Will Anheuser-Busch InBev Now Dominate Craft-Beer Brewpubs?

By Rich Duprey Markets Fool.com

Anheuser-Busch InBev (NYSE: BUD) has tried everything to assert itself in the craft-beer industry. First it launched its Shock Top brand of craft-y beer, then it started buying up craft brewers, followed by acquiring distributors and demanding others carry only its brands of beer. It even bought the two biggest suppliers to the homebrew market, the seeding ground for future craft brewers.

Continue Reading Below

Its latest venture is just another step in its efforts to dominate craft beer as it does mass-brewed suds: It's now opening craft-beer brewpubs.

Image source: Getty Images.

On the house

On Dec. 16, Anheuser-Busch's first Goose Island Vintage Ale House opened its doors in London and the brewer plans on opening a string of the craft-beer-inspired pubs based on the Goose Island brand, which itself began as a brewpub on Chicago's North Side in 1988.

In 2011, A-B InBev acquired Goose Island from Craft Brew Alliance (NASDAQ: BREW), which had a 42% stake in the brand, for $39 million. In a way, A-B was already invested in the small craft brewer because it owns 32% of Craft Brew Alliance, but Goose Island was also the first craft brewery the megabrewer purchased outright. From there, it has made about a dozen other acquisitions, including Blue Point Brewing, 10 Barrel Brewing, Elysian Brewing, and Breckenridge Brewery.

Continue Reading Below

Anheuser-Busch's acquisition also sparked a frenzy of craft-beer buyouts by bigger brewers. Heineken bought half of Lagunitas in 2014; Constellation Brands paid $1 billion for Ballast Point Brewing last year; MillerCoors owns a portfolio of craft-y beers, including Blue Moon; and a private equity firm recently bought a stake in Dogfish Head Craft Brewery.

Pub crawl

The brewpub formula is something different, though -- a completely new direction to cash in on craft beer's popularity. It's not that Anheuser-Busch doesn't own or hasn't operated pubs in the U.S. or in the past. As noted, Goose Island operated brewpubs when it was acquired, and A-B opened one this past June at the Hard Rock Hotel & Casino in Las Vegas. It also intends to open a pub in Philadelphia next summer. In addition, Anheuser-Busch runs several dozen Belgian Beer Cafes.

Image source: Getty Images.

What makes this latest initiative noteworthy is that Anheuser-Busch is launching the pub in London with plans to expand elsewhere in Europe. Compared to the U.S., where the craft-beer industry has matured significantly over the past 20 years, despite its relative small size in relation to mass-produced beer, the craft-beer movement in Europe is still in its infancy.

Well, not quite: The beer market there is different than in the U.S. For example, there are more than 1,500 beers in Belgium, the home of Anheuser-Busch InBev; Belgium reportedly has more breweries per person than any other country, as well as more than half of the world's Trappist monastery breweries. Regional beers are also important in the country. The Belgian beer industry as a whole could probably be described as "craft," while Germany's beer-purity law, the Reinheitsgebot, imposes a near-craft-beer requirement on German brewers that make them more artisans than anything else.

Image source: Goose Island Beer Company.

Crafting global growth

Yet according to the Brewers Association, the trade group representing the American craft-beer industry, craft-beer export volumes increased more than 16% in 2015; exports hit 446,151 barrels and $116 million, with Western Europe witnessing a 33.4% increase.

So it makes sense for Anheuser-Busch InBev to target Europe for expansion for its brewpubs, as opposed to the U.S., where there are more than 5,000 breweries in operation -- 99% of which are craft brewers -- and 1,650 brewpubs as of last year.

A-B's Goose Island pub in London will offer the brand's various barrel-aged beers along with an American smokehouse-style menu, which makes it a decidedly American-flavored effort that capitalizes on the growing popularity of U.S. craft beers. It's easy to see how Anheuser-Busch could replicate the model here and become totally vertically integrated: from the brewing and distribution of the beer, to serving it in its own alehouses that allow it to own the craft-beer market.

10 stocks we like better than Anheuser-Busch InBev NV
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Anheuser-Busch InBev NV wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of Nov. 7, 2016

Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Anheuser-Busch InBev NV. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.