AB-InBev seeks to buy more distributors
On 17 May 2013 AB-InBev snapped up another beer distributor. It bought C&G Distributing Company in Lima, Ohio, for an undisclosed sum, merely weeks before a new law comes into effect that prevents brewers in the state of Ohio from acquiring beer distributors.
It was never going to be quick, easy or uncontroversial. But if AB-InBev wants to grow U.S. profits, it has to cut out the middlemen – the distributors. Although the U.S. may be the most regulated beer market, thanks to its three-tier system, the protection this system awards to the distributors is not exactly universal. There are about 20 U.S. states which allow brewers to own distributors.
AB-InBev, though working closely with more than 500 independent wholesalers across the country, already owns and operates 17 distributors, many of them in metropolitan areas.
A year ago, Harry Schumacher, the Editor-in-Chief of the trade publication Beer Business Daily, estimated that AB-InBev-owned distributors (in AB-InBev’s lingo “branches”) distribute 135 million cases (the equivalent of 10 million barrels/11.7 million hl) of beer, which translates into 5 percent of total U.S. beer. Or 10 percent of its own beer.
Beer distribution is a lucrative business. According to Mr Schumacher, distributors’ profits are about USD 1.0 per case.
AB-InBev managed to purchase the C&G Distributing Company in Ohio from the Cecala and Guagenti families, who have owned and operated C&G for more than 60 years, before state legislators managed to close the door on such deals.
Legislation approved and signed into law by Ohio Governor John Kasich in May 2013 will block beer makers from purchasing beer distributorships, but that law does not take effect until 29 July 2013. AB-InBev already owns an Ohio beer distributor and had opposed that portion of the bill.
As often the case, you win some, you lose some. While AB-InBev got lucky in Ohio, it may have run into trouble in the state of Illinois. For several years now, AB-InBev has tried to buy the share it does not own in the Chicago beer distributor City Beverage. However, in early May, the Illinois Senate passed a bill that would require AB-InBev to sell its stake in City Beverage. Illinois Governor Pat Quinn has 60 days to sign the bill, which would give AB-InBev until January 2015 to dispose of its stake.
