Dive Brief:
- U.S. antitrust regulators are looking into an incentives program for distributors offered by Anheuser-Busch InBev as part of an investigation to decide whether to approve the pending AB InBev-SABMiller merger, worth over $100 billion, people familiar with the matter told Reuters.
- AB InBev defends the incentives program as a way to encourage sales of its own brands in an increasingly competitive environment where the company continues to lose market share to craft beer brands. However, certain aspects of the program are thought to have been designed to suppress craft beer sales rather than just increase AB InBev's sales, sources told Reuters.
- As part of the merger deal, AB InBev has to divest all of SABMiller's U.S. assets, so craft brewers may not win their argument there, according to Reuters. But precedent exists for limitations on incentives programs, which the Department of Justice put in place after AB InBev acquired Grupo Modelo in 2013. AB InBev had to divest all of Modelo's U.S. assets and, for three years, not offer potential Modelo-hurting distributor incentives.
Dive Insight:
Per the incentive plan, the greater percentage of AB InBev brands a distributor sells, the greater a reimbursement on its marketing spend.
But if a distributor increases sales of AB InBev beers, and its craft beer sales rise faster, the reimbursement would be less. Also, if a distributor wants to run a promotion for a craft brand, it would have to run an equivalent promotion for Budweiser, which is cost-prohibitive for many distributors, sources told Reuters.
Those two aspects of the incentives plan could hold up the investigation into the AB InBev-SABMiller merger. It's arguable that the incentives could interfere with craft brewers' ability to have their beer sold with the same focus from distributors.
The number of distributors aligned with AB InBev varies from 467, as an AB InBev spokesperson told Brewbound, to 1,100, as reported by Reuters, out of about 3,000 total in the U.S. The remaining distributors are often much smaller, which makes it more difficult for craft brewers to build relationships with major retailers, Reuters reported.
If the investigation concludes that these incentives are more about shutting out craft brewers than AB InBev building up its own sales, antitrust regulators could block U.S. merger approval. The merger has already received approval in Australia, South Africa, and most recently, the European Union.
With that kind of momentum, AB InBev may be able to succeed with its merger even with the incentives program in place. Or, in all likelihood, it may have limitations placed on it as the Grupo Modelo deal did.