Photo by <a href="">Michael Brenton</a> (<a href="">CC</a>).
Photo by Michael Brenton (CC).

Policy Innovations Digital Magazine (2006-2016): Briefings: Big Beer Brewing

Jun 20, 2008

There is nothing like a cold beer on a hot day. And as summer temperatures have started to rise, so too have the stakes surrounding Belgian brewer InBev's $46 billion bid for American beer giant Anheuser-Busch. A successful takeover would create the world's largest brewing company.

But many beer lovers fear that industry consolidation will lead to homogenization, a process some deride as "lagerization." Hearty ale varietals brewed in small batches were once the norm. Nowadays, pale, crisp, mass-produced lagers account for 90 percent of all beer produced worldwide.

Lagerization is a worry to more than just consumers concerned about taste. Other critics, such as Missouri Governor Matt Blunt, share broad concerns about the local economic impact of a globalized beer market. In a thinly veiled attempt to block the InBev gambit, Blunt recently asked the Federal Trade Commission to review the proposed deal. Anheuser-Busch is headquartered in his state.

As the global market leader, InBev peddles upward of 200 beer brands in more than 130 countries around the world. But as sales trend downward, especially in developed countries, giants like InBev, SABMiller, and Anheuser-Busch have sought growth through the acquisition of locally produced brands.

A spokeswoman for InBev conceded recently that the company's goal is to find "the right balance between global and local." As beer is the world's most popular beverage, getting the balance right can be a daunting challenge.

Maureen Ogle, author of Ambitious Brew: The Story of American Beer, first visited China in 1987. At the time, potable water was still a rarity in all but the biggest Chinese cities. Traveling through villages in the countryside, she and her husband were astounded by the variety of locally produced beers and soft drinks they came across. "God knows how many pints of beer I drank on that trip," she said.

When she returned a decade later, however, everything had changed. "Even in the smallest villages there was nothing but Coke and Heineken."

Ogle's experience is not unique. In pubs and restaurants from Belfast to Bucharest, young people have been turning away from traditional local brews and embracing lighter beers, typically lagers. This phenomenon has raised questions familiar to observers and critics of globalization.

Are consumers around the world simply gravitating to a superior product, or are tastes being shaped by the marketing muscle of giant, multinational corporations?

Like most of human culture, beer had its origins in Mesopotamia. Perhaps as early as 12,000 years ago, bakers living in the fertile crescent stumbled upon the fermentation process by chance. Sumerians first recorded the brewing of beer in written records roughly 6,000 years ago.

Throughout much of history, beer was produced and consumed locally. Families brewed ale mainly as a dietary supplement, or because it was safer to drink than water. Beer did not become a salable commodity until it was first bottled, sometime in the 16th century.

The lagerization trend traces its roots to the early 1960s. A conglomerate of European breweries bent on conquering the beer world launched a new brand, Skol beer, designed to appeal to the broadest possible palate. "They were hoping to achieve the same consistency of flavor as Coca-Cola," said Ogle.

Skol quickly became the most popular beer in Brazil, the world's fourth-largest beer market. Brahma Brewing Company, the original brewer of Skol in Brazil, merged with rival brewer Antarctica in 1999. That new company, AmBev, joined with Belgian brewer Interbrew in 2004 to form InBev.

There is still much room for growth in the beer industry and the consolidation trend is unlikely to slow down. As beer sales go flat in the United States and Europe, brewers will increasingly turn to emerging markets, Asia in particular.

Anheuser-Busch now operates more breweries in China (14) than it does in the United States (12). A fifteenth Chinese plant will come online in late 2008. Not long ago, China surpassed the United States as the largest beer market in the world.

Asians, says Ogle, are much more receptive to American consumer products than Europeans—especially beer. "American brewers have found a less hostile market in Asia and, wow, talk about a market," she said.

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