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Oakes Weekly - September 25, 2003

Musings on the Big Boys
Oakes Weekly September 24, 2003      
Written by Oakes

Vancouver, CANADA -

Happy Oktoberfest, everyone. Now, I know that the Munich brewers were never the smallest of breweries. But despite their girth, they still represent Bavarian brewing to just about everybody. But like dozens upon dozens of brewers before them, two of Munich’s finest (who were already glued together) have now fallen into the Interbrew fold.

Of course, that’s not new news today, but let’s tally it up now - Lowenbräu, Spaten-Franziskaner, Beck’s, Diebels, Tucher, Dinkel-Acker, Schwaben-Bräu. All our part of the family of "the world’s local brewer". That’s a pretty big chunk of market share for any one brewery in the German market. What I’m not sure of is what they are going to do with Franziskaner and Tucher. It doesn’t make too much sense in promoting competing wheat brands, but what else to Tucher do? I know they do other beers, but the wheats are what they’re known for. Franziskaner is universally considered the better brewer of wheats, but one has to worry about the future of these products.

What’s next for Interbrew? Well, more acquisitions of course. I don’t think they’re done with Germany, either. They’ve got all the global brand pop they need in Beck’s and Spaten, but the other reason they do these deals is to gain distribution channels. And in Germany I think that will mean another couple of breweries to get a more national presence. They’ll be looking at anyone with a good presence in Berlin, and probably someone else in the north as well.

Note: If you want to scare yourself, do a brewery search under Interbrew.

Interbrew has had a lot of success leveraging its Alexander Keith’s brand in Canada. This has gone under their watch from a regional dominance in Nova Scotia to being a huge national player in the specialty market. Specialty? Sounds odd to anyone who’s ever had the stuff, but it’s true. They’ve gobbled up a lot of market share from macros, imports and yes, some of the micros. Molson has attempted to build the Rickard’s brand in a similar fashion, but with far less success. (Although it is still alarming how many people think these bargain-basement, mass-produced products are actually micros, but that’s a rant unto itself and I’m trying not to rant today).

So where does this leave Molson? Well, rumours are that members of the family (who still retain controlling interest in the brewery) are looking to sell. They’ve denied this of course, since nothing is a done deal, but it makes sense. The company wants to be a big international player. Well, they’re not. They have some US presence, which makes them attractive to companies who want to boost market share there. They are big in Canada, but faltering and their lack of focus on such strategies as building out Rickard’s and making Export their coast-to-coast flagship brand is revealing just the kind of vulnerabilities potential suitors like to see. Moreover, they have a strong Brazilian presence and have successfully launched A Marca Bavaria (a re-badge of one of their Brazilian brands) in Canada. That combination of weakness and success looks good to someone seeking acquisition. Plus, Molson is dreaming if they think they can bang with SABMiller, Carlsberg and Heineken. So what wouldn’t surprise me - Heineken increases their interest in Molson. These guys are in bed in other areas and I’m not sold on a full-on takeover occurring just yet as Molson still thinks they’re in the big leagues, but rest assured once they call in their big friend to help them the ending is inevitable.

Back to SABMiller for a moment. Pilsner Urquell is brewed in Poland and Russia now. I haven’t had the pleasure but one has to wonder just how far this brand will decline. First, those Saaz hops are inevitably fresher in Bohemia than anywhere else. That doesn’t mean you can’t make killer pilsner with them (see Victory Prima Pils) but it doesn’t help. But watch where your Urquell comes from - if costs are cheaper outside the Czech Republic, SABMiller has no qualms about misleading consumers (they’ll no doubt put their spin on it, but consumers are dolts and won’t read the fine print to realize that PU is no longer Czech). Just think - if Interbrew decides they like this plan, you’ll be drinking Hoegaarden and Spaten made fresh in Toronto. Hey, at least then maybe I’d be able to find a beer called "Spaten" on my shelves.



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start quote The company wants to be a big international player. Well, they're not. end quote