The world's largest brewer, Anheuser Busch InBev
Anheusner Busch InBev's recent acquisition will jeopardize the livelihood of the very forces revolutionizing America's beer industry: small brewers and independent distributors.
Historically, antitrust authorities have heavily policed deals between corporate behemoths, such as Microsoft and AT&T, to prevent the solidification of monopoly power. Such power magnifies what economists call "barriers-to-entry." In short, when a Microsoft or AT&T gain more control their respective markets, it's more difficult for smaller firms and entrepreneurs to enter the industry and compete. Unfortunately, according to Bob Pease, President and CEO of the Brewers Association, this blockbuster deal between the world's most dominant beer superpowers will be approved by the end of June.
Bad news, indeed, for America's 4000+ independent brewers and distributors. Unlike corporate beer companies, who cripple innovation, small startup breweries are providing beer lovers with a vast array of styles, sub styles and flavors. The list goes on and on, from "low-alcohol 'lawn mower beers' to high-octane Russian imperial stout."
Problem is, most states prohibit breweries from independently selling their products, and instead force them to go through an official beer distributor. As one could image, these distributors largely impact what beers end up at bars, restaurants, and other venues.
Once again, startup breweries are a dealt a bad hand by corporate power -- Anheusner Busch InBev is also the biggest beer distributor in the US. Now, most markets only have one or two distributors, and naturally, Anheusner Busch InBev shamelessly distributes its own product. Making matters worse, Anheusner Busch InBev recently purchased five independent distributors, tightening its grasp on the beer-distribution industry. For small craft brands looking to compete, the going just got even rougher-- markets will now be more flooded with Anheusner Busch InBev products.
In addition to controlling 45% of US beer market, Anheusner Busch InBev also incentivises independent distributors to sell its own products and forgo craft beers. Recently, the Voluntary Anheuser-Busch Incentive for Performance program was introduced, which pays distributors on a sliding scale based on the quantity of the Anheuser-Busch sold.
The logic here is simple-- if independent distributors push Anheuser-Busch products, they make more money. If the independent distributors opt to push craft beer, they incur an opportunity cost equal to the bonus Anheuser-Busch is willing to shell out. For independent distributors looking to survive, it's clearly in their best interest to sell Anheuser-Busch products. The collateral damage? Small, independent breweries trying to compete with corporate superpowers. Not much of a fair match.
Since merging with SABMIller, Anheuser-Busch has bought out several small brewers to remove them from the marketplace. This includes California's Golden Road, Arizona's Four Peaks, Colorado's Breckenridge, Virginia's Devil's Backbone, Chicago's Goose Island, Oregon's Ten Barrel, Washington's Elysian, and Michigan's Virtue Cider.
In light of this merger, Anheuser-Busch-- now with projected annual revenue in the $60 billion range-- will control 29% + of the global beer market. With this sort of market power, Anheusner Busch InBev's lobbying power over the production and distribution aspects of the beer market is multiplied. More distributors will be incentivized to carry Anheusner Busch InBev, more smaller breweries will be bought up, and more retailers will cut back on craft brews.
It's a disheartening day for mom-and-pop breweries in the United States, to say the least.
