A microbrewer explains the distribution alliance between Anheuser-Busch and Redhook Ale Brewery and its effects.
There's a classic big company-small company brawl brewing in the beer industry. The first punch was thrown recently when the world's largest brewer, Anheuser-Busch, announced it was forming a "distribution alliance" with Washington-based microbrewer Redhook Ale Brewery. The press release announcing the union went on to explain that Anheuser-Busch would make an equity investment in Redhook. "That was no press release," said Jim Koch, founder of the Boston Beer Co. and brewer of Sam Adams beer, when asked to comment on the announcement. "That was a declaration of war. What it means is that the cozy, fraternal days of the microbrewery business are over."
Koch says that Anheuser-Busch has made it clear it intends to capture half of the $400-million microbrewery market within five years. "This is not a company that makes idle threats," says Koch. "Redhook now has access to virtually unlimited capital to build breweries throughout the country. As it increases production, you can expect to see brutal competition for shelf space, accompanied by intense price wars. This is not going to be pretty.
"The one advantage we have at Boston Beer," says Koch, "is the strength of our sales force and the relationships we've built with a lot of people in the distribution channel -- bar owners, independent liquor-store owners -- who have no desire to see Bud take over the world. But when you look at it from the perspective of the typical microbrewery, this is a battle that Anheuser-Busch is clearly in a dominant position to win.
"You know, just when you think things are going pretty well, along comes Bud Hook, and you're reminded that microbrewers have prospered in the absence of any attention from the big breweries. What I'm going to do now is go home and rent the second movie in the Star Wars trilogy. I forget how it ends and whether the good guys win."
For those of you who have forgotten, the title of the movie Koch is referring to is The Empire Strikes Back. Undoubtedly, he's forgotten who wins because no one does. The story is left to be continued. How apropos as we wait to see how the microbrewery wars unfold.