Anheuser-Busch InBev is the biggest brewing company in the world, but it has a problem it can’t shake.
While Bud Light accounts for at least 1 out of every 6 beers sold in America, sales of its flagship beers have been slumping: between 2010 and 2016, the value of Budweiser sales fell 17 percent and Bud Light sales slipped 14 percent, according to alcohol market analyst IWSR. Through most of that period, craft-beer sales grew at a double-digit clip.
Back in 2011, when there were half as many American breweries as there are now, AB InBev responded to surging craft-beer popularity by purchasing Chicago’s Goose Island for $38.8 million. In the process, it loudly announced a new strategy: “If you can’t beat ‘em, buy ‘em.” Six years and one $100 billion merger with SABMiller later, AB InBev controls nine more formerly independent craft breweries, from Seattle’s Elysian to Virginia’s Devils Backbone.
But as sales of hoppy IPAs continue to surge, and sales of Light (and Lite) macrobrews continue to drop, AB InBev is recalibrating its approach. Rather than buying up as many craft-beer producers as it can, it’s using its vast resources to buy data – tons of it – through a little-known division called ZX Ventures.
Launched in 2015, ZX Ventures is charged with “disrupting” the beer industry by developing and investing in businesses that will provide value and improve user experiences – and make more money for AB InBev – somewhere down the road. They’ve invested in e-commerce delivery systems, beer-rating applications and home-brew suppliers, all of which provide data points that can tell them about trends and help them get ahead of the market.
Over the years, as AB InBev absorbed Elysian, Devils Backbone and North Carolina’s Wicked Weed, the backlash to the announcement has become formulaic: The craft brewery announces that nothing will change despite the new ownership. Fans get angry, call the owners traitors and sellouts, and swear they’ll never drink the beer again.
But as a result of AB InBev’s 2016 merger with SABMiller, snapping up small brewers has become harder. The U.S. Justice Department’s settlement prohibits AB InBev from acquiring any craft brewer “without allowing for department review of the acquisition’s likely competitive effects.”
So where are the growth opportunities? That’s where ZX Ventures comes in. According to its mission statement, “ZX Ventures is hopelessly dedicated to creating and analyzing the data necessary for determining our ideal strategies, products and technologies. We believe that the more we know and learn about our consumers and products, the better chance we have of anticipating their needs in the future.”
Translation: They want to know everything about purchasing patterns and decisions. What are customers looking for? What are influencers thinking? How can they make it easier to get AB InBev’s products into the hands of people who might want beer?
ZX Ventures’ broad portfolio includes last year’s purchase of Northern Brewer Homebrew Supply and Midwest Supplies, two of the largest home-brewing businesses in the country. It also has a minority stake in PicoBrew, the countertop home-brewing system that uses Keuriglike “PicoPacks” to make beer in a certain style or mimic the recipe of an existing brand.
In October 2016, ZX Ventures purchased a minority interest in RateBeer, a 17-year-old international beer-rating site that has grown to become one of the largest online databases of crowdsourced beer, brewery and bar rankings in the world. But neither RateBeer nor ZX Ventures publicized the deal until June 2017, when beer website Good Beer Hunting published a story about the move. ZX Ventures did not respond to requests for comment for this article.
Some beer lovers feared that AB InBev would try to goose its notoriously bad ratings on the site – 10 of the “top” 20 slots on the “Worst Beer in the World” list are AB InBev products, including Natural Light at No. 1 and Natural Ice at No. 2 – or get preferential placement for reviews, which seems silly: RateBeer’s audience, which gives its highest praise to imperial IPAs or rare Belgian beers, probably isn’t looking for Bud Light Chelada. What seems more likely is that the ZX Ventures team is interested in access to a large number of data points: The most popular and trending beers, styles and search terms in any region around the world.
Are more people giving high ratings to saisons in London than Los Angeles? Are Bavarians searching for IPAs available to them? What are the most highly rated beer bars in the Southeast? Which beer styles have grown the most in the past year, in terms of average ratings or the number of searches, and where?
If certain cities are rating sour beers higher than the norm, for example, Elysian’s sour pineapple seasonal or a new wild saison from Wicked Weed could be given extra promotional play in those markets.
Strangely, compared to AB InBev’s purchases of breweries and home-brew suppliers, there hasn’t been much blowback about the RateBeer purchase from the American beer community. There were about 50 requests for account removals immediately after the acquisition was made public, says Joe Turner, the founder of RateBeer, but in August, “we set all-time records for total ratings and unique users, and our unique users were up about 100 percent year-to-year.”
This doesn’t surprise Kate Bernot, a writer for the Takeout and former beer editor at Draft Magazine. “I always got the impression they were the older, quirkier beer drinkers,” she says. “It was always the real dorks’ rating site. Their reviews and descriptions always sounded higher caliber than Untappd or Beer Advocate.”
And when users have spent years compiling hundreds or thousands of reviews of local Pilseners or imported IPAs, and forged a community in RateBeer’s user forums, they might find it hard to quit. “Are people so used to giving up information on the Internet that this didn’t rattle them, probably because you sort of expect your online info to be exploited?” Bernot asks. “If I was a RateBeer user and I had data there, I’d think that’s just part and parcel of using Internet services.”
For a look at the future, where e-commerce meets data wholly within an AB InBev ecosystem, turn to Brazil, AB InBev’s second-largest market after the United States. After a long day on the beach, a thirsty Brazilian can fire up Ze, a service that promises one-hour beer delivery in 10 major cities, including Sao Paulo and Rio de Janeiro. (ZX is also an investor in Starship Technologies robotic delivery service.) When the bottles are empty, the drinker can go to an app called BeHoppy, which helps find, log and rate craft beers, similar to the popular American app Untappd. It can even display information about a beer if the user takes a picture of the label. (Shockingly, the photos in the iTunes App Store show photos of Goose Island’s Four Stars Pils and Shock Top.)
RateBeer could help to create a similar experience in Europe, where ZX Ventures has acquired Beer Hawk, a UK-based online craft beer retailer, and Saveur Biere, the leading French online craft shop. Both increasingly sell AB InBev products, but also offer the AB InBev researchers plenty of data to consider.
Unfortunately for ZX Ventures, most of these foreign business models are unlikely to take hold in the United States. Marc Sorini, a veteran lawyer who heads the Alcohol Regulatory & Distribution Group at McDermott Will & Emery, an international law firm in D.C., says it’s due to the three-tier system of alcohol in this country, which separates breweries from means of distribution and consumer sales to prevent monopolies.
“Under ‘tied-house’ and related laws in place in almost all U.S. jurisdictions, ABI could not own an off-premise retainer – on-line or otherwise,” Sorini wrote in an email. “While some specific exemptions to the tied-house laws exist in almost every state, existing laws in many states would prohibit ABI – either directly or indirectly – holding an ownership interest in an off-premise retailer capable of delivering beer to consumers.”
If e-commerce is off the table, then the most important way for AB InBev to make money in an increasingly crowded marketplace is to get the right beer in front of the right customers at the right time. And right now, the world’s biggest brewer is tapping into a steady flow of data that can help it do just that.