A recent deal to combine two of the largest beer conglomerates in the world could put the squeeze on Connecticut's 32 craft beer makers.
Anheuser Busch InBev's acquisition of its main rival, SAB Miller, would create the largest beer producer in the world, accounting for one out of every three beers consumed worldwide. The deal still needs regulatory approval.
U.S. Senator Chris Murphy of Connecticut is concerned that the merger could threaten the viability of the state's 32 local breweries.
"They operate on really thin margins," Murphy said. "If all of a sudden, the price for their cans goes way up, or if their distributors tack on an extra surcharge, then that could be the difference between staying in business, or having to go out of business."
Justin Gargano, founder and president of Thimble Island Brewing Company in Branford, agrees with Murphy. He said the merger will force distributors to focus more time and effort on the Bud-Miller brand, which could squeeze out smaller craft beers.
"It's like: which one do they want to push, and that is what I think is going to affect the craft beer companies," Gargano said. "Now they are going to have less focus from the distribution houses to push those brands."
Another critical issue is cans. Beer cans are a cost-effective way for new breweries to get their beers into local package stores, but Senator Murphy believes there could be a shortage of cans if this merger goes through.
"We've already heard stories that they are having problems getting cans from their distributors, and they believe that's because there's pressure coming already from big companies to 'slow walk' cans to the small guys," Murphy said. "That pressure will only get worse if InBev and Miller are allowed to combine."
Murphy sent a letter to the Department of Justice's anti-trust division, asking it to review carefully the deal to ensure that smaller breweries have equal access to the supply and distribution chain as the big beer producers.
Read the full text of Murphy's letter below.
To: William J. Baer, Assistant Attorney General; Antitrust Division, U.S. Department of Justice
Dear Assistant Attorney General Baer,
I write to you regarding the impending merger between two of the world’s largest beermakers, AB InBev and SABMiller, and the effect it could have on the small brewery industry in my state. According to recent reports, the deal reached by AB InBev to buy out its main rival would create the largest beer producer in the world. As the Department of Justice reviews this merger, I urge you to specifically consider the impact it will have on competition and access for all American brewers, particularly those in the independent craft brewing industry. While I take no position on the legality of the merger under U.S. antitrust laws, I believe careful review is necessary to ensure that consumers are protected and economic competition is preserved.
I have heard from a number of small craft brewery owners in my state of Connecticut who are already facing challenges accessing an effective and reliable distribution system, and who are deeply concerned about the potential negative impact this merger could have on the market. Many of these breweries have informed me, for example, that they consistently have difficulty procuring sufficient cans to distribute their product, raising concerns that larger producers like AB InBev and SAB Miller may already be impacting the supply of this critical component for their business. Merging these two companies into a larger market player with the ability to control an even greater share of the supply and distribution chains could have a significant impact on the continued viability of the currently thriving craft beer industry. Thus, the unique challenges in distribution and access that small craft brewers face in Connecticut and elsewhere require careful consideration as part of your review of the AB InBev-SABMiller merger.
Last year, American small and independent craft brewers contributed $55.7 billion to our economy and provided more than 424,000 Americans with employment. Connecticut alone has 32 breweries and brewpubs with another 19 in planning, and in 2014, these brewers employed over 4,000 workers and produced over 72,000 barrels of beer. As craft beer continues to increase its contribution to the American economy, it is imperative we ensure these businesses are able to fairly provide their product to consumers through a competitive market.
Like you, I share a profound interest in protecting choice and competition for the benefit of American consumers. I trust that you will thoroughly review the proposed merger between AB InBev and SABMiller to ensure that fair access is protected for all in the beermaking industry, and that consumers continue to be offered competitive prices and a wide range of products. Thank you for your attention to this important matter.
Christopher S. Murphy United States Senator