Not long ago, the beer industry seemed much simpler and less confused. There were micro/craft beers, imported beers, and industrial light lagers that were mostly made by the big three – Anheuser-Busch, Miller, and Coors (often dubbed BudMillerCoors or BMC). Originally, I don’t think BMC felt threatened by craft beer because it made up such a small, niche segment of the market.

But over the years, BMC’s sales and market share continued to decline (at least in the U.S.) while craft continued to grow exponentially. Somewhere along the lines, BMC finally realized that craft beer is not a fad, and that it’s here to stay. Which is when they employed a number of measures (via advertising, distribution and retail) to try and squash this new threat, however small it was. (If you haven’t seen the documentary “Beer Wars” yet, you should give it a watch.)

When that strategy didn’t quell craft beer’s growth, they adopted a new approach: If you can’t beat them, join them. This was when they started pushing “crafty” brands — Coors’ Blue Moon and Anheuser-Busch’s Shock Top being the most successful of the bunch.

But that wasn’t even good enough, so they adjusted their strategy once again: If you can’t join them, buy them. But not like previous acquisitions, where they’d buy up a brewery and then either dumb down the beers (to appeal to the masses) or just shut the place down. Now they’re being more hands-off and providing the breweries with the tools to better succeed, including capital, personnel, technical expertise, distribution, etc. This strategy is still in full effect, as there’s been a feeding frenzy of craft acquisitions lately (e.g., Elysian, 10 Barrel, Lagunitas, Golden Road, Saint Archer, and Ballast Point, just to name a few), and it doesn’t show any signs of letting up.

Recently, however, the strategy seems to have been adapted to include: Since you can’t buy them all, at least cut off their distribution networks.

I highly recommend you read this article, which does a great job of explaining the situation. But if you’re short on time, the gist of it is this: AB-InBev recently introduced a new incentive program for distributors that offers hefty reimbursements if 98% of the beers they sell are AB-InBev brands (plus there are other incentives to encourage the sale of AB-InBev brands / discourage the sale of other craft brands). According to the article, one distributor has already dropped Deschutes as a result of this incentive program.

Is AB-InBev trying to smother craft breweries, or is it just trying to increase sales of its brands?

Yesterday (12/8/15), Brewers Association CEO Bob Pease testified at the U.S. Senate hearing regarding the merger of two of the largest multi-national breweries, Anheuser-Busch InBev and SAB Miller. He had this to say:

“In fifteen states, large brewers such as Anheuser-Busch InBev are allowed to own wholesalers. At present, ABI is the largest beer supplier and one of the largest beer wholesalers in nine states … If ABI is permitted to maintain ownership of wholesalers, ABI can continue to systematically sell parts of its wholesaler network to other favored wholesalers that ABI effectively controls. Simultaneously, ABI will continue to purchase additional independent wholesalers and discontinue sales of competing brands that the independent wholesalers currently sell. Craft brands will then be forced into the MillerCoors network or to small specialty distributors that lack the ability to fully serve a territory … States have granted exceptions to allow limited self-distribution by craft brewers … but they are inadequate to address the imbalance that currently exists.”

As he mentioned, some states (including WA) allow breweries to self-distribute, but that only gets them so far. If a brewery really wants to grow, they’ll need distribution help.

In other words, this distribution pressure (along with the rapidly growing number of other craft breweries), will make it much harder for a start-up craft brewery to become the next New Belgium, Stone, etc. If a new craft brewery doesn’t have ambitions of getting huge, that’s fine, but sometimes even small breweries need distribution assistance on a local and/or regional level.

Obviously, if you find this upsetting, you can just continue to support independent craft breweries, especially the local ones. But it gets trickier when it comes to breweries like Elysian, which is now owned by AB-InBev. In a way, if you drink Elysian beer, you’re still supporting local jobs and a local brewery, but a higher percentage of its proceeds are now going to AB-InBev in St. Louis and/or Belgium, and that money essentially funds AB-InBev’s plans to squash competing craft brands.

I guess it comes down to individual viewpoints, principals and personal finances. Even after being acquired, Elysian still makes good beer, and some beer drinkers really don’t seem to care who owns the brewery, as long as the beer’s good and it’s affordably priced.

What do you think?