Anheuser-Busch InBev NC (Anheuser-Busch) and SABMiller (Miller) are talking about merging, which would created the world's largest brewer.
The talks, confirmed to The Wall Street Journal, are all about America's changing beer tastes and the competition for space in your supermarket's display case. And not just in your supermarket, but in stores around the world.
As the Journal notes, Anheuser-Busch is itself the product of an international merger, teaming Budweiser with Becks and Stella Artois. A successful merger with Miller would add at least 200 other beers to the portfolio, including many European brands.
Both companies said a merger was by no means certain but that both said they are open to exploring the possibility. While joining forces might be seen as going on the offensive in the beer wars, there is no doubt that it is also a defensive move, at least in the U.S.
Rise of craft beers
As we have noted earlier, craft beers have put a dent in sales of America's most iconic brands. A 2014 report by Mintel estimated craft beer sales would total $20 billion for the year, with 23% of survey respondents saying they prefer to drink a craft beer.
The survey also delved into why so many consumers – especially young consumers – are flocking to little known beer brands brewed in or near their local communities. The reasons are similar to why they buy vegetables at farmers markets and frequent restaurants that serve locally sourced food.
Among consumers age 25 to 34, 70% say “the brand of beer you drink says a lot about you.” Sixty-six percent said the style of the beer is also an important defining characteristic.
All about style
"The leading purchase driver among craft beer drinkers is style, pointing to a more discerning consumer base," Beth Bloom, Mintel food and drink analyst, said at the time of the report's release. "Not only do craft drinkers consider themselves knowledgeable and adventurous, but they're eager to share this knowledge.
But American beer drinkers have always tended to support one brand of beer over another and identity, influenced by marketing campaigns, was always a factor. You were either a Budweiser drinker or a Miller drinker. Consumers had firm ideas about why they liked one brand and didn't care for the other.
This is changing with the current demographic and generational shift. For Millennials, beer fealty isn't formed by advertising campaigns, but by the notion they are identifying with a concept – a small scale business that is part of the surrounding community.
Not particularly brand loyal
These consumers may not be brand loyal in the strictest sense, but they enjoy supporting local breweries and sharing in that sense of community that the smaller brewers have instilled – meaning they may move from one craft brand to another.
This creates problems for the traditional breweries that operate on a massive scale. The very efficiency that helps their bottom line is a liability with a segment of the consumer populace that is growing in importance every day.
How do these iconic brands respond? For two very big beer companies, the answer apparently is to get even bigger.