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.
Bob Pease of the Brewers Association has sobering news for craft beer lovers. In a New York Times op-ed earlier this month, Pease warned that the coming merger between Anheuser-Busch InBev and SABMiller will have an impact on your local beer selection that you hadn’t expected.
The problem is rooted in the three-tier system of liquor regulation, which forces craft breweries to sell their beer through distributors. In some states, the law allows big breweries to own distributors. Making matters worse, the distribution industry has undergone consolidation, and many areas of the country are served by a handful of distributors.
A-B, which controls 45 percent of the U.S. beer industry, has been particularly aggressive, buying five independent distributors—a move that has led to a Justice Department investigation. The brewery also compensates its distributors using a formula that in effect penalizes them for handling craft brands rather than A-B brands. That, too, is being investigated.
Pease hopes that the when the Justice Department gives final approval to the InBev-SAB merger, it will take steps to keep the beer market competitive. He points out that in 2013, it prohibited A-B InBev from interfering with independent distributors that sold Mexico’s Modelo beer. Pease urges Justice to give craft brand distributors similar protection, require A-B to reduce its stake in distributors, and bar compensation systems that favor A-B’s own brands.
Last week, U.S. District Judge Gonzalo Curiel rejected, at least for the time being, the Brewers Association’s definition of craft beer: production under 6 million barrels a year, less than 25-percent controlled by a big brewer, and using “only traditional or innovative brewing ingredients.”
G. Clay Whittaker of The Daily Beast argues that Judge Curiel has in effect given every brewer in America the green light to describe its beer as “craft.” (Which is ironic considering that Anheuser-Busch InBev, during Super Bowl 49, ran an ad making fun of the entire segment.)
Judge Curiel gave the plaintiff, Evan Parent, the opportunity to amend his complaint, which might eventually lead to a legal definition of what craft beer is. Then again, the phrase “craft beer” could go the way of “the Champagne of bottled beers,” an advertising slogan that expresses a meaningless opinion about the product.
Yesterday, it was reported that Anheuser-Busch InBev is working to acquire SABMiller. Paul Gatza, the head of the Brewers Association, issued a statement about the proposed deal.
If acquisition goes through, Gatza believes the federal government would order the combined business to divest itself of Miller brands in the United States. The brands, which are profitable, could be bought by MolsonCoors, or possibly Constellation Brands, Heineken, or Carlsberg. The acquisition would also have an effect on the ten-year joint venture between Miller and Coors, which runs until 2018. It’s unclear what will happen to the Leinenkugel family of beers, currently owned by Miller.
Gatza believes the takeover would have little impact on what American craft breweries will produce, or their acceptance by the nation’s beer drinkers. He also believes beer distribution won’t change much. He’s less sure of what effect the takeover will have on the wave of mergers and acquisitions in the craft brewing industry, or whether consumers will view craft beer as less of a reflection of the brewers’ “personal passion.” About this he says, “Time will tell all.”
Large and small breweries are lining up behind competing bills that would provide tax relief to the industry.
The Small BREW Act would cut excise taxes for small brewers, which it defines as those making less than six million barrels a year. (The current definition tops out at two million, and thus excludes Boston Brewing Company and D.G. Yuengling & Son.) The Brewers Association, which represents smaller breweries, supports this bill.
On the other hand, the Fair BEER Act would halve the excise tax for the smallest brewers—those making less than 60,000 barrels a year—but give only modest relief to brewers in the 60,000-to-two-million-barel range. It would also apply to importing producers such as Corona and Heineken. The legislation is backed by the Beer Institute, whose membership includes the industry giants.
With millions of dollars in tax breaks at stake, both sides are lining up heavyweight lobbying firms to make their case to lawmakers.
Last year, the Brewers Association liberalized its criteria for what qualifies as a “craft brewery,” and welcomed Boston Beer Company, D.G. Yuengling & Son, Straub Brewing, August Schell Brewing, and Minhas Craft Brewery into the fold.
However, five well-known breweries—which aren’t called Anheuser-Busch, Miller, or Coors—still fail to qualify:
On this day in 1925, “Grand Ole Opry” radio show aired for the first time on WSM, a Nashville radio station. The Opry’s home, Ryman Auditorium, attracts hundreds of thousands of visitors from around the world.
And now….The Mash!
We begin in Kalamazoo, where Bell’s Brewery is selling glassware designed for Oberon. It’s called the American Wheat-Witbier Glass, and is made by Austrian glassware maker Spiegelau.
Mike Nichols is best remembered as a film director, but more than half a century ago, he and Elaine May created and voiced animated commercials for now-defunct Jax beer.
The Brewers Association has put together an infographic with statistics on the size of each state’s craft beer industry: number of breweries, production, and economic impact.
As it turned out, Pabst Blue Ribbon wasn’t sold to the Russians after all. The group that acquired it didn’t involve Oasis Beverages, itself the biggest independent brewer in Russia and Ukraine.
British lawmakers took the first step toward scrapping a centuries-old rule that requires “tenanted” pubs to buy their beer from the brewery that owns them.
An app called Next Glass has been called ”the Pandora for beer”. Using a mass spectrometer, the Next Glass lab staff use a mass spectrometer to analyze beers sent to the lab by Beer Census.
Finally, Jay Brooks’s blog linked a 1929 Mickey Mouse cartoon, ”The Galloping Gaucho,” in which Mickey enjoys a beer. Presumably he was outside the U.S., where Prohibition reigned. However, temperance groups couldn’t have been thrilled about a cartoon character drinking alcohol.
In 2005, when Maryanne and Paul toured the state researching Michigan Breweries, most of the establishments they visited were brewpubs. Now a solid majority are microbreweries. It turns out this is a national trend.
Sometime during 2013, the number of micros exceeded the number of brewpubs; and, since the middle of 2012, more than three-quarters of newly-opened establishments are micros. Bart Watson, chief economist at the Brewers Association, identifies three reasons why this is happening.
- First, a number of states, such as South Carolina, have passed “pint laws” that allow breweries to breweries to sell full pints of their beer on-premise.
- Second, the growing popularity of food trucks makes it possible for customers to enjoy something other than salty snacks at their local brewery.
- Third, a brewery owner doesn’t have to enter the restaurant business, which eats up capital and poses additional challenges. Running a brewery is hard enough.
The October 10 Friday Mash contained an item about a new beer and food pairing course offered by the Brewers Association. The course, which you can download for free, co-authored by chef Adam Dulye, the Association’s culinary consultant and Julia Herz, the Association’s craft beer program director.
It’s constructed as a five-day-long introduction to craft beer, pairing beer with food, and how to pour and present beer at the table. In addition to lectures and suggested readings, instructors guide students through two tasting sessions of beer styles and a food pairing session.