News U.S. Challenges AB-InBev's Purchase of Grupo Modelo

Discussion in 'Beer News & Releases' started by jesskidden, Jan 31, 2013.

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  1. johnnybgood1999

    johnnybgood1999 Disciple (339) Oct 31, 2008 Virginia

    Most people that I know drink BMC because of the price and a perception that craft beer is dark and bitter. I've converted a few guys with light, refreshing craft brews. If I give them an American Pale Wheat or a Witbier, they are usually surprised at how smooth and refreshing that beer is. At that point they realize beer can have positive flavors and craft isn't necessarily bitter. After the lighter crafts I'll sneak in a low bitterness brew, like a Williamsburg Coffeehouse Stout or a Chocolate Yeti. Usually they are hooked and shocked that dark, bitter beer can be so good.
  2. otispdriftwood

    otispdriftwood Defender (637) Dec 9, 2011 Colorado
    Beer Trader

    They have deep pockets and perhaps the math supports their fight. ROI and all that.
  3. JackHorzempa

    JackHorzempa Poo-Bah (3,448) Dec 15, 2005 Pennsylvania
    Premium Member

    Patrik, There is a ‘regular’ Schlitz beer and a totally separate beer that is labeled as “1960’s formula”. If you go to the Schlitz website there is no longer any mention of the beer labeled “1960’s formula”:

    Interestingly in the History & Advertising tab they still list:

    “2007: The ‘Classic 60’s Formula’, the one that made Schlitz the most popular beer in the country in the 1950s and 1960s, is back.

    “2008: The ‘Classic 60’s Formula’ of Schlitz, in traditional brown glass bottles, returns to its birthplace, Milwaukee, Wisconsin.”

    Below is something I posted previously:

    I bought a case of Schlitz 1960’s formula beer last summer and I was pleasantly surprised!

    First off, the case cost less than $20.00 including tax. As I paid for the beer I thought to myself: I can’t remember the last time I paid less than 20 bucks for a case of beer.

    Now, Schlitz 1960’s formula beer is not ‘earth shattering’ but it is indeed more flavorful than a typical BMC beer. They utilize a bit more hops (bittering and flavor/aroma) then present day BMC beers so it has more hop presence. They still use adjuncts in this beer (corn) but at a lower level; they use 30% adjunct in making this beer.

    What they were going for in making this beer is just as the label say: 1960’s formula. This means a bit more hops and less adjuncts then present day beers. I thought this was a very tasty and pleasant beer given that it is an American Adjunct Lager.

    Crusader likes this.
  4. familydog

    familydog Initiate (134) Jul 11, 2006 Pennsylvania
    Beer Trader

    So let me understand this. On one hand, we have government regulating the beer industry to ensure AB-Inbev majority market share. On the other hand, government wants to prevent an acquisition to ensure beer industry competition. The irony just baffles me.

    Maybe the "Justice" Department ought to spearhead a task force aimed to eliminate all favorable legislation for any brewery.
  5. chefkevlar

    chefkevlar Disciple (336) Apr 17, 2010 South Carolina
    Beer Trader

    That's not a just a rep that's the owner! That was an awesome string of tweets though. He's one person who isn't shy about speaking his mind that's for sure.
    RobertColianni likes this.

    BEERMILER12 Poo-Bah (2,369) Sep 11, 2010 Maine

    19etz55 likes this.
  7. 19etz55

    19etz55 Disciple (325) Aug 12, 2007 New Jersey


    BEERMILER12 Poo-Bah (2,369) Sep 11, 2010 Maine

    It's definitely nice to see Goliath fail from time to time... although I guess it's bound to happen when all they can do is buy out David and still completely suck in the eyes of craft drinkers pretty much everywhere.
  9. 19etz55

    19etz55 Disciple (325) Aug 12, 2007 New Jersey

    Hopefully more people like us will join and fight the GOOD fight. There's always hope even if it is micro sized.
    BEERMILER12 likes this.
  10. tolar111

    tolar111 Disciple (391) Aug 17, 2008 New York

    VABA likes this.
  11. Mebuzzard

    Mebuzzard Poo-Bah (3,467) May 19, 2005 Colorado

    I wonder if AB was still 'Merican would the DOJ intervene.... :sunglasses:
  12. Crusader

    Crusader Aspirant (211) Feb 4, 2011 Sweden

    Seems like the entire landscape that brought forth the 3 tier system has changed, from a highly competitive market with several major players post-prohibition to the near duopoly of today with one clear dominant player which wants to become even more dominant. Add to that distributor consolidation and the 3 tier system looks like less and less of a hindrance for ABInbev, they're achieving ecnomies of scale in all three tiers: brewing, distributor and retail with the clout that comes from offering the most popular brands in bulk at good prices for the distributor and retailer, and in the end the consumer. This whilst also incrementally increasing prices for the consumer who is getting less and less of a deal as the years go by, with price increases above simply inflation, since the competitive forces which used to force the brewers to show restraint in pricing is no more. AB-Inbev communicates their intent to raise prices and MillerCoors follows suit.

    Then again it's difficult to achieve a stable equillibrium where several major players are more or less equally successful and able to compete against one another in a way which doesn't end up with one of them on top, or with several of them going out of business with the end result being the same. The most realistic best case scenario is perhaps one where the craft breweries continue to do well despite the best efforts of ABInbev and MillerCoors, and despite the market dynamics above, where they continue to win more market share and grow in value sales and become a formidable opponent to the big brewers.
  13. bigflatsbeerman

    bigflatsbeerman Aspirant (242) Nov 2, 2005 New York

    I just watched CBS news video on this. The anchor at the end of the story said "it could mean increased prices for everybody at home". I would propose a slight change to, "it could mean increased quality for everybody at home".
    This just points to the perception of beer as a commodity with no differentiation.
  14. jesskidden

    jesskidden Meyvn (1,257) Aug 10, 2005 New Jersey

    What does "it" refer to in the quote above- the ABI-Modelo purchase or the DoJ lawsuit to stop it? The Department of Justice believes the purchase will allow AB-InBev to raise prices with less resistance from other brewers if they can control the supply and importer's cost of Corona and the other Mexican brands.

    How could "quality" be affected if Modelo is or is not purchased by AB-InBev?
    UncleJimbo likes this.
  15. tozerm

    tozerm Initiate (0) Jul 1, 2005 Washington

    "“We must slow the volume trend of High End Segment and cannot let the industry transform,” AB InBev said in internal strategy documents obtained by the Justice Department, referring to the threat posed by imports and craft beers."

    That pretty much says it all right there.... cannot let the industry transform.
    Holmes698 and ehammond1 like this.
  16. MaltMilkshake

    MaltMilkshake Initiate (0) Feb 9, 2011 California
    Beer Trader

  17. scootny

    scootny Poo-Bah (1,582) Dec 31, 2007 New York
    Premium Member Beer Trader

    Hopefully this is all the Justice Department needs to stop the Modelo acquisition.
  18. WassailWilly

    WassailWilly Initiate (0) Sep 8, 2007 New York

    They better be scared I just wish I could convince everyone to drink good beer...
  19. PorterLambic

    PorterLambic Poo-Bah (2,440) Nov 26, 2003 Florida

    Hey, they gotta protect their swill and should be allowed to do whatever they want. (where is that sarcasm icon?)
    Honestly, they are talking out both sides of their asses or did they not notice their own attempts to penetrate the high end beer segment with tweaked versions of the same old dreck they've been shilling for decades?
    It's like the auto companies complaining about the inclusion of light trucks in the fuel avg. ratings because they don't want to make fuel-efficient trucks. Maybe AB-InBev should start advertising something other than Bud & Bud Light.
  20. RashyGrillCook

    RashyGrillCook Aspirant (260) Apr 30, 2011 Florida
    Beer Trader

    In terms of putting a stop to the acquisition, having that in writing on their internal documents is a million times more effective then petty hearsay. Reminds me of the quote "Say it and forget it. Write it and regret it."
    mfnmbvp, JulianB, kneary13 and 5 others like this.
  21. UCLABrewN84

    UCLABrewN84 Poo-Bah (12,433) Mar 18, 2010 California

    High End Segment Advocate.
    jcb7472, Sarlacc83, JulianB and 33 others like this.
  22. Boilerfood

    Boilerfood Initiate (0) Jun 5, 2012 Indiana

    Can we get shirts with this printed on it?
  23. cavedave

    cavedave Poo-Bah (2,412) Mar 12, 2009 New York
    Beer Trader

    Haha, as if there is a for profit industry that doesn't hope its competitors do poorly. This is news?

    It would be news if an internal memo said, "We really hope our competitors succeed, and we hope they are successful in causing our profits to go down drastically." That would be news. Some folks need to get a grip on what being in business actually means.
    beertunes, ceazaleo, Danielbt and 8 others like this.
  24. taez555

    taez555 Poo-Bah (1,588) Dec 9, 2002 Massachusetts

    They're a business trying to maximize their profit, what else are they gonna do?

    That being said, this is basically the reason I refuse to drink BMC products. People always say you should give beer a shot regardless of the brewer, but I call that bullshit on that. I refuse to drink their beer due to their business practice of actively trying to squash ALL competition, not to mention trick people into buying mediocre "craft" beer released under bogus names that hide the fact their brewed by them.

    But yeah... not really news.
    jcb7472, Naterobsnyk4, cjoc83 and 3 others like this.
  25. cavedave

    cavedave Poo-Bah (2,412) Mar 12, 2009 New York
    Beer Trader

    I am with you, sort of. You lost me after the first sentence.

    ABI's flagship beers suck, so I son't drink them. I love BCBS and BCBCS and I can get them more easily now. If that is because of folks like you who understand that business is business, and still don't buy from companies like ABInBev, well, all I can say is thank you.
    JoeyBeerBelly and atoulouk like this.
  26. Lutter

    Lutter Initiate (0) Jun 30, 2010 Texas

    Was this an old email or something? Because it would seem to me that the purchase and inflow of cash into Goose Island over the past 2 years has only furthered their nightmare of "not let[ting] the industry transform."

    It sounds like they changed their tune (around late 2010/early 2011), agreed that change was happening, and rolled with it by entering the "High End Segment" with stuff like the Goose Island purchase and "premium" (I use big quotes there) offshoots of their main brands like Budweiser Black Crown, Bud Light Platinum, and Beck's Sapphire.
    steveh likes this.
  27. arfenhouse

    arfenhouse Initiate (0) Oct 29, 2012 California

    Buy more craft, not like I needed to say really say that.
    ddegennaro likes this.
  28. jesskidden

    jesskidden Meyvn (1,257) Aug 10, 2005 New Jersey

    That article is a mess. He uses the volume market share of craft beer ("about 5%" - actually it's 5.7% according to the Brewers Association) and then the dollar market share of AB-InBev -"39%". (Craft's dollar share is 9.1% and AB-I's volume share is 46.9%. All figures are 2011's - 2012's not out yet for the most part.)

    He claims that 38 states ban self-distribution - the Brewers Association says it's allowed in 34 states and in D.C. And then he quotes a brewery owner in Ontario, Canada about the difficulty of distribution! Needless to say, the 50 US states' individual distributions laws are quite a bit different than Ontario's.

    For a more factual explanation of the DoJ's case against the AB-I/Modelo deal, see the actual DoJ complaint-

    The United States of America... brings this civil action under the antitrust laws of the United States to enjoin the proposed acquisition by Anheuser-Busch InBev SA/NV of the remainder of Grupo Modelo S.A.B. de C.V.

    In which it is explained that:
    The DoJ believes that AB-I's prices are kept low because Modelo/Crown higher-priced imported beers don't always go up in price when AB and/or MC raise their prices in lower segments - thus narrowing the gap between premium - above-premium - high-end segments. Also note that the two leading import brewers, Heineken (which includes Newcastle and now the Mexican brands of FEMSA- Tecate, Sol, Carta Blanca, Indio and Dos Equis, etc ) and Modelo/Crown alone have more dollar share of the US market - 13% - than all 2000+ "craft brewers" combined.
    Ranbot, beergurujr, afksports and 3 others like this.
  29. TheBeerAlmanac

    TheBeerAlmanac Savant (967) Mar 3, 2011 Kentucky
    Beer Trader

    What exactly do you do, anyway? I feel like if ever there was a job title of beer ninja, you might be it.
  30. mborden

    mborden Initiate (172) Jan 28, 2009 New York

    "Better to remain silent and be thought a fool than to speak and to remove all doubt."
    Gunboat82 likes this.
  31. Hanzo

    Hanzo Initiate (0) Feb 27, 2012 Virginia

    In other news Microsoft wants to find a way to stop people from buying Apple products.
  32. TheBeerAlmanac

    TheBeerAlmanac Savant (967) Mar 3, 2011 Kentucky
    Beer Trader

    Normally I'd just hit the "like" button and move on, but we're not necessarily talking about competing products like laptops or operating systems. Craft brewers have realized there's room to commingle as each respective brewery offers a desired product in its own right in the mind of their consumers. AB sees it as a winner take all competition, that it's their beer or no beer, which is horrible for the end consumer, us, who wants variety and quality. In the end it's still business and everyone's trying to make a buck, but MS vs. APPL is company vs. company and that's healthy competition that breeds quality. AB vs. craft beer is company vs. industry and that doesn't breed a better product, it stifles growth and oppresses the evolution of the industry.

    Sorry, didn't mean to get so serious, I think I need a beer. What time is it?
  33. Hanzo

    Hanzo Initiate (0) Feb 27, 2012 Virginia

    I agree with what you are saying, I was just pointing out that as a big business, of course AB wants to knock out their competiton, we don't need an article to know that.
    JulianB and TheBeerAlmanac like this.
  34. MN_Beerticker

    MN_Beerticker Initiate (0) Jul 10, 2012 Minnesota

    Well fellow David Advocates get out your slings. Let's help increase market share.
  35. MostlyNorwegian

    MostlyNorwegian Zealot (548) Feb 5, 2013 Illinois

    Corporate beer still sucks.
  36. mschofield

    mschofield Meyvn (1,349) Oct 16, 2002 Massachusetts

    I think it is important, sure the assumption was BMC was trying to keep craft down and they'd do sneaky things to do it ("pay for play", fake craft brands etc..) but to go and write it down to me means they're not thinking "we need to do this" they're thinking "we have the right to do this"
  37. gwdavis

    gwdavis Initiate (0) Feb 8, 2012 Georgia

    I wish, but god knows the entire BMC crowd is constantly having favors done for it compliments of government regulation. The evil empire strikes again.
  38. MammaGoose

    MammaGoose Initiate (0) Jan 10, 2013 Wyoming

    I'd say that's a fairly obvious statement coming from A-B. Of course they want as many people used to buying their beer as possible. And for the better part of the century, Ameridan adjunct lagers were pretty much the only option of beer. If your product is sold to the vast majorty of beer drinkers, nearly the total population of beer drinkers, really...for a century...then ANY change in the market would be disconcerting. The craft beer world boomed pretty quickly. It was a niche that was easy to ignore for a few decades and then within the last decade or so, it got huge. So of course the BMC companies don't want it to keep progressing. I don't think we need "inside info" to assume that; it's obvious economics.

    I do find it interesting that they specifically say they cannot let the industry transform, but the BMC companies themselves are transforming. THEY are the ones changing their products/advertising a little bit and trying to ride the craft beer wave.
    cavedave likes this.
  39. frazbri

    frazbri Crusader (740) Oct 29, 2003 Ohio

    Legality comes down to the details.
  40. cavedave

    cavedave Poo-Bah (2,412) Mar 12, 2009 New York
    Beer Trader

    Big business is favored by govt.? Wow, that is almost as big news as OP.
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