Anheuser-Busch InBev’s acquisition of two prominent Colorado beer distributors has industry professionals worried the aggressive growth will leave more than 200 Colorado craft brewers with fewer options for selling their beer.
For Colorado consumers, the result could be less craft beer on the shelves.
By fall, A-B InBev — the world’s largest beer maker and the U.S.’s second-largest beer distributor — will own the Littleton, Colorado Springs and Pueblo operations of Standards Sales Company as well as Loveland-based American Eagle Distributing.
“American Eagle currently sells approximately 20 non-AB brands. We are seeking to keep a handful of local brands, pending supplier approval,” said Bob Tallett, Anheuser-Busch vice president of business and wholesaler development.
Loveland-based Grimm Brothers Brewhouse is one of the craft breweries under American Eagle distribution. Brewery vice president Russell Fruits said he doubts his and other non-A-B-owned craft brands will continue to be distributed under Anheuser-Busch ownership.
Fruits said it “will be a first” if A-B InBev keeps the existing distributor’s craft brands — including Epic, Breckenridge, Great Divide and Odell — in its portfolio moving forward.
Steve Findley, president of the Colorado Beer Distributors Association, echoed Fruits’ concern.
“Historically, in their branches, they only distribute the Anheuser-Busch family of products,” Findley said of A-B-owned distributors.
“It remains to be seen how this is going to shake out (for craft brewers),” he added.
The acquisition of the three Standard Sales distribution territories came as part of a trade in exchange for A-B InBev’s distribution territories in Kentucky, where the beer maker can no longer legally own them.
By buying up territory in Colorado, A-B InBev will gain control over beer distribution in a large part of the state.
Colorado ranks third in the country for breweries per capita and number of craft breweries. The state is also at the forefront of a movement now eating up double-digit market share (11 percent, as of 2014) of the big beer industry led by A-B.
Though affiliated with A-B InBev, American Eagle was previously independently owned. It distributed craft beer brands to more than 1,100 retail stores, restaurants and bars in Northeastern Colorado.
Looking to retire, American Eagle owner Jerry Helgeson sold the distributorship to longtime beer partner Anheuser-Busch for an undisclosed amount and will finalize the sale in September. Last year, American Eagle distributed 3.5 million cases of beer, less than 3 percent of Anheuser-Busch’s U.S. distribution.
The Loveland company currently employs 100 workers.
“I don’t foresee any changes,” Helgeson said, when asked how his business and employees would be affected by the sale.
A three-tier system
Following the repeal of Prohibition in 1933, a three-tier system for alcohol’s production, distribution and sale was developed. The purpose was to prevent abuses among brewery-controlled taverns, known as tied-houses, by separating the three tiers under distinct business owners.
But a loophole in the three-tier system allows breweries — from microbrewers to beer giants — to control two of the three tiers by distributing beer under a separate wholesaler’s license. Many craft breweries distribute their own beer under this loophole. Part of their success in Colorado is predicated on it. A few, such as Denver’s Crooked Stave and California’s Stone Brewing, also distribute other breweries’ brands.
As long as breweries can only control production and distribution, three-tier separation may remain intact.
But Mat Dinsmore, owner of Fort Collins liquor store Wilbur’s Total Beverage, said he worries when two of three tiers are controlled by one large company.
“This is a breakdown of the three-tier system,” he said.
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Along with the rise of thousands of small craft breweries, the U.S. also has seen large-scale consolidation of its brewing industry over the past few decades.
Last year, Reyes Beverage Group purchased Florida’s biggest distributorship and surpassed Anheuser-Busch InBev as the country’s largest distributor; both companies distribute more than 100 million cases of beer annually.
And A-B InBev’s purchasing of craft beer distributors is a side note to it purchasing craft breweries, which started most notably in 2011 with Chicago’s Goose Island (now produced in large part in Fort Collins) and continued with Seattle’s Elysian Brewing Company earlier this year.
A-B’s recent departure from Kentucky, where it controlled two distribution territories, followed a change in legislation that closed the loophole allowing brewers also to distribute beer there. It was hailed by proponents as a strengthening of the three tiers.
“We strongly support the three-tier system,” Tallett said. “And we anticipate working with our wholesaler partners to potentially sell portions of the (Colorado) territory in the near future,” he added, when asked about the possibility of a monopoly over the state’s distribution.
The Oregon example
In 2014, A-B InBev purchased Portland, Oregon’s Morgan Distributing, merging it with A-B’s previously acquired Western Beverage distributor, which is based in Eugene.
Some Oregon craft brewers, such as Ninkasi Brewing Company and The Commons Brewery, protested the acquisition and switched distributors after the change in ownership.
“Some local brewers elected to move their brands to other wholesalers, and a small number we chose to discontinue,” David Craig, an Anheuser-Busch regional vice president of sales, told the Portland Business Journal at the time.
He said his company’s moves weren’t “meant to harm the local craft beer industry, but to create a better environment for its customers,” the journal reported.
If Anheuser-Busch’s Colorado distribution follows its example in Oregon, competitive craft brewers will find other means of distribution while the less competitive ones could disappear from shelves.
“If another distributor picks (the craft brewery) up, normally you don’t miss a beat,” Dinsmore said.
But, he added, “The Bud(weiser) (and Miller)Coors networks literally touch every person in the state with a liquor license. Their footprint is so big … your ability to sell, your access to market shrinks (under a smaller distributor).”
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Fruits said Grimm Brothers has been in discussions with “several craft beer-focused distribution companies.”
CR Goodman Companies, Elite Brands of Colorado, Western Distributing Company and Loveland-based High Country Beverage are some of the other local distribution options for Colorado craft brewers.
High Country Beverage previously competed with American Eagle Distributing by partnering with MillerCoors as well as with New Belgium Brewing. The company declined to comment on the implications of its Loveland neighbor’s change in ownership.
For one of American Eagle’s biggest current craft customers, Odell Brewing Company, the distribution situation will take at least a few weeks to sort out.
“We are currently gathering as much information as we can, just as we do when we enter new markets,” said Eric Smith, director of sales and marketing for Odell, “and always look for the opportunities to decide what path is best for the brewery.”
Anheuser-Busch InBev at a glance
•12 breweries across the U.S.
•47.6 percent share of U.S. beer sales
•Second largest distributor in U.S.
•600 independent wholesalers in network
•16 million barrels of Budweiser shipped in 2013
•Approximately 10 million barrels brewed in Fort Collins