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SABMiller plc’s Crafty Meantime Move Holds Lessons for Diageo plc And Compass Group plc

Global food and drinks giants have been slow to wake up to the challenge posed by the craft food and revolution, but the message has seeped through to SABMiller (LSE: SAB).

SABMiller has grown into the world’s second-biggest brewer by investing in mass market brands such as Pilsner Urquell, Peroni Nastro Azzurro and Miller Genuine Draft, but now it faces some tasty competition.

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Now it has just splashed out on London’s Meantime Brewing Company, in a belated bid to hop on board the craft beer bandwagon.

Craft beer is by far the fastest-growing part of the beer market, with Meantime boosting production by 58% last year.

By comparison, the overall UK beer market grew by just 1%.

Slow Food, Fast Growth

Craft beer is trendy right now, it goes down nicely with a hipster beard, but it is also part of a wider move towards locally sourced food with natural ingredients made by companies people can identify with and trust.

I have written before that this poses a challenge for global megaliths such as Unilever, which has a large portfolio of processed food, and it is also a threat to Diageo (LSE: DGE) and Compass Group (LSE: CPG).

To be fair, it is a threat that both recognise and are working hard to counter.

Diageo chief Ivan Menezes has been pursuing a premium brands strategy for several years, recognising that consumers increasingly thirst for quality, luxury and ultra-premium vodkas.

Its strategy has been knocked off course by the emerging market slowdown and Chinese anti-corruption drive, which called time on the practice of giving premium spirits as gifts to public officials.

But focusing on aspirational brands has arguably helped Diageo maintain strong sales in its key US market.

Finding Its Way

Your average foodie will turn their nose up at contract catering, but Compass Group has made a public commitment to producing healthy, delicious and sustainable food.

It won positive publicity for its Imperfectly Delicious campaign, which aims to encourage people to eat crooked carrots and cauliflowers, which all too often end up on the compost heap.

Compass also knows it can’t serve second-rate grub to one of its main markets, oil services and mining workers in remote locations, who don’t want to add boring food to their list of privations.

Unfortunately, falling oil and commodity prices have hit demand, as companies lay off workers, but Compass still put in a solid recent performance, and its share price is 13% in the last year.

SABMiller, Diageo and Compass Group are following the foodie revolution rather than leading it, and there is a risk they could get left behind. You can’t buy authenticity. 

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