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Archive for February, 2012

Why can’t the big brewers make good beer?

Posted by beer_chris on 12-February-2012

It’s been a while since I posted a single word to this space. Most of my thoughts and research projects that used to turn into blog posts get vented out on Twitter instead. However, the answer to the question in the title deserves more than a series of 140 character ramblings that disappear into the ether of the Interwebs.

The basic premise of my question is this:

Big brewers – and by big I really mean AB-Inbev, SABMiller and Molson Coors – seem unable to make good beer. From time to time one of them may surprise with a brand success, but it quickly gets marginalized into the overall ‘portfolio’ or morphed into a meaningless brand that consumers seek out for the name instead of the contents of the package. There seems to be no reason for this. Good beer, in my experience, is made by skilled brewers and taken to market by distributors with a wide reach and a solid understanding of a given territory. The big brewers have no end to these resources. They also have large staffs of saavy marketing professionals who can do an excellent job of developing brand strategies and getting a product’s story to consumers.

These seem like huge advantages. So why can’t they do it?

It seems to me it comes down to one major factor: Large firms struggle to encourage innovation within their corporate culture.

These firms are massiveĀ industrialĀ operations. Ā Encouraging innovation can be counter-intuitive to the things that have made the company historically successful, and so it is really a challenging thing to do. This concept – striking the balance between encouraging innovation and maintaining exceptional operations – stretches well beyond the brewing industry. It makes me think about a GE commercial from a few years ago featuring an elephant dancing in the jungle. The implied message of that image is that an industrialĀ behemothĀ like GE was still agile enough to innovate. It also showed a recognition that innovation was the real engine of long term growth.

All this B-school talk aside I think this has majorĀ repercussionsĀ in an industry long defined by brutal fights over percentage point moves in the sales of well-marketed but tasteless products. Developing and successfully selling a product that is expensive to make and will never – ever- be as big as the big brands is simply antithetical to the culture of these organization. As we like to say at the big company I work at, ‘You can ask the elephant to dance but just don’t try to polka.’

In order to encourage innovation and independent thinking, firms of all types will sometimes setup largely autonomous subsidiaries with a distinct mission that may vary from the larger corporate parent. Some of the big brewing firms have tried to build independent units like this. MolsonCoors has arguably been the most successful with it, harvesting the Blue Moon brand from The Sandlot microbrewery at Coors Field, and brewing some tasty products (and selling them that way) out of their independent AC Golden brewery. AB-Inbev and SABMiller have been largely unsuccessful with this concept, with the 2008 spinoff of Michelob into aĀ separateĀ company stumbling in the shadow of sister-macro product Ultra, and Miller not really trying – although the push of Leinenkugel nationally may have been an attempt in this direction.

The trouble has been that the products seem to suffer from integration into the larger promotional machinery of the firm. What gets marketed as ‘craft’ by the larger entities usually has been made with shortcuts which impacts quality and get’s marketed like the other brands, i.e. focusing more on the label instead of the contents of the container.

How much great beer is coming out of the pilot breweries at these behemoth organizations? We may never know – but I feel confident that the people working at these firms are creating it and it’s just never getting sold.

I thinkĀ there are other dynamics that impact whether a large brewer could successfully market a product based on quality. Distributor partnerships are critical. These influential regional partners seem likely to be optimized for theĀ logisticsĀ of managing the massive volume big brands, and so it seems natural they would push hard against fragmenting that into a set of smaller niche ‘good’ beer that doesn’t fit that mold. I also think consumers would have a hard time accepting a ‘good’ product from the large firms – a lot of bad beer has been pushed on them for a long time, and a not small percentage are resentful of big company products in the base case. Those barriers are real.

In the end I think it’s all about building a culture of innovation and integrating what comes of it into the top level strategies of the organization. If these firms keep trying to sell good beer using the tools that sell bad beer, I do not think they will be successful.

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