Wednesday’s ad is for the American Corn Millers’ Federation, from 1933, just as Prohibition ended. The ad is singing the praises of brewing with “dry milled corn grits,” which they explain is “the public preference.” And then there’s this great tagline: “Brewed with Corn Means Quality Beer.”
The inevitable approval of the merger between Anheuser-Busch InBev and Grupo Modelo moved one step closer today, according to Harry Schuhmacher’s Beer Business Daily, who writes that a “consent decree has been filed with a federal judge today seeking court approval of the ABI-Modelo-Constellation deal with the DOJ. News of the settlement agreement comes before the April 23 court deadline to report to U.S. District Court.”
Apparently, “[t]he agreement is close to the one A-B revised in February, selling the big Piedras Negras brewery to Constellation and allowing them to some time to expand that facility to brew all of US Modelo beers (and any others Constellation wants to brew there). But the agreement also includes ‘certain distribution guarantees for Constellation in the United States.’”
Constellation Brands released a statement, Anheuser-Busch InBev and Constellation Brands Announce Revised Agreement for Complete Divestiture of U.S. Business of Grupo Modelo, outlining the deal, and the transaction website, Global Beer Leader, also has a statement.
Here’s part of ABI’s press release:
Anheuser-Busch InBev and Constellation Brands Announce Revised Agreement for Complete Divestiture of U.S. Business of Grupo Modelo
AB InBev to sell Piedras Negras brewery and grant perpetual rights to Constellation for Corona and the Modelo brands in the U.S. for USD 2.9 billion
Constellation to acquire 50% of Crown it does not own for USD 1.85 billion
Terms and merits of combination between AB InBev and Grupo Modelo relating to global deal remain unchanged
AB InBev synergy projection revised to approximately USD 1 billion from USD 600 million
Anheuser-Busch InBev (Euronext: ABI) (NYSE: BUD) and Constellation Brands, Inc. (NYSE: STZ, STZ.B) today announced a revised agreement that establishes Crown Imports as the #3 producer and marketer of beer in the U.S. through a complete divestiture of Grupo Modelo’s (BMV: GMODELOC) U.S. business. The transaction establishes Crown as a fully owned entity of Constellation, and provides Constellation with independent brewing operations, Modelo’s full profit stream from all U.S. sales, and rights in perpetuity to the Grupo Modelo brands distributed by Crown in the U.S.
As part of AB InBev’s acquisition of the 50% of Grupo Modelo it does not already own, AB InBev has agreed to sell Compañía Cervecera de Coahuila, Grupo Modelo’s state-of-the-art brewery in Piedras Negras, Mexico, and grant perpetual brand licenses to Constellation for USD 2.9 billion, subject to a post-closing adjustment. This price is based on an assumed 2012 EBITDA of USD 310 million earned from manufacturing and licensing the Modelo brands for sale by the Crown joint venture, with an implied multiple of approximately 9 times. The sale of the brewery, which is located near the Texas border, would ensure independence of supply for Crown and provides Constellation with complete control of the production of the Modelo brands for marketing and distribution in the U.S.
AB InBev and Constellation have agreed to a three-year transition services agreement to ensure the smooth transition of the operation of the world-class brewery, which is fully self-sufficient, utilizes top-of-the-line technology and was built to be readily expanded to increase production capacity. During this 3 year timeframe, Constellation plans to invest approximately USD 400 million to expand the Piedras Negras facility, which will then enable it to supply 100% of Crown’s needs for the U.S. marketplace. Today, Piedras Negras fulfills approximately 60% of Crown’s current demand.
As previously announced on June 29, 2012, AB InBev has agreed to divest Grupo Modelo’s 50% stake in Crown, the joint venture between Modelo and Constellation, that currently imports and markets Modelo’s brands in the U.S., to Constellation. The transaction value remains USD 1.85 billion, providing Constellation 100% ownership and control of Crown.
Carlos Brito, Chief Executive Officer of AB InBev, commented, “The AB InBev and Grupo Modelo transaction has always been about Mexico and making Corona more global in all markets other than the U.S., where the brands will be owned and managed by Constellation. We are pleased to have reached this revised agreement that preserves the merits of the Grupo Modelo transaction while allowing us to move expeditiously to the Modelo integration process and the capture of approximately USD 1 billion of synergies, up from our original estimate of USD 600 million.”
Rob Sands, President and Chief Executive Officer of Constellation Brands, said, “The revised agreement with AB InBev will make Constellation’s Crown beer division a fully independent competitor and the third largest producer and marketer in the U.S. beer industry. This is a transformational acquisition for our company as we will hold perpetual rights to Corona and the Modelo brands distributed by Crown in the U.S. We will have autonomous control of production, distribution, marketing and promotion of these brands in the U.S. Bill Hackett, President of Crown, and his management team have decades of experience in the beer industry with the iconic Modelo brands. I am confident that all Constellation and Crown stakeholders, including our valued wholesalers, shareholders and employees will see the benefits of this amended agreement.”
Should be all over but the shouting at this point.
In what has to be one of the most unusual marketing efforts by a large brewer, Olympia Beer has offered to pay $1 million dollars — in increments of $25,000 a year for the next four decades — to anyone who can find conclusive evidence of a live Bigfoot. The contest is the brainchild of Evan and Daren Metropoulos, who recently bought Pabst Brewing Co., which also owns the Olympia brand.
Full details and rules can be found at OlympiaBigfoot.com, but here’s their “Mission Statement” for finding Bigfoot:
Olympia Beer and Bigfoot have been leaving footprints together in the Pacific Northwest since 1896.
We have been sharing the same backyard for over a century and we believe it’s time to do what has never been done, and that is to offer a one million dollar reward to anyone who can ensure the safe capture of Bigfoot. When we say safe capture that means Bigfoot has to be alive and breathing folks, with no wounds. That’s right you can’t use any act of violence, no guns/knives/boxing gloves/nets/etc, only sugar or sweets to lure him in.
You must register to participate in the search. To report your discovery of irrefutable evidence of the existence of Bigfoot, click on the “Submit Capture Report” link on the left and follow the instructions to report your evidence. You participation in the search is subject to the complete Official Rules.
To aid us in this adventure, Olympia Beer is partnering with The Falcon Project
The Falcon Project has been identified as “the most penetrative search for Bigfoot ever conducted in the United States.” They will conduct an aerial search for Sasquatch employing an unmanned airship with high definition thermal imaging camera equipment.
Sure, it’s a publicity stunt, but it’s a funny one. And what if someone actually does it? Apparently 14% of all Americans believe Sasquatch to be real, while another 14% say they’re not sure.
Winners must provide “irrefutable evidence” of Bigfoot’s existence and, according to the rules, may include “DNA Evidence.” From the rules:
“Bigfoot” refers to a previously undiscovered species of upright, bipedal hominid, native to North America existing contemporaneously with the Contest Period or the twenty-five (25) year period immediately prior to the Contest Period. There is no set type or amount of evidence required to establish proof for purposes of this Contest other than that all evidence presented must satisfy the Judging Panel. Evidence may include, but is not limited to DNA Evidence. DNA Evidence may include hair, blood, tissue or saliva that proves the DNA sequence of the donor shows that said donor resides in the primate evolutionary family tree, among other apes or hominids, but does not have the same genetic markers and DNA sequence as any known species. Evidence may also include “Visual Proof” of a live physical body. Physical remains may be considered as evidence provided that it can be conclusively demonstrated that the date of death pre-dated the Contest Period. Visual Proof shall not include footprints, bone fragments, inconclusive skeletal remains, or any other non-definitive evidence of the existence of Bigfoot. Any photo or video taken with photographic or video equipment is not sufficient to qualify as evidence in and of itself for consideration in the Contest, but may be considered as supporting evidence.
NO HARM SHOULD BE DONE TO BIGFOOT OR ANY LIVING CREATURE AS A RESULT OF PARTICIPATION IN THIS CONTEST. ANY EVIDENCE OF SUCH ACTIVITY SHALL LEAD TO DISQUALIFICATION FROM THE CONTEST AND NOTIFICATION TO THE PROPER LEGAL AUTHORITIES.
This is my seventh annual annotated list of the Top 50 so you can see who moved up and down, who was new to the list and who dropped off. So here is this year’s list again annotated with how they changed compared to last year.
- Anheuser-Busch InBev; #1 last seven years, no surprises
- MillerCoors; ditto for #2
- Pabst Brewing; ditto for #3
- D. G. Yuengling and Son; Same as last year
- Boston Beer Co.; Same as last year
- North American Breweries; 3rd year on the list, same position as last year
- Sierra Nevada Brewing; Same as last year
- New Belgium Brewing; Same as last year
- Craft Brewers Alliance; Same as last year
- Gambrinus Company; Same as last year
- Minhas Craft Brewery; Up 3 from #14 last year
- Deschutes Brewery; Down one from #11 last year
- Lagunitas Brewing; Up 3 from #16 last year after jumping up 10 from #26 the previous year, having been at #36 three years back
- Bell’s Brewery; Down 1 from #13 last year
- Matt Brewing; Down 3 from #12 last year
- Harpoon Brewery; Down 1 from #15 last year
- Stone Brewing; Up 1 from #18 last year
- Brooklyn Brewery; Up 2 from #20 last year, after jumping up 5 the year before
- Boulevard Brewing; Down 2 from #17 last year
- Dogfish Head Craft Brewery; Down 1 from last year, after being up 5, 9, 5 and 4 the four previous years
- Abita Brewing; Up 4 from #25 last year
- World Brew/Winery Exchange; Up 4 from #26 last year, after jumping up 11 the previous year
- Shipyard Brewing; Up 1 from last year, having moved up 4 the prior year
- Alaskan Brewing; Down 2 from #21 last year, their second drop in as many years
- August Schell Brewing; Down 2 from last year, also their second drop in as many years
- New Glarus Brewing; Up 2 again this year from #28 last year
- Long Trail Brewing; Down 5 from #22 last year
- Great Lakes Brewing; Down 1 from last year, after jumping up 4 the previous year
- Firestone Walker Brewing; Up 4 from #33 last year, after rising 3 spots the year before
- Anchor Brewing; Up 2 from #32 last year
- Rogue Ales Brewery; Up 5 from #36 last year
- Summit Brewing; Down 1 from #31 last year
- Full Sail Brewing; Down 4 from #29 last year
- SweetWater Brewing; Up 1 from #35 last year, having rise 3 the year before
- Victory Brewing; Up 4 from #39 last year
- Oskar Blues Brewing; Up 5 from #36 last year, having jumped up 8 the previous year
- Pittsburgh Brewing (fka Iron City); Down 7 from #30 last year
- Mendocino Brewing; Down 1 from #37 last year
- Cold Spring Brewing; Down 5 from #34 last year, after jumping up 13 the prior year
- Flying Dog Brewery; Down 2 from #38 last year
- Founders Brewing; Not in Top 50 last year
- Ninkasi Brewing; Up 2 from #44 last year
- CraftWorks Breweries & Restaurants (Gordon Biersch/Rock Bottom); Down 3 from #40 last year, after the two merged during 2011 and were #42 and #48 in the year before the merger
- Odell Brewing; Down 2 from #42 last year
- Bear Republic Brewing; Up 2 in their second year on the list
- Stevens Point Brewery; Down 3 from #43 last year
- Blue Point Brewing; Down 1 from #46 last year
- Southern Tier Brewing; Not in Top 50 last year
- Lost Coast Brewery; Same as last year in their second year on the list
- Karl Strauss Breweries; San Diego CA; Not in Top 50 last year
Not too much movement this year, except for a few small shufflings. Only three new breweries made the list; Founders, Southern Tier and Karl Strauss.
Off the list was BJs Restaurant & Brewery, Narragansett Brewing and Goose Island Beer, which had plummeted 30 from #18 the year before, after selling their production brewery to Anheuser-Busch InBev.
The Brewers Association has also just announced the top 50 breweries in the U.S. based on sales, by volume, for 2012. This includes all breweries, regardless of size or other parameters. Here is the new list:
- Anheuser-Busch InBev; St Louis MO
- MillerCoors; Chicago IL
- Pabst Brewing; Woodridge IL
- D. G. Yuengling and Son; Pottsville PA
- Boston Beer Co.; Boston MA
- North American Breweries; Rochester, NY
- Sierra Nevada Brewing; Chico CA
- New Belgium Brewing; Fort Collins CO
- Craft Brewers Alliance, Inc.; Portland, OR
- Gambrinus Company; San Antonio TX
- Minhas Craft Brewery; Monroe WI
- Deschutes Brewery; Bend OR
- Lagunitas Brewing; Petaluma CA
- Bell’s Brewery; Galesburg MI
- Matt Brewing; Utica NY
- Harpoon Brewery; Boston, MA
- Stone Brewing; Escondido CA
- Brooklyn Brewery; Brooklyn NY
- Boulevard Brewing; Kansas City MO
- Dogfish Head Craft Brewery; Miilton DE
- Abita Brewing; New Orleans LA
- World Brews/Winery Exchange; Novato CA
- Shipyard Brewing; Portland ME
- Alaskan Brewing; Juneau AK
- August Schell Brewing; New Ulm MN
- New Glarus Brewing; New Glarus WI
- Long Trail Brewing; Burlington VT
- Great Lakes Brewing; Cleveland OH
- Firestone Walker Brewing; Paso Robles CA
- Anchor Brewing; San Francisco CA
- Rogue Ales Brewery; Newport OR
- Summit Brewing; Saint Paul MN
- Full Sail Brewing; Hood River OR
- SweetWater Brewing; Atlanta GA
- Victory Brewing; Downington PA
- Oskar Blues Brewery; Longmont CO
- Pittsburgh Brewing; Pittsburgh PA
- Mendocino Brewing; Ukiah CA
- Cold Spring Brewing; Cold Spring MN
- Flying Dog Brewery; Frederick MD
- Founders Brewing; Grand Rapids MI
- Ninkasi Brewing; Eugene OR
- CraftWorks Breweries & Restaurants (Gordon Biersch/Rock Bottom); Chattanooga TN/Louisville KY
- Odell Brewing; Fort Collins CO
- Bear Republic Brewing; Cloverdale CA
- Stevens Point Brewery; Stevens Point WI
- Blue Point Brewing; Patchogue NY
- Southern Tier Brewing; Lakewood NY
- Lost Coast Brewery; Eureka CA
- Karl Strauss Breweries; San Diego CA
Here is this year’s press release.
As the news keeps swirling around the possible — I say inevitable — buyout of Grupo Modelo by Anheuser Busch-InBev in a breathless “will they, won’t they” kind of coverage, I’m utterly fascinated by the theater of it all. It’s especially interesting to see the many “business experts” weighing in with no real understanding of the history of the brewing industry or how it all works. These “instant experts” all seem to assume that general economics or business principles apply equally well to every scenario, yet fail to grasp that alcohol has always navigated a different path through the economic world, with extra layers of taxation, legislation and law, its moral or anti-alcohol critics, and has to abide by at least 51 sets of laws (federal laws plus one for each state). I brought this up last month in The Beer Monopoly, but this morning an economics reporter from the New York Times, Adam Davidson, weighed in with his own take on the shenanigans.
In his It’s the Economy column published today, Are We in Danger of a Beer Monopoly?, he gives his own version of reality. In his world, where there are nearly 2,400 American breweries, he at least admits many of them are “tiny,” but goes on to claim that a few “have become large national brands.” National, yes, but “large” is a somewhat relative term. They’re large compared to a tiny nanobrewery or even an average sized brewpub, but the volumes of beer manufactured by ABI and SABMIller are in another class altogether. All 2,398 of the other breweries represent much less than 10% of the total beer produced in the U.S., meaning there’s a fairly wide chasm between the two groups, even if “a handful” of them have been successful. Measured against the domination of the biggest two, even the most successful seem modest by comparison.
But this is an argument that many economists seem to make, and indeed it’s the same argument that ABI always makes when they’re trying to buy another global company. How can there be a monopoly with so much competition? Just walk down the beer set in an average grocery store and, if you know who owns or controls what, you’ll easily see who’s winning the beer wars. The power wielded by ABI and SABMiller is so far above that of any smaller brewer, or even the total of all of the smaller ones, that it really is a true David and Goliath relationship. Sure, the big guys throw a few crumbs to the little guys nipping at their heels, but they don’t feel seriously threatened by them. Lately, they’ve been paying closer attention because they’re losing incremental marketshare, but they’ll respond to any such loss, because it hurts the share price. But saying they’re on equal footing is the economic equivalent of pretending that employees and employers have equal bargaining power, as most economic textbooks continue to insist.
But here’s Davidson’s takeaway from recent events as ABI tries to win approval for buying Grupo Modelo. “So I was surprised to learn that the Justice Department is worried that Anheuser-Busch InBev, the conglomerate that owns Bud, is on the cusp of becoming an abusive monopoly.” That’s almost spit take worthy. “On the cusp?” ABI has been a de facto monopoly with one or two others for decades, all but controlling the marketplace, not that anybody has been particularly concerned in the business world.
Anyone who hasn’t had their head buried deep in the sand for last few decades has to have noticed that we live in a society utterly dominated by business interests. Business power is the only power that matters. Political power takes a back seat to it and the will of the people is something politicians invoke only when they’re trying to get elected. How else can you explain that corporations have all the benefits of being a person, with none of the responsibilities or consequences? How else can money be considered free speech to influence politics? How else can you explain the many businesses deemed too big to fail while the same individuals those corporations ruined are left swinging in the wind, with no life raft for the ordinary flesh and blood person.
Davidson goes on to give a flawed history of the brewery business, and seems to think that mergers are a relatively new phenomenon. Of course, brewery mergers and acquisitions have been going on in brewing since the late 19th century, and stopped only briefly for about thirteen years, during Prohibition. Then he says we’re “still in the very early stages of what appears to be a global version of the scale-based consolidation we’ve seen in the United States over the past century.” I can’t tell if that’s a joke? The global beer world has been dominated by an ever-shrinking group of very large conglomerates for at least the last three or four decades. It’s hardly a new thing. In 2010, the four largest beer companies accounted for over half of all beer worldwide, and according to another source the Top 5 were about half. Heineken, Carlsberg, and a few others are very large companies, indeed, and they, too, have been gobbling up breweries around the world for many, many years.
It’s probably not a coincidence that Davidson has his own S.H.A.M.E. profile. Why the New York Times continues to let him shill for big business, well’s that’s a whole other discussion, but it’s obvious he’s defending the pro-business position. It’s also clear that he’s part of the theater that will ultimately end in the DOJ’s approval of the deal between ABI and Grupo Modelo. Here’s my prediction of what will happen next. As always happens, the two parties will hammer out a compromise that was probably the deal everybody wanted in the first place, but this way both parties look good in the public eye. The DOJ will look like they’re being tough on big business and are protecting the public while ABI will look good because they were able to get the deal done, and their share price will shoot up. Everybody wins. As Shakespeare observed, “all the world’s a stage.” And we’re the audience. I just wish they’d stop pretending we’re all idiots.
Today’s infographic is an interesting one, created by NPR. Entitled Two Beer Companies, 210 Brands, it shows all of the beer brands owned by Anheuser-Busch InBev and SABMiller across the globe. Below the map, there’s also a list of brands by country, color-coded by which beer giant owns or controls them. How accurate is it? Hard to say. It doesn’t appear to include line extensions, which would balloon the chart to many times its current size, but glancing at the list for the United states, it looks like it may be missing some, though to be fair I didn’t do a line by line comparison.
If you haven’t seen it yet, U.S. News & World Reports had an interesting read entitled Hopslam: How Big Beer Is Trying to Stop a Craft Beer Revolution, and subtitled “The blocked merger between Modelo and Anheuser-Busch shines a light on the long-brewing fight between big beer and craft brewers.” It’s a long piece, but worth it for pulling together a number of threads that have been pulling together lately.