Executives involved in the billion-dollar beer merger between Anheuser-Busch and SABMiller tried to paint a rosy picture of its impending marriage — despite a wealth of contradictory testimony — assuring lawmakers that there’s really no downside to the deal: everyone will benefit, even consumers.
InBev CEO Carlos Brito told [PDF] members of the Senate Judiciary Committee hearing on Tuesday that the company’s $107 billion deal to buy SABMiller and sell the MillerCoors brand to Molson Coors for $12 billion is all about increasing competition, not lining the beer giants’ wallets.
“The purpose of this transaction is to enhance our ability to serve new markets, particularly in Africa, Asia and Central and South America,” Brito said during the hearing. “If anything, our divestiture of SABMiller’s interest in MillerCoors will create an even more competitive marketplace, building upon what is already a golden age of consumer choice in American brewing.”
To illustrate what he means, Brito opined about how the deal would barely touch the U.S. marketplace, at least when it came to his company’s big beer – Budweiser – noting that the brand’s sales position wouldn’t change.
Despite Brito’s repeated assertions that the deal isn’t meant to bench craft brewers, that “the beer market has never been so competitive and so open,” he and his counterpart from Molson Coors faced tough opposition from lawmakers and the craft industry.
Senator Richard Blumenthal, of Massachusetts, questioned the industry’s consolidation over the past several years – including purchases by InBev of small craft brewers and distribution companies.
“Through the eyes of consumers, the result has been higher prices,” Blumenthal said. “These megamergers may have been good for shareholders, but not so much for beer drinkers.”
Molson Coors CEO Mark Hunter tried to placate those concerns [PDF], noting that the company only owns one distributor and has no intention of buying others.
“It will not change consumer choice, it will not change the competitive pricing environment, it will not change our market share…and it will not change the explosive growth of craft brewers or their access to the market through the MillerCoors distributor network,” he said.
Brito echoed the sentiments, claiming that the companies’ “small role… has not stood in the way of craft’s remarkable growth. In fact, several of our owned and operated beer distributorships are in markets that are home to some of the country’s most successful craft brewers.”
That reassurance wasn’t exactly met with applause, as Senator Chris Coons, of Delaware, poignantly noted that “nobody wants to take a seat at a bar and discover their only choices are between a Bud and a Miller,” he said.
Bob Pease, CEO of the Brewers Association, contradicted Brito and Hunter’s testimony, noting in his own testimony [PDF] that the big beer makers have incredible influence over U.S. wholesalers, giving it a competitive edge that would only grow if they combined forces.
“In communities where ABI or a closely related wholesaler is one of two choices for a brewer to access the retail market, the wholesale tier is simply not competitive,” he said. “Over the last several months, ABI demonstrated its ability to expand control of the wholesale tier by leveraging its company-owned wholesalers and relationships with favored wholesalers.”
The distribution of beer in the U.S. has been a point of concern for many antitrust experts.
Diana Moss, president of the American Antitrust Institute, who also testified [PDF] at the hearing, told Consumerist earlier this year that it’s possible the underlying reason for the merger hinges on control of more distribution centers.
“It’s not about the 70% market share of production,” Moss says. “They want the global market, but in the U.S. they want distribution. That is the pipeline to getting the consumer and a lot of craft brewers use the Miller distribution centers to get to shelves.”
It’s this motivation – to control the arm of the beer business that essentially provides consumers with choice – that worries Moss.
“A merged ABI-SABMiller would be a more powerful ‘gatekeeper’ of the critical distribution channels that craft brewers need to get their products onto retail shelves, jeopardizing the choice, variety, and innovation that consumers benefit from,” she says.
While the Senate subcommittee has no power to block the merger between the beer companies, members of Congress have previously asked Attorney General Loretta Lynch to investigate the merger’s impact on craft brewers, specifically whether or not the deal would push them out of the beer market.
“Large multinational brewers should not be allowed to use their market power to limit consumer choice and access to small innovative breweries,” Delaware Senator Chris Coons and Sens. Angus King, of Maine, Jeff Merkley, of Oregon, Susan Collins, of Maine, and Richard Blumenthal, of Connecticut, wrote in a letter to Lynch. “Put simply, we believe craft brewers must be able to conduct their business without being denied access to necessary raw materials and distribution companies.”
by Ashlee Kieler via Consumerist