Big Brewer is watching you

By Pete Brown

- Last updated on GMT

Big Brewer is watching you

Related tags: Ab inbev, Stella artois, Anheuser-busch inbev

Pete Brown runs his own slide-rule over the megadeal between AB InBev and SABMiller and concludes that the future may be less than rosy for both pubs and small brewers in the UK.

A great deal has already been written in this magazine — and across the entire news media — about the massive deal between Anheuser-Busch Inbev and SABMiller to create what many commentators are calling Megabrew, others The Evil Empire.

One of the main arguments I’ve seen expressed by beer lovers is “Well, all they make is bland eurofizz anyway. If you drink decent beer, it won’t make any difference.” I’ve also read people arguing that the world’s new biggest brewer — accountable for around a third of beer production globally — will help small-scale brewers. As Goliath grows ever bigger, little David will attract even more sympathy and support.

The reason for adding my own shovel-full of words to the mountain already written on the subject is that I fear such views are dangerously naïve.

The day before the agreement in principle to the merger was announced, AB Inbev were in the news in the US for a different reason: the launch of an investigation into anti-trust activities by the brewing giant.

Since the repeal of prohibition, the US drinks trade has been organised in a way to try to prevent brewers having undue power and influence over retailers. Instead of having direct contact, American brewers must sell to a wholesaler, who in turn sells to retail outlets.

Historically, Anheuser Busch got around this by buying the wholesalers they sold to, and then preventing them from selling competitors’ products. This is illegal, but Anheuser Busch did it anyway. In 1934, 1942, 1969 and 1977, the brewer was charged with several thousand instances of ‘trade practice violations’, for which it was fined hundreds of thousands of dollars. They just kept doing it anyway, because such sums are small change to a company of that size.

Old habits seemingly die hard: on 12 October this year, the US Justice Department announced that is probing allegations that AB Inbev is seeking to curb competition in the beer market by buying distributors with the intention of making it harder for craft brewers to get their products on store shelves. AB InBev made no response to a request for a comment by the PMA, but it had earlier confirmed to Reuters news agency that it was talking to regulators saying: “We are working cooperatively to address any questions they have”.

You might read this and once again think that this doesn’t apply here in the UK, as we don’t have the same system of distribution. But what the American story shows us is a continued attitude of trying to put rivals out of business by cutting off their access to market. And there’s more than one way to do that.

I used to work for an agency that did the ads for Whitbread — back then, one of the UK’s ‘Big Six’ national brewers, and now part of the global empire that is Anheuser Busch Inbev. At the time, Stella Artois was growing by 19% a year and every pub wanted to stock it. Whitbread also marketed Heineken in the UK, and the old 3.4% ‘cooking lager’ variant wasn’t doing so well. So the Whitbread sales force simply said that any bar wanting to stock Stella Artois had to take Heineken as well.

Such sales practices are common in the British market. But we’ve never seen how they might play out if one company controls a third of beer production.

This new brewing Death Star will own many popular brands. What’s to stop them from saying ‘If you want Stella, Stella Cidre, Peroni, Becks, Bud and/or Pilsner Urquell, you can only have them if you refuse to stock anything by Carlsberg or Heineken? Or anything by local craft brewers?’ AB Inbev has been aggressively buying craft beers in the US, and SABMiller bought Meantime in the UK earlier this year.

Pubs could very soon finding themselves with a craft beer choice of only Goose Island and Meantime if they also want to stock many of the leading mainstream lager brands.

It’s dangerous to dismiss all big brewers as being the same. SABMiller is culturally very different from A-B Inbev. The former displays an understanding and respect of beer culture. A-B Inbev on the other hand, has a demonstration for ruthless cost cutting, and a belief that beer is no different from dog food or toilet rolls in how it should be sold to consumers.

Mainstream beer is about to become a meaner place full of nastier products, and craft beer and real ale may well find it harder to compete against this mainstream. While people are still speculating on what Megabrew might really be called, I worked out (well, an internet site did) that an anagram of ‘AB Inbev SABMiller’ is ‘Barman’s Evil Bible’.

Sounds about right.

Related topics: Beer

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