As you say Paul, “Their product actually costs more”. It also costs more to make per unit volume, thus the profit margins are smaller. This probably doesn’t fit the big boys business model. If the big guys could live with smaller margins, they could produce a product that competes favorably with the “craft” industry more efficiently due to economies of scale. A lot of times in industry a company will buy a smaller company and discontinue products of the smaller company because the margins on these products don’t fit the profit strategy of the bigger company. I have seen this many times. So if the big guys business model demands high profit margins, “craft” style beers just don’t fit.
What are the defining characteristics of the mega beer business plan? Intensive distribution (sell it everywhere), low margin, lots of mass media ads, high volume. Their business models demands small margins, not big margins.
If Bud Light was a high-margin product, they’d be bigger than Apple.
From the numbers I’ve seen, I think it’s actually the opposite. Granted, the big boys can negotiate for lower costs, and they use a little less in raw materials, but they’re also selling product at half to two-thirds what small brewers are.
This is a great read if you want some insight into how AB was run before and after InBevs bid. Some fascinating stuff. What a train wreck that family ended up being in the end.
And evidently I forgot to add a link. In any event “Bitter Brew” by William Knoedelseder
Yes, but the product probably costs 20% of what the craft product costs to make. A 4.5% ABV beer where the production efficiency is in the high 90% range. Believe me, at half the price, their margins are still higher than the craft brewers.
I don’t agree that they are using these to try to compete with craft beer. I think they are mostly producing these beers for the fringe of their huge following of BMC drinkers who’s thirsts are getting curious - but who still want something similar to BMC.
If we’re just talking about ingredient costs, and about Budweiser versus, say, Ruination, sure. Budweiser versus Boston Lager, no way.
And ingredients are just a tiny fraction of what it costs to produce beer. Utilities, packaging, taxes, insurance, labor, transportation, marketing, R&D… Economies of scale can bring you small gains in some areas, but not a factor of five across the board.
or maybe it is just to keep their brewmasters interested
Holy crap, it almost sounds like Sean knows how the beer industry works! I wonder why 
Some interesting tidbits.
Craft Beer makes a significant amount more profit than the BMC’s “on premise”.
Now the brewery’s margins can be another story depending on the efficiency of the brewhouse, ergonomics, utility cost, taxes, etc…etc…
Depends … let’s talk about it in 5 years and see how well Bud Black Crown does… BTW, anyone remember Bud American Pale Ale?
I run a bar here in Hawaii and I carry about 15 beers on tap and about 80 different types of bottled beer. My biggest sellers are the Bud products. I carry a great assortment of craft beers and they have a generous amout of sales but most of my sales are from Budwieser and Miller products. As long as there’s a demand for it Budweiser will continue to make, what in my opinion, are the worst tasting beers I’ve ever had. But I’m a craft beer guy, that’s expected. However, I have to carry what my customers like. Aloha!
Products come and go. Let’s see in 5 years if AB-inBev is still one of the top three beer companies in the US.
[quote]I think, if you think Bud doesn’t “get it,” then you don’t really “get” what Bud is doing.
[/quote]
Most of this country, and the world now, I guess, is buying the American Light Lager.
I just came back from family vacation at Disney. I visited the Miller Ale House, (actually, I just read the beer menu posted on the outside, and decided it wasn’t worth my time), The Miller (as in Miller-Coors or whatever the conglomerate is called these days) Ale House had one or two ales available, one being Guinness, one “craft” beer in Sam Adams Boston Lager, and 64 varieties of American Lager (including imports)…
The place was packed…and no one seemed to be holding their nose and being forced to drink it. The truth of the matter is, I just don’t get it.
I didn’t make it downtown, but I couldn’t find a decent local craft beer in the liquor stores, either. I have nothing good to say about Disney’s brewpub, either.
They (Bud, MC, Disney) are just doing what big business does, make more money. If they make a profit on something, they sell it and market it…they care not if it is what I like…as long as someone does. They may be alarmed at the trend of craft beer vs. their own products, but they sure aren’t worried about its market share.
And lets see how much market share they continue to lose. I’m sure they will be a huge maket force in 5 years. In 10 even. 15? 20???
Augustus Busch, founder of Budweiser, refused to drink his own beer. He called it “That slop”, or in his accented english, “Dot Shlop”… He considered it base, and only good for the lower class. He started an aggressive marketing campaign, and succeeded. As most people simply follow what advertisement tells them is good, they believe. When it comes to successfully selling beer to the masses, Bud gets it. When it comes to pleasing the minority of beer drinkers who buck the system and demand something with real flavor, they don’t. I refuse to buy any Bud, Miller, or Coors product simply because they mass produce, and mass market, for the sole purpose of mass consumption.
A huge section of “craft beer culture” has its head up its ass. Sure, you and everyone you know loves craft beer and can’t fathom drinking anything else, but you and your friends (and me and my friends) are not everyone in the world. And, newsflash, your opinion isn’t the “right” one, that’s just like, your opinion, man.
Craft beer is doing a terrible job bringing in different kinds of people. The majority of craft beer drinkers are white men with lots of discretionary income. A few breweries are trying to bring in (white) women (also with lots of discretionary income). But I don’t see any efforts to bring in anyone else. I’m pretty sure there are more black guys in the NHL than in craft beer.
So, with craft beer being mostly white men, many of whom are in the 50+ age range, I don’t see how craft beer can keep growing over the next 20 years.
The BMC brewers do the same thing pretty much every other successful company in this country has done for the past 100 years or so: market a product that can be produced cheaply, consistently and uniformly, in mass quantities and sold to the public as the best out there. Look at any consumer product and find where the top selling companies produce the best products. You might find a few but they are the exception to the rule. That is especially true with food products. If you’re not sure that’s the case, look in your fridge and pantry (and trash) and see how many large-brand products you carry. Ok, you might buy a lot of store brand (usually made by one of the larger named product producers) or small brand stuff but your friends, family and neighbors probably are not the same way.
Industrial lager is a product to be marketed like all these other products. They produce a product that you never have to worry about opening and getting a bad batch or an imperfect batch. They can sell that uniform, clean product all over the world based on the idea you are going to be cooler, sexier, have a better time, etc. if you consume it. People have been drinking that beer for generations. There are familial attachments to brands. Memories. Histories, even. People like myself drank it through college. If those products fall off it will be because new generations are exposed to a superior product and choose to defy the advertising around them. Will everybody do it? Probably not. As long as Calvin pisses on the logo of various car brands, people will keep buying up what advertising tells them to.
My employee drinks Bud Light, not because of the ads, but because he likes Bud Light. I share craft and homebrewed beer with him quite often, but he prefers the flavor of Bud Light, only drinking half a glass of whatever I offer before going back to his brand. His friend and neighbor drinks Miller Lite, again because he likes Miller Lite. My employee hates the flavor of Miller Lite so much that he will bring his own beer when visiting his neighbor and I’m sure the reverse is true. Neither of these guys has been duped by advertising into drinking their particular favorite. They just like the beer.
So like, I’m an idiot I guess (or at least it is assumed so ). I think I understand the overall strategy of big companies who sell mass produced products and their marketing strategies. What I am trying to figure out is this: If overall beer consumption in the US is lagging but craft beer consumption is growing, why does Bud (or Miller or Coors) not just come out with a beer that pleases craft beer drinkers?
And, FWIW, I am in the industry, Nate, and I am constantly surprised at how many people are turning to craft beer. Stereotypes aside, I know many people who 5 or 6 years ago had never tried anything more exciting than an Amber Bock and they are now buying craft beer. Sure, they may still have their Bud Light in the fridge, but they are also discovering (and more importantly BUYING ) local and regional craft beer and choosing it over BMC.
I actually thought the Bud American Ale was a fairly decent beer but that it was NOT marketed well at all. Perhaps if they had thrown their guns at selling that beer they could have taken away some market share from Sam Adams and Sierra Nevada.