Saturday, June 4, 2016

Something to Know - 4 June

Matt Davies

Tired of the "NOISE"?.   Trumpy is Grumpy and he's the one who is now screaming.   Hillary seems to have found a way to talk and get the Donny rattled.   Okay, let's fuggetaboutit until Wednesday morning, and get up to date on another subject that fascinates political junkies; Beer.    Most people like beer, and become attached to particular types and brands over time.   However, this beer junkie does not like the corporate brewers who ride rough-shod over the market and mislead consumers and act like gang mobsters in keeping out competition.  I have developed an appreciation for the local craft brewers, and their attempts to stick it to the big guys, but it is getting nasty out there.   We have four craft  breweries in the immediate driving (or bicycling) distance here in Claremont.  Here's how it is going as of this year:

The Opinion Pages | OP-ED CONTRIBUTOR

A Big Merger May Flatten America's Beer Market



ANHEUSER BUSCH-INBEV, the world's largest brewer, recently made headlines by announcing that it would temporarily rename Budweiser, one of its best-selling beers, as America. It's a curious name choice, not only because AB-InBev is based in Belgium, but also because of what the new name stands for: independence.

As Anheuser-Busch InBev looks to finalize a $107 billion merger with SABMiller, the world's second-largest brewer, federal antitrust authorities need to weigh what this means for the growing number of small brewers and independent distributors who are driving the industry. Recent reports say that antitrust authorities are likely to approve the deal by the end of the month. If they do so without adequate protections, the merger could stifle consumer choice and choke off America's beer renaissance.

Today there are more breweries in this country than at any time in history — some 4,300, with scores coming online every year, producing a vast variety of styles, from low-alcohol "lawn mower beers" to high-octane Russian imperial stouts. Thanks to the innovative nature of small start-up breweries, new styles and substyles seem to emerge every day. But state laws usually don't allow brewers to sell their products themselves; instead they have to use distributors, which hold enormous sway over which beers end up at which bars, restaurants and stores.

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.

As federal antitrust authorities consider the proposed merger, they can establish legal guard rails to preserve competition in the beer industry. For example, in 2013, the Department of Justice prohibited Anheuser-Busch InBev from interfering with independent distributors that sold Modelo brands, the fastest-growing Mexican imported beers in the United States, ensuring that Modelo would remain competitive. Now, in 2016, the least the government could do is issue the same provision for America's craft brewers.

Additionally, the Department of Justice should require Anheuser-Busch InBev to sell off or reduce its share in its distribution network. It should also require the company to modify its anticompetitive incentives to distributors to not deliver other brands of beer. Finally, it could investigate ways to limit the number of additional independent breweries that the company can buy.

America's beer drinkers want choice. They want variety. They want quality and authenticity. As an industry, we need to give them that — but we can do so only if the market is a level playing field.

Correction: June 2, 2016 

An earlier version of this article misstated a detail about the Voluntary Anheuser-Busch Incentive for Performance program. It pays distributors on a sliding scale based on the share of Anheuser-Busch products they sell; it does not pay retailers.

Bob Pease is the president and chief executive of the Brewers Association.


Donald Trump aids and abets violence.

- An American Story

No comments:

Post a Comment