US. Anheuser-Busch InBev roars against craft breweries bill in Texas legislature

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Because it is “only” about beer and not regularly taken too seriously, citizens sometimes deny themselves the exquisite pleasure of watching money and power manipulate politics in the state Legislature.

Take a little bill, HB 602 by Jessica Farrar, D-Houston, which passed unanimously in the House in late April. The bill would allow small craft breweries in Texas to sell token amounts of their beer in their breweries in the same way Texas wineries have for years been allowed to sell a bottle or two of wine to visitors after a tour.

What’s the difference, you might ask. Why would an emissary of the largest brewing company in the world take time out of an undoubtedly busy schedule to come before a state Senate committee, as reported today by the Houston Chronicle, to voice his objection to a few breweries selling in a year what would amount to a infinitesimal fraction of one day’s production?

Mark Bordas, a representative with Anheuser-Busch InBev in Austin, told the committee Tuesday that the bill discriminates against his company because it is tailored to breweries producing fewer than 75,000 barrels per year.

It would seem, as Bordas contended, that AB InBev should have just as much a right as the little guys to let a few six packs of Budweiser and Bud Light leave with tourists at their Texas plants.

But here is where it gets delicious. Small brewers were encouraged to add a brewery output stipulation to the bill by the Wholesale Beer Distributors of Texas. Ostensibly, as Keith Strama, an attorney for the suds lobby, told the committee, “The bill was designed to promote local breweries as they gain market share.”

More importantly to the lobby, however, the stipulation would deny large breweries sales of any of their product directly to customers. Nothing since the repeal of Prohibition in 1933 has been more dear to the wholesalers than their nearly absolute control of the flow of alcohol through them from producer to retailer.

Since that time, no one has benefited more in this so-called three-tier system established by Texas law in 1935 than the major breweries. For generations distributors catered to their biggest and best customers as small regional breweries went out of business and the giants consolidated.

The Belgian conglomerate InBev’s purchase of the nation’s biggest brewer, Anheuser Busch, in 2008 gave the new company nearly a 20 percent share of the world’s beer sales. Last year, AB InBev produced 339,945,117 31-gallon barrels of beer worldwide. Anheuser Busch’s share of that production, 100,939,289 barrels, represented almost half of all the beer sold in America.

By comparison, St. Arnold Brewing Co. in Houston, the state’s leading small producer, turned out 31,445 barrels of beer.

Why, then, you might reasonably query, would the global leader in brewing squander time fighting over legislative chump change? The answer isn’t in St. Arnold’s volume, but in its 22 percent increase in production in 2010 from the year before.

Once an annoyance to the big brewers and wholesalers, craft brewing is now a legitimate force in the market. From a low mark of 80 breweries in 1983 there were 1,753 in America in 2010.

For the past 25 years, craft brewing has been the only segment of the market to grow, while the sales and production among the giants has slowly and steadily declined. Craft brewing grew to nearly 10 million barrels in 2010, still a fraction of Anheuser Busch’s production alone but an 11 percent increase from a 2009 that had seen growth of more than 7 percent from the year before.

In 2010, AB InBev’s sales were down 2.1 percent in the U.S., and the production volumes were down 13.1 percent in Russia, 4.9 percent in western Europe and 2.4 percent in China.

Never one to take competition of any kind lightly, Anheuser Busch was not likely to sit still while the Texas Legislature gave even a tiny advantage like limited on-site beer sales to someone else.

Bordas told the committee AB InBev had at one time supported HB 602 but was unaware the bill had been amended to keep companies of its size out.

His statement suggests that the Wholesale Beer Distributors helped the craft brewers amend the bill without telling the company with which they worked to defeat nearly identical bills in past sessions.

You are free to take AB InBev and the distributors at their words. But as we speculated at the time: “The unanimous vote approving HB 602 by Rep. Jessica Farrar, D-Houston, either shows how far the House has come on the issue or that the Wholesale Beer Distributors of Texas are saving their considerable wealth and lobbying expertise for the Senate.”