InBev: What A-B Wants, A-B Gets

by Jack Curtin
ALE STREET NEWS
mAY/jUNE 2007

Anheuser-Busch's foray in the craft beer world, begun seriously in 2006 and moving forward steadily this year, has manifested itself in various joint ventures with smaller brewers as part of its "Here's to Beer" campaign, most notably the first St. Louis Brewers Heritage Festival in early May and a day-trip for the beer press to visit the breweries of Fort Collins during last year's GABF in Colorado, topped off by a mini-beer festival/buffet luncheon outside the A-B facility there. Those developing relationships can only a good thing for the beer industry as a whole.

A-B's relationships with the nation's beer wholesalers, though? Not so good. It's no secret that the behemoth's efforts there are driven in large part by the demands of its distribution network, which wants its share of the craft and high-end import pie. The import side is where conflict primarily arises, with the company's effort being driven by the acquisition of the InBev brands, over 80% of which were in houses outside the A-B network at the time of the deal. It's not been an easy road, with lawsuits flying back and forth.

In franchise law states, A-B has been, out of necessity, more generous than those without such protection for the brand holder, offering as much as three times gross profit for the InBev rights, leading to ten figure checks being proffered. A "fair agreement" accepted by New York's Manhattan Beer Distributors was reported to be $65 million; in California, a non-franchise state, the "fair" offer was one times gross profits. A-B has sued distributors in Arizona, Louisiana and Rhode Island and its InBev brand purchases in New Jersey are currently under litigation. And that's just the tip of the legal iceberg.

Various statements from A-B officials indicate that roughly a third of previous InBev wholesalers have already agreed for the brands to move to their wholesalers. Estimates are that that this means that the A-B network now distributes or has deals pending to distribute about 60 percent of InBev U.S. volume, with that figure expected to reach 75% by year's end.

Copyright (c) 2007 Jack Curtin


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