Beer, Wine & Spirits

Craft beer under threat from the mega-brewers

Luke Graham, News Assistant
Mega-brewers threaten craft beer
Mega-brewers threaten craft beer

The craft beer sector has become a victim of its own success as the big multinational brewers corporations look to exploit a change in how their customers take their drinks.

In December, Scottish craft beer company BrewDog published a blog post lamenting that several craft beer companies had been sold to or bought out by larger beer corporations in the previous year.

"2015 has been a bad year for craft beer," BrewDog co-founders James Watt and Martin Dickie wrote. "Global beer mega corporations, the ones who destroyed, bastardised and commoditized beer over the last 50 years have been acquiring craft breweries left right and centre."

The blog post was published in response to the sale of Camden Town Brewery to AB InBev, the world's largest brewer.

And Camden Town is unlikely to be the last example of this trend.

"In the U.S., as well as the U.K., there has been an intensification of big brewers acquiring craft players," Jonny Forsyth, global drinks analyst at Mintel, told CNBC via email.

"This has been caused by AB InBev being more aggressive in its craft acquisition strategy, other major brewers deciding to follow AB InBev's lead and some craft brewers looking to make the jump from regional players to global craft icons, but needing support to do so."

The future of craft beer

Sarah Warman, head of marketing at BrewDog, also felt more craft beer players were likely to be bought out.

"Last year, it was quite a tidal wave of craft brewers who ended up selling out," Warman told CNBC in a phone interview. "It is inevitable that that's going to happen some more in 2016.

BrewDog founders James Watt, left, and Martin Dickie at their production facility in Ellon, Scotland.

The increasing attraction of the small craft brewer to the big multinationals is down to the changing tastes of the consumer.

In the U.K., lager sales have dropped by 8 percent over the past 5 years, according to market research by Mintel. But between 2014 and 2015 alone, sales of bitters and ales have grown from 895 million litres in 2014 to 913 million litres in 2015. One in five U.K. consumers told Mintel they would drink any type of craft beer.

"Craft beer is gaining share on the major brands globally," added Forsyth. "Take a look at America and the major beer brands have been in long-term decline since the 1990s, whereas craft beer has continued to grow at a very fast rate."

Inside Anheuser-Busch’s craft beer deals

In 2014, craft beer accounted for 11 percent of volume and 19 percent of value of the total U.S. beer market, according to the figures from the U.S.-based Brewers Association.

The trend of craft beer companies being bought out could also pose a threat to competition in the sector.

"There are certainly threats from the purchase of formerly independent brewers by large, multinational brewers," explained Bart Watson, chief economist for the Brewers Association, to CNBC via email.

"In the U.S., the combination of distributor incentives and small brewery purchases by AB InBev threatens the competitiveness of the middle tier."

Bad beer or good business?

In their blog post, BrewDog said they expected the quality of Camden Town Brewery's products to decline as a result of the acquisition. However, AB In-Bev rejected this criticism.

"Investing in companies like Camden Town Brewery is part of our global strategy to build an exciting portfolio of premium brands that can meet the diverse and changing needs of consumers," a spokesperson told CNBC via email.

"The partnership is about investment in the category and growing the Camden Town Brewery brands and business."

Watson also put the situation in perspective and pointed out other explanations for why craft brewers may decide to sell.

"For some brewery owners, they may reach a point where selling is a natural step, due to age, lack of succession plan, or desire to do something else," he said. "With all these deals, it's easy to forget that 99 percent of independent breweries haven't sold."

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