Tuesday, June 30, 2009

Getting Buschwacked

We have commented previously on the ominous trend to consolidation in the beer industry-a trend that will lead to the shuttering of local businesses and higher beer prices for consumers. Another window into this trend can be seen from the following article in the WSJ: "Anheuser-Busch InBev NV is studying the idea of consolidating its network of independent U.S. beer distributors, perhaps by owning many more distributors itself, according to an analyst report that represents a potential blow for the beer titan's roughly 600 distributors."

What this means is that eventually, if nothing intervenes to stop it, all of the country's beer distribution will be in the hands of foreign entities; and the three-tiered system will become moribund. What this means in New York is that hundreds of independent, non-franchise wholesalers-along with the dwindling cohort of franchise wholesalers-will be made extinct.

Decisions on marketing and beer pricing will be made in Belgium-and the consolidated sclerosis of a distribution system will suck the consumer parched dry; with cost savings winging their way right out of the country. As the WSJ points out: "The report is the first serious indication that the brewer based in Leuven, Belgium, intends to put the squeeze on its distribution network to improve its own profitability. Potentially billions of dollars currently flowing to distributors could be at stake. InBev has reduced costs at Anheuser since acquiring the company for $52 billion last fall. But its distributors so far mostly have been spared the knife."

So, with independents looking to NY State for some statutory protections-while franchise wholesalers fight them tooth and nail-it appears that both sides are fighting a war of attrition while the common enemy waits to literally pick up the pieces. New York needs to act promptly to counteract the monopolistic, anti-consumer, trends that threaten to force the state's beer consumers to drown their sorrows in higher beer prices.