Budweiser is now America, quite literally. Anheuser-Busch InBev, the world’s largest brewer, recently announced Budweiser’s temporary identity change amidst a $107 billion merger with the world’s second largest brewer, SABMiller.
Is Anheuser-Busch InBev looking to arouse nationalist sentiments (USA! USA! USA!), monopolize the American beer market, and crush the very heart and soul of the American Dream (the aspiring entrepreneurs at the forefront of America’s beer renaissance)?
The jury’s still out. What we do know is that Anheusner Busch InBev’s recent acquisition will jeopardize the livelihood of the very forces revolutionizing America’s beer industry — small brewers and independent distributors.
Historically, antitrust authorities have heavily policed deals between corporate behemoths, such as Microsoft and AT&T, to prevent the solidification of monopoly power. Such power magnifies what economists call “barriers-to-entry.” In short, when a Microsoft or AT&T control their respective markets, it’s nearly impossible for smaller firms and entrepreneurs to enter the industry and compete, the very process that decreases prices and spurs innovation.
Unfortunately, according to Bob Pease, President and CEO of the Brewers Association, this blockbuster deal between the world’s most dominant beer superpowers will be approved by the end of June.
Bad news, indeed, for America’s 4,000+ independent brewers and distributors. Unlike corporate beer companies, who cripple innovation, small startup breweries are providing beer lovers with a vast array of styles, sub styles and flavors. The list goes on and on, from “low-alcohol ‘lawn mower beers’ to high-octane Russian imperial stouts.”
Problem is, most states prohibit breweries from independently selling their products, and instead force them to go through an official beer distributor. As one could image, these distributors largely impact what beers end up at bars, restaurants and other venues.
Once again, startup breweries are dealt a bad hand by corporate power — Anheuser-Busch InBev is also the biggest beer distributor in the U.S. Most markets only have one or two distributors, and naturally, Anheuser-Busch InBev shamelessly distributes its own product. Making matters worse, Anheuser-Busch InBev recently purchased five independent distributors, tightening its grasp on the beer-distribution industry. For small craft brands looking to compete, the going just got even rougher, as markets will now be more flooded with Anheuser-Busch InBev products.
In addition to controlling 45 percent of the U.S. beer market, Anheuser-Busch InBev also incentivizes independent distributors to sell its own products and forgo craft beers. Recently, the Voluntary Anheuser-Busch Incentive for Performance program was introduced, which pays distributors on a sliding scale based on the quantity of the Anheuser-Busch products sold.
The logic here is simple — if independent distributors push Anheuser-Busch products, they make more money. If the independent distributors opt to push craft beer, they incur an opportunity cost equal to the bonus Anheuser-Busch is willing to shell out. For independent distributors looking to survive, it’s clearly in their best interest to sell Anheuser-Busch products. The collateral damage? Small, independent breweries trying to compete with corporate superpowers. Not much of a fair match.
Since merging with SABMiller, Anheuser-Busch has bought out several small brewers to remove them from the marketplace. This includes California’s Golden Road, Arizona’s Four Peaks, Colorado’s Breckenridge, Virginia’s Devil’s Backbone, Chicago’s Goose Island, Oregon’s Ten Barrel, Washington’s Elysian and Michigan’s Virtue Cider.
In light of this merger, Anheuser-Busch, now with projected annual revenue in the $60 billion range, will control over 29 percent of the global beer market. With this sort of market power, Anheuser-Busch InBev’s lobbying power over the production and distribution aspects of the beer market is multiplied. More distributors will be incentivized to carry Anheuser-Busch InBev, more smaller breweries will be bought up, and more retailers will cut back on craft brews.
It’s a sad day for mom-and-pop breweries, to say the least.