AB InBev invests $2billion to compete with craft brewers
AB InBev will invest $2billion upgrading and diversifying its US business over the next three years to stay competitive with craft brewers.
The company plans to spend $500million in 2017 alone on enhancements to its distribution, packaging, sustainability and technology.
The investment is designed to help make its beer fresher, save on shipping costs and lower its environmental footprint. It will also be used to expand into new categories, including low-alcohol beverages and other drinks.
The company will create new distribution facilities in Los Angeles and Columbus, Ohio, at a cost of $82 million, to reduce the amount of time between brewing and shipping.
Sales of AB InBev's signature Budweiser brand has been declining over the past three years. Beer as a category has also been losing market share to spirits for seven consecutive years.
CEO João Castro Neves said: "The market continues to be very competitive and much more fragmented. We’re making those investments to cope with all this additional complexity."
IBISWorld analysts noted in a recent report: "The company’s Budweiser, Bud Light, Natural Light and other major brands have struggled to maintain relevance among many US consumers, who have transitioned away from lagers and light American-style pilsners in favor of craft beer styles that have been popularized by U.S. microbreweries. However, the company remains an industry powerhouse and, as a result of its massive economies of scale, continues to yield the highest operating margins in the industry."
Among recent product diversifications by AB InBev include the acquisition of SpikedSeltzer, an alcoholic sparkling water, and a partnership with Starbucks to bottle and sell Teavana teas.
It has also acquired craft breweries, including Goose Island, Blue Point, Elysian, Golden Road, Karbach Brewing Company, Devils Backbone and Wicked Weed.