When the opportunity to buy the Schlitz distributorship was first presented to me, I immediately started with future sales projections. This was in 1980, and while the brand was declining, its market share was still around 40%. My original projects included sales that first had growth, than if they went flat and finally, I did what I considered was a worst case scenario, to lose half the current volume.
I had also targeted several of the smaller distributors that I was interested in purchasing. At that time, there were nine separate companies selling beer in my market. What I did not project or anticipate was that within two years, the Jos. Schlitz Brewing Co. would sell out to the Stroh’s Brewing Co. At first glance, it gave all the Schlitz wholesalers hope that the future was going to be bright. So much for that.
Within two years, it became obvious that this combination of Stroh/Schlitz was not working and many longtime Schlitz distributors began selling out. The Dallas distributor at the time, a longtime friend of mine, sold to Coors because he had lost all faith in Stroh senior management and saw no future. He sold while his business still had excellent volume and high value.
Over the decades the industry has seen and experienced the Schlitz/Stroh model many times. National breweries including Pabst, Falstaff, and Hamm’s all sold and combined, as did regional breweries such as Olympia, Rainer, Lone Star, Pearl, Jax, and Schaffer, to name a few. The death of many of these breweries was self-inflicted and their volume became the prey of AB, Miller, and Coors. Death was imminent, so they all sold while some value still existed.
At this past week’s Craft Beer Convention in Denver, projections of a total craft share of 20% in six years would mean volume of 37 million bbls. Given sales trends, margin growth, the number of current, new and projected breweries; and then throw in the overall decline of total beer volume, add in the import share of 14%, that means over one third of the industry volume is high end. Consider that there are also over 1,800 new breweries in planning.
ABI and MC have lost over 17 million bbls in volume since 2008 when InBev bought AB. Both companies’ premium and lights continue to lose volume, while both companies have aggressively added line extensions, flavors, ciders, and other products in an effort to off-set these volume losses. So far, it has not worked.
So the question becomes, will history repeat itself as it appears it will? If the crafts continue to grow at their current rate, and given what ABI has done in the past, expect ABI to aggressive pursue buying SABMiller. It is in ABI’s DNA. The US beer industry is close to 50% of the world’s GP for beer, and while both ABI and SABMiller continue to develop China, Africa, and South America the money is here.
Attendance at this year’s recent BA’s Craft Brewers Conference was close to 9,000 people! 9,000!! There are, and have been many reasons that this craft craze has grown, but regardless, the industry has changed and will continue to change. History will repeat itself, we just do not know who will buy whom, but we can be confident in knowing it is only a matter of time. For both ABI and SABMiller that the time is coming…
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