The U.S. Department of Justice has approved Anheuser-Busch InBev's purchase of its biggest rival, SABMiller. This is the penultimate green light in the long march to create a worldwide beverage superpower. Only China remains as the final roadblock, but a stamp of approval is expected. The initial deal came together back in November 2015 for $107 billion, and now has approval from 21 jurisdictions. Though the resulting company will control nearly 30 percent of the world's beer, at least in America, craft beer may be the winner in this deal.
The merger's announcement raised red flags in the independent beer world, with the president of the Brewers Association (trade group to craft brewers), Bob Pease, even penning an Op-Ed in The New York Times. Pease detailed the dangers of letting the world's two largest brewers combine market power to squeeze out competition, and made several requests of the DOJ should it approve the merger. These appeals included ending wholesaler incentive programs to sell less craft beer, reducing the number of wholesalers AB InBev owns, and investigating its craft brewery acquisitions.
Apparently the Justice Department listened. In approving the merger, it stipulated several requirements that meet nearly all of the BA's wishes. Gone is the AB InBev program that paid wholesalers bonuses if its beers made up more of its sales (and implicitly, less craft). And though AB InBev isn't asked to sell off any of the distributors it has bought, it now has a cap of moving 10 percent of its volume through them. The DOJ even announced it would be reviewing all future craft brewery acquisitions.
These stipulations protect consumer choice, says Bart Watson, chief economist for the Brewers Association. "We're pleased the DOJ put in new safeguards, but we still have concerns over the world's two largest brewers merging."
The Brewers Association's response was far from celebratory, but overall it's a win for craft beer and its fans, says Sam Holloway, a University of Portland professor of entrepreneurship and founder of Crafting a Strategy. "The Brewers Association deserves credit," Holloway says. "They've drawn a line in the sand and made a dent in the AB InBev system." In fact, craft beer appears to have greater protection as a result of the merger.
While the power struggle between the world's largest brewer and indie operations will wage on, things are only getting better for the average beer lover. Another concession of the merger is SAB Miller selling its stake in the MillerCoors' joint venture to Molson Coors. That means the new AB InBev SABMiller megabrewer won't increase its U.S. market share — though it remains at roughly 45 percent. Meanwhile, the canning of the incentive programs will keep distribution lines open to smaller players, as will the cap on AB InBev acquiring wholesalers.
The Brewers Association is smart to remain wary of the merger. But in the meantime, the rest of us can lean back on our bar stools and enjoy the greatest beer culture in the world — now brought to you in part by the U.S. Department of Justice.
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