(Jock Fistick/Bloomberg)
Dow Jones Newswires | The Illinois Liquor Control Commission
blocked a bid by Anheuser-Busch InBev NV’s U.S. division to buy a
controlling stake in its largest Chicago-area beer distributor, in a
blow to the brewer’s efforts to compete more effectively in one of the
country’s key beer markets.
The commission’s ruling Wednesday also hints at the regulatory hurdles
the world’s largest brewer could face if it embarks on a wider effort
to control more of its distribution in the U.S.–a strategy some
analysts expect.
The seven-member Illinois board ruled that Anheuser, as a company based outside the state, can’t control a distributor in Illinois. It cited the importance of maintaining a “three-tier” system, referring to the regulatory regime for alcohol sales in U.S. states that generally requires beer to be sold to a distributor before reaching a bar or store. The system, put in place after Prohibition’s repeal, was designed in part to prevent anticompetitive behavior and minimize social problems associated with alcohol.
The commission said Anheuser could not buy the 70% of City Beverage that it doesn’t currently own, or it would revoke City Beverage’s license to distribute beer in Chicago. City Beverage, which distributes the bulk of Anheuser’s products in the Chicago metropolitan area, is part of Detroit-based Soave Enterprises. Anheuser and Soave were close to wrapping up the deal last month before the commission expressed concerns.
Anheuser was surprised in part because it had owned some of its distribution in Illinois in the past. And it took the 30 percent stake in City Beverage in 2005.
The brewer, the largest in the U.S. by sales, wants to own the distributor outright so it can improve its performance and make the brewer more competitive in the Windy City with MillerCoors LLC. MillerCoors is the nation’s No. 2 brewer, but it has long led the Chicago market.
Anheuser, which makes Bud Light, Beck’s and Stella Artois, owns about a dozen distributors around the U.S., in states such as California and New York. About half of U.S. states allow beer makers to distribute their own beer, although brewers usually sell to independent distributors. Some Wall Street analysts have said they expect Leuven, Belgium-based Anheuser to try to buy more of its distributors to cut costs out of its supply chain.
MillerCoors, the Illinois association representing beer distributors and Southern Wine & Spirits of America, the nation’s largest liquor distributor, all testified against Anheuser’s efforts to buy all of City Beverage at a hearing last week.
Another example of business trumping the consumer. We only have this arcane system because it benefits the major party contributors. This is sickening.
Why do you think Illinois count of Breweries have dwindled?
Answer: Illinois Laws
The foreingers at AB-InBEV are not looking out for anyone but themselves, this was good for joe sixpack in the short and long run.
Anheuser does NOT brew Beck’s!
There is no such thing as Anheuser-Busch anymore – it’s Anheuser-BuschInBev, and yes, they do brew Beck’s.
Yes, the three-tier system is not perfect, but it enables competition and allows smaller breweries, namely craft brews, to have access to distribution – small brewers don’t necessarily have the scale or funds to establish their own sales force to call on all of the accounts that could potentially sell their product.
Actually, the three tier system hurts small and craft breweries. They can try and market to stores, bars and restaurants, but then they have to try and convince distributors that they will sell enough for the distributors to start to carry and deliver. Then in stores they have to deal with shelf space issues which controlled by the distributors generally. As seen above, a 30% stake in a distributor pretty much gets you whatever you want. Many start-up and small breweries would love and alternative or exemption to the three-tier system – then they can market and sell directly to the stores, bars and restaurants.
There’s a good documentary about this topic, Beer Wars maybe, its on netflix, good show.