U.S. nears approving merger of AB InBev, SABMiller

The U.S. Justice Department is close to approving the merger of two of the world’s biggest brewers, Belgian-based AB InBev and SABMiller, according to reports by Bloomberg.

However, sources close to the matter say it may include conditions to prevent AB InBev from shutting-out Craft brewers from store shelves.

Craft brewers are small independent brewers that have been growing in the U.S. and other western countries.

According to people familiar with the matter, part of the conditions for approval may include limiting the merged company’s ownership of distributors.

In the US, AB InBev reimburses wholesalers for marketing expenses on a sliding scale based on the percentage of brands sold with those who sell 95% or more of the brewer’s brands getting compensated handsomely.

According to the Brewer’s Association, which represents 2,800 craft brewers in the US, those rewards effectively shuts out the sale of competing beers.

The association also complained about AB InBev’s ownership of wholesalers during a Senate hearing in December.

“If you want to grow your business as a craft brewer, if you want to get your beer into a chain store, if you want to get your beer into the stadium, you need to use the Anheuser–Busch distributors or the MillerCoors distributor,” Bob Pease, the chief executive officer of the association told U.S. lawmakers. “Those are the only two options in most markets that have the horsepower to effectively bring your beer to the retail market.”

The Brewer’s Association would like the merged entity of AB InBev and SABMiller to divest its own wholesalers and change incentives to encourage the distribution of competing brands.

AB InBev have also faced complaints from labour unions, (the International Brotherhood of Teamsters), about a planned closure of a MillerCoors plant in North Carolina, saying it would lead to higher prices.

The Chief Executive Officer of AB InBev, Carlos Brito, told U.S. lawmakers in December that distribution won’t change as a result of the takeover. Brito said his company will commit to limiting the volume of beer distributed by wholly owned distributors to “around” 10%, from between 7% and 8% currently.

Brito added that there is no penalty for a wholesaler that carries non-AB InBev brands saying that the incentive program has been revised to make wholesalers eligible “to receive benefits“ regardless of how many competitive brands they carry. He also said there would be no termination of any distributor or renegotiation of contracts with distributors.

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