E-Malt.com News article: USA: Anheuser-Busch sets up new deal with distributors

St. Louis-based Anheuser-Busch Cos. plans to change a decade-old exclusivity incentive with wholesalers in order to keep them happy and committed to its brews, St. Louis Post-Dispatch reported April 3.

Now some of the benefits of "exclusivity" that are traditionally reserved for distributors who carry only beers from Anheuser-Busch or its allies will be bestowed upon wholesalers who carry some competing brands.

The idea is to keep wholesalers in the fold, while granting leeway to sell a small amount of beer from competing sources, such as local craft breweries.

The plan could be a way out from an "all-or-nothing" dilemma that popped up too often for Anheuser-Busch's liking: should wholesalers ditch their exclusivity agreements with A-B in order to carry attractive niche beers, or stick with the company even though it blocked access to some nifty brews?

The exclusivity system started to fray last year. Some wholesalers defected, and Anheuser-Busch's percentage of beer shipped through exclusive houses dropped to 60 percent from nearly 70 percent in 2006.

August A. Busch IV, Anheuser-Busch's chief executive, told analysts in February that the current form of exclusivity is "working against" Anheuser-Busch.

Anheuser-Busch is "trying to provide an avenue to the high-end," said Dave Peacock, vice president of marketing at A-B's domestic beer subsidiary. "We want a profitable, healthy and viable wholesaler."

The new program could be particularly helpful in the Southeast and Southwest, where franchise laws tend to block wholesalers from grabbing new brands, said Evan Athanas, vice president of sales and wholesale operations at A-B's domestic beer unit.

The volume of outside beer won't be "a distraction to our business," he said. "A few small brands would benefit" A-B's wholesalers.

"WARMER, FUZZIER"

When Anheuser-Busch became the master U.S. importer of swanky European beers from Belgium-based InBev last year, executives suspected the deal could get messy.

The St. Louis-based brewer wanted to move the high-end beers — including Stella Artois, Beck's and Bass Pale Ale — into wholesale houses that carried only Anheuser-Busch beers.

The high-end beers, commanding tasty prices and a sophisticated cache, were meant to reward A-B's network of 600 independent wholesalers, responsible for carrying beer to grocery stores, bars, clubs and gas stations.

But the transition was a hassle in some states. It sparked lawsuits and caused some bars to run out of InBev beers. Because of state franchise laws, some Anheuser-Busch beer distributors couldn't get the beers, leaving a gaping hole in their portfolios.

Anheuser-Busch has taken a "warmer, fuzzier approach" to distributors, Mark Swartzberg, an analyst with Stifel, Nicolaus, told clients in a March 24 research note. Changing exclusivity could be a "win-win-win," he said.

"If a brand in question does not directly compete against an A-B brand, all parties have an opportunity to share in the upside of delivering on the brand's unrealized value."


04 April, 2008