Craft brewers find proof that the distribution system is 'rigged' by Anheuser-Busch

Discussion in 'Beer News' started by Miles_in_beer_city, May 27, 2017.

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  1. readyski

    readyski Maven (1,471) Jun 4, 2005 California
    Trader

    Excuse my naivity, but when are we gonna march on the Capital or the lawns of Bud Weiser. Or does that happen in 20 years when we're back to 100 brewers :rolling_eyes:
     
  2. Miles_in_beer_city

    Miles_in_beer_city Pundit (848) Jun 18, 2014 North Carolina

    Are you saying that AB doesn't use strong arm methods to dominate the industry outside of NC? Why would they oppose self distribution above specific volumes only in NC, if not to either get a cut of the small businesses cash flow, or to apply choke points in the distribution of their products?
     
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  3. drtth

    drtth Initiate (0) Nov 25, 2007 Pennsylvania
    In Memoriam

    No I'm saying that there are other states that have better legal control and more vigilant law enforcement in place to back it up. There is a distinction between ABInBev the company and the independently owned distributors who handle ABInBev producs who are not being externally by a foreign corporation.

    Look through this portfolio of breweries represented by one of the Philly area distributors who also handles ABInBev beers. Then try to tell me they are controlled by ABInBev or lobbying for any other interest than their own special interests as a member of the PA Wholesale Distributors Association. (Keeping in mind that in the Philly area I can easily find beers from most if not all of those breweries.)

    http://www.origlio.com/beers/portfolio

    Given the separation between ABInBev and the independently owned distributors in North Carolina who handle their beer why would a group of independently owned local companies lobby against a ruling that would negatively impact their individual businesses? Their own self-interest.
     
    #103 drtth, Jun 8, 2017
    Last edited: Jun 8, 2017
  4. Boomer4ES

    Boomer4ES Initiate (0) Jan 31, 2012 North Carolina

    I take issue with the idea that a craft brewery should be allowed to sign a contract with a distributor and then opt out at any point with no penalty. If this wording has been changed or removed, that is news to me. These agreements generally come with pretty significant price tags, and it was my understanding that the bill put forward had basically get out of jail free clause, which would essentially allow a brewery to collect a massive check and then turn around and leave the distributor if they "weren't happy."
     
  5. herrburgess

    herrburgess Grand Pooh-Bah (3,053) Nov 4, 2009 South Carolina
    Pooh-Bah Society

    what kind of "massive check" does a brewery receive from a distributor?
     
  6. Miles_in_beer_city

    Miles_in_beer_city Pundit (848) Jun 18, 2014 North Carolina

    OK, your PA distributor carries those products. How does that say that the legal and binding contract between them and ABI does not stipulate that bud products are given priority above all non-ABI products.

    ABI is going to tilt the playing field on a state-by state or country by country basis based on what the laws in each of those allow, and are clearly not opposed to contributing to (buying) politicians in the hope those laws will always favor them.
     
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  7. drtth

    drtth Initiate (0) Nov 25, 2007 Pennsylvania
    In Memoriam

    The PA distributor gives preference to what sells best for their business. In bars and other retailers where ABI sells best the distributor happily provides product that sells. In bars and retailers where ABI doesn't sell, that same distributor happily provides other product that sells. They provide beers from their portfolio that the customers want to buy. Other distributors, many of which have no connection to ABI, do the same.

    Frankly I'm not clear why you seem to think the only brewing company who wants a competitive advantage is ABI. Nor do I understand why you think ABI has any influence at all over the many other distributors who handle competing breweries and have no connection to ABI what so ever.
     
  8. Miles_in_beer_city

    Miles_in_beer_city Pundit (848) Jun 18, 2014 North Carolina

    Well clearly Bud will be #1, as locally it is 85% of their business, but will they push GI IPA for shelf space or a tap line, vs. a local but equally as good (or better) IPA, because they are contractually required to put ABI products first?

    I never said ABI has an influence with a distributor that does not distribute Bud as there is no contract with ABI. The discussion is about the distributor with a ABI contract and also distributes non-ABI product.

    The local Bud distributor stated that Bud is 85% of that business. When contracts are agreed upon or renewed, any business man will not put 85% of his volume/revenue in jeopardy by refusing to put all ABI products above everyone else.
     
  9. drtth

    drtth Initiate (0) Nov 25, 2007 Pennsylvania
    In Memoriam

    What this side-bar mini thread is really all about is that you keep saying that ABI has tha same influence everywhere that you think they have in your small corner of the world and I keep pointing out that what you think is true there for NC isn't the same everywhere else and that corruption is a two player game. Similarly you keep insisting that the influence and corruption you think you see in your small corner of the world exists everywhere else and I keep saying, no, it does not. Clearly we are going nowhere except around and around in the same tiny circles.

    So here's hoping your small corner of the world manages to survive and work its way out from the clutches of the only source influence and the force of evil you think you see.

    Have a nice day.
     
  10. lateralusbeer

    lateralusbeer Savant (1,158) Feb 7, 2010 North Carolina
    Trader

    Couple points here.

    1. SOME of those agreements come with hefty price tags, such as when Wicked Weed signed with the local Bud House. In many more cases, smaller craft brands sign on with minimal to no compensation for their path to market. I can't think of another industry where two business cannot sever ties.
    2. The bill as I read it allowed for immediate return of the rights, so there was no lapse in service, to prevent the old school practice of distributors burying brands that were in the extraction process. The brewery and distributor would then have a year to determine fair compensation.
    3. Most importantly - even if that provision were considered a "poison pill," from everything I've read the distribution side never came to the table, never even offered or considered a compromise, never budged one inch. From a consumer perspective, that looks like, "We've already bought the votes we need, so we're going to just bury this." That's offensive. If the biggest distributors aren't willing to even discuss an evolving market, why should any conscientious craft beer fan want to support them?
     
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  11. nc41

    nc41 Initiate (0) Sep 25, 2008 North Carolina
    Trader

    The distribution cap is nonsense, I believe we all see that, but I'm sure there's members of the NC legislature that's is making a buck off this. It's what greases the wheels and why lobbyists make a lot of money. But that it got as far as it did was a big first step, in time this archaic law will be repealed. It makes no sense at all that a small business would be burdened with a 3 tier system against their will, so I understand when a brewery like Old Mech says FO, instead of growing and hiring more people and paying more in taxes they chose to stay put and do neither. It's not short sighted, it's criminal if they're taking cash or other things for votes, but it's also what's killing this country in so many different areas, it's a pay to play scheme.
     
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  12. Miles_in_beer_city

    Miles_in_beer_city Pundit (848) Jun 18, 2014 North Carolina

    ABI will flex their mu$cle everywhere they can when laws do not make such practices illegal. Craft has dug into their domination of the beer industry, and that want that 10 - 15% back. That is big corporate business.

    It's not just my corner of the world, but global.

    Your ABI cheerleader outfit is very becoming on you.... :stuck_out_tongue:
     
  13. drtth

    drtth Initiate (0) Nov 25, 2007 Pennsylvania
    In Memoriam

    Oh, I'm quite far from being an ABI cheerleader but I'm not surprised you would interpret any disagreement with your views in that way. My own personal view is actually that one defeats an enemy by knowing exactly what they are doing and how, not by imagining things or wild speculation based on hearsay evidence.

    Yes they want some of that 10-15% back (they weren't the only Big Kid to lose part of that share). If they are succeeding in NC the way you think they are, start lobbying with your state legislature and law enforcement groups since they are the ones who made/make the laws that enable such things to happen in NC. Any laws that enable what you think you see happening there were put in place by your legislature. But also keep in mind that AB was also big business during the rise of the Craft beer movement and before the InBev acquisition and they couldn't stop the Craft beer movement then.
     
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  14. Haybeerman

    Haybeerman Pooh-Bah (2,510) May 21, 2008 Colorado
    Pooh-Bah Society

    Yes and no. AB distributors operate under a Wholesaler Equity Agreement. The WEQ refers to 10 "Exhibits". Exhibit 9 "Operating, Sales and Merchandising Standards" lays out how AB expects their distributor to compensate sales reps. If a distributor does not comply, they are subject to forfeiting sales/marketing reimbursements - for the average AB distributor, that's ~$300,000 per year.
     
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  15. Haybeerman

    Haybeerman Pooh-Bah (2,510) May 21, 2008 Colorado
    Pooh-Bah Society

    Yup - as a part of a wholesaler's agreement with with ABI: "Develop and utilize an employee compensation, incentive and recognition system that ensures employee compensation per unit (including sales commissions, or Wholesaler funded incentives) for (i) any premium or above Anheuser-Busch brand is equal to or greater than employee compensation per unit for any premium or above competitive beer product sold by the Wholesaler, and (ii) any sub-premium or below..." (goes on to say the same as above
     
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  16. Leebo

    Leebo Initiate (0) Feb 7, 2013 Massachusetts

    See also, MA. Recent pay to play fines for a distro in the Boston area. Love to see how the top to botton reorg of the state booze laws play out. Probably same old, same old.
     
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  17. drtth

    drtth Initiate (0) Nov 25, 2007 Pennsylvania
    In Memoriam

    Yes, the first round of fimes were one result of an investigation first begun to deal with the pay to play being used by an all craft distributor. Dishonest folks will be that way no matter which brewery they represent. There was punishment for that Craft distributor so I'd say expect much the same outcome for any others with "dirty hands" before the MA and Fed folks are finished.

    Edit: interestingly, that whole Boston area investigation was first triggered by the tweet(s) of a Craft brewer whose sales were suffering because he refused to play the game. But apparently not many such people had the guts to not play along because they were looking out for their own self-interest and succeeding.
     
    #117 drtth, Jun 8, 2017
    Last edited: Jun 8, 2017
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  18. jesskidden

    jesskidden Grand Pooh-Bah (3,071) Aug 10, 2005 New Jersey
    Pooh-Bah Society Trader

    "10-15%" ? Got a cite for that stat? AB in the US had 49.2% of the US market in 2008 - the year of the InBev takeover. (They never quite reached their long time desired 50%). In 2016, it was 42.7%, according to the Brewers Association.

    Even at a loss of ~7% of the US market, hard to say that's all went to "craft" given Crown/Constellation's increase from 5.1% to 8.3% during the same period.

    Internationally, it's much hard to figure AB-InBev's worldwide market share given their purchase of Grupo Modelo>sale to Constellation followed a few years later by the purchase of SABMiller>sale to MolsonCoors in the US/Asahi in Europe/Snow in China, etc.
     
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  19. Haybeerman

    Haybeerman Pooh-Bah (2,510) May 21, 2008 Colorado
    Pooh-Bah Society

    From the Anheuser-Busch InBev SA/NV (that's a nice bar call) quarterly earnings report: Globally, Q1 2017 was ABI's second quarter as a combined company with SABMiller. Overall, organic revenue was up 3.7% (rev per hl up 4.3%), with total volumes down 0.5% (own brands down 0.2%). Worse in the U.S. where rev per hl up 2.2%, but
    volumes down 4.7%.

    Before the biggest beer acquisition in history, ABI had a 20.9 global share and SAB had a 9.7 global share. To your point, due to the required divestitures, they don't have a 30.6 share. There has been significant work done to size the global beer business after all the acquisitions and divestitures played-out. Though a couple smaller European brands short of completing the divestiture part, with the sales of Snow (a brand almost the same size as the total US beer business), MillerCoors, Peroni and host of others, ABI NV global share clocks-in at 28% according to Euromonitor International.
     
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  20. Haybeerman

    Haybeerman Pooh-Bah (2,510) May 21, 2008 Colorado
    Pooh-Bah Society

    "10-15%" ? Got a cite for that stat?

    That is overstated. According to a blend of Brewers Association, shipment reports, IRI and Nielsen, between 2008 and 2016, ABI and MillerCoors lost a combined 10.9 share of market from (78.2 to 67.3). ABI was down 6.1 and MillerCoors down 4.8.
     
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