Sam Holloway, Ph.D. - Crafting A Strategy

A Shift In Strategy for AB/In-Bev

This morning, we were all surprised to hear that Anheuser Busch bought Seattle’s Elysian Brewing. That makes two iconic, awesome craft breweries in the Pacific NW that have been acquired in the last few months. While I will let others debate the soul of craft beer and consumer reaction, I want to talk to you about the winds of strategic change. Specifically, I want to celebrate the brewpub/tasting room business model that is disrupting the 3-tiered system.

We’ve discussed this in our podcast on Blue Ocean Strategy. The brewpub business model is a ‘strategic weapon’ that helped craft beer pioneers like Kurt and Rob Widmer level the playing field and get into business. Now, with the rapid acquisitions of iconic Elysian Brewing and 10-Barrel Brewing, we see the incumbent firms acknowledging this business model is the future.

Often, large publicly traded firms ignore disruptive innovations, usually because they are under extreme pressure to perform well in the short term to keep investors happy. We’ve written about this practice of ‘ Chasing Profitability To Your Death’, borrowing ideas from Harvard Professor Clay Christensen and his research. What I find extremely interesting about AB/In-Bev is they are different than companies like Bethlehem Steel, Woolworth’s, and other historic incumbent firms. AB/In-Bev is being proactive, shifting from a Defender strategy to more of a Prospector strategy (Miles and Snow, 1978).

CRAFTINGASTRATEGY.COM members can read about the change from Defender to Prospector and also listen to Dr. Mark Meckler’s short video on firm strategies for adaptation by clicking on our white paper: Competitive Advantage Through Consistent Routines. All the great firms adapt to the new reality, and in this paper we discuss how Widmer adapted from a Defender strategy (where they protected and promoted their awesome Hefeweizen by making investments in equipment and distribution to scale this style and take it national) and later adjusted to consumer preferences for variety by introducing their “Rotator IPA series”. Is AB/In-Bev following their lead and shifting gears toward understanding variety and quality – it appears so.

What does this new reality look like? Defenders prosper by investing in technologies and assets linked with economies of scale. Defenders produce one great product in large volume, and organize their entire business to protect and promote their flagship beer. Heineken is currently organized this way, which we discuss here. When a defender changes strategy, and looks to adapt to changing consumer preferences, they become Prospectors (Miles and Snow, 1978). Changing to a Prospector strategy requires a shift in entrepreneurial thinking.

Prospectors solve problems differently than Defenders. Prospectors explore for new opportunities and new markets, and aim to develop new technologies and products that fit emerging customer preferences. Most prospectors start small and develop these new products internally. However, a well capitalized incumbent firm like Anheuser Busch may actually find it ‘cheaper’ to acquire small innovative firms than to develop new products themselves. The recent string of acquisitions by AB/In-Bev certainly fits a shift to a Prospector strategy.

If I am right, then this is only the beginning of the acquisition spree. Prospectors are aggressive, smart, and timely and they value risk taking much more than Defenders. Let’s keep our eyes on AB/In-Bev, but right now they appear to be following Miles and Snow’s (1978) strategic playbook page by page.