Outside the tour center of Anheuser-Busch ’s Fort Collins brewery, a team of eight huge clydesdales pull the iconic red wagon around the parking lot. The gold harnesses catch the sunlight and people eagerly snap pictures with their cell phones.
The Budweiser Clydesdales have been a crowd pleaser since 1933, but a lot has changed since then.
Between mergers and acquisitions, including the $103 billion purchase of rival SAB Miller, Anheuser-Busch InBev is a multinational company accounting for about 30 percent of global beer sales.
In the past, beer drinkers only had a handful of options, but now the proliferation of choices has lead to consumers favoring styles over brands. This shift in buying behavior away from brand loyalty is hard to combat for a company like Anheuser-Busch, who have invested millions of dollars in their image.
The world’s biggest brewer has seen its market share slip by 2 percent annually since 2014. To combat the drop, they are investing in ways that smaller brewers can’t.
The company plans to spend $500 million in 2017 alone, according to David Taylor, vice president for supply for Anheuser-Busch.
“It’s all part of a $2 billion investment by 2020, and specific here to Fort Collins we have $28.9 million in this brewery, we have about $1.4 million going to the Barley Research Facility and we’re adding some brewing capability to make a broader variety of beers,” he said.
In a greenhouse on the other side of the clydesdale paddock sit rows and rows of green barley plants, their stalks about waist high. The plants are a key part of Anheuser-Busch’s Barley Research Facility, where Dr. Gary Hanning and his team breed barley plants that are more drought and insect resistant and produce higher yields during the malting process. Since barley is self pollinating, Hanning and his team have to disrupt that process and use pollen from a different plant.
“This is the new seed from that pollination, so once it’s dried down and mature that eventually goes to the field,” Hanning said.
By picking just the right seeds and contracting with farmers, the company can not only keep a tight control on quality, but will also solidify its vertical integration from seed to sip.
“Anytime you control of all aspects of the supply chain you are in a pretty good position,” said
Dr. Jim Francis, director of the beverage business institute at Colorado State University. “The interesting thing is while Anheuser-Busch InBev has lost some market share, and gone down in volume, their net profits have either gone up or held steady over the last three years.”
The continued trend of beer giants and private equity firms buying up the competition could help those craft brewers extend the life of their business in an increasingly crowded marketplace said Francis.
“They would get access to distributors, and shelf space that they wouldn’t otherwise have. Anheuser-Busch InBev is the benchmark for efficiency.”
Consumers are willing to pay more for craft beer, especially if they perceive it to be locally produced. Most of the time very little is changed in the beer itself when it is purchased by a large company, but that presents a difficulty for consumers, said Francis. How do you know which brewery is independently owned by looking at the bottle, and which isn’t?
“The consuming public -- most of them won’t even recognize the changes in the craft beers,” he said. “They will continue to buy them and a lot of them won’t even know that Anheuser-Busch InBev owns the majority share.”
That’s one reason why the Brewers Association, a national organization of craft brewers, advocates for transparency in labelling, according to chief economist Bart Watson.
He said that while 99 percent of the breweries in the U.S. are still small and independent, the overall marketplace is getting more crowded. In 2016 the craft beer industry grew by 6 percent -- that’s actually a low number for the industry.
“We’ve certainly seen a slowdown, as the industry has matured and as we’ve gotten a more competitive marketplace with more brewers entering,” Watson said. “For larger production breweries, like ODell and New Belgium, they are going to face more direct competition in scale retailers and we’ll see that going forward in Colorado as grocery stores and other chain retailers start carrying beer, so the competitive challenges really vary based on what your business model is and what you’re trying to do in the marketplace.”