AB InBev's Marketing Draws Scrutiny -- WSJ
May 17 2017 - 03:02AM
Dow Jones News
Massachusetts says brewer's giveaways to bars and retailers
break industry rules
By Jennifer Levitz
BOSTON -- A battle is brewing in Massachusetts between state
regulators and Anheuser-Busch InBev NV over allegations the beer
giant has provided nearly $1 million in unlawful giveaways to
entice retailers and bars to push Budweiser over rivals.
The state's Alcoholic Beverages Control Commission has issued a
report detailing investigators' findings and set a June hearing in
Boston on the matter. The report alleges a subsidiary of AB InBev
gave out bar equipment as incentives to hundreds of Massachusetts
businesses in violation of a state law meant to keep beer companies
from squeezing out competitors.
Sales representatives "offered the refrigeration equipment to
the retailers at no cost, provided the equipment was only utilized
for Budweiser products," investigators said in the report.
While financial arrangements for visibility are common in some
industries, such as the grocery business, they are forbidden in the
alcohol sector in most states. That ban harkens to post-Prohibition
laws aimed at preventing any one large beverage maker from
controlling the chain of manufacturing and sales.
AB InBev said in a statement that it has been working with the
alcohol commission since Massachusetts first raised questions. "We
believe that we lawfully provided branded point-of-sale items to
retailers and plan to contest these allegations," the company
said.
The scrutiny comes at the same time that mainstream beer
manufacturers and the exploding craft-beer segment are increasingly
jostling for customers, creating unprecedented tension in the
industry nationwide, said beer consultant Bump Williams.
"Shelf space is limited; display space is limited; cooler space
is limited," said Mr. Williams. "Getting that share of mind and
getting that share of wallets is intense as I've ever seen it."
U.S. shipments of craft beer have soared in the last decade,
hitting 23.4 million barrels in 2016, up from more than 7.7 million
barrels shipped in 2006, according to industry tracker Beer
Marketer's Insights. During the same period, domestic shipments of
mainstream beer -- including brands like Budweiser -- fell nearly
13% to 151 million barrels, from 173 million barrels.
California leveled similar charges against AB InBev, alleging
that the company fully or partly paid for refrigeration units,
televisions and draft systems at Southern California retailers. In
March, the state announced AB InBev agreed to pay $200,000 and
further train staff to settle the case.
"We have fully cooperated with the California Department of
Alcohol and Beverage Control and have addressed issues in a timely
manner," AB InBev said in a statement, adding that its increased
training goes beyond what is required in the agreement with the
state.
According to Massachusetts investigators, AB InBev's exclusive
distribution subsidiary in the state handed out free equipment,
ranging from coolers worth up to $5,700 each to "Budweiser
signature draft towers" -- flashy red and chrome stand-alone brew
dispensers -- valued at up to $3,500 each, to 441 retail outlets in
2014 and 2015.
Massachusetts law prohibits alcohol companies operating in the
state from providing stores with "money or any other thing of
substantial value" to induce retailers to buy certain alcoholic
beverages.
Nonetheless, the practice "definitely still affects a lot of
people" and hurts access to the market, said Rob Burns, the
co-founder of Night Shift Brewing in Everett, Mass., and president
of the Massachusetts Brewers Guild, an industry advocacy group.
For example, if a bar has only 10 draft lines, and a distributor
buys half of those, a brewer trying to win over that retailer has a
smaller chance of getting its beer to customers, he said. "Right
away your ability to sell into that account is gone because someone
bought lines," he said.
In Massachusetts, such concerns caught the public's attention in
2014 after a local brewer took to Twitter to denounce Boston as a
pay-to-play city where distributors paid retailers to push certain
beers.
Following an investigation spurred by that complaint, the state
in 2016 slapped a $2.6 million fine on Craft Brewers Guild, the
largest distributor of craft-beer brands in the state, for
"kickbacks" to certain Boston-area retailers. Craft Brewers Guild
is contesting that fine in state court and didn't respond to a
request for comment.
Write to Jennifer Levitz at jennifer.levitz@wsj.com
(END) Dow Jones Newswires
May 17, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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