Blog of an aspiring foodie

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 massive industrial operations.  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 industrial behemoth 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 major repercussions 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 a separate 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 think 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 the logistics 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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4 Responses to “Why can’t the big brewers make good beer?”

  1. I worked in the biofuels business for a while, and met some brewers who had moved over from large breweries into the biofuels business. It’s actually quite simple why large breweries don’t make good beer – they’re not trying to make good beer. It really is an insignificant consideration. The *only* consideration is to get as high a percentage of the sugar (from corn or barley) converted into ethanol as possible in as short a period of time as possible. They often overshoot (i.e. they make a beer at 4% ethanol, intending to sell a 2.6% beer) and just dilute back with water.

    Taste is simply not a consideration for them. Their profits come from making as cheap a product as possible, and marketing the crap out of it so they can sell it for as much as possible.

  2. ytee said

    Fundamentally I think you’re right, and this puts a much simpler point on my overall premise – but I keep thinking about things like AC Golden and decisions like AB-Inbev’s bailout of Goose Island. I actually think that in the boardroom they want to make good beer in order to crack off a piece of the only segment of the market that is growing. I just think that they are unable to translate that to the shop floor because they cannot adequately innovate and modify their longstanding culture that is oriented only at exceptional operations – which as you point out is really just making ethanol cheaply and quickly. Unless they change that culture they won’t be successful at getting there.

  3. I’m a tad more cynical than that. I think large brewers buy high-quality labels for the brand value. Truth of the matter is most consumers can’t tell the difference between a good beer and a bad one. Buying smaller labels is just a marketing move, not a move to import quality into their operations. They have the resources, and could easily acquire the talent. I think the simplest hypothesis is that they’re simply not interested in quality beer, it’s still too much of a niche market.

  4. Victoria said

    I think you are definitely right. Most of all the good beers, not many, that I’ve had had been either home brewed by someone that I know or local breweries. The market will settle for quantity and not quality- that is for certain with everything that we consume these days.

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