Anheuser-Busch Trying to Chug the Competition

The threat of a monopoly is fairly simple to grasp: less competition = higher prices. Right now the US Department of Justice is considering a major merger for this very reason.  Anheuser-Busch InBev, the largest beer company in the world, wants to buy Grupo Modelo (a much smaller, but still relatively large beer company).    While most of us generally look at beers as either domestic (Bud, Coors, Miller) or imports (Corona, Stella, Amstel), the reality is that most are owned by massive multi-national companies.  InBev’s catalog of brews is enormous, including familiar domestics (Bud) and imports (Stella), while Grupo Modelo has mostly imports (Corona, Modelo..etc).

InBev and Coors-Miller control the vast majority of the global beer market, with Grupo Modelo making up a much smaller fraction.  So you may wonder: with Coors-Miller still out there for competition, why does the Justice Department have a problem with InBev wanting to buy Grupo Modelo?  One word: Mavericks.

The reality is that Coors-Miller and InBev are so powerful that they can greatly determine the overall beer market.  Their main issue is that Modelo is what economists call a “maverick.”  While Coors-Miller and InBev have sort of an inside agreement on pricing, Grupo Modelo refuses to play ball.  So when the big 2 want to raises prices, they have to be careful because Americans may go buy Corona instead. 

You may recall a couple summers ago, Bud introduced Bud Light Lime, with nearly identical taste and similar clear bottle as Corona.  This wasn’t an accident.  Everything about it was done to take away Modelo’s power which is largely derived from Corona, the #1 import beer in the US, so that InBev could turn around and jack up its prices across the board. 

The US Justice Department is seriously worried that if InBev can buy Modelo, then all bets will be off and the big beer companies will be able to gouge consumers.  The end result…if you like any major brew, you’ll be screwed. 

Oh, and if this doesn’t make you dislike the big breweries already, then just remember that InBev was recently sued amidst allegations that it’s been watering down Budweiser. 

My advice?  Buy local and enjoy a Newport Storm.

Got any legal questions?  Email me at AThayer@srt-law.com  

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