Skip to main content

Don't let big brewers win beer wars

By Steve Hindy, Special to CNN
updated 10:52 AM EST, Wed December 12, 2012
STORY HIGHLIGHTS
  • Steve Hindy: Anheuser Busch aims to buy Modelo, Corona beer maker; craft brewers worry
  • Already MillerCoors and AB control most of U.S. beer market; deal would make it 80%
  • He says the duopoly has huge influence on beer distribution; leaves craft brewers struggling
  • Hindy: In other industries, like oil, antitrust rulings draw line for market share. Why not for beer?

Editor's note: Steve Hindy is co-founder, president and chairman of The Brooklyn Brewery. Brooklyn Brewery started in 1988 and is among America's top 15 craft breweries.

(CNN) -- The proposed purchase of Mexico's Modelo beer brands by the world's largest brewing conglomerate, Anheuser-Busch-InBev, is causing deep concern among America's craft brewers.

Anheuser-Busch already controls about 47% of the U.S. beer market. Adding Modelo's Corona beer and other brands would give it another 6%. MillerCoors, the other big player in the United States, controls about 30%.

If the Modelo deal goes through, a duopoly would control more than 80% of the U.S. beer market.

Steve Hindy
Steve Hindy

The concentration of market share in two global companies means they have tremendous influence over distributors and retailers. This gives an advantage to big brewer beer brands over small brands created by America's independent craft brewers. Ultimately, with limited choices, the beer consumer loses.

The Department of Justice is determining whether the sale would violate antitrust laws.

As I understand it, Anheuser-Busch claims it would have no say in the marketing or sale of Modelo brands in the United States. Those functions would be left to Crown Imports, the Chicago-based marketing and sales company that is owned by Constellation Brands, the world's largest wine company.

In 10 years, Anheuser-Busch would have the right to buy Crown.

Become a fan of CNNOpinion
Stay up to date on the latest opinion, analysis and conversations through social media. Join us at Facebook/CNNOpinion and follow us @CNNOpinion on Twitter. We welcome your ideas and comments.



It's hard to understand how a brewery could own another brewery and not have some control over sales and marketing. Doesn't the owner control the price of beer sold to the importer/marketer? Doesn't the owner contribute to the sales and marketing programs and costs of the importer/marketer? Doesn't the owner have some say over the hiring of personnel for the brewery it owns?

Eatocracy: Learn how to homebrew

And isn't the owner responsible to its shareholders to ensure the brewery is maximizing shareholder value?

America's small brewers have been on a roll in the past decade, claiming more than 6% of the U.S. beer market since the craft brewing revolution began in the early '80s. That 6% is divided by 2,400 small companies.

The duopoly already has tremendous influence over beer distribution in America.

In most markets, brewers have two choices, a so-called Blue and Silver distributor, who sells MillerCoors brands, or a Red distributor, who sells Anheuser-Busch brands. (The color codes describe the primary colors of the brewers' labels.)

Through so-called "equity contracts," the large brewers prescribe how much money distributors spend to sell and market their brands. In some cases, they have the right to approve or disapprove the manager of the distribution company. In some cases, they have the right to approve the succession plan of the distributor. In some cases, they have the right to approve the sale of a distributor.

Conan: 'I want my free Guinness already'
Catalan beer back from the dead

Craft brewers constantly struggle to get the attention of these distributors.

In the mid-1990s, the CEO of Anheuser-Busch, August Busch III, declared that he wanted "100% share of mind" from his wholesalers. Some Red distributors ejected non-Anheuser-Busch brands from their warehouses. Distributors who gave his 100% were given more favorable terms for their purchase of beer. August III is gone, but the new owners of Anheuser-Busch have called for distributors to get "aligned" with the brands they control.

Large brewers also have control over some retail sales of beer. Many chain supermarkets and stores appoint "category captains" to determine which beers are sold in refrigerated aisles and which beers go on the warm shelves. If the category captain is a Blue and Silver distributor, MillerCoors will play a key role in choosing which brands get sold where. If it is a Red distributor, Anheuser-Busch makes the calls.

This results in a tug-of-war between large brewers trying to get maximum placement of their brands and small brewers trying to get a spot. Obviously, a company that controls 53% of the U.S. beer market is going to have a better shot at shelf space than my company.

Both members of the duopoly have wholly owned brands like Shock Top and Goose Island that are presented as craft brands. They own large shares of some other breweries like Red Hook and Kona. There is concern that these brands would get greater attention from wholesalers than independent craft brands, like mine. This can greatly limit the beer consumer's choices.

In sports venues like arenas and stadiums, the large brewers monopolize space. They typically have advertising contracts with the venues, and this results in their having a dominant share of the beer taps and other beer placements. If you want a Brooklyn Lager at Yankee Stadium or CitiField or the new Barclay's Center in Brooklyn, you'd better be prepared to spend some time searching. Brooklyn Brewery is in those venues, but in a very limited way.

More beer news on Eatocracy

Those are my concerns, and the concerns of other craft brewers. Obviously, I am not an attorney. I know little about antitrust law. I recently read a couple of books about the oil industry and learned that antitrust rulings in that industry have drawn a line for defining a company with too much market share.

Given this, I am baffled by the state of the U.S. brewing industry. How did we ever get to a situation where two companies control 80%? And how can we allow them to control more?

Follow @CNNOpinion on Twitter

Join us at Facebook/CNNOpinion

The opinions expressed in this commentary are solely those of Steve Hindy.

ADVERTISEMENT
Part of complete coverage on
updated 1:50 PM EDT, Sun September 21, 2014
John Sutter boarded a leaky oyster boat in Connecticut with a captain who can't swim as he set off to get world leaders to act on climate change
updated 7:22 PM EDT, Fri September 19, 2014
Is ballet dying? CNN spoke with Isabella Boylston, a principal dancer at the American Ballet Theatre, about the future of the art form.
updated 5:47 PM EDT, Fri September 19, 2014
Sally Kohn says it's time we take climate change as seriously as we do warfare in the Middle East
updated 9:02 AM EDT, Fri September 19, 2014
Dean Obeidallah says an Oklahoma state representative's hateful remarks were rightfully condemned by religious leaders..
updated 3:22 PM EDT, Fri September 19, 2014
No matter how much planning has gone into U.S. military plans to counter the Islamic State in Iraq and Syria, the Arab public isn't convinced that anything will change, says Geneive Abdo
updated 11:44 AM EDT, Fri September 19, 2014
President Obama's strategy for destroying ISIS seems to depend on a volley of air strikes. That won't be enough, says Haider Mullick.
updated 9:03 AM EDT, Fri September 19, 2014
Paul Begala says Hillary Clinton has plenty of good reasons not to jump into the 2016 race now
updated 11:01 AM EDT, Fri September 19, 2014
Scotland decided to trust its 16-year-olds to vote in the biggest question in its history. Americans, in contrast, don't even trust theirs to help pick the county sheriff. Who's right?
updated 9:57 PM EDT, Thu September 18, 2014
Ruben Navarrette says spanking is an acceptable form of disciplining a child, as long as you follow the rules.
updated 11:47 AM EDT, Fri September 19, 2014
Frida Ghitis says the foiled Australian plot shows ISIS is working diligently to taunt the U.S. and its allies.
updated 3:58 PM EDT, Fri September 19, 2014
Young U.S. voters by and large just do not see the midterm elections offering legitimate choices because, in their eyes, Congress has proven to be largely ineffectual, and worse uncaring, argues John Della Volpe
updated 9:58 PM EDT, Thu September 18, 2014
Steven Holmes says spanking, a practice that is ingrained in our culture, accomplishes nothing positive and causes harm.
updated 2:31 PM EDT, Thu September 18, 2014
Sally Kohn says America tried "Cowboy Adventurism" as a foreign policy strategy; it failed. So why try it again?
updated 10:27 AM EDT, Thu September 18, 2014
Van Jones says the video of John Crawford III, who was shot by a police officer in Walmart, should be released.
updated 10:48 AM EDT, Thu September 18, 2014
NASA will need to embrace new entrants and promote a lot more competition in future, argues Newt Gingrich.
updated 7:15 PM EDT, Tue September 16, 2014
If U.S. wants to see real change in Iraq and Syria, it will have to empower moderate forces, says Fouad Siniora.
updated 8:34 PM EDT, Wed September 17, 2014
Mark O'Mara says there are basic rules to follow when interacting with law enforcement: respect their authority.
updated 9:05 AM EDT, Tue September 16, 2014
LZ Granderson says Congress has rebuked the NFL on domestic violence issue, but why not a federal judge?
updated 7:49 AM EDT, Tue September 16, 2014
Mel Robbins says the only person you can legally hit in the United States is a child. That's wrong.
updated 1:23 PM EDT, Mon September 15, 2014
Eric Liu says seeing many friends fight so hard for same-sex marriage rights made him appreciate marriage.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT