As AB InBev finalizes its $108 billion takeover of SABMiller, the beer giant is also fighting a battle on another front, as craft brewers oppose its proposed incentives program.
AB InBev is trying to reverse its declining US volumes of Budweiser and Bud Light by offering financial incentives to the distributors on whom the entire industry ultimately depends.
The company’s move is raising alarms among craft brewers who worry that it will become more difficult to get shelf space for their products, the Wall Street Journal reports.
Specifically, the world’s largest brewer has introduced a new incentive program that could offer some US independent distributors annual reimbursements of as much as $1.5 million—if 98 percent of the beer they sell are AB InBev brands, according to the newspaper. If a distributor sells just 95 percent AB InBev brands, the brewer could cover up to half of the distributor’s contractual marketing support for those brands, including retail promotion and display costs.
The average annual benefit to distributors would be about $200,000 each, AB InBev calculated as it introduced the plan at a distributor meeting in St. Louis. The plan presumably would pressure distributors to drop competing brands and discourage them from stocking new brewers.
“It’s a very Machiavellian lever they’re pulling,” Tony Magee, founder of craft brewer Lagunitas Brewing Co., told the Journal.
But Ricardo Melo, an Anheuser-Busch vice president, said in a statement that the program “better equips wholesalers to compete in the future.” He noted the incentive is voluntary and nothing “prevents distribution of other brands.”
Meanwhile, a group of consumers in Oregon has sued AB InBev and SABMiller, seeking to block the pending merger because it will lessen competition in the US in violation of antitrust law. Of course, antitrust regulators in a number of countries are already looking into that issue.
AB InBev issued a statement to Fortune, stating the the lawsuit was without merit:
“We believe that the claims alleged in this lawsuit are without merit, and we intend to vigorously defend against them. The U.S. beer market has never been more competitive, with strong growth from craft brewers, and nothing in this transaction will change that fact. Instead, this transaction provides a compelling opportunity to extend the reach of AB InBev’s iconic American brands, such as Budweiser, to markets outside of the United States.”
Of course, antitrust concerns are one reason AB InBev is looking to sell SABMiller’s Grolsch and Peroni brands in Europe, including their related businesses in Italy, the Netherlands and the UK. The company also said it’s looking to sell Meantime Brewing, the London-based craft brewer SABMiller announced it was buying in May.