Overcapacity Hits Big Beer
Not that long ago, the United States drank 200 million barrels of beer, and Anheuser-Busch made half of it. In order to meet demand and ensure their beer was arriving in stores fresh, the company meticulously planted breweries all around the country—twelve of them in all. Well, now the US drinks about 170 million barrels, but 23 million of that is craft, and 41 million is imported. So:
“Anheuser-Busch is selling its decades-old New Jersey brewery and is closing two others in California and New Hampshire as part of a broader strategy to optimize production. The Anheuser-Busch brewery in Newark, New Jersey, which opened in 1951 and is one of the company’s longest-running facilities, will be sold to the Goodman Group in 2026. Its Fairfield, California, and Merrimack, New Hampshire, facilities will close in early 2026.”
Trying to put a positive spin on this news, a spokesperson told the reporter that this was a way “to invest even more in our remaining operations and in our portfolio of growing, industry-leading brands." Whether the Fox reporter followed up with “then why are you shutting down 25% of your breweries?” the article does not reveal.
Brewing capacity is one of those background concerns that rarely pierces the consciousness of the consumer, but it’s a big deal. That is true at the level of the individual brewery and the industry as a whole. Further, it’s one of those delicate-balance situations in which getting it wrong in either directions is bad for the individual brewery. At a macro level, overcapacity normally drives prices down, which is always hard on producers. It’s especially bad for breweries right now, which face a host of financial challenges. Craft and big beer function largely in separate realms, though, and it’s seemed like big beer has been able to replace lost beer volumes with flavored-malt beverages and the like. This news suggests otherwise.
Further, for anyone who has followed the beer industry over the past fifty years or so, this is a shocking development for a financial and logistical juggernaut.
As Anheuser-Busch started its growth spurt midway through the previous century, it organized in a way that was light years more sophisticated than most of its peers. The company created an amazing, integrated system that started with ingredient sourcing, continued to the brewing process, with proliferating regional brewhouses that could service local markets, and included the most integrated distribution system in the U.S. Their ad and marketing budget was bigger than some countries (no, I didn’t actually check this “fact”), and Bud and Bud Light logos became the wallpaper to our lives.
On the brewing side, it was a tremendous operation. I learned about this in a visit to St Louis in 2013. Worried that the separate brewhouses would begin to develop a house character, each week the flagship brewhouse in St Louis sent out kegs of fresh yeast to each of the satellite breweries. They contracted thousands of acres of hops. I don’t recall offhand how they sourced their malt, although I’m certain they had complete control over that process—but I do remember learning that they used two different sources and types of rice, which meant added complexity in terms of consistency. No matter—AB made it work They even had a reliable source for their famous beechwood staves. Every week, St Louis received samples of beer from each North American brewery (another eight serviced Canada) and their extremely talented in-house tasters did a blind tasting of all 20 plants to ensure that the beer all tasted the same.
As craft beer was starting to gain in popularity, it promoted a narrative that the big breweries cut corners to same money, while the little breweries caressed their ales, using the finest ingredients and traditional methods. But if you happened to talk to a brewer familiar with an AB plant, they would tell you in hushed tones what an incredible system it was. People in the know would tell you without reservation that no brewery in the world had a bigger commitment to quality than AB.
Anheuser-Busch felt it needed to take all these steps to become the continent’s king, and they could afford to do so because they were selling half the beer Americans drank. For decades, it made Anheuser-Busch a battleship immune to competition—no one had the time or money to invest in a structure that could challenge them. A central element in the Bud approach were these individual breweries, which simultaneously boosted quality and, thanks to proximity, lowered costs. So the fact that the company is shuttering a quarter of its American plants is a pretty big concession to a changed world.
If you wanted an important data point about not just where American beer consumption is, but where it’s headed, you could do a lot worse than watching where Anheuser-Busch is putting its money. The fact that they’re being forced to dissemble part of the battleship is truly a sign of the times.