The money talks, I’ll not deny
I heard it once, it said,
“Goodbye”
~ Richard Armour ~
It seems every week another brewery that once prided itself on their “micro” status is bought up for an unimaginable amount of money by a massive “macro” conglomerate. While craft beer lovers are understandably confused and annoyed by this, many homebrewers have taken solace in the fact their passion is untouchable, that we are safe from big brand brewers meddling in our weekend rituals.
And then, out of nowhere, it came to light that Northern Brewer/Midwest Supplies, purportedly the world’s largest retailer of homebrewing goods, was acquired by none other than AB InBev. Why?
Curious of what this could possibly mean for homebrewing, I reached out to industry professional, Ron Rivers, hoping to gain some insight on the impact such an acquisition
might have. Ron is co-owner of New Jersey based Love2brew Homebrew Supply, which he founded in 2011 and currently serves a national audience through their online store, two retail stores, and a growing network of re-sellers. A hearty cheers to Ron for taking the time to share his thoughts on this issue!
| The Industry Speaks |
With the recent announcement of InBev’s acquisition of Northern Brewer/Midwest Supplies, the Homebrew Community has changed seemingly overnight. Social media has exploded with reactions some understanding, many more upset, about the choice to partner with the beer conglomerate. Change in our industry and the evolution of our community is a certainty, but the direction of both is still unclear. I offer my speculation and perspective not to debate over what is “right” and what is “wrong,” but rather to contribute to the conversation about what this may mean for all of us in the long term, homebrewer and homebrew shop alike.
At the outset, it’s important to recognize that Northern Brewer/Midwest Supplies is a great company. It is home to a large group of passionate individuals who have dedicated their lives to improving the homebrew community’s lifestyle; its founder, Chris Farley, put forth a vision of homebrewing that, throughout the years, has helped to shape an industry. Consequently, many of your favorite homebrew shops may not have been able to enjoy the progress that we have made today without his efforts. I personally believe he deserves all of the success he has achieved.
The first question to consider in the conversation is, “Why would InBev (ZX Ventures) acquire Northern Brewer/Midwest Supplies?” ZX Ventures is the global Disruptive Growth Unit of Anheuser-Busch InBev. A Global Disruptive Unit is a business entity that exists to disrupt existing markets and to displace their competitors through strategic advantages. Those advantages could take place in the form of a number of ways such as access to capital, access to goods, strategic innovation, and other methods that may be challenged for their legality. The InBev/ZX Ventures purchase of Northern Brewer/Midwest Supplies happened because InBev/ZX believes that they can derive significant revenue from the acquisition by using their marketing advantage, in turn displacing current homebrew retailers– this likely includes both online vendors and your LHBS (Local Homebrew Shop).
In addition, homebrewers are an excellent resource of beer innovation. With their purchase of Northern Brewer/Midwest Supplies, ZX Ventures will now have access to every Northern Brewer/Midwest Supplies customer’s purchasing trends (which kits sell best, which grains, hops, yeast, etc.), which will likely be used to feed new beers into their growing craft/macro brewery portfolio of over 200 beer brands. This portfolio will increase to over 350 beers after the recent SABMiller purchase.
The conversation inevitably leads to the question, “What happens now?” There are a large number of potential scenarios that can occur depending on InBev’s strategy. Based on my experience of the homebrew industry and community, I predict three potential scenarios and their likely effects on homebrewers and homebrew shops.
1. The Little To No Change Scenario
Northern Brewer/Midwest Supplies controls the current majority of sales in the homebrew industry and InBev could supply them with certain raw materials and disposable goods at significant reduction in cost while maintaining industry average prices that exist now. This scenario supports Todd Jackson of Northern Brewer when he says, “Nothing will fundamentally change…” However, it is questionable that InBev/ZX would make an investment without having a plan of action in place to improve profitability through change.
For the Homebrewer: Not much would change; many homebrewers have a LHBS or an online shop they prefer and that Homebrew Supplier would still likely remain competitive on the majority of items you like to use for brewing.
For the Homebrew Shop: Spread the joy of homebrewing and continue to help build your community. Focus on improving your service and offerings starting today. Even if nothing changes in the industry we should always be focused on improving the experience we can provide our local brewers.
2. The Change Of Strategy Scenario
One inevitability of this merger was some level of fallout of homebrewers who frequented Northern Brewer/Midwest Supplies. Many homebrewers commenting on social media feel slighted by this acquisition and have vowed to no longer support Northern Brewer/Midwest Supplies because of the merger. It is likely that the decision makers at ZX/Northern anticipated some level of customer loss due to the merger, so we have to ask– how significant will the fallout be and does it matter? It is a possibility that a new direction and investment would be to turn away from more advanced and veteran brewers in favor of newer brewers. In this strategy, novice brewers would not be immersed in the current homebrew community and, more importantly, not aware of the recent merger and what it means to the veteran homebrewer. In this scenario, you would likely see increased efforts to attract new brewers by increasing product offerings geared towards this group while reducing offerings that cater to veteran brewers.
For the Homebrewer: In this scenario, you would likely need to find a new supplier for your advanced brewing needs. Whether you choose your LHBS or another online supplier to meet your needs will be up to you, however you may be forced to leave Northern Brewer/Midwest Supplies.
For the Homebrew Shop: If you observe this trend occurring then you will need to respond accordingly by increasing your offerings to veteran brewers. This includes grain, hop, and yeast selection as well as equipment options. This strategy makes sense in any scenario as some of your extract brewers may choose to move to all-grain in the future and may be looking elsewhere for supplies.
3. The Industry Disruption Scenario
In this scenario, they utilize their market advantages to try to hinder existing local and online Homebrew Suppliers. One possible way of disruption would be pricing items as a loss leader– essentially losing money on the sale to attract new and existing business. I am not privy to InBev’s operational costs, however I believe it is safe to assume that they acquire 50 lbs of 2-Row for less than any of your LHBS or online vendors can. Slashing prices on certain staples could create an environment that would render most small local homebrew shops unable to compete on pricing (which according to the American Homebrewers/Brewers Association 2013 Infographic are frequented by 95% of homebrewers). This may seem like a pessimistic prediction, however within the last 6 months In-Bev has been investigated by U.S. antitrust officials over incentives to distributors to sell InBev brands at the expense of local craft brands, has been under a European Union antitrust investigation for preventing beers from entering the Belgium Market, less than three weeks ago was fined $6 million dollars for bribing Indian officials, and four days ago was approved to purchase SABMiller, creating the largest beer company in the world controlling 30% of the global beer market. These actions do not indicate an appreciation for fair and competitive market practices, so I would conclude that the industry of Homebrewing is not immune to this type of business mentality.
For the Homebrewer: In this scenario, you will face a decision about whether or not you are willing to pay more to support a small business industry, or if it would make more sense for you to save more money per batch. There is no wrong answer and I believe as a community we need to embrace that. Homebrewing is many different things to many different people, and in the end the decision will be made through purchases nationwide. If the majority of homebrewers decide to support the In-Bev/ZX/Northern Brewer/Midwest platform then the result will likely be a significant decrease in the availability of local Homebrew Shops. If they choose to support their LHBS, and said LHBS continues to provide excellent service and a helpful environment, then the industry could continue to improve as we are used to.
For the Homebrew Shop: Although this scenario may strike you as grim, I believe a continued focus on creating great homebrewing communities and improving our level of service (value) to our homebrewers will allow us to move forward and grow against disruptive efforts. This scenario is best handled by proper preparation, which means always being focused on making your LHBS experience the best available. Homebrew customers have choices when it comes to purchasing and they choose you. Never take that for granted, and be sure to constantly be focused on creating the best experience possible for your brewers. An open offer to any LHBS owner reading this: if you have questions or want to share ideas on how improve the experience you offer your local homebrewers, please feel free to email me at ron@love2brew.com.
Looking forward to what comes next is more ambiguous. To be clear, I do not know what InBev/ZX plans to do with their acquisition of Northern Brewer/Midwest Supplies and whether or not any of the possible scenarios discussed will be relevant. I am certain that whatever scenario and strategy they choose to implement will align with their purpose as a publicly traded company, which is to maximize shareholder value above all. The Homebrew Industry has changed and although we cannot foresee the immediate impacts of this change, we as a community are responsible for its direction. In his article Good Beer is Your Right, Northern Brewer founder Chris Farley said, “You make a choice, a vote, a statement every time you open a bottle of craft or homebrewed beer instead of a can from a factory with an advertising budget that could swallow your local microbrewery whole.” That statement has never been truer for the Homebrew Community. In essence, every dollar spent on homebrew supplies is now a vote and those votes will shape this industry going forward. My only suggestion to you is to be conscious of your vote.
Cheers,
Ron Rivers
Founder, Love2brew
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40 thoughts on “The Industry Speaks | A Homebrew Shop Owner’s Thoughts On The Acquisition of Northern Brewer by AB InBev”
I’m happy for the NB/MW teams and the resources and exposure they provided over the years to the homebrew scene. I’m sure that many people got their first kit from NB and moved on from there to expand their interest in the field. I rarely use them, as I believe in supporting my LHBS, but have met dozens of new brewers whose only knowledge of brewing have been gained from the NB catalog. I do worry that the acquisition signals a transition to a different world, one in which the 900lb gorilla dictates purchasing and pricing for everyone, and supply chains can be artificially manipulated on a whim. We’ve seen the hops shortages of late but how much more difficult will it be when one company can corner and control large swaths of the market and/or price out competitors? Unsure if US antitrust laws could be applied to a global organization headquartered in Belgium operating under EU authority.
I’m going to be roundly criticized here, but I’m going to say it anyway: if I owned a craft brewery or a homebrew supply store and those nerds came and threw ridiculous amount of money at me, I’d take it. Boulevard Brewing sold for $100M! I bet the owner really liked owning it and making great beer, but when someone offers $100M for something it is near impossible to turn it down.
I agree.
I can’t disagree, as I’ve never been in such a situation. I’m sure with $100M in my face, my decision making would become, ohhhh, slightly jaded 🙂
I have to agree with you. Look at Ballast Point…They threw out a ridiculous number and they buyer bit. No matter what your business is it can be bought for the right price. Only a bad business person would term down an incredible offer.
Disagreed very much. Alaskan said they would never sell. They don’t want to risk losing customer base or quality. Turning down an offer is not a sign of a bad business person. It’s someone who refuses to sell out. NB sold out and they have already lost many customers.
I used to be a customer of Northern Brewer, but in the last two years I have tended to buy from local shops or from other online sources such as Homebrew Supply Company. My impression of Northern Brewer is that they have lost credibility by selling products that don’t work as claimed, by hawking expensive gadgets that most folks don’t need, and by using hyperbole rather than plain talk in ads and product descriptions. This acquistion is probably a good fit for their organization as it will enable Northern Brewer to abandon any appearance of credibility.
I hope this will turn out to be good news for LHBS owners and staff who value the relationships they have with customers, who offer constructive advice in lieu of relentless ‘upselling’, and who deal with complaints in a fair and friendly way.
Nice write up
I enjoyed reading this, and I hope that it is a sign that home brewing, small craft brewing and the associated supply chains will continue to “live long and prosper”.
I also want to say that I buy everything I can from Love2brew. It is all about customer focus and shipping time. I always get free shipping to my home just outside Boston and rarely wait more than a day or two to get it.
I have bought equipment and supplies from Midwest and Northern, but I do my best to avoid them. Mostly because it takes 10 days to get a shipment that costs $7.99, which means that no liquid yeasts can be ordered. Some people may be worried that the purchase will have a negative impact. I’m hoping that the opposite is true.
When I got started. I searched the web for my information. I found Northern Brewer. It was easy. It did not take much. Soon I found pod cast resources and more web resources. I have purchased some items from NB. No shame. I did learn to find my own local shops . One of which is closed now. I’ll still look for others. Anyways, because of most of my resources including NB saying support your local Homebrew shop. I do and will continue to support the local Homebrew shop. I hope others will share support of staying local if possible.
Nice write up. I like how you added suggestions for the homebrewer and LHBS. What upsets me about this is the mega-corporate mentality of “If you can’t beat them, buy them”. I worry about the long term effects to the craft beer industry of AB-Inbev purchasing all these craft breweries. I worry about the quality of the craft beer as corporations who own craft breweries cut corners to maximize profits to please their share owners. Now I worry about the long term effects of them purchasing NB/MW to the home brew community. Homebrewing is what it is today because of the LHBS’s and the home brewer. If mega-corporations start sticking their nose into this I fear for the craft long term.
Bah. Northern Brewer and Midwest were my local shops. Now I’ve got nowhere to go!! Honestly, Northern Brewer has always seemed overpriced, and I would only exchange a co2 tank there occasionally. My guess is they’ll drop product prices to try to push out the competition.
This is capitalism, it is a bit shocking that mega-corp even acknowledges homebrewing as a market but I have wholehearted congratulations towards Northern Brewer/Midwest Supplies for building something great enough to be noticed on that scale. First two kits came from them and every brewing ingredient for the last 7 years has come from LHBS. Their(NB/MW) availability, location in middle america and customer service is the reason I’m an avid homebrewer, I couldn’t say enough about their customer service, when I first got into kegging I thought I needed 3 kegs and didn’t even touch one for a year at which point I found out that it would not hold pressure no matter which lid or o-ring was on it I called them and by the time I finished explaining they said a replacement keg is in the mail with a paid return label to send back the broken one. Great company with great products, I hope I can remain a customer as I only buy equipment through them but it does weigh on my decision now. I will say that this is business and every person has a price and I congratulate anyone who is able to sell something they built from nothing for a hefty profit.
I don’t blame the owners for selling. Homebrew shops aren’t sacred. Your point about customer service is illustrative of the challenges they will face.
Good customer service will only continue if it can be justified through increased profitability. AB will do a cost/benefit, i.e. cost of returns, customer service vs. short term profit, cost of losing customers and revenue. I suspect NB looked longer term than they will be able to now.
I hope the owners know what they signed up for.
Great article! I won’t shop at Northern Brewer, but frankly I didn’t shop there anyway. I think AB-Inbev will use every advantage to disrupt the market. I don’t mind honest competition. I think my LHBS will win many customers with better service and the ability to talk to knowledgeable brewers.
However, I don’t think AB will compete honestly. I think they will leverage every advantage and push the envelope on the legality of their actions. If they push competitors out of business with illegal practices and then pay a few million dollar fine as a result, I suspect they would see that as a good business strategy.
This is my personal theory, but I think we are going to see the equivalent of GuitarCenter for homebrewing.
I live in Canada, so this acquisition is irrelevant to me, but I’ll comment anyway. Number one: congratulations to NB. I’m with da kine… if I had built a successful business and was offered a large sum of cash, I’d probably take it. I’ve got my kids to think about. Number two: I don’t brew nearly as often as many seem to (once every month or two… seriously, how do you people rip through five gallons a week??? I’m amazed, and jealous.) so prices per batch are almost meaningless to me, but if I did brew four batches a month it would be hard to say no to a company that was selling bags of grain at a loss. When younger I refused to shop at Walmart and other big box places, but once again, I’ve got kids. Sadly, principles cost money that I can’t afford. I just took out a Costco membership this week! I hope that if the scenario arises where NB does start selling ingredients at a loss, people don’t get all high-and-mighty about others taking advantage of it. Not everyone can afford to stay principled.
All that aside, I do hope that your LHBS innovates if necessary and survives. Nothing beats a place where you can go in and talk to actual people who know their shit.
Thanks for the great thoughts Ron! I run an online home brew shop in Canada and I’m following this very closely. I’m not sure what AB’s motives are but I’m sure it’s less to improve the home brewing community and more to make more profit for it’s shareholders.
I don’t have a problem with somebody cashing out on his success. That’s pretty much what all of us do every morning. What bothers me most about this acquisition is the way InBev chooses to “compete” in the market place, something that Ron points out.
The overwhelming majority of my purchases are from my LHBS, turning to online vendors only when necessary. I have only occasionally used Northern Brewer. In the future, I will continue to my past purchasing practices, but will likely exclude NB from my process as almost nothing they offer is unavailable from other businesses. I expect they won’t miss me nor will I miss them.
InBev has a Distribution system to rival UPS or FED EX
Its all about Logistics
InBev has the ability to SHIP “anything” anywhere, for pennies a pound
inBev could put all “On Line” home brew shops out of business by doing free shipping on ANYthing you buy….. 50lbs of grain or a used Keg…..or 1 oz of hops
But why put those “on line” retailers out of business ???
Look ahead …… Who is next on their shopping list… that will show what their plan really is
Or they control the market – dictate prices to everyone – raise them up
If they cut off the Supply of ingredients to Home Brewers – what do they gain ?
I’m still not going to buy a Bud….
This purchase is part of a bigger move – wait for it
just my 2 cents
I think the shipping is really where it’ll cut the cost-Think if you could create the Amazon of homebrewing. Monthly membership fee for free two day shipping, shipping& distribution for other businesses, exclusive kits, media, lab services? They definitely have a chance to make something no one else can. I’m not sure if they will, but I’m not necessarily against it. There’s always going to be a market for the small, local business.
I don’t buy the “manipulating cost of ingredients”, we’ve been hearing this for a while and I’ve heard mixed opinions from brewers. Personally, I’ve never had an issue finding hops or grains. Not everyone has everything all the time, and popular hops might be a little more expensive, but that’s OK. Demand brings new supplies and varieties to market.
I’m not nearly as positive that InBev has the ability to shine in the home delivery business. What they do now is run wholesale to retail delivery businesses, which involves big trucks making large deliveries to relatively limited destinations. And in many states, the distributors are used to calling the shots and telling retailers when they’re getting deliveries and how much of their order is actually getting filled.
That’s all a long, long way from the Amazon model, and taking a look at the lobbying going on in my state, it appears that there’s a huge stake at the corporate level in maintaining the massive, heavy handed distribution model.
I sincerely doubt that they’ll ever voluntarily get away from the UPS/FedEx/USPS deliveries. And sooner or later, Amazon is going to add hops and malt to their grocery delivery network at competitive prices, and InBev is going to find itself in a huge struggle to match Amazon in terms of cost, coverage and convenience.
Maybe the “disruptive” braintrust behind this move will have the foresight and ability to force the company to really upgrade their distribution network, but I have the feeling the corporate HQ will stay stuck in the mindset of guys with dollies wheeling kegs and cases and dealing with stores that are closed on Sundays and holidays. Northern and Midwest will stick with UPS shipping out of a few warehouses scattered around the country.
Steven – One of my neighbors is the main logistics guy for a company in our town. He agrees with you and so do I about InBev and their ability to crush almost all online distributors via free shipping. My LHBS costs me about $6.00 in gas to get to. I visit them for 30# and up purchases plus some good conversation. Would be really nice not having to drive an hour round trip through construction, though.
Could not resist: “I’m thinking I might take that new chick from logistics.”
I am interested to know the revenue split of NB/Midwest between homebrewer and craft brewers. I would guess – not knowing the American market at all – that most of the revenue comes from the latter, ie. that homebrewers like me and yoy might not be the most interesting part of the purchase. Being the de facto distributor to a large number of craft breweries and brew pubs on the other hand would probably make a lot of sense for them.
In South Africa SABMiller already plays a good role, we buy our local hops from them (which makes it cheaper than any imported hops) or LHBS as it’s more convienient. We can also get malt directly from their malting plant, so prices are very cheap for local malt. SABMiller is supportive of homebrewing, I think AB Inbev will do the same…
Let’s not lose sight of the fact that Northern Brewer/Midwest Supplies was ALREADY owned by a Venture Capital Firm. They “sold out” YEARS ago. Frankly, I’m a little impressed that they found a way to “sell out” twice. I’m not even sure what the founder has to do with the company anymore. Here’s the actual President of NB/MS: https://www.linkedin.com/in/dolores-dinyon-09a7093
I guess my point is that getting upset about one VC selling a business to another VC is a bit silly. If you were going to get all pissed off and take your ball and go home, you should have done that already. Years ago.
Agreed.
Is Northern Brewer online or do they have physical shops? In the UK we don’t have any physical chains that I might be aware and LHBS are really rare (I live in a conurbation of a couple million people and ours closed down a few years ago). I do all my brewing shopping online, which is very reasonably priced and four or five different vendors supply the whole country (some quite small, but ‘craftish’ millers, etc.).
Both. They have 2 brick-and-morters, and I believe Midwest has 1, plus both operate online stores as well.
NB has 3 B&M (Mpls, St. Paul, & Milwaukee) and Midwest has 1 (St. Louis Park).
Ahh, that’s right.
This is complete speculation, but here goes. This sounds like something I’ve seen before in corporate culture. Some patron within the HQ has made a pitch for “thinking outside the box” and has gotten a slush for pet projects. “Disruption” is a dated term — it’s something out of TED talks of five years ago. The fact that they’re using this kind of term suggests they’re already behind the curve, or the corporation is so stodgy they’re not really ready for radical rethinking.
You’re going to see a culture clash followed by the green eyeshade folks looking really hard at the costs and revenues. And that’s when the trouble will start. If the home brewing business unit is lucky, it will be sold off and be free again. If it’s unlucky, it will go through a long, ugly spell of micromanagement and battles for control of the supply chain and customer service functions.
It’s possible this will work out, but if the main patron is someone like ZX Ventures which uses tons of dated corporate buzzwords, it’s not an encouraging sign.
Wow, we must have been typing at the same time, but you said it so much better than I did.
This is part of the “frothy-ness” of the current market. I saw it in the ’90’s with opto-electronics. Seemingly serious, no-nonsense business people get caught up in a wave and collectively lose their heads. I don’t think there is any realistic plan behind the purchase. All it takes is a handsome, fast-talking b-school grad, too much money in the investments coffer, and a frothy market, and you get mindless moves like this. I predict A-BInBev will tire of this purchase within two years and sell it off.
My LHBS happens to be Ballast Point’s “Home-Brew-mart” which was part of the $1B acquisition. I still shop there; and in fact they’ve renovated and it’s nicer. But I don’t feel as cool after buying my supplies there anymore. ‘m no longer stickin it to the man–in fact, it’s the opposite. : /
I’ve never used NB, but I just checked their prices on malt and my LHBS is 20% – 40% cheaper… They’d have to drop their prices quite a bit to get any business around here. And then there’s the shipping cost!
I’ve always found NB to be far too focused on creating gimmicky products with trademarked brand names. Their catalog was really flashy with pro photography but not a lot of substance. When compared to Morebeer’s, which for a while was almost like a bible of ingredient profiles for me, NB’s was super-thin. I feel like they made a huge shift away from connecting with the actual homebrewer around the time that they ditched the Brewing TV videos. From that point forward they seemed more interested in branding that brewing.
I think that all home brew suppliers should be state owned.
…and sell weed.
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