The Empire Strikes Back
- June 5th, 2010
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After being turned away by the Illinois Liquor Control Commision to increase their stake in City Beverages, InBev has filed suit within the state of Illinios protesting a law that allows small, craft brewers to self-distribute. InBev has been coveting the money that distributors make for a long while. Reports have suggested that they’ve also been interesting in consolidating the distro landscape.
This is a pretty big shot fired across the bow of how business is done in Illinois. As mentioned earlier, Windy City Distributors, the distribution arm of Two Bros. is the only large craft beer player in the area. City Beverages (AB) and CBS (MillerCoors) dominate the local landscape. InBev desperately wanted to own City Beverages but was shot down. During that phase, the large distro’s (Wirtz, CBS) as well as the breweries (MillerCoors) complained that InBev couldn’t be allowed to own City because it would violate the three-tier system. In the end, it appears that the ILCC’s ruling was based on the fact that InBev was not an Illinois-based company.
So, in return, InBev has filed a suit that threatens to either tear down the three-tier model completely or strip small, craft brewers of their (current) legal right to self-distribute. In many respects, the ability to self-distribute is a practical matter. Many craft brewers covered by the existing legislation brew such small quantities that it simply makes more sense for them to drive the cases/barrels to their customers. Also, finding a distributor interested in doing that for these small brewers is next to impossible. The big boys are far too busy taking over shelf space with vortex bottles and innovative packaging, and the small guys need sure things for their limited allotments.
This will be interesting to watch. It’s hard to imagine it just going away. InBev’s budget in this regard is, of course, limitless. Of course, small brewers have long desired the right to self-distribute. So a ruling that demolishes the three-tier system seems like it may be a bit of a win for the craft beer aficionado and the craft brewer. However, don’t underestimate the power of the distros in any state. Thanks to consolidation, they are large, multi-million dollar operations and are all politically well-connected. The easy way out would be to kill the law that allows small, craft-brewers to self-distribute. It would seem that the money bet would be on this, right now. And, that, of course, would kill the small brewers (and wineries) in the state. It’s essentially a win-win for InBev.









