Why you don’t want to buy Big Beer from InBev

InBevThe US beer market is dominated by AB InBev and rival MillerCoors, which reportedly control about 80 percent of the market.  InBev produces beers like Budweiser, Corona, Stella Artois, Becks, Michelob and others.  MillerCoors produces its Coors and Millers namesakes as well as Blue Moon, Redds, Keystone, Hamms, Milwaukee’s Best, Red Dog, Grolsch, Peroni, Henry Weinhards, George Killian’s, Fosters, Molson,  and a number of other brands.

In stark contrast, independent craft brewers account for 11 percent of the US market—and that’s growing rapidly, even though crafts tend to retail for $8 to $10 per six-pack, versus about $6 for conventional beers. Most distributors sell either InBev or MillerCoors brands as their bread and butter, according to the Wall St. Journal, plus a smattering of independent craft brews. That’s why in supermarkets there are  national craft brews like Sierra Nevada, along with maybe a few local favorites, in addition to the offerings listed above.   InBev bought US beer giant Anheuser-Busch back in 2008, the company accounted for 49 percent of the US beer market, the Wall Street Journal reports. Since then, its US market share has dipped to 45 percent. Since 2005, sales of its big domestic brands like Bud have dropped 5.7 percent, even as craft-beer sales have rocketed up 173.6 percent.

This is important to understand because InBev has recently commenced an effort to force supermarkets to abandon selling craft beers.  According to the Wall St. Journal, distributors whose beer sales are 98 percent InBev brands can get as much as $1.5 million in rebates—as long as they don’t also sell some popular craft brews as well.  This is InBev’s effort to use its still-formidable US market heft to squeeze out those fast-growing craft-beer makers.

For decades, megabrewers like InBev and MillerCoors have utilized exclusive agreements with  independent distributors as a way to distribute its products.  The Wall St. Journal claims:

The world’s largest brewer last month introduced 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, according to two distributors who requested confidentiality because they were asked not to discuss the plan. 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. AB InBev, which introduced the plan at a meeting of distributors in St. Louis, estimates participating distributors would receive an average annual benefit of $200,000 each.

The beer giant reportedly plans to spend about $150 million next year, as part of a “three-year plan to restore growth in AB InBev’s most profitable market,” the United States. 
 And beyond pushing up the percentage of AB InBev products in the mix, the incentive plans place another restriction on the distributors who choose to take advantage of the offers: They can only carry craft brewers that produce less than 15,000 barrels or sell beer only in one state.
 Such a provision would put a hard squeeze on excellent, relatively large craft brewers like San Diego’s Stone, Northern California’s Sierra Nevada, and Colorado’s Oskar Blues. InBev’s new program is already having an impact, theJournal reports.

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.”

Is this legal?  Hard to say.  Currently, the Journal reports, just 38 percent of AB InBev-aligned distributors participate in the company’s incentive programs. InBev “aims to double participation in three years behind the new rewards plan”.  However, as a consumer, we urge you to respond to InBev’s most recent anti-competitive scheme by using your power of the purse — don’t buy InBev products.   There’s no better way to fight monopolistic tactics than to refuse to give that monopolist your money.

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