Breaking News: DOJ Approves Mega-Merger

I just did the Six-Pack yesterday, but this is too big to ignore.

The U.S. Department of Justice has approved the merger of the world's two largest beer companies. Anhueser-Busch InBev (aka Budweiser, among others) and SABMiller (which includes the Coors and Miller families of beer among its brands) have cleared this final global regulatory hurdle this afternoon, as confirmed by A-B InBev. Now, like the approvals from the European Union, South Africa, and others, this DOJ approval will likely include stipulations. A-B InBev has already had to make plans to divest itself of most of SABMiller's European holdings, and this is expected to continue in the U.S., where SAB Miller will likely have to spin MillerCoors off to MolsonCoors (MillerCoors was an existing joint venture of the two beer companies).

The result will be A-B InBev controlling 29% of the world's beer supply, and the macrogiant gaining an increased foothold and level of access into Africa, SABMiller was originally a South African company, and Asia.

In additional news, MillerCoors bought a majority stake in Athens, GA craft brewery Terrapin Beer Company, up from their previous 21% stake, which was still low enough to call Terrapin a "craft brewery". Between the mega-merger and Goose Island's recent problems, it's hard for me to be super-optimistic about Terrapin's future.

A-B InBev throwing their weight around

Despite its best and ongoing efforts, Budweiser parent A-B InBev knows it can't buy up ALL the craft breweries. So, the behemoth beer company has come up with a heavily anti-craft solution to turning around their declining market share (45% vs. 49% in 2008): use their massive financial resources to incentivize independent distributors to carry more of their products.

Per this Mother Jones article (and originally reported in the Wall Street Journal, but sadly it's behind a paywall), A-B InBev will "reimburse" independent beer distributors up to $1.5 million (and, per the WSJ, an average of $200,000) each if A-B InBev sales make up a certain percentages of distributors' sales. Additional requirements of this program will push larger, widely-distributed (read: more dangerous to A-B) craft breweries such as Sierra Nevada and Oskar Blues OFF THESE DISTRIBUTORS' SHELVES ALTOGETHER!

The folks at A-B InBev have seen craft beer's surge eat away at their market share for years now. A-B has now created a plan and dedicated up to $150 million over the next three years to get that market share back. And it's already working. Per the article linked, Oregon's Deschutes Brewery noted that a St. Louis distributor has dropped them in order to take advantage of the A-B reimbursements.

The Budweisers and Bud Lights of the world are the big money makers for these distributors. Ultimately, I can't blame them that much for accepting this strong-arm tactic. But I would much rather see craft beer continue to thrive and continue to chip away at the macrobrewers' market shares. I look at the explosion of high-end beer/wine/liquor stores and smaller (and largely small business) bottle shops, and would love to see them thrive at the expense of A-B InBev's tactics.