We are going to change it up a little week and talk about some beer politics going on right now involving Anheuser-Busch-InBev, Craft Breweries and Beer Distributors. First let me give you a little back ground on how beer makes it to your local beer distributor, grocery stores, gas stations and restaurants. Before beer gets to you, the consumer it travels through a three tiered system consisting of the brewers, the distributors and the retailers. What does this mean though?
It means generally breweries will sell their beer to a distributor, that distributor will sell the beer to retailers (grocery stores, restaurants etc.). This is especially important when beers are traveling across state-lines. There are nearly 3,300 licensed beer distributors across the US making over 13,000 labels available to all of the us, the consumer. There are exceptions where breweries will sell beer directly from the brewery to consumers and restaurants, but the above is the general rule of thumb.
Now it shouldn’t surprise anyone that the highest selling brewer in the country is Anheuser-Busch-InBev, makers of the popular Budweiser, Busch, Stella, and Corona brands. These are only a small subset of their portfolio, but make up a large chunk of the beer sales across the United States and the world as a whole. The recent surge in craft beer over the last two decades has made a small dent in AB-InBev’s bottom-line, but it has been enough for them to take notice. Over the last few years, they have purchased a number popular craft breweries including Goose Island, Blue Point, Elysian and most recently Breckenridge. Budweiser also launched this distasteful ad attacking craft beer during the 2015 Super Bowl.
Now, I could go on a giant tangent about this terrible ad and how most craft brewers are actually the ones brewing the hard way; putting in longer hours and spending their life savings to follow their dreams, but we can save that until after the Super Bowl when they will probably launch another ad like this.
AB-InBev’s strong sales gives them a lot of pull with the distributors and I didn’t even mention the fact that they own many distributors themselves. AB-InBev’s latest strategy to curb the surge in craft beer is to use their leverage with distributors to push out craft beer brands not owned by AB-InBev. The strategy, introduced in November, is a new incentive program that 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. If 95% of the beers they sell are AB-InBev brands, they would be eligible to have the AB brewery cover as much as half of their contractual marketing support for those brands, which includes retail promotion and display costs. Of course, in order to get to this number the distributors would have to cut ties with other brands. Many craft brewers fear the program encourages AB-InBev distributors around the country to drop competing brewers and discourages them from stocking new brewers. AB-InBev has skirted around this by saying the the program is completely voluntary and they aren’t forcing any distributors into it. They also said the they can qualify for the program if the craft brewery they are selling only produces 15,000 barrels or only sells in one state; meaning they don’t care about the little guys. However, Some of the larger craft breweries around the country produce well over that limit though including popular craft brands like Boston Beer Co, Stone, Bell, Sierra Nevada and Dogfish Head. These are some of the breweries which really believe in the craft beer industry pouring cash into support of craft beer. Things like Sierra Nevada’s Beer Camp Series brought smaller breweries to markets they can’t typically reach and Dogfish’s Sam Calagione‘s Brew Master TV series shows the endless possibilities of craft beer on TV. The true aim is to stop the surge of craft beer sales which have grown nearly 200% in the last 10 years and doesn’t appear to be slowing down anytime soon. It is for this reason that AB-InBev is using shady tactics to slow down the surge. Time will tell if this incentive program draws a Justice Department investigation like Anheuser-Busch’s “100% Share of Mind”program 1997, but let’s hope it does.
I personally don’t know how much of an affect this incentive program will have on the craft brewing industry, but my guess is not much. Craft Breweries are popping up all over the United States on a daily basis as the demand for craft beer continues to grow. Restaurants and bars are being pressed by their customer base to increase the variety of craft beer they carry. At the end of the day, the only thing that will truly stop the surge of the growing craft beer demand in this country is the consumers and right now they are looking to get their hands on as much craft beer that is available to them. Regardless of this fact, AB-InBev is already drawing ire from the craft beer community with some BrewPubs completely dropping AB-InBev brands. Because I see it as a shady business tactic and you will not see me review any beers from breweries owned by AB-InBev. The next post will probably jump back into a new beer review, but hope this little peak into beer politics didn’t bore you too much.