Think Tank Lambastes Big Beer Brewers, Modelo Sale

Dec. 14, 2012 — -- Pretty much everyone agrees on beer. So what's political about it?

Beer also happens to be big business, and as such, debate over markets and regulation follows it, right into the halls of a Washington, D.C., think tank.

With Anhueser-Busch Inbev seeking a controlling share of Grupo Modelo, the brewer of Corona and Modelo Especial, the D.C.-based New America Foundation criticized the sale, which it says would solidify a virtual duopoly of the American beer market, as Inbev and its counterpart, Miller Coors, dominate the U.S. beerscape.

In a new report, the think tank argues for stronger state and local controls, raising some political and philosophical questions about markets, competition, consumer choice and the role of government in controlling enterprise to help the little guy -- all with an eye toward boosting the panoply of microbrews that, New America says, will be squeezed out of the U.S. market.

"The diversity that we see, just in that little 5 percent of the marketplace ... is greater than anywhere else in the world," said Barry C. Lynn, director of New America's Markets, Enterprise, and Resiliency Initiative, at a panel hosted at the think tank's Washington offices Wednesday. "It's a result of that marketplace that was put into place in the 1930s."

As Lynn and others see it, Big Beer has been squeezing that post-Prohibition model of how beer is sold in America, with brewers, distributors and retail sellers each separated in a three-tier system geared to prevent monopolies. New America's panelists said that Anhueser-Busch Inbev and Miller Coors had pushed that system to its limits by pressuring distributors to carry only their products, taking advantage of their size to crowd independent brewers out of bar taps and off store shelves.

"They have a great level of influence on what's supposed to be an independent tier in pressuring those distributors to favor their product," said Dogfish Head Brewery's Sam Calagione, who appeared as a panelist Wednesday.

Calagione came face to face with the monolithic, large-brewer-influenced distribution industry when he began his now widely popular brewery in Delaware in 1995. He called the local Anhueser-Busch distributor to inquire about carrying his beer. "It was really a one-sentence phone call," Calagione told the audience at New America. "They said, 'Sorry, we're not picking up any new products.'"

The beer market appears to be flourishing with independent brews, but it isn't as diversified and variegated as it seems: The two giants own a stable of brands, aside from the Buds and Millers, that includes Red Hook, Widmer, Goose Island, Corona, Old Dominion, Leinenkugel, Blue Moon, Shock Top and Rolling Rock, having acquired the smaller labels over the years.

New America and Calagione agree that beer laws should allow small brewers to self-distribute, and that they should prevent large brewers from essentially programming distributors to crowd out the competition, as New America claims AB-Inbev has done by disseminating a Wholesaler Family Consolidation Guide to its distributors. "It's about consumer choice -- the fact that the craft-brew segment is growing is about consumer power," Calagione said on Wednesday. New America's Lynn made a case for regulation, and against laissez-faire economic conservatism: "We have an instance that proves markets are moral -- if you make them so."