News broke last week that federal regulators were investigating Anheuser-Busch InBev, the world’s biggest brewer and the force behind brands as varied as Bud Light and Boddington’s, for allegedly trying to squash competition through the purchase of beer distributorships. The probe came as AB InBev moved bullishly forward with a $104 billion takeover of chief rival SABMiller, though it isn’t clear if the investigation is enough to stop such a merger.

AB InBev had bought control of five distributors in three states in the months leading up to the news, which Reuters first reported, jolting the craft beer sector in particular. The frightful logic runs something like this: Each distributorship AB InBev snaps up means one fewer distribution channel for craft brewers, the smaller of which have enough trouble convincing distributors to carry their products in the first place. Should AB InBev come to control enough distributorships, the logic continues, it could effectively cut off the supply of craft beer to some regions of the country, or at least seriously curtail the variety available. The horror!

Except that’s unlikely. Why? Because we’ve seen this movie before, and craft beer is still very much alive in the U.S. of A.


What’s happening today — the outright acquisition of distributorships — is much different than the 1990s tack of simply leaning on them. Still, the plot looks very familiar.


It all started in March 1996, when August Busch III, chairman of what was then simply Anheuser-Busch, told a national wholesalers conference, “Each of you [must] exert your undivided attention and total efforts on Anheuser-Busch products. If you sell our competitors’ products, can you still give us your best efforts? I don’t think so.” It was the thinnest of veiled threats: The nation’s biggest and most reliable brewer was asking distributors nationwide that carried their brands to focus only on those, to the exclusion of others. Busch III, a great-grandson of the company’s cofounder, left a couple of things unsaid in announcing what became known as AB’s “100 percent share of mind” push: what, exactly, the brewery would do if distributors did not play ball and who its target was.

The first did not really need to be said — distributors, one by one, starting only months after Busch’s comments, began to fall in line, abandoning non-AB brands for Budweiser et al. (And it’s unlikely Busch III would ever have annunciated retaliatory penalties for distributors that did not give their mind 100 percent over to AB — that might have placed his company in violation of antitrust laws. Sound familiar?)

The second thing he left unsaid did not really need to be spelled out, either. Everyone who followed such things knew that Busch III was targeting what were just coming to be widely called craft brewers. Then, as now, they represented perhaps no more than 10 to 15 percent of the domestic beer market sales-wise, but they had spent much of the 1990s to that point growing torridly fast. Some craft brewers, such as the Boston Beer Co. (a.k.a. Sam Adams) and Sierra Nevada, seemed unstoppable, with their brands in nearly every state. Newer arrivals, such as Lagunitas and Stone, seemed poised for the same swift rise. Speaking of newcomers, there were around 400 brewpubs in the U.S. in 1996, the year of Busch III’s address; 15 years before there had been zero.

BlueMoon1
Coors’ Blue Moon is the best-selling example of what came to be called phantom crafts, brands that looked and (somewhat) tasted like craft beer. (Photo courtesy of Blue Moon Brewing Company.)

Such growth made big brewers nervous. To curb it — or at least to get a cut of it — they came up with what came to be called phantom crafts, brands that looked and (somewhat) tasted like craft beer, Coors’ Blue Moon the best-selling example. Macro-brewers also flat-out bought up the smaller competition, or at least healthy chunks of individual craft operations (yes, the much-ballyhooed Big Beer buying spree of today is also a repeat). Anheuser-Busch in particular orchestrated a public-relations campaign against Sam Adams and the now-defunct Pete’s Brewing Co., maker of the Pete’s Wicked brands, then the two biggest craft operations. The campaign, which spawned a devastating segment on NBC’s Dateline in October 1996, questioned the beers’ origins, given that both Sam Adams and Pete’s then were contract-brewed at other facilities. (Boston Beer has long since moved most Sam Adams brewing in house.) The 100-percent-share-of-mind push on distribution, then, was just another weapon Big Beer plucked from its arsenal to level at these craft upstarts.

And yet none of it worked. Not really, anyway. Craft brewers became their own worst enemy in the late 1990s, as that frenetic growth spawned too many flash-in-the-pan entrants making too much iffy beer. Many consumers were turned off, having popped the top on one too many lousy craft offerings. Infighting among craft brewers abounded, too: contract brewers vs. those who risked capital opening a physical plant; West Coasters vs. East Coasters; veterans from the earliest days vs. whippersnappers seen as piggybacking. Finally, beginning in 1996 and lasting through 2000, about one third of the craft brewers and brewpubs in the U.S. shuttered; 1999 would mark the first year more craft breweries closed than opened. Big Beer’s reactionary measures did not help matters, but it’s entirely likely that the craft sector would have convulsed with or without the likes of 100 percent share of mind.

Besides, that campaign failed. Following the shakeout of the late 1990s, the craft sector again began rising, this time with product quality as holy writ, governments at all levels willing to lend a helping hand (or at least to get out of the way) and a much more informed consumer base, thanks to developments such as the Web and social media (not to mention, ahem, a crop of new beer critics who enjoyed a benefit of hindsight their predecessors didn’t). The increase in the number of craft breweries, including brewpubs — to more than 1,300 in 2006 and then to nearly 1,700 in 2010 — and a jump in craft sales to boot emboldened distributors to break with AB and its 100 percent share of mind. Pretty soon, by the close of the 2000s, the campaign was a relic, another stopgap that failed to stem the rising tide. AB had not abandoned the campaign; it just wasn’t a worthwhile focus anymore.

Make no mistake: AB remained the nation’s biggest brewer through the 1990s and the 2000s, its 2008 merger with InBev making it indisputably the largest on Earth. It’s not like it buckled under the second big boom in craft beer (at least not yet). And what’s happening today — the outright acquisition of distributorships — is much different than the 1990s tack of simply leaning on them. Still, the plot looks very familiar: seemingly unstoppable craft growth and jimmying the levers of distribution to slow that growth. Lucky for fans of double IPAs and Oktoberfests throughout the land, the ending should be pretty familiar as well.