Anheuser-Busch InBev is facing scrutiny from the U.S. Justice Department and California attorney general's office over allegations that the megabrewer is squeezing out craft competition at the distribution level. Independent brewers claim that after AB InBev bought their distributor — the middleman selling to bars and stores — their sales stalled. The investigation comes after a recent spate of purchases where AB InBev acquired five distributors, but there are also complaints that AB InBev-aligned (but not owned) distributors intentionally neglected contracted craft clients. Here's everything you need to know:
Distributors are required for most brewers.
Selling direct isn't an option for the majority of brewers. Instead, post-Prohibition-era rules require them to contract with a distributor to get beer to consumers. Even if a brewer wanted to change distributors, breaking the contract often requires a brewery to pay its distributor for lost future profits.
AB InBev owns 17 U.S. distributors.
The company has purchased five distributors in three states in the past couple of months, and that adds to the 12 it previously acquired in major cities like Los Angeles, New York, and Boston. A Reuters report cites an unnamed brewer that claims its "healthy sales" were hurt in 2011 and 2012 after AB InBev purchased two distributors they worked with.
But that's only a small fraction of its distribution.
To put those 17 in perspective, AB InBev works with another 500 distributors to sell its beer across the U.S. However, there are also allegations that those independent distributors are being pressured to favor AB InBev products.
And it owns former craft brewers.
Starting with its acquisition of Goose Island in 2011, AB InBev has since purchased Blue Point, Elysian, 10 Barrel, and Golden Road Brewing. While the company had no direct competition at shared or owned distributors five years ago, that's not the case any longer.
Craft beer has the fastest rising beer sales in the U.S. market.
Last year, craft beer sales grew by 17.6 percent to now cover 11 percent of the U.S. market. Overall beer sales (craft included) were practically flat, at 0.5 percent growth, in 2014. The continued craft growth is what's attracted AB InBev to the segment, and also painted a target on the backs of all craft brewers.
When AB InBev buys a craft brewery, it is no longer a craft brewery.
A craft brewer is defined, per the Brewer's Association, as producing less than 6 million barrels annually and being less than 25-percent owned by a non-craft brewer. Even if small specialty batches are produced by an AB InBev brand, they are not considered craft. Yes, even Goose Island's world class Bourbon County Stout.
AB InBev is about to get even bigger.
The company just agreed to initial terms to buy its closest competitor, SAB Miller at a whopping $106 billion — an amount large enough to purchase the entire U.S. craft brewing industry at least three times over. The combined corporation would control roughly 30 percent of the world's beer.
AB InBev is cooperating with regulators.
AB InBev is covering its bases on the five distributors they bought in California, New York, and Colorado. A spokesperson stated that they are communicating with, and answering any questions, that the Department of Justice and the California attorney general's office have.