Another round for everyone!
It is the undisputed queen in gatherings with friends and in the much-desired “After Office” around the world. With its characteristic bitterness and freshness, it has made its way over the years to position itself as the most consumed alcoholic beverage in the world. As many of you can imagine, we are talking about beer. Although its origins are not entirely clear, evidence has been discovered showing that around the year 4000 BC, some peoples were already fermenting barley to obtain a thicker and more intense beverage than the one we consume today, but it was not until the 13th century that the term “Beer” was born and a more standardized process for its production was invented.
Moving the clock forward a few centuries, we find that beer is one of the most consumed beverages in the world, surpassed only by water, coffee and tea. The expansion of agriculture, coupled with the advance in industrial processes and methods of packaging and preservation, was the perfect combination to create one of the world’s most profitable industries. The ranking of highest annual consumption is headed by the Czech Republic, Spain and Germany, countries where consumption is estimated at more than 130 litres per person per year. But the massive adoption of beer not only benefits the companies that manufacture the product since there are also typical celebrations around it, such as Oktoberfest in Germany and St. Patrick’s Day in Ireland, which generate a large-scale influx of tourists.
One of the branches of this industry that has grown exponentially in the last 10 years, is the manufacture and marketing of craft beer. In Argentina, for example, it is estimated that there are around 800 craft breweries, which produce an average of 70 million litres per year and directly and indirectly employ 50 thousand people. The birth of most of these breweries has a common denominator: A group of friends join together out of simple curiosity or hobby. So one day, they decide to investigate and embark on the brewing process, which requires knowledge, but above all, patience. In many cases, in the same home of one of them, they decide to create a mini factory and start experimenting. And that is perhaps the key: experimentation. Breaking the established moulds of the industry and leaving the standard parameters, they decide to go further and try different fermentation methods, different alcoholic grades, and even add ingredients such as honey, flowers and fruits.
Perhaps this new tendency of consumers to flee from the monotonous industrial processes, added to the fresh air provided by the new varieties of beers, was what made small projects become big companies in a few years. Some of these projects stopped being “local” producers to position themselves head to head with multinational brands on supermarket shelves and even made agreements with pubs to have the exclusivity of both the sale of beer and the aesthetics and decoration of the place, as Heiniken (BATS EU: HEIA) has been doing with numerous European pubs. And this is perhaps where one of the great problems of this branch of the industry arises, which is to offer a craft product on a large scale without succumbing to the temptation to industrialize the process to save time, and costs and obtain a higher profit in exchange for jeopardizing its reputation.
So while some companies are struggling with the transition of becoming large companies without betraying their roots, industry giants such as Belgium’s Anheuser-Busch InBev (BATS EU: ABI) are forced to innovate in order not to lose ground in an increasingly competitive and fragmented market and use their resources to absorb an ever larger portion of the industry. If we take the case of Anheuser-Busch InBev (BATS EU: ABI), we find that it currently controls approximately 25% of the world beer industry, owning within its conglomerate top brands such as Budweiser, Corona, Stella Artois, Águila, Brahma, and Quilmes, among others, and even sold the rights to produce Corona beer in the US to another giant such as Constellation Brands Inc. (NYSE: STZ), to secure a key share in the North American market.
Thus, in just six years, this conglomerate used an aggressive positioning strategy to become the leader in a large part of the world, taking advantage of the favourable wind generated by craft breweries and using the prestige of some of the brands in its possession, such as Quilmes, it took the risk of experimenting with new processes and launching products such as “Quilmes below zero” or “Quilmes double malt,” and thus tempting the demanding consumer once again.
Looking to the future, the brewing industry is really promising. In Argentina, for example, it was the mass consumption industry with the highest level of investment in 2020 and 2021. The great competition generated by the new players in the industry has resulted in a variety of products that even tempt cocktail consumers, who were reluctant to drink beer because they could not tolerate its classic bitterness. But ingenuity and experimentation managed to capture this consumer niche, creating fruity and floral varieties that are the delight of those who prefer sweet drinks. In this way, we can see how the current beer industry was not satisfied with its “natural” growth, as it had been doing for decades, but decided to kick the board to reposition the pieces and include new players, both on the consumer and producer side, and when a demanding consumer finds a supplier that understands and solves his questions, success is assured.