March 28, 2011

On ABI, Goose Island, and What You Buy When You Buy a Brand

So the online multiverse is abuzz with the news that Goose Island, one of the original presences in craft beer and a stalwart name in Chicago and the Midwest, will be acquired for $38.8 million by macrobrewing, adjunct-using, superdemonicbeervillain corporation Anheuser-Busch-InBev. Goose Island already had an ABI investment as part of the Craft Brewers Alliance, but now it will be a wholly owned property.

Born Small Town...
then moved to an industrial city in Jersey.
Image courtesy adman Jeff Stevens
Of course, online melee has just begun. Cue the rending of garments, wailing and beating of kegs as craft beer fans nationwide mourn the death of a craft brewery (death, in this case, being what happens when someone gives you 40 million dollars). I'm not going to join that, as you might imagine, because I think it's far more interesting to ask some questions here before we skip to the part where we assume this is bad.

First, though, a disclaimer: I hated AB for a long time. And I hated them for a specific reason; they bought Rolling Rock, moved it to Newark, NJ, and put the town of Latrobe, PA out of business. That type of corporate sociopathy led me to not buy any AB products - including Redhook and other CBA member beers - for many years, until AB was purchased by InBev, at which point I figured they'd gotten their desserts. There may still be some anti-AB bias.

Okay, with that out of the way, the question I want to ask is why ABI did this now, and whether it will work, which means we're really talking about business.

The first issue is easier: ABI sees the landscape, the rising tide of craft beer, and sees themselves on the outside. MillerCoors has done a better job of making money in the craft market than they have, particularly with Blue Moon, but also with investments in Leinenkugel and others.

Honestly, this beer is bad.
Not that ABI hasn't tried. They launched Shock Top as an alternative to Blue Moon, the American Ale, Landshark Lager, and various seasonals (there's a pumpkin and a winter beer that are both pretty terrible with cutesy names I can't remember), all in an attempt to make some money in the craft beer crowd. All of those efforts have basically bombed. So they've decided to start with an existing relationship, an iconic brand already built around a major beer market, and to outright buy the core competency (business term) of flavor-centric "craft" beer (obviously it will not be a "craft brewery" by Association definition).

But will it work? The Beer and Whiskey Brothers seem to think so, based on the idea that casual beer drinkers won't care. I am less certain. Casual beer drinkers have had ample opportunity to go to mass-produced quasi-craft beer, and haven't yet. Is the thought that they needed to be introduced to a better product (like they did with Blue Moon)? Honestly, I am unconvinced that ABI knows how to keep a successful product the same, or market successfully to a craft audience. Their marketing instincts for this in the past have been way off, and I haven't seen any signs that they've corrected the real problem.

A clue that the thinking may not have changed can be found via Jack Curtin's excerpting of the WSJ story linked above:

In addition to buying Goose Island, the company said it plans to increase by double-digit percentages this year its advertising spending on its Shock Top wheat ale, Belgian import Stella Artois, Landshark Lager and other specialty brews.“We really needed to step up our efforts in the high end,” Dave Peacock, president of Anheuser’s U.S. unit, said in an interview Monday.

I don't think that the secret to Landshark Lager's failure was that they didn't market it enough. They did, after all, buy the naming rights to a frikkin stadium. The problem is the beer is not very good. That's a problem potentially rectified in the case of Goose Island, but only if ABI keeps the brewing in good hands.

Brewmaster Greg Hall is stepping down for Brett Porter, formerly of Deschutes (side note: Brett Porter? His real name is two beer terms? Could you ask for a better brewing name?), so there is still great beer knowledge there. But the comments again were about commitment to high end brands, not beer quality. What ABI does well is quality control, usually at the expense of flavor. If they do that here, they'll continue their record of appealing to neither craft beer drinkers or casual drinkers.

courtesy Top Fermented
Of course, it goes without saying that many craft beer drinkers will take this as a personal affront, and never touch Goose Island again. To them, the very money and touch of a major corporation goes against everything they care about in craft beer, and so is toxic. Some will try and justify this by saying the beer tastes different (whether or not it will), and some will just be honest about it. Others will wait and see if, in fact, the beer does change. If it doesn't, or if it (heaven forbid) changes for the better, they'll be stuck with a choice.

If ABI can ramp up production and keep the character of Goose Island relatively intact, how should craft beer drinkers feel? Again, I'm skeptical that they can and will, but if they do, what exactly is the moral gripe with a big business, rather than a mid-size business, making money on beer? What people normally say is that big brewers don't deliver good beer, so they deserve disdain. But what if they successfully brew good beer, distribute it widely, and market it well? How is that different from what Dogfish Head or Sierra Nevada or whoever is trying to be? If what you want is good beer, does it matter that a big brewery paid craft brewer John Hall $40 mil (plus a yearly salary as CEO) to make it? So much of our attachment to craft beers is a personal connection, whether it's where we first had the beer, or that time we met the brewer, or a taste we associate with a community or pub... do those memories survive a takeover intact, or does that brand equity get lost because the money we spend on a bottle ends up in the pockets of shareholders?

From a branding standpoint, ABI has to walk a line they've never shown they can walk. They have to show that they understand the value of real aesthetic quality over standardization and of brand culture over marketing. And if they can pull it off, they're gambling that the same people to whom they must appeal might still not forgive them, just for being them.

2 comments:

  1. Nice take. Most of what I've read today has been pretty reactionary. AB buying GI will be good or bad. It's not that simple and your questions are spot on.

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  2. Thanks Zac. I totally understand emotional reactions, especially for those with ties to GI. But the Halls were in it as a business, and they made a business decision that is totally their right. We'll see if ABI's decision was equally good business.

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