This post was contributed by Tony Chapman and originally appeared on Linkedin. Find him on Twitter @tonychapman.
What will happen to the Mill Street brands now they have been swallowed by InBev/Labatt? My 6 insights and predictions.In my new keynote ‘From Mass to My,’ I talk about a Great Divide. On one side is the 'MASS' marketplace, populated by too many me-too brands. Price becomes the primary tie-breaker for consumer engagement, cost cutting not creative the primary tactic for survival, and the organizations that chase the increasingly promiscuous consumer are often in a race to zero without an airbag. On the other side of the Great Divide, is the ‘MY’ marketplace where products and services succeed by enabling 'my' life and livelihood versus simply providing a suite of benefits. Craft beers, for example, enabled me to tease my adventurous palate, identify with a local brewer, be an 'Indie' while keeping my dollars and jobs in Canada.
So what happens when a ‘Mass’ beer brand acquires a ‘My’ craft brand?[caption id="attachment_11768" align="alignright" width="300"] Tony Chapman's new keynote is titled 'From Mass To My'.[/caption] This week, Labatt, a subsidiary of global InBev Breweries bought Mill Street Breweries for an undisclosed sum. The true masterminds behind this deal and previous acquisitions of other craft breweries like Goose Island, Shocktop, and Magic Hat is 3-G Capital. Their appetite extends beyond Craft as witnessed by the news that they will also be swallowing the third largest beer company in the world, SAB Miller. 3-G Capital has offices in New York City and Rio de Janeiro. Their managing partner Alex Behring has forged an alliance with Warren Buffett, which give them the ability to tap into Berkshire Hathaway’s war chest. In a very short order, 3-G Capital has lapped up Tim Horton’s, Burger King, Heinz and now Kraft Foods. What’s in store for Mill Street Brewers who pride themselves on being Artisan Brewers and creators of sought after craft beers like Mill Street Organic and Tankhouse Ale?
Their spin doctors say that the Artisan Brewmaster will continue to paint the future of Mill Street. It is 'business as usual', and 'our craft recipes will never change.' They tout the benefit of a capital injection that will allow them to invest in more manufacturing to meet growing consumer demand. Well, their parent company 3-G also practices a 'hands-on' Artisan style of management. Their playbook is to cut costs through widespread layoffs and to bring in a culture where they demand more and more for less and less. They focus on one outcome, and that is to be the low-cost operator. When they achieve this position, they have the best of both worlds. They can compete on price while returning substantial profits to their shareholders, the vast majority who live outside of the country that they operate.
They focus on one outcome, and that is to be the low-cost operator. When they achieve this position, they have the best of both worlds.
So here are my six predictions of what we can expect for Mill Street Breweries over the next few years.1) ‘Jump Ship’ - Hardcore craft beer drinkers will jump ship as their identity is attached to buying local and from independent brewers. In the short term, this will take the froth out of Mill Street sales. 2) ‘Defend at any Cost’ - Labatt/InBev will do whatever they can to hold onto to the coveted territory – the tap handles in bars, and the shelf space at retail that Mill Street has earned as an innovative Craft Brewery. However, this approach will come at a price. Mainstream breweries like Labatt often buy their way into bars and retail outlets through discounting, promotions, and lavish perks for the owners of bars, restaurants and retailers. Artisan Brands without deep pockets have had to earn their distribution. Paying to maintain existing Mill Street placement through current Labatt bought deals will cut into their short-term profitability. Mill Street is a non union shop, if their workers demand the same terms as Labatt that to will increase costs.
3) ‘The company that I keep’ - Many of the new Urban restaurant and bar formats define themselves by favouring craft beers and distillers, versus mass brands. They prefer Muskoka versus Moosehead, Steam Whistle over Stella and Beaus over Budweiser. Mill Street now moves from crafted by to owned by and could find themselves on the move out of these hip venues. 4) ‘Grab Territory’ - Labatt’s sales force will take control of the entire Mill Street portfolio and be accountable to expand distribution across the country. InBev might also bring Mill Street Organic and Tankhouse to international markets. Expanded distribution is where they will realize their return on investment. 5. ‘Friend not Foe’ - Mill Street is also in the business of owning Brew Pubs, the theater of many craft beer operations. Their theatre will need a new act as there is no way Labatt/InBev can keep or grow a competitive pub chain given that they depend on restaurants and bars for millions of dollars in profits. My prediction is that they will sell Mill Street Brew Pubs to Cara Foods, who has been on an acquisition spree. Through this deal, Labatt could gain an advantage over their rival Molson Coors and become Cara's preferred vendor. 6. ‘Hop the brand’ - At one time, Alexander Keith’s was the number one draught beer in Canada, Rickards Red owned the ‘red’ category. Globally Guinness owned stout, and Heineken was the dominant Lager. All of these brands, and many more, have traded their enviable and unique position for a portfolio strategy. Instead of doing 'one thing very very well' like Steam Whistle, they have chased short term profits and growth, while risking brand equity, by pumping out line extensions. Some brands have offered up a light format while others have boldly launched flavours and even ciders. My prediction is that given the consumers thirst and appetite for 'organic', you will soon see the Mill Street ‘Organic’ label and font sewn to other Labatt brands. Budweiser Organic – could take its place beside Budweiser Ice, and Bud Lime.
Given the consumers thirst and appetite for 'organic', you will soon see the Mill Street ‘Organic’ label and font sewn to other Labatt brands.