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Wednesday, November 14, 2012

While We're Talking InBev, See Today's Washington Monthly

I got a bit of private blowback on yesterday's post, so I should probably be wary about pointing to another anti-InBev screed.  Ah well, caution has no place on a blog.

The following sections are taken from a long article in the Washington Monthly, a left-leaning political magazine heavy on public policy wonkery.  I emphasize left-leaning, because the article takes a certain view--or any way the author, Tim Heffernan, does.  He thinks US beer regulation, which drives distribution through a third-party, works because it's inefficient.  It keeps prices high and makes market dominion hard.  He compares the US model favorably with the British model which he says drives up consumption and has turned the country into an 18th-century style hellscape:
It’s apparent in their hospitals, where since the 1970s rates of cirrhosis and other liver diseases among the middle-aged have increased by eightfold for men and sevenfold for women. And it’s apparent in their streets, where the carousing, violent “lager lout” is as much a symbol of modern Britain as Adele, Andy Murray, and the London Eye. Busting a bottle across someone’s face in a bar is a bona fide cultural phenomenon—so notorious that it has its own slang term, “glassing,” and so common that at one point the Manchester police called for bottles and beer mugs to be replaced with more shatter-resistant material. In every detail but the style of dress, the alleys of London on a typical Saturday night look like the scenes in William Hogarth’s famous pro-temperance print Gin Lane. It was released in 1751.
So okay, you may not like the set-up.  But the meat of his argument involves consolidation of beer companies at the mass-market end of things and does echoes the points raised in yesterday's post.  Like:
Prior to the 2008 takeover, Anheuser-Busch generally accepted the regulatory regime that had governed the U.S. alcohol industry since the repeal of Prohibition. It didn’t attack the independent wholesalers in control of its supply chain, and generally treated them well. “Tough but fair” is a phrase used by several wholesale-business sources to describe their dealings with the Busch family dynasty. Everyone was making money; there was no need to rock the boat....

Then, after eliminating everything it could at home, the new regime turned to squeezing more out of its increasingly nervous partners, the wholesalers. And, today, with only one remaining real competitor, MillerCoors, the pressure it can put on its wholesalers is extraordinary. A wholesaler who loses its account with either company loses one of its two largest customers, and cannot offer his retail clients the name-brand beers that form the backbone of the market. The Big Two in effect have a captive system by which to bring their goods to market. 
Heffernan goes on to describe some pretty rough tactics InBev used on distributors in Arkansas, and how InBev has skirted the law in California and New York.  I can't actually verify any of this and would of course welcome corrections.  Even if the truth is less dire, I don't think it takes a lot of imagination to envision a world where InBev also owns Modelo and SABMiller--that would surely be catastrophic to competition and would certainly make control of "independent" distributors more likely.  The thing is, except for stockholders and managers at InBev, there's really no one who benefits from monopolies.  It's just bad all around.  Let's hope federal regulators see the danger and nix any further InBev mergers.


  1. If you've never heard of this guy before he's consistently put out great posts about brewers and distributors. If this topic interests you at all they are well worth the read:

  2. Do you really believe the US government would let ABInBev buy Miller Coors? One has to imagine that would cause a monopoly on the beer market and so would not be allowed.

  3. Kind of off the main topic of the story, but I don't really understand how he can argue that the British model "drives up consumption" when beer consumption in Britain has been in steady decline for years

  4. He also gets glassing wrong. As the name implies, it's smashing a glass into someone's face, not a bottle.

    He seems to have formed his opinion of British drinking culture from scare stories in tabloid newspapers. It's such a distorted view of pubs that I can't take anything he says seriously. London's streets looking like gin lane? I assume he's never visited the city.

  5. Where in the article is there a comment on the deteriorating quality /taste of the beer since the consolidation? The craft beer is the last great hope.