AB InBev, the world’s largest beer company with over 500 beer brands in more than 150 countries, announced that it would be acquiring the organic energy drink company, Hiball Inc. This deal is expected to close in the third quarter of this year, and is Ab InBev’s most recent effort to expand beyond beer, according to a recent Advertising Age article.
Hiball is a small San Francisco company with only 20 employees, and is known for its healthy alternative to mainstream energy drinks. Its products include organic energy drinks, sugar-free sparkling energy waters, cold brew coffees, high protein energy drinks, and its Alta Palla brand of sparkling juices and waters. This acquisition by AB InBev seems not only a move towards diversification with non-alcoholic beverages, but also towards the natural and healthier beverage market.
This isn’t Ab InBev’s first move into the non-alcoholic beverage segment. In summer of 2016, the company partnered with Starbucks to produce, bottle, and distribute the coffee giant’s first ready-to-drink bottled Teavana teas, according to a Fortune article. This was AB InBev’s first move into the tea and larger non-alcoholic beverage markets in the U.S. These ready-to-drink Teavana craft iced teas began being sold in grocery and convenience stores in select markets in February of this year, according to the Advertising Age article. This was a wise first move for Ab InBev, as it contributes its beverage production and distribution expertise, as well as its long-standing relationships with more than 500 wholesalers and retailers across the U.S., while Starbucks brings Teavana’s knowledge of Teas, and retail activation and consumer engagement expertise to the partnership.
The acquisition of Hiball also isn’t AB InBev’s first move along the organic/natural beverages trend either. In 2015, for instance, Ab InBev acquired Mill Street Brewery, Canada’s largest organic beer producer, according to a St. Louis Business Journal article. While still a beer company, the 2015 acquisition shows AB InBev’s budding interest in healthier beverages. This month’s announcement of Hiball’s acquisition is in line with this idea, as it aims to make healthy beverages, with the use of organic and fair-trade ingredients, including vitamins, guarana, ginseng, and caffeine.
As overall beer sales have slowed in the last few years, AB InBev is expanding its non-alcoholic portfolio, and is doing so with ready-to-drink tea, and now energy and sparkling waters. This is a strategic move, as these three non-alcoholic beverage segments – tea, energy drinks, and sparkling waters – are currently the fastest-growing, according to Brewbound, at 7 percent, 4 percent, and 16 percent sales increases, respectively, during the 52-week period ending May 14.
From a marketing management perspective, here are some questions to consider:
- Do you think Ab InBev’s expansion into the non-alcoholic beverage segment threatens its core alcoholic products (beer)? Why or why not?
- Propose another strategy AB InBev could employ to deal with the slump in beer sales.
- Why do you think Ab InBev might’ve chosen to acquire such a small company, especially having partnered with a large company like Starbucks in the past?