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NPR: Craft Brews Slowly Chipping Away At Big Beer's Dominance

Discussion in 'Beer News' started by dauss, Mar 18, 2013.

  1. dauss

    dauss Advocate (585) Colorado Aug 9, 2003

    http://www.npr.org/2013/03/17/174571197/craft-brews-slowly-chipping-away-at-big-beers-dominance

    Big 3 brews like Shocktop and Blue Moon as "gateway" beer? I hope so.
     
    BeerLover99 and jmmy3 like this.
  2. loafinaround

    loafinaround Savant (380) New York Jul 16, 2011

    Still only a drop in the brewed bucket.

    One thing I never understood (which one of the npr commenters beneath the article brought up again):
    Why is the beer distribution stranglehold that BMC maintain not illegal according to monopoly laws, much like Ma Bell and the rights to telephone pole space?
     
  3. If "BMC" has a "stranglehold monopoly" on beer distribution, where are these thousands of different craft and imported beers that line the shelves of beer stores coming from? There are 2000-3000 beer distributors in the US - AB owns a little over a dozen and at the time of the Miller-Coors merger, Coors owned 3. Outside of those brewery-owned wholesalers, it's a rare distributor in the US that doesn't also carry craft or non-AB/M-C imports.

    For more info, see the 21st Amendment, the 1935's FAA Act and the 50 individual states' franchise and three tier laws.;)
     
  4. loafinaround

    loafinaround Savant (380) New York Jul 16, 2011

    Just to be clear, I'm not writing that question as an open air complaint... more to ask for clarification on why the distribution arrangement is legitimate under the law. I'm a scientist/prof, not a lawyer... so the details of these laws and how they're applied legitimately aren't clear to me. I know there are many shop owners and brewers on this site, so I know many on BA know these answers.
    The one thing I thought I have heard is that a bev center will not be able to get certain craft beers unless they sell a certain # of BMC's. Is that right? Why is that legal? Is it contracts w/ BMC that causes distributers to do this? What does selling bud have to do with their next shipment of GI? Seems fishy.
    In the end, I think distribution / availability has more to do with crafts popularity than any other factor. Many people have little exposure to a decent craft selection. As we know, we have to actively seek out a select few bev centers....
     
  5. Stahlsturm

    Stahlsturm Savant (420) Germany Mar 21, 2005

    How could it not be legal ? Every business decides what they want to deal with (aka. can make a profit with) and what is too much trouble. Mandating what a distribution has to carry amounts to a Communist planning economy.
     
  6. hagbergl

    hagbergl Savant (310) Maryland Aug 27, 2009

    On a slightly different note, NPR has been running news stories every once in a while about the burgeoning craft beer industry in general, and on their Massachusetts station, WBUR, about local craft brewing companies, like Pretty Things. This is great–even though sometimes the focus of articles like the one above is on the conflict between the macros and craft breweries, and not on the craft beer "scene" itself. I'll take any good publicity, especially the kind that educates people about the business situation the small breweries have to contend with, which I personally think sucks. So in short, thanks, NPR.
     
  7. rlcoffey

    rlcoffey Savant (490) Kentucky Apr 20, 2004

    Agreed. But on the other hand, so is mandating that a brewery MUST use a distributor, which is required in most states.

    On the gripping hand... (okay, I dont have a 3rd point)
     
  8. Slowly chipping away until the craft breweries sell to the big boys. I will not mention any names...Coughgooseislandcough
     
    Bitter_Echo likes this.
  9. From the comment made by the Beer Institute spokesman, it appears that there are plenty of beer drinkers who aren't in college who still drink with their wallets. Personally, I prefer quality over quantity any day - that's the main reason I drink craft beer and hopefully the reason of the majority of BAs.
     
    MickeyD and hagbergl like this.
  10. loafinaround

    loafinaround Savant (380) New York Jul 16, 2011

    well, that's also the case with food, wine... everything. Many people prefer inexpensive thing... in order to follow a budget, or simply because they don't care enough about the more expensive stuff to pay the price differential.
     
  11. BigBarley

    BigBarley Savant (330) Texas Aug 5, 2011

    In fact, I feel like that is the reason that BMC appears to have a monopoly on the entire beer market. Lots of distributors have been known to make it more difficult for craft beer to get much shelf space, and most store owners aren't as knowledgeable (or concerned) as the standard BA, so in the end they kinda leave it up to the merchandisers and vendors. Who will put out 2 six packs of Sierra Nevada Pale Ale, and then put 18 six packs, in various containers and sizes, of the good old King of Beers. And people will keep seeing that wall of red and saying "Well, commercials keep telling me this stuff will turn me into a party animal who grabs life by the short hairs... commercials are never wrong!" and the cycle of misinformation continues.

    Someone should start lobbying for craft beer reform laws. Every beer section in the world must have no more than 40% of their available space devoted to beers with adjuncts. The rest must follow the purity laws.

    Eventually InBev will produce "Bud Pure" and then I'll have to come up with an equally ridiculous response.
     
  12. Well sometimes it's not the price but rather value for the price. In particular one beer that I like that sells for $19.99 a sixer here in NY and sells for $12.99 or $13.99 in Chicago. I won't buy it since the value is skewed by something.
    But your avatar tells me you go for the good stuff [or is that a ruse?]
     
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  13. loafinaround

    loafinaround Savant (380) New York Jul 16, 2011

    until a company becomes so large that it becomes a monopoly... I think the monopoly discussion is legit in this case, considering how few companies manage 90% of the beer consumed in the US. I don't think they have 90% of the market share merely because their product is so vastly superior to the rest, and are the only affordable products.
    At what point do monopoly laws kick in?

    If it was communism, there would be one brand of beer, there wouldn't be nearly enough made, you'd have to wait on line for 5 hours to get 1 can for your family, and it would taste like crap. Ensuring more than 2 private brewing companies have a fair chance at being distributed and participating in the economy around the country does not amount to communism.
     
    Bluecane likes this.
  14. Do you not understand why GI did that, besides the dollar signs? The popularity of 312 was causing them to use a lot of their tanks for it. They were able to move 312 to a completely different brewing facility, thanks to that deal, which in turn gave them more brewing space to work on other creative beers.

    This isn't simply a blanket "selling out" scenario.
     
  15. I think you have Communism mixed up with Capitalism. Or at least Capitalism as practiced by the alcoholic beverage industry. Translation: a very powerful lobby at the Federal and State levels.
     
  16. loafinaround

    loafinaround Savant (380) New York Jul 16, 2011

    nah, I go for the good stuff...as does virtually everyone on BA. But I'll confess I do the same w/ food and other booze. It's all the good stuff over here... (thank you fairway market!)

    Very true about value pricing. I just brought up the pricing situation because honestly, most people don't have the luxury of blowing cash on the brews we do. It's a legit concern. Especially in places w/ high costs of living...

    and others simply don't give a shit enough about beer (or whatever other item) to pay the extra price. Totally legit. It's not everyone's thing. So BMC is great for them. BMC does have a legitimate market due to their price point... a very large one. But I highly doubt it's legit 90% of the beer market. I suspect it would be lower if craft were allow to invade more shops.
     
  17. Stahlsturm

    Stahlsturm Savant (420) Germany Mar 21, 2005

    Is there a law against founding your own distribution company ?
     
  18. So, that's one craft brewery that's sold out completely to AB in the past 35 years or so of the "craft brewing era", so only approx. 2400 more to go. That is pretty slow "chipping away"...
     
  19. DIM

    DIM Champion (760) Pennsylvania Sep 28, 2006

    Interesting article and some insightful responses. I don't have anything add except that the phrase "crafty beer" is very funny to me; quite apt I think.
     
  20. It's rather difficult to argue urban legends and rumors... AB and it's successor ABI isn't too happy about it's independent wholesalers carrying independent craft brands (one reason why they bought GI and into CBA and Coastal/Dominion- to have alternates to offer their houses) but I doubt you'll find a contract stipulating that distributors can only sell one case of Anchor products (in NJ, Anchor is carried by a number of AB houses)to a retailer if they buy 10 cases of Bud. And I doubt it would be legal.


    So, how did it get "popular" if this mythical "BMC" has a stranglehold on distribution? Boston Beer Co. has grown into a multimillion barrel brewing company by being distributed nationwide by primarily Miller and/or Coors houses. Ditto for Sierra Nevada and New Belgian, both closing in on 1m bbl/yr. Pretty poor "strangling" on MillerCoor's part.

    Well, in the US brewing industry there is nothing close to a "monopoly" (mono=one). ABInBev has around 47% of the market and the SABMiller/MolsonCoors joint venture MillerCoors has another 29% - a pretty classic oligolopoly, with two firms controlling about 3/4 of the market. BUT that's the first tier of manufacturers and importers - you're point was about the second tier - the wholesaler distributors, around 2,000 independent companies and less than two dozen owned by AB or MC.

    The Anti-Trust Division of the DoJ is constantly watching the mergers and buyouts in the US industry. They approved the Miller-Coors deal because they felt it created stronger competition to Anheuser Busch. They re-worked the AB - InBev deal and made InBev sell off it's best selling US brand at the time - Labatt and forbid the new owners from selling AB-InBev-brewed Labatt in the US. The DoJ is now working out a deal that will essentially create a new "macro" in the US with about 6% of the market, by making the current Modelo (Corona) importer, Crown, buy both the brands and the largest brewery - the US calling the shots to allow a Belgian company to buy a Mexican company.
     
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  21. You specified "completely", but is there a much larger number of craft breweries that AB/MC have any percentage of ownership in?

    In the back of my mind I do wonder if GI "broke the ice" so to speak, and other breweries think that it's a way to sky rocket their distribution, brewing, and profits. It's no secret that the portfolio of brands that AB/MC have acquired over the years is sort of staggering and ultimately even "habitual", so I can see some validity for concerns. But I do agree that "chipping away" is indeed menial when you get down to brass tax.
     
  22. If there were a word that meant slower than "slowly" I would insert that into the title.
     
  23. rlcoffey

    rlcoffey Savant (490) Kentucky Apr 20, 2004

    In most states, yes. Some states allow self-distribution to a certain point, some dont. Mine is very strict, if I owned a brewery, neither myself nor my spouse (if I had one) could own any part of a distributor.

    Most states have a strict 3 tier separation, breweries/distributors/retailers cannot mix. Every state has some exceptions. In my state brewery and retailer can mix, as a brewery can sell on site.

    Texas, IIRC, is weirdly strict, in that brewpubs can sell on site but cant sell to distributors at all, while breweries can sell to distributors but cant sell on site.
     
  24. rlcoffey

    rlcoffey Savant (490) Kentucky Apr 20, 2004

    Widmer, Red Hook, Kona all partly owned by ABI.

    Terrapin is partly owned by MC.

    Im sure there are others, but those I know off the top of my head.
     
  25. First, I have no problem with selling out or capitalism in general. To each his own.

    Second, I must disagree with your analysis above. Assuming your basic statement about 312 is true, then it sounds like GI did do it for the money. If not, then GI would have just produced less 312 so that they could focus on the creative beers.
     
    Beerandraiderfan likes this.
  26. rlcoffey

    rlcoffey Savant (490) Kentucky Apr 20, 2004

    The Brewers Association does.

    Its 51 separate battles though (federal laws plus 50 state laws). They win some, they lose some, some are unclear.
     
    BigBarley likes this.
  27. I do/don't have a problem with capitalism, or at least where it has gone in America, but that's a whole other conversation. :)

    Point taken. Obviously money was a factor, but there were other reasons as well. Simply making less of their most popular beer would be a horrible business move.
     
  28. Yeah, the number is "larger", but still pretty insignificant compared to +2,400. AB owns a 1/3 or so of CBA (Redhook, Widmer, Kona) and half of Dominion/Fordham. MillerCoors owns under 1/4 of Terripin.

    I'd say the ice was broken back in the mid-90's when Miller (pre-SAB) bought half of Shipyard and Celis. Shipyard bought back Miller's share a few years later, and, conversely, Celis invoked a contractual obligation and made Miller buy him out completely. Miller closed Celis and eventually sold off the brand and equipment.

    After that episode (and the "craft shakeout" that followed) there wasn't much such action save for AB buying into Redhook and Widmer (pre-CBA) and signing distribution deals with them.

    I don't agree. AB did very little acquiring in the US in the period of being #1 from the 1950's to date, going from under 10% of the market to today's near 50%. For much of the 20th century they were required to get DoJ pre-approval for any such deals after a deal in the late 1950's buying the American Brewing Co., of Miami which the DoJ made them sell off the brewery and brands. After that, they bought a closed Schlitz brewery in the '80's and the Rolling Rock brand in the mid '00's.

    Miller bought some small brewing companies (Gettleman and Leinenkugel in WI), a few breweries (a Lucky brewery in Azusa, CA - now closed - the former Carling brewery in Ft. Worth TX) and some brands (notably Meister Brau and Lite). Coors bought the Stroh brewery in Memphis.

    It was the parent companies of today's two US "Big Brewers" which grew into global multinational giants by acquisitions- in particular, ABInBev and SABMiller (MolsonCoors is still an "also ran" globally).
     
  29. Chris77McGrath

    Chris77McGrath Savant (285) Ohio Feb 8, 2013

    Still good news.
     
  30. But that's only true if the "your" in "Stahlsturm's" question IS a licensed brewery - I read that question as asking if it is possible for an independent start-up company to get a wholesale license in most states, and that happens all the time.

    Although, granted, with the disappearance of the other big breweries in the US (Stroh, Heileman, essentially Pabst) and their networks of indie distributors AND the increasing pressure of AB and MC on their wholesalers to merge, the number of distributors continues to go down in the US even as the number of breweries increases. Still, probably nearly half the beer distributors in the US aren't MC or AB houses- though many of those are, where legal, general alcoholic beverage wholesalers, also carrying wine and/or spirits.
     
  31. It breaks my heart the the craft beer market share is so small in relation to ABI and SAB Miller Coors. My goal is to turn as many as I can towards craft as I can.
     
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  32. rlcoffey

    rlcoffey Savant (490) Kentucky Apr 20, 2004

    I took it differently, in the context of our discussion, as he was responding to my point about breweries being FORCED into using a distributor.

    But yeah, start ups can happen. There is a small craft*-only distributor that just started up near me.

    *for a definition of craft that includes some imports
     
  33. I didn't mean literally AB, Miller or Coors buying up companies, but rather the Global companies that acquired THEM, as you mentioned...and they DO like to swallow up brands. So, that's why I think there can be warranted concern, however small the concern is, that they could target craft breweries more frequently.
     
  34. Oh, yeah, :eek: I see that now. I was still concentrating on the claim of other posters about AB and MC controlling distribution in the US. I'd say preventing that was a major point of creating the 3 Tier System post-Repeal and while it did not prevent the current brewing industry oligopoly, it did create an independent middle tier that allows 1000 "shipping" craft breweries to exist in the US.

    Also there's no doubt the 3T laws haven't not kept up with the current model of the industry but thy're changing all the time - just the fact that the "tied house" laws that would have prevented brewpubs in all 50 states have all been repealed in the last 3 decades or so, shows that.

    Now it took a while for that middle group to catch on to the benefits of selling craft beers, and not all of them have (in some cases still trying to please AB who brought them to the dance" and bought 'em those Mercedes in the driveway at home).
     
  35. One ‘practice’ that I found particularly objectionable was Anheuser-Busch’s past initiative of “Share of Mind”. Below is an article from 2008 discussing this practice:

    “Anheuser-Busch’s “100% share of mind” program is legendary. It started ten years ago, when A-B began offering incentives to their distributors so they’d care only about A-B products. Though I assume they never said so — wink, wink — they encouraged distributors to drop non-A-B brands and concentrate on only the important brands. And at that time, such was A-B’s market strength that many distributors did in fact tow the line.”

    I am guessing that under AB InBev this specific practice is no longer in effect. It would not surprise me if there are other programs or incentives akin to the “Share of Mind” initiative in place.

    Cheers!
     
  36. Right, but the era of the "Big Three>Two" in the US being owned by giant conglomerate multinationals is only about a decade old - SAB - Miller in 2002, Molson - Coors in 2005, followed by Miller - Coors in 2007, and finally A-B - Inbev in '08.

    I think it's important to point out that AB, Miller and Coors got to the top in the US by "organic" growth almost exclusively and it's rather hard to predict what the future of the US industry may bring without historic examples, certainly since the US market is now essentially stagnant as far as total yearly sales totals go.

    And most of the purchases those parent companies made here and elsewhere tended to be big ones, entering or gaining large market share in new countries. OTOH, AB in the US buying GI gave it no significant bump in market share.
     
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  37. rlcoffey

    rlcoffey Savant (490) Kentucky Apr 20, 2004

    Did any of the older, large breweries that went away in the 70s/80s/90s not go thru Pabst at some point?

    Schlitz, Falstaff, Ballantine, Hamm, Schaefer, Stroh, Olympia (Im sure Im leaving some out). All are or were owned by Pabst at some point. Im not sure that was the best business model.
     
  38. I'm sure there is still some of this going on in undeveloped craft beer markets. In a large city like where I live, the profit from the sale of craft beer becomes way more than what ABI would give a company to carry solely AB products... I would think anyway, those guys have some deep pockets.

    As far as distribution goes, I always see people saying that the distro's aren't doing enough to distribute craft beer into new accounts. I know personally I try to put as much craft into an account as possible but lots of times it's not worth the hassle if an account won't move through the product. Trying to keep beer fresh in an account can be difficult if the store doesn't move through a consistent amount of product.
     
  39. “Trying to keep beer fresh in an account can be difficult if the store doesn't move through a consistent amount of product.” It can be even more challenging if the BMC breweries obtain ‘premium’ shelf space and the craft beers are relegated to less prominent space.

    The distribution & sale of beer has many aspects to it and there is no doubt that the BMC breweries know how best to play this game. The good news is that in more ‘sophisticated’ markets craft beers are selling well; maybe because there is a well-known and established market (e.g., BA type folks) who demand these products. In less ‘sophisticated’ markets it is more of a street fight for space, tap handles, etc.

    Cheers!
     
    frazbri likes this.
  40. Not sure what you mean by "going through" Pabst. What is now called Pabst is really the remnants of Paul Kalmanovitz' S&P Corporation, which by the late 1970's owned General Brewing Co. (Lucky Lager and dozens of old mostly California budget brands) Falstaff (which owned Narrangansett, the Ballantine brands and some other smaller NE and mid-West brands) and Pearl (Pearl, Jax, Country Club).

    Pabst at the time was still among the largest US breweries - #3 or 4 - with a yearly barrelage of around 15m. Then, in a weird 3 way deal, Pabst bought Olympia (which owned Hamm and Lone Star) and Heileman bought Pabst, and then spun-off a "new" (and fatally weakened) "Pabst"- keeping Lone Star, Henry Weinhard, and Pabst's modern, relatively new GA brewery.

    Soon after, S&P/Kalmanovitz bought the weakened Pabst and eventually folding it into his other three companies, as he closed breweries and dropped brands. By the end of the '90's, it was all pretty much one company, dba "Pabst Brewing Co." headquartered in San Antonio TX (Pearl's original brewery) and running the old Olympia brewery and contracting with Heileman and then Stroh for much of their production.

    Then Stroh closed and Pabst bought most of their brands (which included Heileman's huge portfolio which Stroh had bought a few years early) and made the deal with Miller for contract brewing their portfolio and closed their last breweries in the period of '99-'02.

    So, the S&P/Pabst company never had any ownership of the brewing companies like Ballantine, Schlitz, Schaefer, all the Heileman brands, Stroh, etc., but simply bought or took over the rights of the brand names/labels by buying the successor companies.

    Yeah, kinda confusing...
     
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