Inbev's new distro incentives

"Never mind all of the brewery workers on the west side of Chicago. Right?"

Not to take away from Jersey, but -- you know?

 

http://www.motherjones.com/tom-philpott/2015/12/big-beer-wants-take-away-your-craft-beer

The boiled down take home is ABInBev has substantial financial incentives for distributors to reduce the amount of craft beer they handle or sell.

If a number of distributors get in line with these incentives, perhaps a window opens for some new distribution companies to open up? I think you should buy a van and turn your garage in to refrigerated beer storage just in case.

 

While the issue has already bended discussed on BA, this is a good article.

 

http://www.beeradvocate.com/community/threads/inbevs-new-distro-incentives.361678/

 

Illegal, probably not since it is voluntary and doesn't carry the "do this or we drop you" stick. Ethical, probably not. Good for competition, absolutely not. Good for craft beer, no way in hell.

 

So in the article it says national craft distributed big boys like Stone, SN, Deschutes etc will be impacted by this. What can we as consumers expect?

Also what InBev calls "incentives" to the distributor is just another word for bribe. Chose to distribute craft if you want, but it will be less profitable and less efficient. Decide to distribute only InBev and we'll give you incentive bonuses. Yeah, that's a bribe. How can't the legal system see that?

 

Apparently you've never worked in a job with commissions or bonuses. "Sell more of our product, we pay you more" isn't illegal, it's how sales incentives work in every business.

 

It may be a great business model but many people on this site have already noted how it will be bad for craft beer. The basic business model is how we ended up with a handful of breweries by 1980 that for the most part all brewed variations on the same these. The 4,000 craft breweries are, for the most part, celebrations of other values with much more of a local flavor and much more diversity.

And i have worked in business for the better part of 3 decades so I have some idea about how it works.

 

The devil, as always, is in the details. It would be one thing of the ABI incentives were based solely on growing sales of ABI products, e.g., sell $100 of ABI products and ABI will give you an extra dollar to help with marketing. Sell $150 dollars and ABI will give you $2 to help with marketing. Under this scenario a distributor could sell $150 of ABI product and $50 of craft product and still get the incentive.

But this is different. The way this incentive is structured, i.e., by percentage of overall sales, means that a distributor cannot increase its sales of craft above 2% or 5% of the distributor's total volume.

Thus, the first scenario allows for competition between craft and ABI because craft and ABI can grow while the distributor gets the incentive based on growth in sheer volume of all brands. But the ABI incentive programs doesn't allow for competition/growth because the craft volume must automatically be below a percentage threshold. For example, if a distributor's craft sales go up the distributor must also increase sales of ABI to get the incentive (even if there is no consumer demand to support those ABI sales). What ABI is hoping will happen is that distributors have a reverse incentive to sell less craft to make their percentages work so that they can get the ABI incentive.

I don't believe it is illegal, but I don't believe it will be good for people that like beer from the bigger craft brewers.

 

For 2014 the Brewers Association reported:

So, for 2014 the Craft Beer Market was 16.18% of the overall beer market in terms of dollars.

@Homers_Beer_Odyssey @jesskidden

Cheers!

https://www.brewersassociation.org/statistics/national-beer-sales-production-data/

 

This is nothing compared to what companies are already doing in this country. It's pathetic how we and our government are slaves to corporations

 

I found this paragraph interesting.


And beyond pushing up the percentage of AB InBev products in the mix, the incentive plans place another restriction on the distributors who choose to take advantage of the offers: They can only carry craft brewers that produce less than 15,000 barrels or sell beer only in one state.
 Such a provision would put a hard squeeze on excellent, relatively large craft brewers like San Diego's Stone, Northern California's Sierra Nevada, and Colorado's Oskar Blues. InBev's new program is already having an impact, the Journal reports.

This does seem to be over the legal line. I would think this would be restraint of trade if your incentive is based on you not being allowed to carry another brewer. Since this has not been brought up is this restriction true?

 

I don't care about this one bit. I'm not going to buy products I don't like for personal consumption based on it being what I see, as I(and everyone else here) isn't that dumb.

If in the extreme case the only beers sold in the US were Budweiser and Bud Light, I'd simply not drink beer. It would be sad, but that is how strongly I feel about it.

Oh and they can't push craft beer out of my supermarkets..as there are only 4 supermarkets of probably hundreds that have beer at all in the county I live in.

 

At what point do the bigger craft breweries join forces and buy their own distribution arms to combat this. That seems like the safest defense.

 

This has zero impact on the obsessive, nerdy BA community that constantly seeks out whales, hard-to-get-stuff and more obscure craft beer. But it highly impacts those casual craft drinkers that buy Stone, SN, NB and other stuff because they shop at grocery stores/liquor stores mostly and buy what's available to them there.

 

Warning: controversial statement. The legal system see's it, but it's propped up to support the actions of those who have the money to dictate it's terms. This is why the legal system does a shit job in preventing the anticompetitive actions across many different industries.

I think that this absolutely sucks and it would be great to see people finding against it given the awareness we have. Perhaps these laws won't get in the way of the growth of zip code breweries, whose ambitions don't stretch as far as mass distribution. Those are the breweries I prefer anyway so thats great, but it's a shame to see a company like Inbev that really tries to sell itself as a great american company do such atrocious things.

 

As more craft gets sold from places like Wawa, Wegmans, Whole Foods and even Costco this limited shelf space becomes more sought after. This is always the opening play for BMC as they have been using it forever. We see the pics every year of another high end brand of beer on Costco shelf selling for dirt cheat ending with 7 cents. That's the ones that didn't sell and won't be repurchased next year.

 

A smart wholesaler will make more money selling craft brands than by accepting incentives from what is likely the only brand in their portfolio to be seeing negative growth.

 

I would generally agree, but my tolerance of corporate ass-hattery has grown thin

I am an ardent follower of Adam Smith, have had multiple heated debates over the failures in sole reliance upon Keynesian policies and lash it all together with a dash of classical liberal leanings, BUT government, politics and business have eroded to the point where it is all one indistinguishable, convoluted mish-mash (three phrases that basically mean the same thing...I'm on fire!) of wealth - power orgies that exclude 99% of the population.

There's tons of wrong going on, but I can cogently argue one point without too much case study and refresher time, and this one point revolves around the Lockean Proviso which is classically applied to physical property, but in theory it still applies here - that unrestricted gathering of a market (property per se) does not allow for the common good of others. A free market society and it's government ought not tamper with free enterprise but when our government is doing the walk of shame after breakfast with big business, what we would define as a classic approach to the role of a laissez faire governance with regard to economy and free markets in general go out the window.

So to get back to where I depart from agreeing with you - I am starting to see big business as "bad" because in order for our system to work, we need ethical actors in both business and government. ABInBev in my philosophical belief, are not acting as anything but "bad" as their unchecked blanketing of the market and not only willful, but active manipulation of the lawmaking process actually goes against a classic free market. These are not the type of businesses that Smith was envisioning, this is more akin to a weird inverse Marxism in one specific private sector (beer, obviously) as they are seeking to control production, distribution and consumer freedom. Furthermore, I truly and honestly believe with every fiber of my being that there are FAR too few non-corrupt elected official, appointee or government actor in DC. Unchecked corporate greed + self interested greedy tone deaf government. This is the new norm.

Well I rambled enough and managed to lose complete interest in what I rambled about, so I will make the mistake of not "fact checking" my economic / philosophical musings. Have at it folks!