Craft beers
Looking at the wide array of taps at bars these days, we seem to be in a golden age of beer. The world is awash in ales, lagers and porters, many made by small breweries, which are gaining an ever bigger share of the market.
Brooklyn Brewery, a pioneer in the craft beer renaissance along with Boston Beer Co. and Sierra Nevada Brewing Co., is doing such brisk business that it plans to build a second brewery on Staten Island in 2017. Small companies like Brooklyn sold 11 percent of the beer Americans bought last year, up from just 2.8 percent in 2004, according to the Brewers Association, a trade group.
But even success with consumers isn’t enough. Small brewers have good reason to fear that mergers among the industry’s giants will make it harder for them to sell their products if those companies also come to control big beer distributors around the country.
When Brooklyn Brewery began selling its lager in 1988, few people took it seriously. Steve Hindy, one of the founders, said some people even sneered that it made no sense to name a beer after a place as gritty as Brooklyn.
“We distributed our own beer for 15 years because none of the big distributors cared about us,” he said recently. Brooklyn and other craft labels caught on as more Americans began experimenting with imported beers from Europe. The growth was helped along by the local and artisanal food movements. And the growing cachet of Brooklyn, the place, has helped with marketing, too; international sales of the company’s beers have boomed, growing about 25 percent a year.
Yet while Brooklyn lager can be found in Stockholm, it can’t be found in many states, like California. That’s partly because beer distribution is mostly through wholesalers, some of whom have been acquired by giant beer corporations like Anheuser-Busch InBev. Reuters reported recently that the Justice Department and regulators in California were investigating whether InBev, which makes Budweiser and Bud Light, was buying up beer wholesalers to curb sales of craft beers in bars and grocery stores.
“When a big brewery buys an independently owned distributor, they would evaluate each one of those brands and not keep all of them,” said Tom McCormick, executive director of the California Craft Brewers Association and a former beer distributor. “The bulk of their attention would be on their in-house brands.”
That fear has been heightened by the announcement in October that InBev, the world’s largest beer company, has proposed buying SABMiller, the second-biggest company, for $104 billion. InBev produces about 45 percent of all the beer sold in the United States while Miller Coors, a joint venture between SABMiller and Molson Coors, sells 26 percent, according to Beer Marketer’s Insight.
The merged company might be able to get around antitrust concerns if it sells SABMiller’s stake in Miller Coors. In 2013, when InBev was buying Grupo Modelo, the Mexican company that makes Corona, the Justice Department forced the companies to sell Modelo’s U.S. operations.
But such a sale would not resolve the distribution problem, which tends to hurt the smallest brewers the most. Hindy said Brooklyn doesn’t sell beer in California and other Western states partly because it does not have strong relationships with supermarket chains like Safeway. High shipping costs are also a barrier. The other big problem is the lack of independent distribution. Wholesalers owned by InBev, he said, are not interested in marketing beers from competing companies.
InBev said small beer companies have plenty of distribution options. “There are more than 3,300 independent beer wholesalers across the country, each free to contract with any other brewer,” the company said in a statement. But in many cities big wholesalers, often with ties to the giant producers, tend to call the shots because they have access to the most bars and retail stores.