The countrys craft brewers are largely watching from the sidelines as one of the worlds biggest beer companies goes head to head with the United States Department of Justice, but its clear they are rooting for the federal government to win this battle.
Once theyve got the power, its crazy what could really happen out in the market, Dave Thibodeau, co-founder of Ska Brewing Co., said of the potential for Anheuser-Busch InBev to acquire the rest of Mexican beer company Grupo Modelo. Our fear is over time (the continued growth of big beer companies) is going to threaten our access to market.
The Department of Justice in January sued to block Anheuser-Busch InBevs effort to buy the portion of Grupo Modelo that it doesnt already own. Grupo Modelo is the third largest player in the U.S. beer industry and together, Grupo Modelo and Anheuser-Busch InBev control 46 percent of U.S. beer sales. The $20.1 billion deal would leave Anheuser-Busch InBev and MillerCoors in control of 72 percent of the market, which, the Justice Department argues, would diminish industry competition, lead to higher prices for consumers and create less incentive for innovation on the part of the major brewing companies.
But the deals effects wont be limited to the beers sold by the nations biggest breweries.
Such consolidations and mergers give the big companies a greater ability and incentive to squeeze craft and regional brewers out of distribution systems through exclusive dealings, said a 2012 report by the American Antitrust Institute.
That access to market is a brewers number one concern, said John Carlson, executive director of Colorado Brewers Guild.
As companies get bigger and shift focus to things they produce, things could get more complicated for brewers, he said.
A bigger Anheuser-Busch InBev, for example, can put more pressure on wholesale distributors to promote and sell their products and marginalize craft beers, Thibodeau said.
That could prove a huge obstacle for breweries that have limited choices of wholesalers.
The dilemma is aggravated as consolidations among wholesalers have increased. Mergers and consolidations have reduced the number of wholesalers by two-thirds since 1990, Joe Thompson, president of Georgia-based Independent Beverage Group, said in a St. Louis Post-Dispatch article.
And, in those consolidation discussions, Anheuser-Busch announced it would give preference to wholesalers that exclusively sold its products or carried brands that dont compete with its products, said Paul Gatza, director of Brewers Association.
That means brewers in some markets are faced with a declining array of wholesaler choices, Gatza wrote in an email.
Theres also the worry that big beer companies will have the power to squeeze craft brews out of bars, liquor stores and restaurants by giving those businesses discounts for dedicating more shelf space or tap handles to their products, Thibodeau said.
Large brewers already have been known to offer the free labor of their own employees to help retailers stock shelves, which allows the brewers to dictate how their beers are placed in the store, Gatza said. Wagon Wheel Liquor owner Mike Rich said that practice may happen more often in large chains like grocery stores, but is rare among local liquor stores because they are all independently owned in Colorado.
And as Anheuser-Busch InBev and MillerCoors acquire full or partial ownership of craft breweries such as Goose Island Beer Co., they come in direct competition with craft breweries, said Damon Scott, head brewer at Durango Brewing Co.
The playing field becomes a lot less even when craft products are backed by the market power of these megabreweries, Scott said.
The Department of Justices lawsuit is encouraging because it shows that the nations biggest beer companies may have hit a limit, Scott said.
Its really the first roadblock these guys have come across, he said.