|Brewsearch & Development -
|I just read a preview of the new entry in BeerNexu's He Said/She Said and became angry. I
did a little research and this is what I found. AB-InBev iis using its formidable US market heft
to squeeze out those fast-growing craft-beer makers thanks to the three tiered system. After
Prohibition, the US government sought to limit the market power of brewers by imposing the
system on the industry. It requires that one set of firms would brew beer; another set would
distribute it; and a third would retail it, either in bars or carryout stores. So, in most states,
distributors—the companies that move beer from breweries and stock retail outlets' shelves
and bars' taps and bottle offerings—can't be owned directly by brewers.
To get around that restriction, megabrewers have sought more or less exclusive agreements
with nominally independent distributors. Today, the US beer market is dominated by AB InBev
and rival MillerCoors, which together own about 80 percent of the market. Independent craft
brewers account for 11 percent of the US market—and that's growing rapidly. Most
distributors sell either InBev or MillerCoors brands as their bread and butter plus a
smattering of independent craft brews. So AB InBev has launched w a new plan to reverse
declining volumes" in the US by offering sweet incentives for company-aligned distributors to
restrict sales of craft beers and push more Bud Light and whatnot.
This incentive program could offer some independent distributors in the U.S. annual
reimbursements of as much as $1.5 million if 98% of the beers they sell are AB InBev brands.
Distributors whose sales volumes are 95% made up of AB InBev brands would be eligible to
have the brewer cover as much as half of their contractual marketing support for those
brands, which includes retail promotion and display costs. It is estimated that participating
distributors would receive an average annual benefit of $200,000 each. And beyond pushing
up the percentage of AB InBev products in the mix, the incentive plans place another
restriction on the distributors - they can only carry craft brewers that produce less than
15,000 barrels or sell beer only in one state.
At least one distributor has dropped a craft brewer as a result of the incentive program.
Deschutes Brewery President Michael Lalonde said Grey Eagle Distributing of St. Louis last
week decided it will drop the Oregon brewery behind Mirror Pond Pale Ale because it "had to
make a choice to go with the incentive program or stay with craft."
All of this raises the question: Under US antitrust law, can a giant company legally throw
around its weight like that? The answer may well be yes since the incentive program is
voluntary—that is, distributors are free to decline the extra support and continue stocking as
many craft brands as they want. Currently, t, just 38 percent of AB InBev-aligned distributors
participate in the company's incentive programs. The company aims to double participation in
three years behind the new rewards plan. But don't give up just yet. The government anti-
trust division is looking into this very carefully. I'll keep you posted.
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|Budweiser Gets Me Angry
|To all my readers and friends, I want to thank you for all your support during my time at Nik's
Wunderbar and at the Northside Lounge. I'm moving back to the enviromental/ecological field so
the next time you see me at a pub it will likely be on a stool next to you. I'll continue to write my
column here on BeerNexus giving you my take on what's happening in the beer world with my
insights derived from many years in the industry. Cheers!