What’s that on the Shelf?

On March 29, 2016, the Washington State Liquor and Cannabis Control Board put forward charges against Anheuser-Busch – levying  a $150,000 fine – stemming from an investigation into business practices which, according to the LCB, amount to violations of law.

Specifically, the LCB alleges that AB, through a distributor, entered into arrangements with a Seattle-based catering company and a local company which owns and operates three local concert venues, the purpose of which were to make sure that only brands owned by AB and its parent company, InBev, were served in those locations.  According to the investigatory report, individuals from the LCB posed as individuals wanting to rent one of the venues for a private event.  In that disguise, they asked whether they could serve Coors products at their event, but were told that was impossible because of an exclusive arrangement between the caterer and AB.

In fact, during its investigation the LCB found two actual agreements in place.  First, AB had an agreement in place with the venue management company.  The purpose of this agreement was to make AB the official beer and malt beverage sponsor for all concerts and events open to the public at the concert venues.  As part of this arrangement, all concerts at one of the venue’s facilities were to be branded as part of the “Bud Light Concert Series”.  This agreement contained provisions stating that the venue was not required to purchase any of AB’s brands, and that AB was not agreeing or expecting to induce the purchase of its brands.

The second agreement identified by LCB was an agreement between the venue management company and the catering company.  It must be noted that this agreement apparently did not contain any provisions which would require the catering company to purchase only AB brands.  Further, when the LCB requested copies of invoices related to all beer purchases for the venues for the period from January 1 through June 30, 2015, the catering company responded by delivering invoices from both a Seattle-based AB distributor and a distributor selling competing brands.

What are we to make of this?  Well, if you’re the LCB you note that none of the competing brands reflected on the invoices were actually available for sale during the several undercover visits made by LCB officers to the venues.  Also, you focus heavily on the statements by venue staff that the caterer was prohibited from supplying Coors products. Taken together, these lead the LCB to believe that AB is exerting “undue influence” over the concert venues in violation of Washington law.  AB, of course, disputes the assertion that it did anything wrong.  And in point of fact there appears to be relatively scant concrete evidence to suggest that it did.

But there are at least two other points to consider.  First is the fact that during their investigation the LCB officers observed many brands of beer available for sale.  Most of those varieties give the appearance of being craft products. Indeed one of the brands was Seattle’s own Elysian.  But a beer connoisseur (or a well-informed LCB agent) would quickly recognize that these “craft” beers were all partly or wholly owned by AB.  This brings home what we’ve come to recognize over the last several years.  AB (like other large suppliers of beer, wine and spirits) has been buying up smaller and craft brands in an effort to stem losses to its core business as consumers have moved away from large national brands.  These large (and extremely well-funded) market participants are doing what they can to protect market share.

Second, it is worth noting that the LCB investigation in this case was initiated because of complaints by a craft brewer.  Reading between the lines of the LCB materials, it appears that this brewer was frustrated by an inability to get its product into the venues, and decided to blow the whistle.  Certainly this too is a rational response to the market conditions.

As a member of the imbibing public, I applaud the whistleblowing brewer – if only because I want to have the opportunity to sample novel concoctions (both brewed and distilled) – and that means we need small suppliers.  Just this past week, for example, I had the chance to taste a really interesting Rhubarb Liqueur made by Blackfish Spirits Distillery.  We need small suppliers in order to keep cranking out these new ideas.   After all, the idea of a rhubarb liqueur simply isn’t going to make it through the committees, focus groups, marketing teams and accounting departments of large suppliers to find its way to market.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.