Anheuser-Busch and the Long Tail of beer

One of the coolest and most surprising (even refreshing!) extensions of the theory last year was to alcohol. First Anheuser-Busch created a division, called Long Tail Libations, to market niche liqueur products. Then all sorts of beer experts (and the WSJ) started writing fascinating articles about how the model applied to microbrews, regional beers and "craft beer".

Earlier this month I got in touch with Anheuser-Busch to hear from the Clydesdale's mouth why the shift from hits to niches was coming to suds, too. I mean, I get how the Internet lowers the costs of distribution in many markets to allow for more choice (the "infinite shelf space" effect), but how does that apply to real bottles on real shelves?

Pat McGauley, vice president of Long Tail Libations, explained: Anheuser-Busch's embrace of niche beers is not driven by a radical change in the economics of distribution, but rather reflects a broader trend toward niches across our culture. Anheuser-Busch happens to be unique among brewers in that it's large enough to have its own distribution network (the others go through third-party distributors, who are hard to sell on micromarkets) and is thus able to experiment with far more products aimed at niche consumers. It can take local microbrews and distribute them nationally or find regional markets for drinks targeted at certain demographics.

Over the last ten years, the company has hugely expanded the number of beers. coolers and other alcoholic drinks it offers, from 26 brands in 1997 to 80 brands in 2007. Today it makes organic beers, drinks for women, and a host of microbrews such as Bare Knuckle Stout and ZiegenBock (available only in Texas)

Visually, the growth of its portfolio looks like this:

But the thing that really blew me away was its latest beer. In its quest to find ever more finely-grained brew niches, it has now moved beyond the organic, beyond the artisinal, beyond even the local. It has now discovered the non-allergenic beer market.

Here, for your sipping pleasure, is a gluten-free beer. Say hello to Redbridge, which is made from sorghum, not wheat or barley.

If you want to read more about Anheuser-Busch's dive into Long Tail marketing, check out this story about their Bud.TV viral video project in this weekend's New York Times magazine.

Comments

[sabik]

Surely 80 isn't really much of a long tail — it's more of a bigger head (on your beer), isn't it?

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[tim]

Nearly none of those products in the 2007 photo are from A-B as niche products. They're all attained as corporate buyouts. The "beer energy drinks" are about the only things developed in-house by A-B.

[Bob]

I thought that Long Tail implied a greater variety in consumer choice. What happens when A-B acquires a small craft brewer? The thinking is that A-B will sell a few of the beers it deems marketable but end production of all else. So while A-B's product line increases, there is a net loss for the consumer as brands get concentrated under the A-B label.

A-B's unique position as a distributor also allows for some, er, unique methods in forcing craft brewers to 'comply'. See Chicago's Goose Island.

[Lucky]

The head is still formidable, with nearly one in three beers in America carrying the Budweiser trademark (Bud, Bud Light and Bud Select).

The A-B NPD/acquisition strategy is generally assumed to have three objectives. 1. While their distributors are, in fact, "indedependent," most have become exclusive to A-B. As the the market fragments and goes premium, A-B is providing these products to keep their distributors from going to competitive suppliers. 2. A-B has the scale to do the product development required to enter every niche, thus allowing them to place a bet on every potential new sub-category. If one or two hit, it's worth it. 3. By entering every niche early, it sucks the oxygen out of the air for the little guys, who used to get a few years of momentum before encountering direct competition from the Empire.

[Timothy]

This post reminded me of a recent WSJ article (1/29): "Smaller Brands Hitch Ride with Coke Distributors"

"Grappling with sluggish sales of their core brands and eager to expand, some distributors are making deals with new companies that market small, faster-growing beverages.

"Coca-Cola Bottling Co. Consolidated, Coke's second-largest U.S. bottler, created a wholly owned subsidiary, BYB Brands Inc., in May 2006 to develop new types of drinks that it wasn't already getting from Coke in Atlanta."

Here's the link - login required I think. http://online.wsj.com/article/SB117003288942590723-search.html?KEYWORDS=honest+tea&COLLECTION=wsjie/6month

[John I.]

Having red the related article of A-B I see two things on the level of corporate culture:

1. What I see as "corporate arogance" is quite present

2. They begin to grasp something of the Long Tail but....just a little.

Ok... it's not much.

But it's a beginning.

p.s. In my opinion A-B should actively and in a larger scale help the local brands and provide them resources and know-how to develop and market their niche products, in exchange they could keep some percentage of the earnings (or something like that).

[nakliyat]

good beer :)

[Mary]

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What happens when A-B acquires a small craft brewer? The thinking is that A-B will sell a few of the beers it deems marketable but end production of all else.
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[Seksüel]

Having red the related article of A-B I see two things on the level of corporate culture:

1. What I see as "corporate arogance" is quite present

2. They begin to grasp something of the Long Tail but....just a little.

Ok... it's not much.

But it's a beginning.

p.s. In my opinion A-B should actively and in a larger scale help the local brands and provide them resources and know-how to develop and market their niche products, in exchange they could keep some percentage of the earnings (or something like that).

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[Jelq]

Hey nice beer collection, don't drink a single one can be a real pain hahaha

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hey buddy great picture I love beer and this post about Anheuser-Busch and the Long Tail of beer is excellent

[Caffeine Addiction]

Redbridge tastes horrible, I prefer other beers.

[Matt]

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[Brian]

Very important this information I like it and I love the beers, but first I need to know about Health Promotion because I think that this is excellent.

[Eye Care]

I love these images have caused great thirst in my mouth.

[gadgets]

Personally, I don’t much care who owns A-B of any city. this country and millions of peoples lives would be better off if they ALL found something better to brew! And there would be less trash. Having worked there after the OKC Murrah Bombing, my response is still the same: SOME people wanted to be wealthy orphans!!

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