Is This Anheuser-Busch InBev's Next Attempt to Control the Craft Beer Market?
Has Anheuser-Busch InBev (NYSE: BUD) finally revealed itself as a monopolistic brewer trying to crush craft brew upstarts?Like an updated version of the Hunt brothers hoarding the world's silver, the mega brewer is accused of cornering the market on South African hops and using its dominance to squeeze the life out of craft breweries.
After its acquisition of SABMiller, Anheuser-Busch also gained control of all the country's hop farms and breeders. And now that it owns them it is refusing to sell the essential beer ingredient to distributors who supply U.S. craft breweries. Instead, A-B will be using the hops for its own beer, threatening to put at least one distributor out of business and cutting off access to the latest taste in brewing.
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Brewing up trouble
At first blush it appears the beer giant is embodying the very traits that Boston Beer (NYSE: SAM) founder and chairman Jim Koch complained about. In a New York Times op-ed and later at an industry event, the craft brewercalled for regulators to rein in Anheuser-Busch because it was limiting consumer choice by buying up craft breweries. Rather than drinkers choosing their beers, the industry giant chooses it for them.
Draft magazine recently reported ZA Hops, which is one of a very limited number of distributors (read, two or three) that imports South African hops, was told by SAB Hop Farms that the popular hops he had been buying, such as Southern Passion, African Queen, Southern Star, and Southern Aroma, were no longer available. Apparently some 20 metric tons of hops that were scheduled for export to the U.S. were instead being rerouted to Anheuser-Busch for its own use.
As a result, ZA Hops is teetering on the edge of ruin. Owner Greg Crum told Draft, "It's done. I still have some stock from 2016, but after that I'm out of business."
Many craft breweries are angry. In posts across social media, brewers like Modern Times Beer, Proclamation Ale, and others said the maneuver by Anheuser-Busch shows what happens when mega brewers are allowed to acquire craft brewers without restriction. Because it is directing the popular hops to the dozen or so high end portfolio of beers that it purchased over the past few years, including Wicked Weed just a few weeks ago, it is able to give itself a competitive advantage.
Much ado about nothing?
Molehill out of a mountain
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Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Anheuser-Busch InBev NV and Boston Beer. The Motley Fool has a disclosure policy.