Only half a victory for AB-InBev in Illinois distributor battle
Anheuser-Busch (A-B), a subsidiary of AB-InBev, can retain its minority ownership stake in one of Chicago's largest beer distributors, Illinois liquor regulators ruled on 31 October 2012, allowing the brewer to have some control over its sales. However, they said no to A-B’s plan to completely take over the distributor City Beverage.
The decision comes in a long-running legal battle between AB-InBev and the Illinois Liquor Control Commission over the state's three-tier system of selling alcohol, in which separate companies make the product, ship it and sell it to consumers.
In 2010, A-B informed Illinois regulators that it wanted to buy out City Beverage, in which it has held a 30 percent stake for years. But the liquor commission blocked the deal to preserve the state's three-tier system. A-B took the matter to court, arguing that several Illinois microbreweries distribute their own beer and that keeping the company out of the distribution business was discriminating.
Illinois legislators responded by creating a law in 2011 that banned brewers from self-distribution. Still, they granted limited rights to microbreweries.
A-B has been looking to increase its market share nationally and save money by streamlining its distribution network. In the U.S., A-B has more than 500 distributors, nearly all of which are independent companies with an exclusive contract to sell A-B beer in a certain geographical area. It’s a lucrative franchise for the distributors, the St Louis Post wrote in May this year.
Wall Street analysts say that by cutting out the middlemen – the distributors –and self-distributing, AB-InBev could increase its profits in the U.S. substantially. Buying up distributors is legal in about half of all U.S. states and AB-InBev already owns more than a dozen distributorships — which it calls “branches” — including some in big, if not especially profitable, markets such as New York and Los Angeles. Ultimately, if AB-InBev went on buying distributors, it could control nearly 50 percent of its distribution, compared to 8 percent today.
