AB InBev now has 35 craft brands across 30 countries; and the company says being a big player in the craft and specialty world is a necessity for growth. And while it may be the world's largest brewer, AB InBev says it's proving the quality, heritage and individuality of such brands with 161 gold medals last year.
Designed to drive these brands forward, the High End is AB InBev’s business unit of global, specialty and craft brands that spans 22 countries, including the US.
Brands in the portfolio include craft beer acquisitions such as Goose Island, 10 Barrel Brewing, Devils Backbone Brewing, Four Peaks Brewing, Wicked Weed Brewing and Golden Road Brewing. These sit alongside premium big brands such as Stella Artois, Stella Artois Cidre, Leffe and Hoegaarden, and home-grown craft style brand ShockTop.
“We expect the premium segment to grow about five times faster than core and value in the years to come,” says AB InBev. “Our High End Company is well positioned to capitalize on this trend and deliver high growth and profitability.”
‘We’re the number one craft beer brewer in the world!’
With the High End unit responsible for 10% of global revenue and 30% of global revenue growth, AB InBev dubs it the ‘#1 growth engine of the company’.
“As consumer tastes for various styles become more sophisticated, craft and specialty brands become more essential for our growth,” said AB InBev CEO Carlos Brito, speaking in the company’s FY18 earnings call this month.
“And as a result, we have enhanced our portfolio across our markets to ensure we're relevant in this exciting and profitable space.
“We're the number one craft beer brewer in the world with the portfolio more than 35 craft brands across 30 countries to meet the needs of every consumer occasion.
“Examples of the success of our craft business are the global expansion of Goose Island - with brew house or brew pub locations now open in Brazil, Canada, China, Mexico, South Korea and the UK - as well the growth of our specialty portfolio.
“In addition to positive recognition from consumers many of our craft and specialty brands have been widely recognized at beer competitions across the world.
"Our craft and specialty portfolio won 363 awards in 2018 including 161 gold medals at the 15 most prestigious competitions in the world. This is a testament to the quality, heritage and individuality of the brands within our portfolio.”
Combining speed, agility and economies of scale
As an autonomous unit that is part of a giant multinational, the High End unit is able to combine speed and agility with the economies of scale, says Brito.
He emphasises that it’s not just about having good brands: it’s also about having the right brands in the right place and the right time.
“For this reason, we established the High End company, an autonomous business unit with a focus approach to the premium segment.
"The High End company is currently in 22 countries which represents roughly 70% of the premium opportunity worldwide. Within these markets, we focus on the top urban centers and target the most premium points of consumption - such as craft beer bars, nightclubs and fine dining restaurants.
“The High End company is led by senior and experienced owners with specialized structure that combines the agility and speed of being independent with the scale of our core business.
“It has established itself as the number one growth engine of our company, responsible for 10% of our total revenue, about 30% of our revenue growth.
Having identified a ‘significant opportunity’ for premium brands globally, AB InBev says the High End business unit is well-placed to capitalize on the growth trend in this category. The brands within the High End Company command a premium and contribute higher margins that other products.
“In fact, premiumization represents our single biggest opportunity for growth,” continued Brito. “We estimate that the premium segment will reach more than 200 million hectoliters by 2020.
"This segment is expected to grow about five times faster than the core and value segment and - based upon our experience - it's a very profitable segment driving about two times more revenue for every hectoliter sold.
“In summary, the premium segment represents a powerful combination of high growth and high profitability, and we're confident that our diversified portfolio of global craft and specialty brands is best positioned to capture this growth.”
‘We’ve got a craft mindset’
While craft beer has spearheaded the craft movement, craft spirits and other artisan drinks are following in its wake. AB InBev, too, is diversifying its craft and specialty portfolio outside beer.
Last month it announced its acquisition of San Diego’s Cutwater Spirits, a maker of spirits and canned cocktails.
Cutwater – whose portfolio is made up of seven premium mixers, 14 canned cocktails and 16 spirits across whiskey, rum, gin and vodka – started life as an off-shoot of Ballast Point Brewing (before becoming a separate company after Constellation Brands bought the brewery).
Cutwater has a 50,000 square foot production facility in San Diego, with an accompanying bar and restaurant to explore new cocktails. It has experienced double and triple growth since inception and now distributes to 34 states.
“When we enter established categories other than beer, we try to do it from a disruptive angle,” said Brito. “So if we're entering spirits in a more serious way, we don't want to enter trying to do a me-too type brand, big brand, national brand. We're entering with a craft mindset.”
Pictures: getty/master1305; getty/freeskyline; CutwaterSpirits/ABInBev