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Mega-mergers threaten craft brew industry 

Big corporate brewers expand control over U.S. beer scene

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THE SMALL world of mega breweries just got a lot smaller. On July 20 the Justice Department approved the $108 billion merger of Belgium based Anheuser-Busch InBev (ABI) and SABMiller.

This merger of the two largest breweries creates an umbrella company that controls over 350 beer brands including Bud, Bud Light, Miller, Corona, Beck’s, Stella, and Pilsner Urquell among others, around 75% of all beer sold in the U.S.

In order to gain antitrust approval ABI will sell off its U.S. stake in Miller to Molson-Coors making that company the new second largest brewery in the world. Canada based Molson-Coors was already affiliated with SABMiller through a joint venture called MillerCoors.

Many craft beer drinkers shun these brands already. In fact, according to the Craft Brewers Association, craft beer grew by 12.3% in 2015 despite and overall drop in beer sales. So why does a mega merger matter to craft beer drinker? Well it matters a lot.

ABI and SABMiller are owner or partial owners of many “craft breweries” leaving a lover of small, local craft beer to wonder where draw the line? Is it OK to support an ABI-owned brewery? How about a SABMiller invested craft brewery? What about a brewery owned wholly or in part by an investment company not associated with any of the macro breweries?

This conflict really hit close to home when, on the same day as the ABI and SABMiller merger was announced, it was also announced that Athens based brewery Terrapin Brewing was purchased by MillerCoors. This takeover wasn’t wholly a surprise as MillerCoors has held a large stake in the company since 2012.

Terrapin joins a long list of craft breweries purchased outright by a larger brewery. ABinBev owns, among others, Devils Backbone Brewing, Elysian Brewing, Blue Point Brewing and, Goose Island Beer Company. MillerCoors owns Leinenkugel’s Brewery, Saint Archer and Blue Moon in addition to Terrapin.

Other breweries held by larger corporations are Ballast Point (Constellation Brands), Lagunitas (50% stake held by Heineken) and craft beer darlings Cigar City Brewing which recently agreed to a sale to Fireman Capital Partners who also own Oscar Blues Brewing.

There are two problems with craft brewery purchases by larger companies. The first is that these companies, according to the Brewers Association, cease to be defined as craft beer but can still be marketed as such.

Because larger breweries can produce beer far more cheaply than your local brewery they can sell their “craft beer” for less. This price differential can push true craft breweries out of taps in you local bars and restaurants and off of shelves in the bottle shop.

Secondly, and perhaps more disturbingly, macro breweries have the capacity to make sure that craft beer never reaches those restaurants and bottle shops in the first place. All beer is cycled through a distributor before it reaches taps and shelves but in some cases macro breweries also own those distributors.

ABinBev owns the distributors in several cities including Boston, Los Angeles, and New York and several states including Florida. ABinBev has also announced an incentive program for distributors who carry at least 95% of their products, reimbursing these distributors as much as half of their marketing costs for ABinBev products. This control of two tiers of the three tier system can squeeze true craft beer out of the system.

The craft beer drinker has two choices in this problem. Choose to support larger breweries by purchasing from their craft beer portfolio. This can be enticing considering brand loyalty is strong with beer drinkers, especially when your brand is a local option like Terrapin.

Or you can choose to support your local, individually owned and operated brewery. This is the option Brew/Drink/Run wants you to take. Inform yourself on what craft beer is and who is true craft before you run to the bar.

When you are there choose, local craft first or at least true craft. Keeping those taps flowing will keep the macros away.

cs
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Raymond Gaddy

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