AB InBev Incentive Program Penalizes Distributors for Carrying Craft Beer
Recently we posted an article discussing whether purchasing beers like AB InBev-owned Goose Island BCBS was bad for craft beer. In the article we covered both viewpoints on the subject with a few examples of how beer giants like AB InBev have unfair advantage in the market over craft brewers, as well as how they use their muscle to influence laws surrounding beer distribution in some states.
Despite the power of Big Beer, craft beer has continued to flourish. Craft beer has grown from 5% total market share in 2010 to 11% in 2014, as well as seeing a 16.7% growth rate from January to June of 2015. As their sales continue to slide AB InBev has introduced a plan to incentivize distributors that sell more of their product, as well as penalizing them for carrying craft beers and placing limits on what they are allowed to offer. For the full story see this article from MotherJones.com.
Some key takeaways from the article:
- Distributors whose portfolio is made up of 95% or more AB InBev products would be eligible for reimbursement of a portion of their marketing support expenses
- Reimbursements could be as much as $1.5 Million and AB InBev estimates the average annual benefit to be around $200,000
- To be eligible distributors could only carry craft beer from breweries producing less than 15,000 barrels per year, or that distribute in only one state. This sounds like a lot but would affect popular national craft beers like Sierra Nevada, Lagunitas, and Bell’s. Even Georgia breweries like Sweetwater and Terrapin would be forbidden, or possibly breweries such as Red Brick, who estimated around 14,000 barrels in 2014.
- Deschute’s brewery has already been dropped by one distributor, who said it “had to make a choice to go with the incentive program or stay with craft.”
This definitely seems to add to the argument that supporting breweries owned by Big Beer is damaging to craft beer. Is this even legal? Another incentive program from then Anheuser-Busch was investigated by the Justice Department for possible antitrust law violations, however there was no legal action in that case. Add to this the fact that AB InBev and SABMiller are currently pursuing a merger (which was just discussed by the Senate’s Antitrust subcommittee yesterday) and Big Beer just keeps getting bigger, with more money and power to crush small craft brewers.