THE GIST
A week after Ohio’s Platform Beer Co. ceased operations and laid off its staff, other craft breweries under the Anheuser-Busch InBev (ABI) umbrella also laid off an unknown number of sales and marketing employees. For a company famous for its cost-reduction measures—and after two straight years of chain retail sales declines for its craft division—the changes signal a strategic move to maximize profitability. And it all comes at a time when craft beer is struggling nationally; overall beer is losing ground to spirits; and even ABI leadership seems more focused on products beyond beer as part of “continued portfolio rebalancing.”
Though ABI has restructured sales and marketing departments within its craft-focused wing multiple times in recent years, a move to further centralize these functions indicates a shift in the parent company’s overall management of its craft breweries, once proclaimed as the "#1 growth engine of the company." It also highlights bigger challenges craft breweries face, even if they have the backing of a multinational conglomerate.
The financial terms of many of ABI’s brewery acquisitions have not been disclosed, but given the figures that have been made public, the total for its 13 brewery purchases, plus those included in its deal for Craft Brewers Alliance, is upwards of $600 million. In 2019, ABI said it had invested an additional $130 million in these breweries over the preceding three years. Now, it seems ABI is retreating slightly from its historic investment in U.S. craft beer while preparing a new advance toward other categories.
In 2022, ABI’s craft portfolio dollar sales in chain retail fell -3.2% versus the year prior.
As was the case for many brands, volume losses were worse, down -7.4% in 2022 are are down -15.6% since an all-time high in 2020.
Beer volume sales overall were down -4.25% and craft volume was down -7.9% last year. All of craft is down nearly identical to ABI craft 2020-2022.
Given that ABI craft sales declined nearly in lockstep with the overall craft beer market, cuts to its craft portfolio could be read as a course correction in line with overall market trends. In a press release paired with the multinational’s March 2 quarterly earnings report, Kona Brewing Co.’s Big Wave Golden Ale was the only craft brewery and brand mentioned by ABI. “Beyond beer” was referenced eight times.
With renewed focus, ABI has put attention, money, and PR efforts behind its spirits-based, ready-to-drink (RTD) cocktail brands Cutwater and NÜTRL, which both have expanded their national footprints and have been featured in Super Bowl ads. Both were mentioned twice in this week’s earnings report.
An ABI spokesperson declined to provide details on the total number of layoffs at the craft breweries, and also declined to provide additional information about restructuring, craft division priorities, and more. However, former employees have shared insights into the extent of job losses:
Staff at breweries including Blue Point Brewery (New York), Devil’s Backbone Brewing Company (Virginia), Golden Road Brewing (California), Karbach Brewing Co. (Texas), and Wicked Weed Brewing (North Carolina) have reportedly been terminated.
Layoffs also included centralized marketing staff at ABI’s New York office who supported craft brands. Two former employees (who asked not to be named because it could jeopardize their severance received from ABI) say these decisions are intended to centralize and streamline sales and marketing functions among the portfolio of breweries.
For workers who lost their jobs as part of the restructuring, a severance plan document obtained by Good Beer Hunting explains how the former ABI staff will receive a lump sum payment “as determined by your age and years of credited service at the time your employment is terminated,” along with other benefit guidelines:
For someone who’s worked at ABI up to four months, they’d receive anywhere from two weeks’ pay (if under 30 years old) up to four months’ pay if they are 61 and up.
Employees who worked for ABI for 40 years or longer can receive a maximum of one year’s pay.
Medical, dental, vision, prescription drug, and mental health coverage for laid-off employees and enrolled dependents continues for six months.
According to a former marketing employee who was laid off last week, ABI leadership was asked by a current employee during a virtual town hall on Feb. 24 the precise number of affected staff to which the executive reportedly declined to give a number.
A written statement provided on behalf of Andy Thomas, president of ABI’s The High End division—which includes craft breweries as well as Michelob Ultra’s Pure line of organic beers and imports such as Stella Artois and Estrella Jalisco—acknowledges the broad set of challenges ABI’s craft brands have experienced.
“Winning in craft remains a key pillar of our strategy to lead and develop the premium segment, but winning means something different in today’s marketplace than it did a few years ago,” Thomas says in a portion of his statement. “Last week, several of our craft brewery partners announced local team updates that will allow them to better address evolving consumer needs and trends in their home markets and beyond.”
For a former commercial employee (ABI’s combined term for sales and marketing functions) at one of ABI’s craft breweries, who was also laid off last week along with a third of that brewery’s sales and marketing team, the terminations confirmed a pervasive suspicion they had that ABI leadership no longer saw the same value they once did in the acquired craft breweries.
“The consensus was like: Craft means nothing to AB,” this former commercial employee says. “We’re not just a cog in a wheel being a craft brand, we’re a cog in a wheel in a cog in a wheel in a cog in a wheel. We don’t move the needle in any way.”
WHY IT MATTERS
The changes ABI is making to how Platform Beer exists in the market are a key indicator of how the company may view success for its craft breweries moving forward. Instead of a singular brewery with its own staff, Platform will continue to exist just as three IPAs (Haze Jude IPA, Odd Future Imperial IPA, and Canalway IPA), presumably brewed at other ABI facilities. Staff restructuring across other breweries is a tangible sign of the value ABI places on big hits—whether regional or national—if these craft breweries expect to receive ABI executives’ resources and attention.
In the early years of its craft acquisitions, ABI’s focus was taking regional breweries national. About a year after closing a deal for Goose Island, ABI took the Chicago brewery nationwide in 2012, led by its IPA; Golden Road followed a similar path via its Mango Cart flavored Wheat Ale. From there, ABI seemed content to develop a bullpen of breweries that performed well in their regions.
When ABI acquired Bend, Oregon’s 10 Barrel Brewing in 2014, then-CEO of craft operations Andy Goeler told Brewbound that the deal “gives us a great footprint in the Pacific Northwest. You get into some of these other markets and notice that the local and regional brands have strength. It is better to do something like this than to build a brand from the outside.”
A former ABI marketing employee says they expect to see other breweries within The High End streamline their lineups as well.
“According to meetings we’ve been in, the craft sector has been declining even since COVID started. … It seems to me like they’re trying to cut as much money as they can, put it into the beers that are doing most successfully and try to grow profits that way,” they said.
ABI executives have said as much, albeit less bluntly. Carrie Shafir, former vice president of marketing for ABI’s craft brewery portfolio, told Brewbound in December that her division’s goals for 2023 include a plan to grow sales for ABI-owned craft brands in top beer styles such as IPA.
While some of The High End’s longer-standing national IPA brands have seen sales decline steadily in recent years, new Double IPA brands have been growing:
Goose Island IPA fell -19% in chain retail sales volume in 2022. Its Beer Hug family saw triple-digit volume sales growth in 2022 after partially debuting in 2021 and receiving a coast-to-coast rollout last year. As of last August, Tropical Beer Hug was the second-largest craft share gainer in convenience stores, behind New Belgium Brewing’s Voodoo Ranger Imperial IPA.
Elysian Brewing’s Space Dust IPA declined -6% during that time while its Full Contact Imperial Hazy IPA performed slightly better (-3.8%).
10 Barrel’s one-time flagship Joe IPA has been discontinued in chain retail while All Ways Down Double IPA, which debuted in late 2021, grew volume sales by triple digits between 2021 and 2022.
“We have 20 brands in our portfolio all across the country in different regions,” Shafir told Brewbound. “As we look to the future, if we’re not focused, it can get messy very quickly, so our strategy for the collective for next year is really mainly focused around leading with style.”
At SAMCOM (Sales and Marketing Communications Meeting), ABI’s annual sales and wholesaler conference which took place in late January, the former commercial employee for one of ABI’s craft breweries said the difference in the physical space allotted to craft breweries compared to other ABI brands was a visual sign of the parent company’s priorities. They say craft breweries each had 10x30-feet booths, while brands like Stella Artois had build-outs 20 times larger with merchandise drops, a tattoo booth, celebrity appearances including Ludacris and Jeremy Allen White, and giveaways.
The disparity is not surprising given the actual value those other ABI brands are earning in chain retail:
In 2022, Cutwater’s portfolio of canned cocktails earned more in dollar sales ($145 million) than any of ABI’s craft breweries. The closest, Elysian Brewing, earned $115 million.
NÜTRL, earning $28.5 million last year, brought in more than a handful of craft brands, including Four Peaks Brewery ($24.6 million), Breckenridge Brewery ($23.4 million), and Devils Backbone Brewing Company ($21.6 million).
Most impressive, both Cutwater and NÜTRL performed this strongly while not having the same kind of distribution and retail access as beer brands because of their spirit base.
“They put their cards on the table,” this former commercial employee says of the SAMCOM displays. But they admit that ABI’s choice to focus company resources on business sectors that are better-performing than craft beer makes sense. “All the trade [publications] are reporting that craft beer is a shrinking category, so there’s a lot of scrambling to recoup that income in some other way. It’s logic, right? We’re just not selling as much beer so obviously there are going to be repercussions from that.”
What is selling are “beyond beer” brands like Cutwater and NÜTRL, which ABI has continued to invest in, as well as sports drink brand Ghost Lifestyle, which has a partnership with ABI—a contrast to the cutbacks at less successful craft breweries. Cutwater, which is the best-selling spirits-based RTD cocktail brand nationally, received a new ad campaign and packaging redesign last month. NÜTRL, a vodka seltzer, signed Saturday Night Live performer Chloe Fineman as a spokesperson.
“There are alternatives to beer now that didn’t exist before. I would imagine—ABI is pretty smart—that they have their finger on something else,” says Annie Johnson, a Seattle-based journalist, national beer judge, and former American Homebrewers Association Homebrewer of the Year. She also worked as the director and brewmaster for PicoBrew, an automated brewing system in which ABI owned a minority stake via its ZX Ventures division, the company’s incubator and venture capital team. “These small craft breweries, not to diminish what they are, but they’re small specks in the overall ABI portfolio—just tiny blips.”
Words by Kate Bernot