade, the notable merger of these two massive beer distributors signals a change from the status quo.  According to AB InBev, a deciding factor in their decision to purchase SABMiller was the latter’s African distribution network and product lines. SABMillers prescient prediction that emerging markets such as Africa would benefit them in the future turned out to the true.  AB InBev is looking to further capitalize on the growth in the beer industry that can be seen across the developing world.  The effort of major brands in the industry to aggressively capture shares in emerging markets around the world is expected to be a continuing trend over the coming years.  The acquisition power that large brands have exercised over the craft beer industry will undoubtedly be turned towards emerging markets to establish a robust presence.  Which emerging markets will turn out to be the most valuable remains to be seen.  Global beer distributors like InBev are positioning themselves to capitalize on growth in as many developing and emerging regions as possible.

The global beer industry today is responding to growth in emerging markets with an aggressive acquisition strategy.  How global brands managed the explosion of the craft beer industry, which rose from grassroots support and local brand identity, reflects the power that the largest players in the industry see in using acquisition to expand their market presence.  Rather than competing directly with brands that occupy a smaller market share in an emerging market, large beer distributors are leveraging the power of scale to acquire established smaller brands.  This has proven to be an effective strategy, particularly in the case of the craft beer industry, as it has allowed companies such as AB InBev and Molson Coors Brewing Company to gain a piece of the craft market while avoiding the costly process of researching and developing product lines to meet market demand.  In the coming years, the global beer industry will experience similar consolidation in emerging markets, as large beverage brands seek to establish themselves in the developing world.