Mergers and Microbrews
The likely merger between Anheuser-Busch InBev and SABMiller to create what should be called Omnibrewery is making some worried that the macros will effectively drive the small microbreweries out of the market by controlling shelf space for the microbreweries like Elysian and Goose Island they buy up.
The problem is that, along with being the world’s largest brewer, Anheuser-Busch InBev is also the biggest beer distributor in the United States. And in several states, the law allows the company to distribute its own beer — and most markets have only one or two distributors. The company has also recently increased its control over the beer-distribution industry by purchasing five independent distributors (acquisitions that prompted a Department of Justice inquiry last fall). That means that Anheuser-Busch InBev can focus on building its own brands while effectively, and legally, shutting out competing craft brands.
The company, which already controls 45 percent of the domestic beer market, also encourages independent distributors to focus on selling its brands over craft brands. The company recently introduced its Voluntary Anheuser-Busch Incentive for Performance program, which pays distributors on a sliding scale based on the share of its beers they sell — which means that if they sell craft beers, they lose money (the Department of Justice is examining this program as well).
Distribution isn’t the only front in Anheuser-Busch InBev’s war on the small brewers represented by my organization. Since its merger with SABMiller was announced, the company has bought several well-regarded craft brewers around the country, including California’s Golden Road, Arizona’s Four Peaks, Colorado’s Breckenridge and Virginia’s Devil’s Backbone. These takeovers were preceded by the acquisition of Chicago’s Goose Island, Oregon’s Ten Barrel, Washington’s Elysian and Michigan’s Virtue Cider.
A merger between the world’s two largest brewers would give the new global corporation, with an estimated $64 billion in annual revenue and control over an astounding 29 percent of the global beer market, an even greater ability to hobble its competitors, at both the production and distribution levels. The enlarged Anheuser-Busch InBev will have more influence over which brands distributors carry, making it harder for smaller companies to get their products onto store shelves. It will have even more power to strong-arm independent distributors not to carry rival brands and exert pressure on retailers to cut back on, or even refuse to carry, competitive brands. And it will have more resources to buy up smaller breweries as they start to feel squeezed out of the marketplace.
I have conflicted feelings here but in the end I’m not freaking out about this. Ultimately, the goal is to have good beer available to consumers. To some extent, the microbrewery purchases will help that happen. I like Elysian and 10 Barrel and I would like it available to me here in Rhode Island. Elysian is just entering the market. Given that Rhode Island breweries are uniformly mediocre to awful except for tiny Proclamation, this improves my life. On the other, local experimentation and production is a great thing and we want to encourage this, right? Part of the microbrew culture is about trying new things and as much as they macros want to monopolize the market, they can’t kill this spirit. It’s true they could easily convince the average beer buyer who has just started getting interested in microbreweries to try some Goose Island 312 instead of something local, but that person is likely to move on from the 312 if they really enjoy microbreweries and if they don’t, they probably wouldn’t have experimented that much anyway. Don’t get me wrong. Monopoly is a bad thing. But beer is just about the nation’s only industry where thousands of local products have threatened to upend a previously nearly iron-clad monopoly. It’s hardly surprising that a new round of consolidation would happen to try and retake control. I just don’t think it will work, at least not that effectively. The Kroger and Safeway might not have local products, but the local liquor store sure will.
In related beer news, New Belgium is finally coming to Rhode Island this week. Mostly that improves my life. On the other hand, every bar will now have Fat Tire on tap and everyone will claim it’s the greatest beer in the world for the next five years until everyone realizes it is terrible.