The Brewers Association Wrestles with Buy-Outs

If I could have teleported into Philadelphia for just one event in the Craft Brewers Conference, it would have been the one where the Brewers Association addressed the wave of buyouts over the past two years. It sounds like it was every bit as fascinating as I’d hoped. The situation, as you all know, is that the largest and most successful American breweries are ripe for acquisition by bigger international players. And that has happened in dramatic fashion, with nearly 30 sales in the past year and a half. The BA is a trade organization, and was set up to advocate for small brewers. As the most influential members of that organization leave–to the very competition BA has protected its members from–it represents a serious crisis for the organization.

Brewers Association Director Paul Gatza addressed the CBC on Thursday. He did the only thing he can do–parse between the deals that are bad for his membership and those that are (at least for now) relatively benign. Chris Funari:

“Private equity investments are different,” he said. “The company doesn’t get the market access benefits or the ingredient access benefits. It feels like it is more a form of banking.”

source

 As more money pours into the space and as savvy business-minded investors become craft brewery operators, the deep passion for brewing — which has long been a cornerstone of craft and a major reason for the category’s impressive growth spurt in recent years — is becoming less of a focus, Gatza argued. “It feels like its differing and it feels like we’re losing some of that,” he said.

And it views even small labels owned by bigger companies as a threat on a different scale than that presented by private equity. Even knowing that private equity’s passion might lie more closely to business than to brewing, the BA still regards investments from that sector as potentially less harmful to the overall craft universe, however.

Although this seems awkwardly legalistic, it’s fundamentally accurate. The BA wandered into the weeds when it tried to clothe itself in the language of heroism (craft beer as a revolutionary social change). But its role as a protector of the little guy is critical for an open, healthy market. And in this regard, BA really does travel with the angels. Here’s what at stake:

Part of the reason these acquisitions are such a threat is their impact on access to raw ingredients and distribution networks. As the largest brewer in the world, ABI can buy ingredients in much larger quantities (for much cheaper prices) causing availability issues for small craft brewers. In addition, ABI owns a significant portion of the American distribution network, outright owning distributors in 10 states and having significant influence over their distributor network nationwide.

“What is needed is a truly independent beer distribution system” said Pease. “Anheuser-Busch InBev has rolled out an incentive program… that basically aligns their distributors not to sell brands that are over 15,000 barrels in their house. We have no problem with Anheuser-Busch InBev incentivizing their distributors to sell more of their own product, but for them to incentivize distributors not to sell other products is something we want to see remedied.”

Consolidation does pose real dangers, and in the coming years, the Brewers Association is going to be the blade edge leading the fight. They were caught flat-footed by the buyouts, but now it’s become a given. The BA’s going to have to give up being a champion for that nebulous concept of “craft beer” and retrench for the fight against small beer. That’s the battleground of the future.

from Beervana http://beervana.blogspot.com/2016/05/the-brewers-association-wrestles-with.html

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