Brief

AB InBev unit paid retailers and bars to push its beers, Massachusetts report claims

Dive Brief:

  • Regulators in Massachusetts say Anheuser-Busch InBev provided nearly $1 million in unlawful giveaways to entice retailers and bars to push Budweiser over rivals, according to The Wall Street Journal.
  • The report from the state’s Alcoholic Beverages Control Commission contends the AB InBev subsidiary gave out bar equipment as incentives to hundreds of businesses, violating state law designed to prevent beer companies from from squeezing out competitors. A hearing is set for June in Boston.
  • The paper noted that AB InBev has been working with the commission since the state first raised questions. “We believe that we lawfully provided branded point-of-sale items to retailers and plan to contest these allegations,” the company said.

Dive Insight:

In food, deals between supermarkets and food manufacturers — along with consumer demand —play a major role in determining whether products get sold and where they appear in the store. But similar pacts involving alcoholic beverages are generally not allowed in most states.

For AB InBev, this is not the first time it has been accused of pushing sales of its products. California levied similar charges against AB InBev, prompting the company to agree in March to pay $200,000 and conduct additional staff training as part of a settlement.

While the Massachusetts report currently is nothing more than accusations, it seems to highlight the growing competition between the beer giants themselves and the once scrappy upstart craft breweries that are fighting for limited shelf space and taps at places that serve their brews.

The number of breweries in the U.S. has increased from 1,447 in 2005 to 5,005 at the end of 2016, much of it tied to craft brews. While the craft space is responsible for about 10% of domestic beer production in the U.S, it's still up significantly from a decade ago and stands in contrast to the big breweries who have seen shipments erode during that time.

Even giants like AB InBev — which boasts 500 beers in its portfolio — and Molson Coors have tapped into craft beer, which is especially popular with millennials thanks to catchy labels and unique flavors. AB InBev purchased Karbach Brewing and Devil’s Backbone in the past year, and Molson Coors bought at least four small regional craft breweries in the last 19 months.

A glimpse into AB InBev's recent earnings report show the struggles facing beer makers, with the company hit by shaky beer sales in Brazil and North AmericaIn the U.S. alone, AB InBev said sales to retailers declined 2% in its 2016 fiscal year, and 2.7% in the fourth quarter — both figures that trailed the overall beer industry. With struggles in its important Brazilian and U.S. markets showing no sign of abating, the company has been desperate to find ways to expand its market share and fend off acquisition-hungry competitors. 

As competition in the beer industry intensifies, companies are eager for any incremental increase in growth they can muster. Regulators are clearly watching how they achieve it.

Filed Under: Manufacturing Corporate Beverages
Top image credit: Budweiser