Craft brewers cast wary eye to mega-brewer merger
The formal agreement this week to merge the world's largest brewing firms has global implications, right down to the pubs of Medford.
Anheuser-Busch InBev NV’s reported $108 billion deal to acquire SABMiller PLC has set off a lengthy, complex process for regulatory approval here in the U.S. and around the world.
Oregon's burgeoning microwbrew industry has carved out an attractive niche the giants can't necessarily duplicate, but have demonstrated they can acquire it, as happened when AB Inbev acquired Bend's 10 Barrel Brewing Co. last year.
"I want to make sure that when the government considers this proposed merger that the concerns of Oregon's small distributors, our craft brewers, are front and center in the debate," Sen. Ron Wyden, D-Ore., said Thursday after speaking to a group on another matter. "I do not want them left off. That's the point of mobilizing now to ensure that they will be heard."
Pledging to protect Oregon's microwbrew industry from potential fallout, Wyden met with craft brew-industry representatives Friday in Portland. The agreement raises substantial questions for consumers and craft brewers, Wyden said.
"How do you ensure a level playing field," he said. "They create jobs all the way across our state, starting with the fields where they grow the hops. Our manufacturers make equipment, ensuring the beer is of the highest possible quality, there are transportation jobs, restaurant jobs. There's a huge economic multiplier, and it's an industry we're very proud of."
Mike Dimon, owner of Portal Brewing Co. in downtown Medford, said there's more than one way a juggernaut can monopolize.
Access to raw materials is one concern for microbreweries, he said. Hops are a commodity that could become scarce.
"I know of a brewer in town who put in a request with a wholesaler for the balance of their contract for hops and was told, 'Sorry, they're all gone,' " Dimon said. "There is more than one wholesaler, so you can go to another. But they want to keep their big customers happy at the expense of smaller ones."
Dimon has kept an eye on exchanges and sees what could happen once the field is narrowed.
"One variety of hops sells for $12 a pound," he said. "There are people who buy up hops like people who buy tickets for a concert, and then jack up the prices (for resale). I've seen them for as much as $30 on exchanges."
The same could be true of barley, but he isn't worried about yeast, he said.
Another, perhaps even tougher battle is likely to be fought for shelf space in stores, Dimon said.
Brewers may lose out as distributors follow the bidding of major labels.
"If they don't sell Budweiser or Coors, then they are not allowed to put any of their stuff on the shelf," Dimon said. "So they've got to move product, and that makes it harder for little breweries to get on the shelf."
Chain stores typically rely on corporate buyers to make their orders, most likely keeping small operators out. A locally owned Shop'n Kart or Food 4 Less might be more willing, he said.
"The only way to beat their plan is to support your local brewery," Dimon said. "No matter who and where it is."
Together, AB InBev and SABMiller sell more than 30 percent of the world’s beer — branded Budweiser, Stella Artois, Grolsch and Pilsner Urquell, among others. It would rank only behind Procter & Gamble Co. and Nestlé SA in consumer goods sales. Ahead, however, lies regulatory approval in the U.S., European Union, China, South Africa, Colombia, Australia and India.
Earlier this week, Wyden wrote a letter urging the Federal Trade Commission and Department of Justice to weigh in any future review process how a deal would affect craft brewers, consumers and distributors in Oregon and across the country.
“It is incumbent on those charged with enforcing the nation’s competition laws to ensure that this proposed merger or others like it do not disadvantage craft brewers in Oregon and nationwide or restrict consumer choice,” Wyden wrote in the letter.
Wyden stated that he was concerned that large brewers may obstruct and outmaneuver craft brewers by purchasing distributors and exerting control over tap lines and store shelves.
"In light of these events," he wrote, "I ask you to consider not only the direct effects of any proposed merger’s impact on consumers and competitors in the large-scale beer market, but also the effects on the ability for brewers of all sizes to enjoy fair access to distribution chains and consumers.”
Reach reporter Greg Stiles at 541-776-4463 or email@example.com. Follow him on Twitter at www.twitter.com/GregMTBusiness, and read his blog at www.mailtribune.com/Economic Edge.