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Many in the craft beer community have been pointing the finger at Budweiser for being hypocritical for bashing craft brewing while its parent company AB InBev has been snatching up craft breweries to add to its portfolio. However, it is possible for Budweiser to do this without being hypocritical. To understand why Budweiser is not hypocritical one must first understand two variations of brand hierarchy. 

Masterbrand

The first is called master brand, and under this hierarchy one brand is recognized as the controlling property and it also instills a single set of values for all its subordinates. The brands underneath are each their own brand or product but take on the values of the master brand. In most cases all the products have the same target audience.

hypo_apple_masterbrand

An example of this is Apple. We all recognize Apple as a high tech company that puts out quality products. Better yet all the products are sussinct. Your iPhone talks to your iPod and iTunes and all those can integrate with your iMac. They’re all partners in the same mission.

House of Brands

In the house of brands model the umbrella company only owns the subordinate brands, but each brand has its own values and target audience. In most cases the brands are all in the same category.

hypo_abinbev_houseofbrands

This is the case with AB InBev. All its products are the same category; beverages. Some target macro drinkers in the case of Bud Light and Budweiser, but have their own demographics, while others target craft drinkers, each with their own tastes. AB InBev has products in different spaces and compete for state of mind and wallet. In essence, AB InBev has a diversified portfolio much like a stock portfolio.


For instance, consider you have a technology stock portfolio in which you have invested in Google, Apple, and Samsung. Your goal is for that portfolio to have net positive growth. Albeit that Apple and Samsung are competitors and have an inverse relationship. Conceivably if Samsung grows market share Apple losses market share. By having them both in your portfolio you hope that will one grow more than the other losses. All together you still have positive gains. This is what AB InBev has done with its beverages. This is why Budweiser is not hypocritical for poking fun at craft brewing; it doesn’t share the same values.


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budwesier_dissecting

The reason Budweiser can poke fun at craft beer is because it’s target audience views craft beer differently that the craft market and it doesn’t share values with the umbrella company or other brands under that umbrella. The macro market generalize all craft drinkers as beer snobs. The Budweiser ad took advantage of this insight and reinforced its target market’s mindset to build stronger loyalty with its drinkers. AB InBev doesn’t care if its brands poke fun at each other because it has a diverse portfolio, and no matter which side you choose it hopes to win. Or hopes that Budweiser can sustain or grow its market share while its craft breweries also maintain or grow market share, even if they are at different rates.

I’m sorry Mr. Cantwell, that’s what happens when you join a giant.

Boycott

But many of the craft drinkers who have seen the ad stated they will now just outright boycott all AB InBev brands (a claim many of them also made when these craft breweries were acquired in the first place). This likely won’t affect AB InBev either and here is why…

In the USA there are 248 million people over the age of 21. It has been reported that there is an average of 40% self-reported craft beer drinkers (99 million). Let’s assume, for the benefit of the doubt, that all those craft drinkers are avid loyalists and drink nothing else, Therefore the remainder are avid non-craft drinkers (147 million); the non-craft drinkers drink nothing else and never overlap with the craft drinkers. The potential macro market is 1.5 times larger than the whole craft beer market. There are a lot of non-craft drinkers! Think about it, for every person you know, friends and family included, how many are truly avid craft drinkers and drinking nothing but craft?

The truth is that there many uneducated and agnostic drinkers who don’t care which brands are owned by whom, and the many that overlap the macro and craft categories, so the avid craft drinker market is even smaller. Even if all the truly avid craft drinkers successfully stopped purchasing each of the many beers AB InBev owns in the USA, AB InBev will likely still come out on top. And that’s the power that AB InBev has work which such a large and diverse portfolio. For a bleaker look at how aggressive AB InBev towards the craft brewing industry, read this blog.

Despite the growth craft beer has had in the USA, it’s still a relatively small market. In 2013 all craft beer produced only equated to one of AB InBev’s brands, Budweiser, at 16 million barrels. And Budweiser is its second best brand in third place of the top beers drank in the USA behind Bud Light in first and Coors Light in second, which it hopes to overtake.

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Craft beer has along way to go before it overthrows the king of beers and its puppet master, but it’s making great strides. Keep up the good work!

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