I thought this was pretty interesting.
Really good read
Yep…good for anyone who doubts the effects Ab is having on the industry.
Thanks for posting that link.
Here’s an astonishing (in present light) quote from Michael Jackson, circa 1988, discussing AB’s insistence on kräusening, the use of chips, and whole-cone hops, when the industry had largely abandoned these practices:
“Perhaps Budweiser’s sales offer reason enough to pursue troublesome methods … The procedures used … also arise from the company’s corporate culture. So long as a brewery, however large, is run by someone who has grown up in the industry, rather than a journeyman cost-accountant or a marketing sorcerer, it is likely to have some such rules of procedure.”
Wow.
The Steal This Beer podcast episode with Gene and Os from talkbeer goes into an interesting discussion about the acquisitions and why all of this makes sense when it seems so clearly like the driver is asleep at the wheel.
The short of what the host (Augie Carton) argues is that the share price for AB Inbev is based around the valuation of Bud/Bud Light as a premium brand. If there are craft beers selling at $20/bottle that’s a higher valuation than the Bud products. So they can buy out a brewery in that space, produce an enormous volume and not just lower the product’s price but lower the value per ounce of beer across that entire style. You can see that with BCBS and BA stouts, Wicked Weed and sours, etc.
I’m not entirely convinced that’s true but it is an interesting theory. I do think it is partially true to the extent that protecting Bud is the number one priority and having beers selling at a greater premium was a problem to deal with; however, a lot of that also appears to be a desire to diversify and then conform craft breweries to the Bud production/sales method not the other way around. After all, both AB and Inbev have long been in the business of brewery acquisition.
I read somewhere a year or two ago that AB-InBev is interested in selling beer to the big retailers: chain restaurants and big box stores. They are building a brand portfolio that allows those retailer’s buyers (or whatever position chooses what to carry) to only have to deal with one brewery or less breweries.
I am not sure how this fits with the 3 tier system, but, it seems to make some since.
One distributor, more like.
I don’t care about AB-InBev. It seems the people in charge care more about a quick buck than their products, and that never ends well, even if you are the top dog.
Distributors, however, ARE the problem. I’ve got hearsay evidence of several in my area engaging in “pay to play”, where stores don’t get allocations from local distilleries/breweries unless they sell x much of y product. (I can’t get spirits from the local distillery, but it’s widely available up in DC, where it’s hailed as “local”.) EVERYTHING local is stale, BMC, Craft, it’s all stale or very close to it. Just last week I say 4 month old Miller High Life, and SNPA bottled back laster SEPTEMBER. Again, I’ve heard rumors from shopkeepers that they think the distributors are pulling old merch from their “favored” shops up in DC (where prices, and profits, are higher) and selling it off down here.
If you love craft beer, or even free market beer no matter the size of the brewery, you owe it to look into the recent mess Maryland has found itself in. The distributors, not “Big Beer”, are the ones controlling the politicians, and they do not have the well-being of the consumer in mind.
This theory is kind of insane accounting/business math. Unfortunately, it’s probably true to some degree. I believe the bit about valuation based on bud as a premium product. The second part seems a little crazy to me though.
This is the part of it that makes me mad as well… but the way I understand it (and I could be wrong) is that AB InBev also owns a lot of the distributors, so they are still the ones pulling the strings. We have two distributors here in Portland that both carry Bud products. Columbia Distributing and Maletis. They market different areas, one has C-stores and one has grocery stores or something like that and according to the articles I read, Maletis is owned/got bought by InBev, but Columbia still has rights to distribute InBev to certain channels. A smaller distro just recently got bought and absorbed by Columbia, so things are a little sketchy around here too. Some aspects of “choice” that are just an illusion.
I think distro/store level is what a lot of people are mad about, rather than high up corporate stuff.
As for the OP, very interesting article, laid out very calmly and to the point rather than an emotional diatribe that you might have expected. Not really shocking to find out that they have grown so large the left hand doesn’t know what the right hand is doing.
AFAIK InBev/other producers cannot own distributors, else the three tier system is just two tiered.
Ironically our local Bud distributor is one of the better local ones for craft beer, they seem to at least try and not buy giant stocks that’ll sit in the warehouse and go stale. Of course that means sometimes you can’t find products from some breweries, but I think that’s a fair trade for better handling.
But it’s not hard to look good when everyone else is so terrible, and I’ve not looked into their ties to the legal mess we’re in now.
You’re right that the brewery can’t own the distributer (in Iowa, at least, which is my only knowledge base). The thing to remember is that the brewer’s uncle, cousin, sibling or whoever can.
I’m not, generally, a conspiracy believer but controlling a market doesn’t have to be done by single company.
I just hope everyone learns to play together one of these days. I know, I’m a dreamer.
Paul
But you’re not the only one.
This makes it look like ABI can own 10% of a distributor…https://www.justice.gov/atr/case-document/file/928731/download
According to this article in New School Beer, AB already owns several distributors (in Oregon at least) and is trying for more. Perhaps they don’t actually own Maletis, but they tried/are trying to buy Maletis according to this, and this is from several years ago. I swear I saw an article saying Maletis had been bought, but I can’t find it now (of course).
http://www.newschoolbeer.com/2014/01/anheuser-busch-oregon-beer-distributors-and-the-doj.html
“If breweries own their own distributors, then they are essentially self-distributing, which is only legal in certain states. For example, because Oregon allows self-distribution, A-B is allowed to purchase Morgan and distribute its own beer.”
This news comes two years after A-B acquired 7 million case distributor Western Beverage Company in Eugene in a deal that is currently being reviewed by the Justice Department.
It looks like this may only apply in Oregon and the other states that allow self-distro, so certainly a state by state issue.
The book Bitter Brew by William Knoedelseder talked about the Busch family buying distributorships. They may not own AB anymore, but, it seems there may be ways around three tier laws.
I’m in that camp as well. Hey, at least Guinness plays nice.
All further proof that we need a Federal distribution reform, else what nearly came to pass in Maryland could become the norm.