InBev continues on path to destroy craft beer market

By Nate Johnson

Amidst their march forward to try to control the worldwide beer market, Anheuser-Busch InBev has come under the scrutiny of the U.S. Justice Department. AB InBev, who already owns a quarter of the global brewing market share and nearly half of the domestic share, is facing allegations that their recent buying of beer distributors is making it more difficult for craft breweries to get product in the stores.

The investigation comes on the heels of InBev agreeing in principle to a merger with SABMiller, which covers many of the most well-known international beers, including Grolsch, Peroni, and Pilsner Urquell. The merger, worth over $100 billion, would give the conglomerate over one-third of the global market share. While the domestic component of SABMiller, MillerCoors, would likely be spun off following the move, the resulting presence in the beer world cannot be taken lightly.

AB InBev has shown an interest in buying craft breweries in the past, such as Elysian and Goose Island, despite having drawn a line in the sand with their pro-macro/anti-craft advertising campaign that set the internet abuzz. The buying-up of distributors, though, changes the game in a whole different way.

In many states, depending on their size, breweries are not allowed to self-distribute to retail and restaurants. For example, in Illinois, breweries that make more than 30,000 barrels per year cannot self-distribute and must work through distributors. The feeling of many craft breweries is that as AB InBev purchases these distributors, they will limit what beers are sold through the channel and push only beers under the InBev umbrella.

This becomes a bigger issue every day as craft beer continues to grow. As of September 2015, the number of craft breweries passed the 4,000 mark in the United States, and craft continues to chip away at big beer’s market holding. Over 12 million barrels of beer were sold by craft breweries in the first half of 2015, a 16 percent increase over the same period last year.

In addition, to retain the “craft” designation, a brewery must make fewer than six million barrels per year. This pushes breweries purchased by the bigger companies out of the favorable niche.

At this point, the investigation is taking place in California, where AB InBev has recent purchased distribution outfits in Oakland and San Jose, but speculation is brewing that the attention may spread to Colorado and New York as well.

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