Because major wholesalers typically carry either Anheuser-Busch InBev (ABI) or SABMiller products, ABI might be able to curb the growth of craft brewers by limiting access to wholesalers; Both ABI’s recent acquisition of seven craft brewers and its incentive programs could stifle the growth of craft brewers

In a letter to the Department of Justice, Klobuchar urged careful consideration of ABI’s conduct both in its own right and within the context of its acquisition of SABMiller

WASHINGTON, DC – Today, U.S. Senator Amy Klobuchar renewed her call to protect competition in the beer market. Because major wholesalers typically carry either Anheuser-Busch InBev (ABI) or SABMiller products, ABI might be able to curb the growth of craft brewers by limiting access to wholesalers. ABI has acquired seven craft brewers since 2014 and four since merger negotiations with SABMiller began. Further, ABI’s incentive program seems to penalize wholesalers for carrying a craft brewer that has achieved more than a modest level of success.

In a letter to Department of Justice (DOJ) Principle Deputy Assistant Attorney General Renata Hesse, Klobuchar urged careful consideration of ABI’s conduct so that it will not stifle the growing competition that craft brewers provide.

“A number of brewers and independent wholesalers have told me that Anheuser-Busch InBev (ABI) may be pursuing strategies, including acquiring multiple craft brands and implementing incentive programs, to ensure only the smallest craft brewers have access to retail outlets,” Klobuchar wrote. “Consumer choice, not producer power, should determine what beers go on the wholesaler’s truck and the retailer’s shelf. In light of what I have heard, I want to make sure that ABI’s conduct, either on its own or in the context of the ABI-SABMiller transaction, will not stifle the growing competition that craft brewers provide.”

Last December, Klobuchar and Senator Mike Lee (R-UT), the ranking member and chairman of the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights held an Antitrust Subcommittee hearing on ABI’s proposal to purchase SABMiller for over $103 billion. The hearing examined how the proposed merger of the world’s two biggest beer producers would impact competition and consumers across the country, including the more than 70 breweries located in Minnesota. More recently, in April, the lawmakers wrote a letter to DOJ urging it to carefully consider the proposed SABMiller and ABI merger.

The full text of the letter is below:

Dear Ms. Hesse:

I write to follow up on my concerns about potential threats to competition in the beer market. A number of brewers and independent wholesalers have told me that Anheuser-Busch InBev (ABI) may be pursuing strategies, including acquiring multiple craft brands and implementing incentive programs, to ensure only the smallest craft brewers have access to retail outlets.

Due to the growth of craft brewing, vibrant competition has developed in this industry over the past forty years, which benefits consumers. This vigorous competition, however, is still tenuous because craft brewers represent a small share of the total market. To be successful and to grow, a brewer must offer a competitive product and have cost-effective access to retail outlets. Without that access, craft brewers would have only a minimal impact on the market, and consumers would have fewer choices and see less competition.

Consumer choice, not producer power, should determine what beers go on the wholesaler’s truck and the retailer’s shelf. Because major wholesalers typically carry either ABI or SABMiller products, ABI might be able to curb the growth of craft brewers by limiting access to wholesalers. Two categories of concerns raise this possibility. First, ABI has acquired seven craft brewers since 2014, four since merger negotiations with SABMiller began. Although each acquired company was small, each had a significant regional presence, and the series of acquisitions may raise concerns. If ABI can offer a full line of former craft beers, it may be able to coerce independent wholesalers into replacing craft brewers’ products with ABI’s newly acquired brands. Second, ABI’s incentive program, at least according to public reports, seems to penalize wholesalers for carrying a craft brewer that has achieved more than a modest level of success (producing over 15,000 barrels per year).

I do not express an opinion about the legality of these strategies. The acquisitions may not foreclose distribution, and the incentive plans may reward effective wholesalers. A series of acquisitions or distribution agreements can be either anticompetitive or procompetitive. Such a conclusion depends on many factual issues, such as whether the conduct would stifle craft brewers’ growth, whether craft brewers have alternative distribution channels available to them, and whether those channels are cost-effective alternatives. At the Antitrust Subcommittee hearing in December, the CEOs of ABI and MillerCoors said that the transaction would not alter craft brewers’ access to retail outlets. In light of what I have heard, I want to make sure that ABI’s conduct, either on its own or in the context of the ABI-SABMiller transaction, will not stifle the growing competition that craft brewers provide.

Thank you for your attention in this matter.

Sincerely,

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