beer distribution

Big Wins for Small Brewers

As expected, the U.S. Justice Department has approved the merger between Anheuser-Busch InBev and SAB Miller. However, MarketWatch.com’s Jason Notte reports that the Brewers Association, which represents craft brewers, won major concessions from the government:

  • A-B, which sells 10 percent of beer through company-owned distributors, can’t acquire any more distributors.
  • A-B  can’t require independent distributors to drop competing brands, and can’t offer incentives that would reward distributors for giving A-B brands preferential.
  • Any future craft brewery acquisitions by A-B must first receive Justice Department approval.

Notte attributes the craft brewers’ win to the Brewers Association’s paying more attention to government relations. The BA has hired a full-time lobbyist in Washington; and, earlier this year, it flew craft brewery executives to the capital to ask members of Congress for tax relief.

According to Notte, state capitals will become the next battleground, now that states–even thouse as small as North Dakota–have enough craft brewers to form a trade association. Some of the issues these associations will raise include bars selling tap handles to the highest bidders, supermarkets putting distributors in charge of choosing their inventory, and limits on the number of liquor licenses.

The Friday Mash (Boomer Sooner Edition)

One hundred and twenty-five years ago today, at high noon, thousands of people took part in the Oklahoma Land Rush. Within hours, Oklahoma City and Guthrie had instant populations of 10,000.

And now…The Mash!

We begin in Tumwater, Washington, once the home of Olympia Brewing Company. Today, it’s the home of a cluster of legal marijuana growers and processors—including one of the state’s largest.

Peru’s Cerveza San Juan beer brand has replaced the roaring jaguar with barnyard animals on its cans. The reason? The brewery is calling attention to the big cat’s endangered status.

Officials have reinstated beer at the University of Missouri’s “Tiger Prowl”, where graduating seniors eat barbecue, get free merchandise, and get ready to say goodbye to their classmates.

Anheuser-Busch InBev has acquired its eighth craft brewery, Devil’s Backbone of Roseland, Virginia. Established in 2008, Devil’s Backbone has won multiple Great American Beer Festival medals.

The Vietnamese love beer, and craft brewers have begun to enter the market. One new craft is the Pasteur Street Brewing Company, whose founders include Vick’s Florida native John Reid.

Forbes magazine’s Tara Nurin explores “pay-to-play” in beer distribution. Even after a high-profile crackdown in Massachusetts, she says it’s “a common yet whispered business practice”.

Finally, Don Russell aka Joe Sixpack takes us back to the bad old days of Prohibition’s “needle beer”: speakeasy owners injected alcohol into near beer—which was still legal in the 1920s. One customer, who sampled the stuff, compared it to 44-D cough syrup.

Why Some Breweries Avoid Distributors

For a start-up brewery, Denver is a challenging market. The area is not only awash in breweries, but demand has driven up the price of cans. This has caused some small breweries to adopt a different business model: bypass packaging altogether, and sell fresh beer only to the immediate neighborhood. Breweries that adopt this model avoid the expense of buying a canning or bottling line, hiring sales personnel, and hiring a distributor. And they have the option to package if market conditions change.

Breweries that sell directly to customers enjoy a greater return on investment. They have more freedom to experiment with beer styles, and brewery owners contend that their product is fresher than the packaged variety. Many have won a devoted following in their neighborhoods. Small breweries have even created their own beer festival, called Festivaus. It attracts more than 60 Denver breweries, and a crowd of over 2,000 attendees.

In two decades, Denver’s craft brewing industry has come full circle. In 1994, when Great Divide Brewing Company opened, it faced stiff competition from four nearby brewpubs; and, at the time, a brewery that opened a taproom was expected to operate it as a restaurant. Instead, Great Divide packaged its beer and didn’t open a taproom for 13 years.

Distribution: Beer’s Next Battlefront?

Last week, Massachusetts’ liquor regulators slapped the state’s largest beer distributor with a 90-day license suspension. The distributor’s offense: paying some $120,000 in bribes to a dozen bars in return for their devoting tap handles to the brands the distributor carried.

Beer journalist Jeff Alworth contends that the practice of paying bars to carry its brands is hardly limited to the distributor that got caught. What made that case stand out was the distributor blatantly bought tap handles. More subtle corruption is harder to detect because state liquor regulators don’t have the resources to monitor every transaction between a distributor and a bar.

According to Alworth, the recent merger of Anheuser-Busch InBev and SABMiller may lead to even more cheating with respect to beer distribution: “Large companies like [Anheuser-Busch InBev] are already making a big play to control distribution. Smaller companies are going to become desperate to get their beer to market. As more and more breweries come online and more and more consolidation happens at the top, the opportunities to cheat will grow.” While this story won’t dominate the media, Alworth predicts that “it will be one of the most important dynamics driving what happens in beer in the coming years.”

Imported American Beer…in Washington, D.C.?

Craft beer lovers vent plenty of anger at the three-tier distribution system, which they blame for not finding their favorite beers in local stores and bars. That, however, isn’t a problem in Washington, D.C., where the owner of a retail establishment can plunk down $5 for an import permit for each trip outside the District. This liberal policy allows enterprising “importers” to head out to breweries (one restaurant owner drove to Indiana to get Three Floyds Dark Lord Ale), load up their rented U-Haul trucks, and put hard-to-find beers on their menu. Imported beer not only attracts customers to bars and restaurants, but also encourages distributors to add new brands to their portfolio. A capital idea, don’t you think?

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