Multiple outlets are now reporting that U.S. antitrust officials are investigating Anheuser-Busch’s distributor incentive programs for violations. And rightfully so. Feel free to click that link for our original post on the incentive program.
The third tier of the beer industry serves an important function in helping brewers disseminate their beers for sale around the country. The key to this tier — and the entire point of it from the beginning — was its independence from alcohol producers. This attribute is literally cited as a reason Prohibition ended. So, it hardly seems like this system should allow distributors to be aligned and sometimes owned by the world’s largest beer conglomerate, one that is specifically buying brands left and right in order to spread out across every tap and shelf in the world. But it does, and it is. We even named this brand Beer Voltron, solely for its ability to combine all of these parts into one, gigantic imposing robot.
Anyway, the next part of this equation is what’s raising eyebrows. A summary from Fortune:
Distributors aligned with AB InBev are contractually required to spend a certain amount each year to advertise AB InBev beers. Those include products of breweries such as Blue Point or Goose Island, which used to be craft brewers, but are now part of AB InBev group.
Under the new incentive plan, AB InBev refunds 75 percent of this money if its beers make up 98 percent of the distributor’s sales, according to documents provided to lawmakers by AB InBev.
The greater the share of rival beers in a distributor’s sales, the less money it receives, according to the document. Even if a distributor raised sales of AB InBev beers, it would still receive less money if craft sales rise faster.
Sounds an awful lot like these incentives have less to do with promoting one company’s beer and more to do with crushing one’s enemies, seeing them driven before you and hearing the lamentation of the women.
But we already know all of this stuff and have found it unfair for a while. Is there any reason to believe the government will agree? It is easy to be cynical, but they are currently hearing perspectives from craft brewers and independent distributors, so we’ll see. Again, from Fortune:
There is a precedent, however, for the Justice Department to put limits on incentive programs. When AB InBev bought Grupo Modelo in 2013, it required the Modelo beers in the United States to be divested and required AB InBev to refrain from offering incentives to distributors that would hurt Modelo for three years.
Antitrust experts said paying distributors to suppress craft sales could run afoul of antitrust law. “It’s the large manufacturers that are trying to narrow the channel of distribution that is most cost effective,” said Andrew Gavil, who teaches at the Howard University School of Law. “That’s the big story here.”