No Subject

Let's review some of the moves in 1997 that suggests this direction: 

Anheuser-Busch is probably the most important harbinger to watch from a 
marketing perspective. In 1996 we predicted many of the moves we've seen come 
to fruition in 1997. First, the emergence of so-called regional brands: Zeigen Bock 
in Texas and Pacific Ridge in California, seek to emulate and usurp the success of 
regional specialty brands such as Shiner Bock and Sierra Nevada respectively. In 
the latter, the most repugnant development was the appropriation of the craft-slogan 
with "Think Globally, Drink Locally." The packaging and advertising of these 
brands deceptively try to lead uninformed consumers to the conclusion that these 
are local/regional craft-beers. Add to the A-B portfolio "Alliance" brands such as 
Redhook, Widmer and Atlanta Brewing and the portfolio begins to assimilate real 
craft roots and include the broad range of beer profiles, from ESBs to Stouts, 
Winter beers to "The" American Hefeweizen. A-B complements the "p-regionals 
(pseudo-regionals)" and craft brands with Red Wolf, "American Originals" and 
Michelob brand products that fill nearly every style profile, albeit with less 
charactered versions than we find in the craft market. A-B chose to exercise stock 
options with Grupo Modelo earning them over half of the hottest growth market in 
the import category with leading Mexican brands such as Corona and Modelo. 
Look to see more of this with other Imports. A final wrinkle to A-B's portfolio in 
1997 came with their investment into Ambrew, a company setting up 
microbreweries in several countries such as Mexico, Ireland, China and more. This 
puts A-B (further) squarely in the import market as well. 

A-B's richly developed portfolio coincides with a push to put a strangle-hold in the 
distribution channel. Their 100% share of mind campaign calls for distributors 
carrying A-B products to focus exclusively on A-B products and provides 
incentives for distributors to kill-off all other brands they carry. The expanded 
portfolio responds to distributor's concerns about losing opportunities based on 
flavor profile or import brands. The portfolio becomes a club that cudgels 
distributors with an answer to nearly any category. Portfolio marketing in the hands 
of the market share war strategists at A-B is a real threat to the craft and specialty 
markets because of the stated and implied intent of the giant. A-B seeks to own 
every segment it enters. And they can bring to bear marketing sophistication and 
resources, legislative clout, distribution channel and retail space influence, 
consumer confusion as well as supplier (hops, grains and -- in the case of Pete's -- 
even advertising agencies!) attrition that this industry and few others have ever 
seen. 

Some small brewers are fighting back with anti-competition lawsuits and we wish 
them with limited optimism the best success -- we all know that A-B's tactics have 
been predatory and anti-competitive; we all know that the fight is fixed (as Leonard 
Cohen sings in his song "Everybody Knows"); we all know that there's no such 
thing as a level-playing field and that proving any of this is damn near impossible. 
Still, if we want to play with our illusion of a free market, something's going to 
have to give. That's why we wish them success.

To compete in this climate through marketing means as well as to address 
distribution "noise" by so many brands, we've seen companies beginning to bring 
together portfolios. As you can expect from the brewing industry, creativity 
abounds in how portfolios are developed -- from distributions agreements to 
mergers, acquisitions and start-ups. Some examples include: 

Gambrinus, with Shiner, Moosehead and Corona: for all intensive purposes in the 
world marketplace, local brands gaining from the strength of their regional badges.  

US Beverage, former Seagram's execs. managing 30-state distribution for strong 
import and specialty brands such as Rogue, Ipswitch, Staropramen and Tennents.

Labatt USA with Labatt Blue, Boddington's, Leffe, Hoegarden, Dos Equis, 
Tecate, Sol, Morretti and more. This year they also announced the addition of 
European uber-brands Carlsberg and Lowenbrau. Expect to hear much more about 
this in the coming year.

The UB Group is an interesting saga, and could become a strong portfolio if not 
overshadowed by chairman Vijay Mallya's infatuation with his flagship Indian 
beer, King Fisher. In 1997 UB Group signed letters of intent with Nor'Wester, 
Mendocino and Humboldt Brewing Companies. If you've followed this story you 
know that Nor'Wester ran out of time and business and it's questionable if the 
Humboldt deal will go through. Currently, Mendocino is the only independent 
craft-brand in the portfolio, but the possibilities of this one ignited the imagination -
- venerable craft brands introducing each other's products into their local markets 
through a united network. 

Ambrew, mentioned above in the A-B portfolio, may be one of the more interesting 
to watch in 1998 (if they can keep investors patient while they continue an 
enormous investment burn-rate) as they build their portfolio by building 
microbrewery brands in different countries: in 1997 their South China and UK 
beers were joined by "Azteca" brewed in Mexico. 

Vanberg & DeWulf have taken an innovative approach to building their Belgian 
beer portfolio by adding three Belgian-style beers from their own brewery in 
Cooperstown, Brewery Ommegang.

Left-Hand/Tabernash Brewing Companies merger is one to watch. If you blinked 
you might have missed this news release last month, but it represents some 
interesting possibilities. Two outstanding brewers -- one specializing in German-
style lagers and the other in charactered ales -- in one market unite their combined 
resources to offer an excellent portfolio with marketing efficiencies and strength.

Out of necessity we believe that 1998 may become the year of the microbrewing 
portfolio cooperatives. Here's how it works: through brewing, distribution, 
licensing and/or marketing agreements brands of similar quality and philosophy 
begin to collaborate with others in strategic geographic regions. No one has worked 
harder and developed the mindshare and education of their local distribution 
network than the regional craft brewer. For lack of advertising and marketing 
budgets, craft brewers have been developing one-to-one relationships, still the 
strongest for influencing decisions at the distribution and retail levels. By offering 
more brands to that hard-earned network, each regional player becomes stronger 
through increased sales/cash flow.

That's what we see in our dusty old crystal ball for the industry in 1998. Yes, more 
breweries will open at a slower rate than previous years. And the market will 
continue to expand, but more slowly per brewer because of the influences 
discussed above. For our money, the most interesting story to watch in '98 for our 
money will be the strategies developed to address the maturing market.

Give us your thoughts online at:

        http://www.probrewer.com/cgibin/probrewer/message.cgi

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