The proposed merger of the two largest beer companies in the USA and the world, Anheuser-Busch InBev and SABMiller, is getting barrels full of attention. Perhaps too much. Most antitrust experts say the merged company would be required to preserve competition by spinning off SABMiller's American assets, including the Miller and Coors brands.
But in many ways, the proposed merger is the lesser part of Big Beer’s efforts to reduce competition and consumer choice. The larger but less publicized story has been how major producers, particularly Anheuser-Busch, have been trying to thwart the rapid advance of craft breweries, which have grown in recent years to account for 11% of the market.
Both MillerCoors, the domestic brewery 58% owned by SABMiller, and Anheuser-Busch have been snapping up craft brewers. And Anheuser-Busch has bought wholesale distributors that in most states are the sole means for brewers of any size to get their products to market.
In the past few months alone, Anheuser-Busch, which is by far the more aggressive of the two, has snapped up five wholesale distributors in three states. Those states — California, Colorado and New York — not coincidentally rank first, third and fifth, respectively, in craft breweries. The purchases were so unusual that the Justice Department is investigating, according to Reuters.
All of this behavior, but particularly the buying of distributors, shows how big brewers are trying to compensate for their inability to keep up with changing consumer tastes. In previous instances when wholesalers were bought, craft brewers reported a decline in sales, at least until they were able to find alternative distributors.
Big Beer's behavior also shows how the laws governing beer sales need to be reevaluated.
After Prohibition was lifted in 1933, most states adopted a three-tier system of producers, distributors and retail outlets, at least for non-distilled beverages such are beer and wine. The idea worked reasonably well for many years. Over time, however, some of its shortcomings have been exposed.
One is that in small states, it is hard to create much competition or scale in the distribution business. Another is that a handful of states still have laws prohibiting direct sales by breweries to consumers, barring drinkers from tasting samples and buying bottles of what they like, much as they might do at a winery.
But the biggest shortcoming is that loopholes in state laws have allowed breweries to purchase the distributors, defeating the very purpose of the three-tier system. If nothing else, these loopholes need to be plugged.
Along with high-quality wines, organic meat and produce, and a revolution in cooking, the craft beer movement has made American tables and taprooms far more interesting places. Big Beer shouldn't be allowed to drop a keg on it.
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