February 25, 2015
The House passed the so-called beer bill overwhelmingly Tuesday and now the Senate should do the same.
Despite remarkably imaginative arguments to the contrary from AB InBev, the bill is designed to preserve competition and limit monopoly power in the wholesale market for beer and other malt drinks.
That’s a good thing.
House Bill 168 provides that no company that makes beer in Kentucky can sell it at wholesale. This is essentially the law that applies to wine and spirits.
Alcohol regulators, independent distributors, MillerCoors and most craft breweries favor the measure.
AB InBev, the company that resulted when a multinational paid $52 billion for Anheuser-Busch in 2008, is battling to hold on to the wholesale operation Anheuser-Busch has long owned in Louisville and another AB InBev bought last year in Owensboro.
In the language of markets, AB InBev is consolidating both vertically and horizontally. Horizontally, across beers, it owns brands covering a range of tastes and pocketbooks, from Rolling Rock and Budweiser to Stella Artois, Beck’s and Guiness. AB InBev has the largest share of the U.S. market, selling almost half of the beer purchased here. In Kentucky it is moving to consolidate vertically so that it will own production of its wide portfolio of beers and the exclusive right to distribute them in a larger geographic area.
Economic history tells us that’s too much market share for one company. It discourages new players, reducing competition and consumer choice, and raising prices.
AB InBev argues that the bill is the work of “greedy special interests” (this from the largest beer producer in the world?) and it endangers 200 jobs in Kentucky.
If this bill passes the Senate, AB InBev will be forced to sell the distributorships in Louisville and Owensboro but, unless people in those communities stop buying beer, they will continue to operate.
It’s hard to see that many, if any, jobs will be lost. However, if the bill fails, jobs will be squeezed out of AB InBev’s consolidated Kentucky operations, if recent history is a guide. Last year Advertising Age reported that the “financially focused, cost-conscious operator” had, since the 2008 acquisition of Anheuser-Busch slashed employees in North America by over 5,000, from 21,871 to 16,852 at the end of 2013.
AB InBev’s management is looking out for its shareholders, as it should. The Senate should be equally concerned about its shareholders, the citizens of Kentucky, and pass this bill.