In a recent post by yours truly concerning the AB-InBev/SABMiller mega merger, I made the argument the acquisition could actually help craft beer. My reasoning was simple. Such a huge merger with all its associated press could cause more people to pay attention to where the beer they are drinking is made. Which could ultimately mean more consumers focusing on locally produced beers.
Sure, that sounds great in theory. But there is one huge way the smallest independent craft brewers can be hurt by the merger. A stronger mega-brewery can put significant pressure onto the distribution tier to focus only on the mega-brewery’s offerings.
Before diving deeper, allow me to first explain the reference to the distribution tier. Almost all beer in the US is sold through the three-tier system. This is simply a system in which a middle-man distributor buys beer from the breweries and sells it to the retailers. (Most every state allows minor exceptions to the three tier system. GA is way, way behind in that regard but that’s another post for another day.)
Why do I believe the mega-brewery will put undue influence on their distributors? Because it has happened in the past. From a CNN article Steve Hindy wrote in 2012: “In the mid-1990s, the CEO of Anheuser-Busch, August Busch III, declared that he wanted “100% share of mind” from his wholesalers. Some Red (Anheuser-Busch) distributors ejected non-Anheuser-Busch brands from their warehouses. Distributors who gave his 100% were given more favorable terms for their purchase of beer.”
We ran into this constantly in the early days of Terrapin. When looking at distributors in new territories, the Anheuser-Busch distributors were not an option for us. 100% Share of Mind was in full effect. But as craft beer became more popular and domestic beer sales continued to slip, many Anheuser-Busch distributors rebelled against the 100% share of mind policy and began to carry craft brands.
Times have changed and today many independent craft brands are distributed by AB-InBev distributors. Many of these distributors are committed to remaining independent. I have talked to more than one AB-InBev distributor who is actively trying to get as many non AB-Inbev brands into their house as possible so they can resist the 100% share of mind push when it comes around again.
An independent system of beer distributors has been key to the success of the craft beer movement to date. Unfortunately AB-InBev has a stated goal of buying their own distributors in the US when possible. There is a real concern that these company owned distributors would be pushed to sell only AB-Inbev brands. Which means that the many independent craft brewers in those houses would be dumped and left to look for other distribution options.
Don’t think it will happen? It is happening. Read this for more details..
Without a system of independent distributors it is doubtful we would see the myriad of choices in the beer aisle we have today. Compare these two pictures. One is representative of an independent three-tier system and one is from a system that allows mega-producers to control the distribution channels. Can you guess which is which?
So to all the craft beer aficionados out there who sometimes complain about beer distributors, please remember this: Independent beer distributors are local business people who provide local jobs and support charities in their local community. And many of them support craft beer. Independent beer distributors are our friend. (As is a system that allows reasonable exceptions to allow smaller brewers easier access to market. More on that next time.)
What are your thoughts?