When Anheuser-Busch InBev (NYSE: BUD) recently took over independent beer company Blue Point Brewing Co., it marked the latest attempt by a brewing giant to break out of brand lethargy, according to Tom Pirko, managing director of beverage advisory firm Bevmark LLC in Buellton, Calif. Pirko, who has consulted many strategic buyers in the beverage space, says big-name brewers have no choice but to diversify since consumers are opting out of buying premium brands such as Budweiser and Coors Light. These days, they prefer selected imports and local brewery offerings. With the craft beer market gaining even more share, Mergers & Acquisitions spoke with Pirko to discuss what to expect from the frothy beverage sector.

What made Blue Point so important for AB InBev to own?

Beer had become boring. It was the same thing again, again and again. Light beer, big brewers' predominant beer, began to lose favor because of it being so nondescript and relatively insipid. Commercial beer had degenerated into a virtual commodity, with the only differences being silly tinkering with packaging. Blue Point, acquired by AB InBev, has a reputation in Long Island for being innovative and full of personality. If your core brands are thought lifeless and boring by the under-40 crowd, isn't it desirable to tack on something with verve to up your image? Wake up call, AB InBev and MillerCoors!

Why hasn't there been more M&A on the part of AB InBev and MillerCoors?

Even though these mega-brewers understand the need to capitalize on the craft trend, they still haven't reconciled the economics of craft beer. Craft brewers are still individually too small to justify major marketing and sales investments. In addition, we have to figure out how to integrate them effectively into distribution systems without causing chaos. Distributor sales forces quickly tire of missionary work when so few cases may be moved. They need to be reinvigorated with the need to push new labels. But, this is an organic process. Brewers are being required to see the mainline business and crafts as a single business, without overly compartmentalizing. The most successful brands of the future are the craft beers of today. Europe's beer culture is far less consolidated and not as heavily dependent on mass media advertising and promotion. It remains a local business with local consumer loyalties. So it's already "craft" oriented.

How has the marketing of breweries changed?

Evolution is a wrong way of looking at the present situation. It's a revolution. Younger drinkers have transformed the business by demanding flavor and unique images with which they can bond. Social media is driving changes in preferences, especially where the action is-the super-premium, import and craft segments. The new rules for beer are now the same rules we apply in the spirits industry. Marketing is beginning to take stronger precedence over sales and distribution. If it isn't interesting, cool or sexy, it's not going to move.

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