When you propose marriage you aren’t supposed to look desperate. But that seems to be the stance at Anheuser-Busch InBev, which just got jilted after its 3rd offer to buy SABMiller in less than a month.
The numbers are ridiculous: $104 Billion to “buy” (a.k.a., merge) a structural basket case that is “big brewing”. Huge dollar mergers & acquisitions, followed by massive cost cutting, and then gi-normous fees for the consultants, bankers and executive parachute artists. This is what passes for “fixing” businesses that are being out-competed, fair and square.
The healthier the beer business gets, the worse the big brewers do. Why is this?
Simple answer: Craft beers taste better and you’re willing to pay for them.
Instead of riding the value curve, the big brewers tried to capitalize on craft beer pricing to harvest margin as their consumption and market shares drifted downward. What used to be relatively cheap (24 pack cases of canned lagers), doesn’t look that way anymore. A few more bucks for a couple 6’s of the good stuff and who wants 24 cans of plain vanilla suds?
So all the big guys seem able to do is fight a massive rear guard action of merge and cut. They refuse to lower prices and force consumer choice or spur consumption. They can’t seem to stick with and grow new offerings. Their craft-like efforts tend to fall flat because of a lack of meaningful differentiation and local flavor.
What to do?
Rather than waste cash on mergers and ruin balance sheets with restructuring games, do the hard work! Cut prices and own the value message on core offerings. Pick credible innovations (e.g., fruit infused) and support them consistently. Do craft offerings but win on value … understand that you can’t “out local” the local guys.
As for competition, don’t simply try to beat out craft beers. Instead, look for ways to co-opt them. Share brewing capacities and distribution channels. Co-market, especially at major events and sports venues. Let the craft guys shine in the “great but expensive” department while you own the “good and inexpensive” territory.
The choices are not hard. The execution, however, is mighty difficult!
It requires “Big Brew” to accept the changed environment in which they find themselves. It also requires that they adjust their ambitions in ways that depart starkly from how they have traditionally conceived of themselves and their brands. In other words, they have to redefine what it means to be a leader.