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Swallowed by a Big Fish. What Happens Next?

In my new keynote, I talk about a great and growing divide between ''Mass and My' Brands.

Mass Brands make up most of our economy, and they are drowning in a sea of sameness. Too much supply, not enough demand, too many media outlets make it a struggle to engage their consumer or customer. They rely primarily on price and promotion to drive their supply chain. Cost-cutting trumps creative expression and it becomes a race to zero without an airbag.

"From Providing to Enabling"

On the other side of the Great Divide, are the ‘My’ brands. The owners and stewards of "my" brands realize that quality and functionality are important, but it's not only what, how, where and when they do it is why. 'Why' is a mindset that changes a brand's purpose from providing to enabling life and livelihood. In doing so, a brand becomes part of its customer's story versus only selling theirs.

"Changing your purpose from providing to enabling is changing your mindset."

So What Happens When ‘Mass’ Acquires 'My'?

Let's look at a case study unfolding as we speak. Mill Street Breweries, one of Canada's most successful craft breweries, has been acquired by Labatt/InBev, one of the world's largest beer companies.

Many Craft Breweries, including Mill Street, earn the status of "My Beer" because they do more than brew beer. Their customers are loyal and often fanatical for a variety of reasons. Some want their adventurous palate teased while being the first to know about the latest creation. Others prefer buying from an independent and keeping their dollars and jobs in their community. Some love shopping across the entire Craft Category to trick up their home beer fridge with a wide assortment of uniqueness while many love to come to the place of origin with their friends and drink from the source.

My 8 Predictions

Now that Mill Street has been eaten by a big fish. They hold true for most acquisitions of this nature.

  • The spin doctors will spin a broken record.

"We bought a beer company and their entrepreneurial spirit. We are providing a capital injection to enable them to invest in more manufacturing to meet growing consumer demand." The reality is that this never happens. The entrepreneurs will soon learn that there is a new Sheriff in town. Acquisitions are expensive, and the only way you can justify the price is to grow the business and cut costs.

  • Jump Ship.'

Hardcore Mill Street consumers will jump ship as their identity is attached to buying local and from independent brewers. In the short term, this will take the froth out of Mill Street sales.

  • ‘Defend at any Cost.'

Labatt/InBev will do whatever they can to hold onto the coveted territory – the tap handles in bars and the shelf space at retail that Mill Street has earned as an innovative Craft Brewery. This approach will come at a price. Mainstream brands like Labatt buy their way into bars and retail outlets through discounting, promotions, and lavish perks for the owners of bars, restaurants and retailers. Artisan Brands without deep pockets have had to earn their distribution. Paying to maintain existing Mill Street placement through current Labatt bought deals will cut into their short-term profitability.

  • ‘The Company that I Keep.'

Many of the new Urban restaurants and Millennial-focused bars favour local craft beers and small distillers, versus mass brands. They prefer Muskoka versus Moosehead, Steam Whistle over Stella and Beaus over Budweiser. Mill Street now moves from crafted by a local to owned by a global, and they could find themselves on the move out of these hip venues.

  • ‘Build your Beachhead.'

Labatt’s sales force will grow sales when they take control of the entire Mill Street portfolio and be accountable to expand distribution across the country. InBev might also bring Mill Street & Tankhouse to international markets.

  • ‘Friend not Foe’.

Mill Street built its brand by staging Brew Pubs, the theatre of many craft beer operations. They will need a new act. There is no way, Labatt/InBev can keep or grow a competitive pub chain when they make billions in profit through on-premise accounts. My prediction is that they will sell Mill Street Brew Pubs to Cara Foods, a large Canadian-based restaurant conglomerate, and parlay the deal into a preferred vendor relationship. We could also see the Restaurant Group also owned by 3-G, get into the Pub Business.

  • ‘Hop the Brand’.

At one time, Alexander Keith’s was the number one draft beer in Canada, Rickards Red owned the ‘red’ category. On a global basis Guinness was stout, and Heineken the dominant Lager. All of these brands, and many more, have traded their enviable and unique position for a portfolio strategy. Instead of doing 'one thing very very well' like Steam Whistle, they chased short-term profits and growth, at the expense of brand equity, by pumping line extensions. Heineken went 'light', Guinness went blonde, Rickards colourful, and Keith's showed a split personality when they got into ciders.

My prediction is that given the consumer's thirst and appetite for 'organic', you will soon see the Mill Street ‘Organic’ label and font sewn to other Labatt brands. Bud Organic – premium organic hops, pure spring water would find an audience.

  • More and Less'.

More sales at less cost. Anything and everything will be done to reduce costs, to take advantage of the efficiencies of being part of a multinational. Heads will be the first to roll but at what point will procurement raise their sword to cut into the quality of ingredients?

Who Will Win With This Acquisition, Mass or My?

Both can.

Labatt/InBev/3G has one line of site, to maximize profitability. They have acquired an extraordinary craft brand, and as they did with Goose Island, they will be successful in expanding distribution, and they won't be shy about finding efficiencies in manufacturing, sales and marketing.

The remaining Craft Breweries can also tap into an opportunity now that Mill Street has lost their Indie cache? If I were a CMO of a Craft Beer, I would commandeer all available resources to target the on-premise accounts where Mill Street has lost premise. I would find ways to engage the Mill Street consumers by becoming part of their life and story. You might see me fast-track my version of an Organic Craft Beer brewed in the world's most environmentally friendly Brew Pubs or maybe repurpose and refit an old grinding 'mill' as a Bread and Breakfast.



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