Import After InBud

Take a look at the sales figures for the import beer segment in any issue of Beverage Spectrum for the past five years and you’ll notice a constant: Corona and Heineken lead the category. In that order. Without exception. But the days of easy sailing for those perennial leaders may be over. The merger of Anheuser-Busch and Belgium-based InBev directly connects the world’s largest beer maker to America’s most powerful beer distribution network. How much – and what, exactly – that potent combination will mean to the U.S. import beer segment is up for debate.

The immediate effects of the merger could be minor. The companies already share a distribution alliance that puts a handful of InBev brands (mainly Stella Artois and Beck’s) in U.S. circulation, but that doesn’t mean that the medium and long term effects of the merger won’t change the landscape, and it also doesn’t mean that InBev doesn’t want it to. “The key rationale for this transaction is the combined company’s ability to create a superior brand portfolio and leverage each other’s distribution networks,” said InBev Global External Communications Director Gwendoline Ornigg in an email statement.

The combined company plans to use Budweiser, Beck’s, and Stella Artois as worldwide banner brands, Ornigg said. She added that the company “has tremendous resources at its disposal… and will invest in Anheuser-Busch’s brands as well as its own.” Any investment in InBev’s brands would tap into a U.S. trend that has reached an interesting crossroads this year. After more than ten years of uninterrupted growth, the import beer market has shown a decline in 2008, according to data provided by the Beer Institute.

There’s still time for the segment to eke its way back into the black for the year, but it would have to fight against a sputtering U.S. economy and a sinking dollar value that makes imported beer comparatively more expensive. Though the economic conditions of the moment clearly pose a challenge for the segment, import beer has enjoyed impressive growth for two decades. In 1998 imports made up 5 percent of the American beer market, according to the Beer Institute. By 2007, the segment grew to 14 percent.

Craig Haringer, marketing manager for Washington-based importer Merchant Du Vin, thinks the trend – despite current hiccups – will continue, and a push from the newly-minted beer behemoth could help it along. “In some parts of the country now, it’s hard to find anything other than a light American lager,” Hartinger said. He anticipates that will change when InBev pushes more Leffe, Stella and Beck’s through the A-B distribution system – and he says that’s a good thing. Instead of viewing the merger as a threat to small-scale importers, he expects the influx of new choices to those areas to fuel increased curiosity for new beers. Increased curiosity, Hartinger said, would translate to increased sales for beer importers of all scales, and allow Hartinger and Merchant Du Vin to sell more Samuel Smith and Lindeman’s Lambics. “People want to try new things that make their eyebrows go up,” he said. “That’s a huge driver in the beer revolution.”

Hartinger has a clear vested interest in the import segment growing, but he’s not the only one that sees the industry moving in that direction. Dave Irvin, co-owner of Eagle Distributing in Billing’s Montana, said he thought that the InBev merger presented another symptom of the world getting smaller. “People are going to be more in tune with what’s going on with Europe,” Irvin said. With customers more interested in European beers, Irwin said he’d welcome additional InBev beers, as long as they make sense in his area – and not everything does. As an Anheuser-Busch distributor, he has access to Asian beers Kirin and Tiger, but opts not to carry them. He has no Asian restaurants in his distribution area, he said, and his experience tells him that Asian beers don’t sell outside of that channel. Conversely, Hoegaarden – one of InBev’s Belgian beers – has gained sales in Irvin’s area despite an absence of local marketing support.

On a national scale, InBev watched sales of Stella Artois grow by 15 percent in the first half of 2008 over the same period in 2007. And Irvin’s also seen growth in Heineken, Bud and Bud Light. “It’s all getting bigger,” Irvin said. “I don’t know where it’s coming from.” That growth could have a bit to do with Americans increasingly preferring beer. Gallup reported last month that beer has regained a double-digit lead over wine as America’s intoxicant of choice.

The turnaround followed a downward trend that started in 2001 when wine ate at beer’s share – even briefly becoming America’s favorite alcohol in 2005. Despite beer’s resurgence, Irvin said the grocery coolers he distributes to haven’t changed since they expanded their premium section three to four years ago. The sections encompass both import and craft beers, and can be prone to rapid change. “They watch those numbers real close, because that’s a high dollar inventory over there.” Irvin said. “There’s always a new import to put in or a new micro to put in.” And Chuck Moran, a vice president at Rhode Island distribution house Mclaughlin and Moran, hopes his distribution house will have more imports to offer retailers as a result of the merger. “Consumers are screaming for more selection,” Moran said. While he said he’d welcome additional marketing support for InBev brands as a result of the merger, his retailers would like the merger to not change much. “I think a lot of people are concerned about supply chain changes,” he said.

Moran said he didn’t anticipate any supply chain changes in his market, and felt confident that InBev didn’t buy Anheuser-Busch at a price tag of $52 billion to simply dismantle it. InBev reinforced that sentiment in Moran when they decided in July to retain A-B marketing brass Dave Peacock, Tony Ponturo, Keith Levy and Robert Lachky. Lachky in particular, Moran said, is “a very good supporter of the beer industry.” He added that, even with the team staying on, InBev would likely bring new ideas, and new ideas are “always a positive thing.”

“It’s a world of change that we’re living in and it’s just another one of those changes,” Moran said. “We’re staying tuned.”