When Goliaths pretend to play as Davids
In late 2015, Chandler Jurinka realized someone was spying on his beer taps.
Jurinka and a partner own Slow Boat Brewery, a Beijing craft-beer maker that distributes its beers across a dozen cities in China and runs a new three-level brewpub in Beijing’s nightlife district. (Jurinka named the brewery after the 1940s Frank Loesser love song “On a Slow Boat to China.”) The business is driven in part by sales of kegs to restaurants and bars in China’s capital, where good beer isn’t as easy to find as it is in, say, Seattle or Kansas City.
One of those restaurants, a popular spot called Home Plate BBQ, once sold five Slow Boat drafts on its nine taps. Slow Boat sent a technician weekly to take care of the tap lines: “We bought them, installed them, and maintained them,” says Jurinka. But one day the tech was startled to find a device called a flow meter monitoring every line. Flow meters measure the beer passing through the taps, as a way for restaurants to track sales.
Home Plate itself hadn’t installed the meter: The global beer giant AB InBev (BUD, -0.15%) had. The restaurant owners told Jurinka it was a free perk from the brewer of Budweiser, Corona, and Stella Artois. With one move, AB InBev had earned goodwill with the restaurant and got a source of intel on its competition—since the meter could monitor Slow Boat’s sales in real time. Jurinka, a broad-shouldered former U.S. Army sergeant, was incensed, he says, “but other than take our beer off tap, there was little I could do about it.”
Then last summer Home Plate hosted a four-day event for AB InBev—a Beijing unveiling for the craft brand Goose Island that included free beer and selfie opportunities with the goose mascot. China’s news sites covered the event like a fashion show. By autumn the restaurant had replaced all but one of Slow Boat’s taps. Now sitting atop Home Plate’s draft menu: three Goose Island beers.
The flow meter was one of the first salvos in a new marketing war. AB InBev is bulldozing its way into China’s nascent craft-beer market: Since early 2016, the Belgian-Brazilian beer conglomerate has inundated Beijing and Shanghai with Goose Island, the Chicago-based craft brand it acquired in 2011. Goose Island brews exotic beers that it ages in French wine casks and bourbon barrels and has the kind of cute animal logo that can turn heads, and tastes, in China. The campaign is central to AB InBev’s strategy of promoting pricier beer to China’s growing ranks of wealthier young consumers. While competitors—including Heineken and Duvel—are importing their own craft beers, none have moved with the same gusto.
AB InBev is seizing an additional advantage: Thanks to China’s weak regulatory climate, it can muscle into the market in ways that wouldn’t pass muster in the U.S. AB InBev has leaned on distributors to keep them from carrying other craft beers. It has given bars incentives to promote Goose Island while shoving other beers off the taps—deals that would be illegal in the States. It’s offering lavish salaries to poach local brewing talent. “AB InBev wants to be a craft-beer brewer,” says Gao Yan, who owns a Nanjing craft brand called Master Gao. “But they want to act like a big brewer.”
The leviathan is turning to China, the world’s biggest beer market, to compensate for a catastrophic mistake it made in the U.S.—missing out on the craft revolution. Over the past decade craft brews grabbed 20% of the U.S. market in dollar terms, largely at the expense of mass-produced lagers like AB InBev’s Budweiser and Bud Light. In 2016 the company’s U.S. sales fell 2%; Budweiser sales have taken the biggest hit, falling 35% since 2008. “Craft beer would never have become as big under independent ownership if [AB InBev’s] Anheuser-Busch had not more or less ignored the sector,” Sanford Bernstein analyst Trevor Stirling told the website Just-Drinks in December.