Sierra Nevada Brewing Company

As the big get bigger, what do the small get?

The potential acquisition of South African Breweries (SAB) by their larger rival Anheuser Busch Inbev (ABI) has got many commentators gasping for breath: not at the audacity of it – that was reserved for when InBev (as was) took down Anheuser Busch – but rather the implications of the sheer scale. The scale, both of the deal (the fourth biggest corporate takeover) and the ultimate beast it will become (who we shall call ABSAB).

Interestingly, a stock response of commentators is ‘Don’t Panic Mr Mainwaring!’ The deal, as these deals do, will create opportunities for smaller operators. Drinkers, reviled by the deal and the inevitable consolidation / loss of brands in the shake-up, will vote with their wallets and support the little guy. New market niches will open up, too small for a goliath like ABSAB to spot, yet alone exploit. David will win the day! Fleet of footedness, quick decision-making will out!

And there will be some of this. Of course there will. But on balance, it’s a romantic notion and one that, in truth, isn’t borne out by precedent.

The first issue is growth. In most western, mature consumer markets beer is flat-lining or declining. Drinkers are drinking less. This pressure rolls through to licensees: what to stock; how much space they can give to beer and ultimately what brands end up on the bar. What licensees want is a range of guaranteed strong sellers and a ‘something interesting’ selection. ABSAB (Stella, Peroni, Budweiser) can fulfil one side, craft can fulfil the other (in fact, increasingly, ABSAB can fulfil this other side too). In less mature markets, there is underlying growth in beer consumption – in central and South America for example – and that growth is driven by brands. Big brands; famous brands, foreign brands; often American or European: brands that are a status symbol. ABI and SAB are getting together because growth in their core markets is slowing (or has stopped). They’re getting together because in emerging markets it’s about brands. The deal allows more consumers to access their brands in more markets, efficiently and cost effectively. And most consumers won’t react negatively. They won’t even think about it.

GoliathThe second issue is craft. Craft beer, however you define it, is exciting, interesting and inspiring. It’s been brilliant for beer in many markets. But craft beer is, what? At best 10 – 15% of market volume. Most of us, most consumers, simply aren’t in the franchise or drink it infrequently. Most of us, in short, drink the sorts of beers that ABI and SAB make.   Now, clearly there is growth and clearly craft is slowly, steadily impacting consumer perceptions of the market. But if we assume that the basis of the ‘Innovation-Adoption Curve’ is correct, then most of us are fairly unadventurous. We’ll follow. And what will this mean in terms of brands? It won’t mean opportunities for spontaneous fermented wild beers hitting the mainstream. It will mean the likes of Blue Moon, Goose Island, Meantime, Lagunitas, Kona becoming more widely available, and if we’re lucky the larger – independent – craft brewers – Sierra Nevada, Brooklyn, Boston Beer will be available too. But the real opportunity if for the crafty beers under the umbrella of brewers like ABSAB. They offer the rationale of differentiated choice, with the convenience of a single and efficient point of supply.

What ABSAB appreciate is that currently global brewing is over-supplied. There are two responses. One, consolidate to ensure supply over time reduces and is done cost effectively. Two, build brands. This deal does both and will be successful.

For smaller brewers, given that they can’t consolidate to the same level, the real opportunity is the second option. To build brands. Take the UK beer market. There are now 1,700 breweries. The UK is the most breweried-per-head country in the world. Yet the beer market has been declining at about 4% a year since 2005. Per capita consumption of beer is falling, despite the noise of craft. There will be a fall out, even with the UK Government’s small brewer duty relief (perhaps because of it). Now is the time to build brands not supply product. Look at Camden Town, only three years old, but already widely available throughout the capital. Why? Good beers (with broad appeal); tremendous branding. Look at Beavertown. Good beers (with more challenge to them), impactful branding.

No, the opportunities presented by ABSAB getting together are twofold. For consumers, it’s in the truly niche operators, who make more complex, highly differentiated and challenging beer styles that they can supply effectively to the market. For small brewers who don’t, the real opportunity is to build your brand. And the real money is to be made when the likes of ABSAB buy them from you.

David Preston is founder of The Crow Flies, a research, strategy and innovation company that helps discover the direct route to success for brands and businesses.; +44 (0) 1283 295100.


© The Crow Flies, 2015

Tales of Ales and Tails

Tales of Ale and TailsOn a recent trip Stateside, I got a real flavour of one of the retailer’s major dilemmas. The store was a large Publix on the Gulf Coast of Florida – certainly as big as a large UK supermarket. As always, I was spending more time looking for stimulus for work than actually doing the food shopping … and then I turned down the beer aisle.   Now, my figures will be slightly out but close enough to be both defensible and illustrative. In the US, the market has two major brewing players – Anheuser Busch Inbev and Miller Coors who control about 80 – 85% of the market’s supply. And then there are the craft brewers, alliances of craft brewers and speciality importers.

Yes, craft beer is likely to be more profitable on a unit basis than big beer, but to command well over 50% of the space? Commercial craziness, no?

That’s the dilemma for the retailer, particularly if you are mainstream / mid-market. How do you optimise your range and space and how the hell do you decide which brands to back, to underspace, to overspace?

Going back to craft beer (or increasingly snacks, spirits, bread, cheese…) it would be easy to argue both sides. For the big boys, it would go something like this: ‘Hey, you’re crazy. I know there’s all this craft beer hype, but just look at the rate of sale and the market share… and times that by the price we command… you should be overspacing us not underspacing us!’. If you’re a craft brewer, equally, you could say, ‘Consumers are tired and dissatisfied with the same old beer choice. They’re individuals not ‘consumers’ and a craft beer range caters to them, shows that you are a specialist and ….well, look at the profitability’.

There’s no right or wrong here, but there seem to be some common denominators.

How appealing is the category: craft beer is over faced because consumers care; it is increasing in both household penetration, frequency and basket size. Authentic beers, with interesting stories are cutting through with shoppers when all big beers can offer in return are new can sizes or bottle shapes. Essentially, research is showing that when a category can drag shoppers off their habitual shopping trajectory, then it’s worth backing.

Brands count: craft beer in the US isn’t stocked out with hopeless chancers. There are strong emerging brands. Brands that are working either because they are genuinely different (say, Dogfish Head), local (say Cigar City Brewing from Tampa) or frankly growing in fame and appeal (say Sierra Nevada, Stone Brewing, Sam Adams, The Bruery). Over in the UK, with Tesco for one aiming the gun at these long tails, it’s the categories where no brands exist, where own label can do as good as, if not better job than the branded alternative where attention is needed.

Principles matter: many of the craft brands in the US have managed to grow in value off the back of their founding principles, principles which they have stayed true to. Jim Koch of Boston Beer is a divisive character because he unapologetically popularised craft beer by owning the agenda, by being in the face of big beer owners and drinkers. ‘Here is a better choice’ he would say, when not dunking himself in vats of Boston Beer. But equally, Fritz Maytag saved Anchor; Keith Grossman built up Sierra Nevada on the back of kit he beat into shape with old ball hammers and welding kit. All of them wanted to drink better beer, so they did something about it. Brands of conviction, attract.

The competitive space is changing: in Chris Anderson’s book, ‘The Long Tail’*, he talks about how retailing will change because of the impact of the internet. Look at Amazon: online bookshop becomes frankly, anything they can sell that they can store and transport; no stores, no range reviews, no square footage to overly worry about. Want a rare Dutch flower arranging book (yes, Mum, I’m referring to you), they’ll get it. As consumers we understand that that might not be the case for a Sainsbury’s or an Asda or a Tesco – but for how long. Internet retailing allows us not to worry about big brands, the Number 1s and 2s, but any brand that takes our fancy. Until food retailers abandon their mega sheds, any strategy will be a compromise – we’ve got a big range, but…..

Interestingly it seems to open up opportunities at both ends. At the ‘endless choice’ end of retail will be the likes of Amazon; at the other, quite insightfully, will be the focused retailers who recognise that as shoppers our brains can only handle so much choice. Reduce the range, reduce the choice, watch sales grow: take Lidl or Screwfix.

And so it turns out, that was my dilemma. Standing in front of this amazing beer fixture; looking at all the choices, reading labels, thinking ‘Oooh, I’ve never had that..’ but totally unable to make up my mind.

*Chris Anderson, ‘The Long Tail’, Hyperion, 2006

David Preston is founder of The Crow Flies, a research, strategy and innovation company that discovers the direct route to success for categories, companies and brands.; +44 (0) 1283 295100.

Can you risk being purposeless?

Clearing through old personal files chocking up the office, I found an article from December 1998, when I was featured in Marketing magazine as ‘Brand Manager of the Week’. Woo! Woo! It was of those experiences that felt pleasing for the ego, until you realised that it’s just part of the magazine’s content filling strategy. Can’t sell the space for advertising? Put in some filler. That was me. Fortunately, that isn’t the point. On re-reading the piece, I reflected on some of my answers from just over 15 years ago. Answers, which, I’m fairly confident in saying I’d give again today (well some of them, at least).

One question in particular was ‘Which brand do you most admire?’ My answer was a brand that is little known in the UK – Patagonia.   Patagonia is a high-end outdoor brand, sometimes mockingly called Patagucci. When asked the question, I remember not having to think of the answer. I had some Patagonia clothing items that were already years old and looking good. This was/is good kit but more than that. Don't buy This Jacket_fotorWhat appealed to me was that Patagonia had purpose.

Founded by Yvon Chouinard in 1973, Patagonia started as rock climbing business: making hardware: caribinas and pitons – the spikes that you hammer into the rock to secure your rope and maybe save your life if you peel.   Chouinard realised that in enjoying the outdoors he was damaging it. Later, he realised that the cotton in his clothes contained chemicals, like formaldehyde, which were injurious to the health of all concerned, manufacturers and wearers. The conundrum was how to have a business yet give back and be responsible. I’m not sure whether Patagonia have a purpose statement. They declare their purpose in everything they do. In their Ironclad Guarantee where they look to repair your clothes rather than you buying new; in their Common Threads Recycling Programme where you can bring in clothes to the store and they go back to be turned into new Patagonia clothes, a cradle-to-grave clothing philosophy. Chouinard also set up ‘1% for the Planet’ in 2002 – member companies give 1% of their turnover (turnover, note) to environmental causes. He followed this by setting up the whimsically named but seriously intended World Trout Initiative in 2005 – to save endangered fish species (he’s a mad keen fly fisher).   These are just a few of the proof points that mark Patagonia out as a purposed company.

I would argue it’s the most important think your brand or your company should have. It’s not some fashionable and fancy fly-by-night initiative. It’s essential. It makes decision making easier; it makes alignment easier; it promotes transparency; it reduces the reliance on chocolate teapot initiatives like employee opinion surveys. What’s central to purposed companies is values – values that translate into a commercial orientation.

Ken Grossman_fotorKen Grossman was a normal young adult, searching for what he wanted to do with his life who became frustrated at the homogeneity and blandness of commercially brewed American beer in the 1970s and 80s. Building a brewery from scrap components, initially in a garage, then a small industrial unit, he held the flame of brewing quality beer sacrosanct. His would be all malt beers (large scale brewers replaced malt with cheaper ‘adjuncts’ like rice or corn syrup); use only whole cone hops (not oils or pellets) – and lots of them and time, to mature the beer to full condition. He started Sierra Nevada Brewing Company with these product values and they remain true today: even though 30 years on, his company is one of the largest craft brewers in the U.S.A

And Howard Schultz’s account of the Starbucks turnaround is a fascinating story too. Starbucks has its own fair share of dissenters, yet aligning behind a purpose was at the heart of the turnaround. “To become an enduring, great company with one of the most recognised and respected brands in the world, known for inspiring and nurturing the human spirit”. You can argue that this is a bit of corporate speak: but the plans below it aren’t: be the undisputed authority on coffee; ignite the emotional attachment with our customers; be a leader in ethical sourcing and environmental impact.   The purpose is the map that asks: is this activity right? Are we behaving in the right way? Should we do this or that?

If you’re not a company founder with direct control over the business, getting to a purpose you can all agree on, will all act on, won’t be easy. Yet the rewards are worth fighting for: alignment; faster decision making; attractiveness as an employer; employee inspiration. Whatever your business or organisation, whatever its size, in this age of transparency, getting a clear purpose isn’t a nice to do, it’s critical.

IMG_1067David Preston is founder of The Crow Flies, a research, strategy and innovation company that finds the direct route to success for categories and brands, including company and brand purposing. To learn more, wing over an e mail to or call on +44 (0) 7885 408367.   You can follow The Crow Flies on Linked In (, on Facebook ( Twitter, caw us at @crowflieshigh. Or just send a well-purposed carrier pigeon.   © The Crow Flies, 2014