As expected, the U.S. Department of Justice approved the acquisition of SABMiller by ABI. This was no surprise at all, but what, if any stipulations the DOJ would require as a condition of the merger has been of keen interest to the entire industry.
In addition to the expected divestiture of its SABMiller’s U.S. business, there are two other key requirements that the DOJ attached to the approval. The first was the termination of the incentive programs such as the Voluntary Anheuser Busch Incentive for Performance Program (VAIP). This was an incentive program that ABI imposed on their independently owned wholesalers which incentivized those wholesalers who dropped craft brands. This was of course a “win” for the craft brewing industry.
A second key provision is a cap on ABI’s self-distribution volume and other measures to protect distributor independence. Specifically, ABI will not be allowed to acquire an independent distributor if doing so would result in more than 10% of its annual volume being distributed through wholly-owned distributorships. This is a win for wholesalers and craft brewers.
There was no requirement however that ABI not be allowed to acquire additional craft breweries. This was an “ask” by the craft brewing industry and seemed to be a long shot at best.
Below is the statement issued today from the Brewers Association;
“Today’s decision by the Department of Justice (DOJ) to approve the acquisition of SABMiller by ABI stipulates many of the safeguards the Brewers Association requested to preserve fair competition and access to market for America’s small and independent craft brewers.
While we continue to believe that the merger of the world’s two largest brewers is bad for both the beer industry and consumers, the DOJ’s significant requirements, including the termination of incentive programs such as the Voluntary Anheuser Busch Incentive for Performance Program (VAIP), a cap on ABI’s self-distribution volume and other measures to protect distributor independence, appear to address some of our major apprehensions with the merger. With effective enforcement of these provisions, small brewers can rely on their independent distributor partners to access the market. This will help ensure that beer enthusiasts can continue to enjoy a vast variety of options from the more than 4,600 breweries in the U.S.
The Brewers Association will closely examine the consent decree and compliance with its provisions, as well as monitor ABI’s actions, specifically with regard to the acquisition of independent craft brewers. We remain concerned about how past, pending and future acquisitions may shift the dynamics of the current beer market. We will continue to encourage the DOJ to monitor and, where necessary, take action to remedy any anticompetitive effects of ABI’s behavior in the U.S.”