Sector News

AB InBev & SABMiller risk differentiation without a difference

September 21, 2015
Food & Drink

The possible $122 billion merger between the world’s two largest beer conglomerates might yield significant economies of scale, but in doing so put at risk the consumer brands upon which its businesses are premised.

Think Roberto Goizueta’s vision to place a Coke “within an arm’s reach of desire” for every thirsty person in the world, only the distribution would be via a generic spigot labeled beer.

The parallels to Coke are illuminating, considering both it and the two beer companies’ global brands — like Budweiser, Stella Artois, and Miller — rely on the power of marketing communications to assert differences that functional experience may not provide. A Fosters might taste somewhat different than a Labatt, for instance, but the associated branding benefits are what truly differentiate the two beers.

Or not.

Like the cola industry, the beer business has been under pressure lately, from both changes in consumer consumption — a sparkling flavored water or tea might be used to quench a thirst that was once satisfied with a brew — and by the way consumers seem more interested in drinking beverages that are actually different, not just branded so.

Different ingredients, brewed in different ways, distributed in different ways and served in different venues that risk not satisfying everyone’s tastes (i.e. niche vs. mass market).

There’s a compelling argument to make for consistency and reliability over the variability and risk of craft microbrews, but the leading brands haven’t chosen to make that case; instead, marketers have reverted to the same old tactics of branding.

It’s interesting that some of the latest marketing content has, in fact, been in reference to other marketing content (Bud’s Clydesdales during this year’s Super Bowl, or Miller’s spot using the same generic slice-of-like targeting used in ads for jeans and cars).

Making a pretty ad or funny YouTube video just isn’t the same thing as actually making beer differently.

All the while, both conglomerates have been buying up visible, successful smaller brands, like Goose Island and Peroni, and then going about standardizing their supply chains and management processes so as to extract profits therefrom.

These two trends give rise to the challenge for the brands under a merged AB InBev/SABMiller.

Are hops supplied by a company-owned farm identical to those purchased in smaller batches on the open market? Not only might they not be as standardized, either in taste or pricing, but the very behaviors of finding, sampling, and physically taking delivery are different, too.

The same goes for everything from the widgets with which machinery like kettles and trucks are operated or repaired, to how employees and vendors are recruited and engaged (and communities or causes are supported).

Consumers of all stripes are increasingly more likely to buy these realities of a brand’s unique business premise than they are to blithely follow the dictates of marketers’ imaginations. Standardizing them risks losing them.

The best and most reliable way to appear different is to be different.

It will be a challenge for a combined AB InBev/SABMiller to realize savings from slashing duplicative headcount and combining supply chains and distribution while maintaining authentic distinctions between its brands.

An even greater challenge will be to use the newly-combined resources to create new, truly real differences for its marketers to communicate.

The world isn’t asking for a single beer spigot, no matter how expertly it might be differentiated.

By Jonathan Salem Baskin

Source: Forbes

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