USA: Craft brewers remain worried about implications of AB InBev, SABMiller merger

As the combination of the world’s two biggest beermakers moves closer to completion, craft brewers remain worried about the implications of competing against an even larger rival, St. Louis Post-Dispatch reported on June 26.

The merger of Anheuser-Busch InBev and SABMiller, announced last fall, has already gained antitrust approval from the European Union, Australia and other countries. Regulatory approval in the United States is drawing near, according to Reuters. If the sale is finalized, Belgium-based AB InBev would control about 29 percent of beer sold worldwide.

In the U.S., AB InBev contends the merger won’t have an impact. AB InBev plans to sell Miller brands in the U.S. that are partly owned by SABMiller to its joint venture partner, Molson Coors, to address antitrust concerns. With this sale, Bud Light would have separate ownership in the U.S. and still compete with Miller Lite domestically.

Buying SABMiller, according to AB InBev, is a means to boost sales in emerging markets including Africa.

In his testimony before a Senate Judiciary subcommittee hearing in December, AB InBev’s CEO Carlos Brito said SABMiller’s stake in MillerCoors would mean AB InBev’s U.S. market share would not change as a result of the combination. Divesting SABMiller’s stake in MillerCoors will make Molson Coors a stronger competitor domestically, Brito told senators.

But craft brewers continue to eye the combination of the two largest brewers warily and worry the sale will curb the explosive growth craft beer has enjoyed in recent years.

With more than two craft breweries opening daily, there were a record 4,144 breweries in the U.S. at the end of 2015, compared with just a thousand U.S. breweries two decades ago, according to the Brewers Association, a Colorado-based trade group that represents U.S. small and independent craft brewers. More than 12 percent of beer produced in the U.S. last year was made by craft brewers, up from 5.7 percent market share by volume in 2011.

While the craft beer industry continues to grow its market share, a larger AB InBev is viewed as a potential threat.

Brewers Association President and CEO Bob Pease, who also testified before the Senate committee last year, has argued that the Justice Department should require AB InBev to sell or reduce its stake in its distribution network and that regulators should move to preserve competition.

Pease said he believes a larger AB InBev will have even more influence over the brands distributors carry, making it more difficult for smaller brewers.

“The U.S. is the most profitable beer market in the world,” Pease told the Post-Dispatch. “When the No. 1 brewer wants to buy the No. 2 brewer, I can’t accept at face value that it won’t have any impact in the U.S. We have serious concerns about maintaining even and unencumbered access to market for small and independent brewers.”

AB InBev, whose U.S. unit is based in St. Louis, said in an emailed statement that with the record number of brewers operating in the U.S., competition and consumer choice in the beer industry are stronger than ever.

“Nothing about the proposed combination of AB InBev and SABMiller would change that,” AB InBev’s statement said. “AB InBev has committed to selling all of SABMiller’s U.S. business and would therefore acquire no brands, or any other assets, in America as a result of this merger. The proposed combination with SABMiller would have zero impact on the U.S. beer market and any claims to the contrary are simply false.”

Despite those assurances, as more breweries open, smaller breweries remain worried a larger AB InBev will have more influence on what beers retailers stock on their shelves and hamper access to supplies such as hops.

U.S. antitrust officials are investigating incentives AB InBev offers to distributors to sell more of its own beer brands, according to Reuters.

And in Missouri, a bill backed by AB InBev that would allow breweries to lease coolers to retail stores was passed by state legislators this year and is awaiting Gov. Jay Nixon’s signature. Craft brewers opposed the bill, arguing only large brewers such as AB InBev can afford to buy the coolers, which will likely be filled by retailers with AB brands.

Florian Kuplent, co-founder of St. Louis craft brewery Urban Chestnut Brewing Co., was one of several hundred craft brewers from around the country who were in the nation’s capital in early June to talk with members of Congress’ staff about the negative impact they believe the AB InBev/SABMiller merger will have on the U.S. beer industry, among other topics.

With Anheuser-Busch buying multiple craft breweries around the country in recent years, including Chicago’s Goose Island, it’s becoming more difficult for consumers to discern what beers are independently owned, said Kuplent, a former brewmaster at St. Louis-based A-B.

“Obviously there’s only so much space on store shelves, and at some point, brewers won’t be able to get their beers on the shelf because of the physical limitations of shelf space,” Kuplent said. “For newer players that get into the market, it may be harder for them to find a distributor to take on a new brand or brewery.”

Stephen Hale, ambassador brewer at the St. Louis Brewery, which makes Schlafly beer, was among the group of brewers who spoke with congressional staff members this month. Founded in 1991, Schlafly is St. Louis’ largest craft brewery, producing about 60,000 barrels annually, with sales in 15 states and D.C.

“I don’t know how it could not have an impact on small brewers’ ability to get access for distribution,” Hale said of the merger. “Anyone who is smaller than Anheuser-Busch InBev/SABMiller should be concerned.”

Another worry is access to ingredients, such as certain kinds of hops that are difficult to obtain because of their limited supply, Kuplent said: “AB InBev’s power is going to be even more significant than it is already and access to ingredients won’t get easier.”

27 June, 2016