{"id":29985,"date":"2018-11-12T21:45:56","date_gmt":"2018-11-13T02:45:56","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/dealing-with-changing-consumer-preferences-in-traditional-big-beer-anheuser-busch-inbevs-foray-into-innovation-and-disruption\/"},"modified":"2018-11-12T21:46:48","modified_gmt":"2018-11-13T02:46:48","slug":"dealing-with-changing-consumer-preferences-in-traditional-big-beer-anheuser-busch-inbevs-foray-into-innovation-and-disruption","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/dealing-with-changing-consumer-preferences-in-traditional-big-beer-anheuser-busch-inbevs-foray-into-innovation-and-disruption\/","title":{"rendered":"Dealing with Changing Consumer Preferences in Traditional \u201cBig-Beer\u201d: Anheuser-Busch InBev\u2019s Foray into Innovation and Disruption"},"content":{"rendered":"

Beer is the oldest recorded recipe in the world. Since its inception in 3900BC in ancient Egypt, many human civilizations have enjoyed this refreshing beverage created from a mix of grain, hops, yeast and water[1]<\/a>. Today, for billions of consumers around the world, beer represents community and an important part of a social universe. Interestingly however, the beer recipe itself has not changed much, and the predominance of large-scale brewers pursuing economies of scale has historically limited innovation in the industry. One of such brewers is Anheuser-Busch InBev (\u201cAB-Inbev\u201d)<\/strong>, a company formed in 2008 by the merger between renown American beer business, Anheuser Busch and InBev to become the largest beer brewer in the world[2]<\/a>. However, as the company braced to expand its leading position in the global beverage industry, the need for radical innovation in its traditional beer business became urgent. Over the past decade, consumer preferences around the world have steadily shifted away from traditional light beers towards liquor and stronger flavor, artisanal craft beers. In 2016, the International Wine and Spirits Record (IWSR) revealed a decline in beer sales worldwide, even though global gross domestic product increased 3.5 percent in 2016. China saw its sales of beer fall 4.2 percent, Brazil\u2019s declined 5.3 percent and Russia\u2019s declined almost 8 percent[3]<\/a>. AB-Inbev hasn\u2019t been spared from these shifting consumer preferences as sales of the company\u2019s flagship beers have been slumping: between 2010 and 2016, the value of Budweiser sales fell 17 percent and Bud Light sales slipped 14 percent[4]<\/a>. Surprisingly, within this time, the craft beer industry which has notoriously shrouded itself with innovation in beer products[5]<\/a> has experienced double digit growth. Between 2007 and 2017, the number of craft beer brewers in the US had grown from 1,500 to over 6,000[6]<\/a> with the volume of barrels produced quadrupling in the same period. Against the backdrop of these headwinds, AB-Inbev has embraced the need for product innovation through a variety of methods including acquisitions, crowd-sourced innovation for product line extensions, and internal incubation.<\/p>\n

Innovation-through-acquisition<\/strong> was an initial strategy AB-Inbev pursued with the hopes of expanding its product portfolio to encompass the eccentricity of new-age craft beer brands. Between 2011 and 2017, the company acquired ten (10) breweries from coast to coast in the United States; ending with and acquisition of Wicked Weed Brewing of Asheville, N.C. in May 2017[7]<\/a>. However, despite evidence of sales growth in many of the company\u2019s newly acquired brands, backlash from die-hard craft beer consumers has been severe. With the purchase of Wicked Weed by AB-Inbev, craft beer festivals dropped the brewer from their events while several brewpubs pulled the beer from their taps[8]<\/a>. Although the beer tastes and looks the same, consumer perception of the product deteriorates with association to AB-Inbev, thus presenting a challenge to AB-Inbev\u2019s innovation-through-acquisition strategy. The company subsequently announced it would not be buying any more craft breweries but would instead grow the portfolio of brands it already owned.<\/p>\n

To expand its existing product lines, AB-Inbev explored Open Innovation<\/strong>. In 2012, the company combined a competition between brew masters with consumer-tastings to help develop a new craft beer. The project had over 25,000 participants and resulted in the creation of the golden-amber lager \u201cBlack Crown\u201d[9]<\/strong><\/a><\/em>, an extension of its Bud Light portfolio. However, Black Crown was less of a success then AB-InBev hoped for. While the beer itself got positive reviews in blind taste tests, it still couldn\u2019t compete with other craft beers, resulting in the company\u2019s decision to discontinue the product line in 2016[10]<\/a>. The company was forced to reconsider its approach to innovation, leading to the inception of ZX Ventures. Launched in 2015 as an internal incubator<\/strong> by AB-Inbev, ZX Ventures<\/strong> was charged with “disrupting” the beverage industry by developing and investing in businesses that will provide value and improve user experiences. ZX has invested in e-commerce delivery systems, beer-rating applications and home-brew suppliers, all of which provide data points that can predict trends[11]<\/a>.<\/p>\n

What does it take to address a consumer that increasingly does not want to be associated with your products? This is ultimately the challenge that \u201cBig-Beer\u201d companies such as AB-Inbev will need to address as more and more millennials switch light beers for wine, spirits and stronger flavored craft beers. For AB-Inbev, investing in ZX Ventures was to better anticipate trends and position the company to be proactive versus reactionary as it was in the case of craft beers. However, I believe more must be done by the company with respect to understanding root causes underlying shifts in consumer preferences including and not limited to health considerations and consumer experience. Without truly grasping this, the company may continue to struggle to keep its traditional business afloat.<\/p>\n

(783 words)<\/p>\n

[1]<\/a> Heartlandbrewery.com. (2018). History of Beer | | Heartland Brewery. [online] Available at: http:\/\/www.heartlandbrewery.com\/history-of-beer\/ [Accessed Nov. 2018]..<\/p>\n

[2]<\/a> The Economist. (2018). Beer monster. [online] Available at: https:\/\/www.economist.com\/business\/2015\/09\/19\/beer-monster [Accessed Nov. 2018].<\/p>\n

[3]<\/a> Marks, G. (2018). Beer sales are down\u2026especially among the 35-44 set. [online] Washington Post. Available at: https:\/\/www.washingtonpost.com\/news\/digger\/wp\/2017\/07\/26\/beer-sales-are-down-especially-among-the-millennials\/?utm_term=.dcd9fce7bf9d&utm_term%3Ftid=usw_passupdatepg [Accessed Nov. 2018].<\/p>\n

[4]<\/a> Hahn, F. (2018). The world\u2019s biggest brewing company is thirsty for your data. [online] Washington Post. Available at: https:\/\/www.washingtonpost.com\/lifestyle\/food\/the-worlds-biggest-brewing-company-is-thirsty-for-your-data\/2017\/12\/28\/3f07ae1e-e127-11e7-bbd0-9dfb2e37492a_story.html?noredirect=on&utm_term=.9771d24206ac [Accessed 13 Nov. 2018].<\/p>\n

[5]<\/a> Rue, N. (2018). The Innovation That Fuels The Craft Brew Revolution | Innovation Management. [online] Innovation Management. Available at: http:\/\/www.innovationmanagement.se\/2018\/05\/01\/the-innovation-that-fuels-the-craft-brew-revolution [Accessed Nov. 2018].<\/p>\n

[6]<\/a> Brewers Association. (2018). Historical U.S. Brewery Count. [online] Available at: https:\/\/www.brewersassociation.org\/statistics\/number-of-breweries\/ [Accessed Nov. 2018].<\/p>\n

[7]<\/a> Taylor, K. (2018). Craft brewers are calling for the boycott of these 14 ‘imposter’ beer brands. [online] Business Insider. Available at: https:\/\/www.businessinsider.com\/craft-brewers-boycott-brands-acquired-by-anheuser-busch-2017-5#11-golden-road-11 [Accessed Nov. 2018].<\/p>\n

[8]<\/a> Duprey, R. (2018). Anheuser-Busch InBev Really Is the King of Beers — The Motley Fool. [online] The Motley Fool. Available at: https:\/\/www.fool.com\/investing\/2018\/08\/28\/anheuser-busch-inbev-really-is-the-king-of-beers.aspx [Accessed Nov. 2018].<\/p>\n

[9]<\/a> Digit.hbs.org. (2018). Anheuser-Busch: Innovating Beer Through Crowd Sourcing \u2013 Digital Innovation and Transformation. [online] Available at: https:\/\/d3.harvard.edu\/platform-digit\/submission\/anheuser-busch-innovating-beer-through-crowd-sourcing\/ [Accessed Nov. 2018].<\/p>\n

[10]<\/a> Schultz, E. (2018). AB InBev Culls Portfolio, Cuts Bud Black Crown and Beck’s Sapphire. [online] Adage.com. Available at: https:\/\/adage.com\/article\/cmo-strategy\/ab-inbev-cuts-bud-black-crown-beck-s-sapphire\/306736\/ [Accessed Nov. 2018].<\/p>\n

[11]<\/a> Hahn, F. (2018). The world\u2019s biggest brewing company is thirsty for your data. [online] Washington Post. Available at: https:\/\/www.washingtonpost.com\/lifestyle\/food\/the-worlds-biggest-brewing-company-is-thirsty-for-your-data\/2017\/12\/28\/3f07ae1e-e127-11e7-bbd0-9dfb2e37492a_story.html?noredirect=on&utm_term=.9771d24206ac [Accessed Nov. 2018]<\/p>\n","protected":false},"excerpt":{"rendered":"

Over the past decade, consumer preferences around the world have steadily shifted away from traditional light beers towards liquor and stronger flavor, artisanal craft beers. Large scale beer brewers are forced to pursue radical innovation in regaining its consumer base. 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