Latest Post | Last 10 Posts | Archives
Previous Post: Question of the day
Next Post: Our unfocused governor
Posted in:
* My weekly syndicated newspaper column…
Anheuser-Busch reportedly has hired over a dozen Statehouse lobbyists this spring to protect its interests in a long-running battle to control how it distributes its brews in Illinois.
The St. Louis company, in the past, has owned a beer distributorship in Illinois. It sought to buy another one in Chicago, but was blocked by the Illinois Liquor Control Commission. So, the company sued in federal court.
In the process, Anheuser-Busch discovered that two relatively small Illinois “craft brewers” were allowed to distribute their own beer in Illinois, but out-of-state craft brewers weren’t given the same privilege. The brewer’s lawsuit tried to use that contradiction to its advantage.
A federal judge decided last September that the contradiction in Illinois practice didn’t allow him to open up the distributor market to Anheuser-Busch. But he did decide that he could stop the small in-state craft brewers from distributing their own product as long as out-of-staters were barred. The judge, however, agreed to stay his decision until the General Assembly could weigh in this spring.
That ruling has set off a furious Statehouse battle. Illinois, like other states, has a three-tiered delivery system for beer — brewers, distributors and retailers — which was set up after Prohibition ended almost 80 years ago.
The Associated Beer Distributors of Illinois is a major player in state politics. Its political action committee has raised almost $1.7 million since January 2008. The distributors usually get what they want in the General Assembly. But, after slowing down a bill to allow in-state and out-of-state craft distributors to self-distribute, they’ve recently had to jump on board or risk allowing Anheuser-Busch to stop the whole process in its tracks.
The craft brewers came into the legislative session asking to distribute a huge amount of beer on their own — 60,000 barrels a year, or almost 2 million gallons. That was viewed in the Senate as a gross overreach, and an amendment was introduced last week to allow them to self-distribute just 7,500 barrels a year. The distributors say, in practice, any brewery that produces more than 2,000 barrels usually ends up turning to the distributors because distribution becomes just too complicated and cumbersome to do it on its own.
Anheuser-Busch is saying it would like to pass a bill to allow it to self-distribute, or at least to buy that Chicago distributorship. But it’s an out-of-state company with little pull in Illinois and no real history of a Statehouse presence. It needed a lot of help, which is one reason it has hired so many bigtime lobbyists, including former state Sen. James DeLeo, who said last week that he is acting as a “consultant” and wouldn’t actually be coming down to Springfield. DeLeo was one of the most influential members of the Senate for years, and he’s still highly respected by members.
Anheuser-Busch also has lobbyists on its team who are close to House Speaker Michael Madigan, including one of the top insiders at the Statehouse, Madigan’s former House Majority Leader Mike McClain.
As with any big move like this, one should always look at what the players really want. And Anheuser-Busch’s real-life strategy appears to be to stop that bill from moving any further in the General Assembly and then take its chances on an appeal of the federal judge’s decision.
If a bill passed that excluded Anheuser-Busch, the company would have a tougher time explaining to an appellate court that state laws are vague enough to grant its requests. A successful appeal could open up the distributor game to the company, which would result in a huge increase in profits by cutting out the middlemen. We’re talking high-stakes and big money here.
Rival brewer Miller-Coors also jumped into the beer wars late last week, reportedly hiring several lobbyists of its own to work against Anheuser-Busch.
Miller-Coors makes a ton of money in the Chicago area (Miller Lite is the far and away top seller), so it doesn’t want Anheuser-Busch to gain any sort of foothold in the region.
It’s always easier to kill a bill than to pass one, particularly when it comes to legislation as controversial as this. The craft brewers still aren’t totally happy with the legislation, and the bill has to navigate some very complicated political waters.
Who will be crowned Springfield’s King of Beers? We’ll know in a few weeks.
Thoughts?
posted by Rich Miller
Monday, Apr 18, 11 @ 1:09 pm
Sorry, comments are closed at this time.
Previous Post: Question of the day
Next Post: Our unfocused governor
WordPress Mobile Edition available at alexking.org.
powered by WordPress.
For some reason, an ice cold beer sounds really good right now. Did you wait until after noon to post this Rich? It’s always 5pm somewhere. Don’t let the clock get in the way of a tasty beverage.
But a serious question, do we know which Illinois distributor A/B wants to purchase? I’ve haven’t seen that in any of the stories yet, but honestly, I’m a Heineken fan, so I haven’t paid that much attention.
Comment by 47th Ward Monday, Apr 18, 11 @ 1:15 pm
We have to keep in mind here that the distributors have a lot of control over the producers. Remember a couple years ago when Bell’s Beer left the state because their distributor sold their distribution rights to another distributor and Bell’s has no say in the change? That big pot of money for campaign contributions has bought them a pretty sweet deal in Illinois.
What is all means is that the small craft brewer gets stuck in the middle. This fight between the big guys over big money and power makes them pawns when all they are trying to do is figure out a way to affordably get their product to market. Pushing the cap down to 2,000 barrels of self-distribution is not a micro-brewery; it is a nano-brewery. The distributors want to give up as little as possible in their effort to thwart the Belgians from St. Louis.
What 60,000 a bit of a stretch? Sure, but that is what you do with legislation. Put out what you want and hope you end up with something you can live with. The craft brewers at this point in the game can only sit back and hope that the big guys beat each other up so much they end up coming out with a minor victory.
At least they have really good beer to drink while they watch and wait.
Comment by Montrose Monday, Apr 18, 11 @ 1:30 pm
Rich said,
“A successful appeal could open up the distributor game to the company, which would result in a huge increase in profits by cutting out the middlemen.”
Would it not also be possible that consumers might also see a decrease in price due to the elimination of a middleman?
Comment by Cincinnatus Monday, Apr 18, 11 @ 1:35 pm
I wish Illinois would just wise up and eliminate the requirement for distributors for wine and beer altogether.
Comment by ChicagoR Monday, Apr 18, 11 @ 1:36 pm
===Would it not also be possible that consumers might also see a decrease in price due to the elimination of a middleman? ===
Corporations don’t spend a small fortune lobbying unless there’s more money involved, or they are against the prospect of less money involved.
Comment by Rich Miller Monday, Apr 18, 11 @ 1:39 pm
Rich,
The law of unintended consequences would be in play. Since corporations would be able to self-distribute, and since there is very little likelihood that distributors would return to the prohibition days of exclusive bars (antitrust concerns), eliminating one level of “management” may indeed lower consumer costs.
There would also be added competition among distributors who may be able to truly be a distributor of product, and would no longer be held to exclusivity.
I only hope that one of the fall-outs to any action is that somehow the Jackson dynasty loses some of its money and resultant clout.
Comment by Cincinnatus Monday, Apr 18, 11 @ 1:46 pm
The craft brewers need to be careful here. In the spirit of anti-trust legislation, I’m all for allowing them some protection to market their craft in the face of the giants so they’re not forced to sell out or driven out of business. Shelf space is hard to get.
But if they want to go large, then they lose that protection and need to slug it out on their own. I imagine there’s plenty of division within the community as to what constitutes a “craft” beer. Sam Adams? I doubt it.
Miller Lite is “far and away” the best seller? Life’s too short for that, folks.
Comment by wordslinger Monday, Apr 18, 11 @ 2:05 pm
I would bet we wont see a drop in price, just the profit trasnfered from distributors to the mega brewers. But cost aside, why do we use this system in the first place? i.e. what is the intent in terms of protecting the public or helping assiting regulation?
Ifthis no longer provides any real benefit to regulaion or health and safety, let it die. If it aids in rgulation or protection of the public, lets keep it in place.
Comment by Ghost Monday, Apr 18, 11 @ 2:12 pm
Ghost,
From last week’s thread, someone gave a great summary of the history of that law. It basically boiled down to the fact that brewers owned bars that drove out competition. The distributors were intended to isolate the point of sale from the manufacturer.
Comment by Cincinnatus Monday, Apr 18, 11 @ 2:18 pm
All the government regulation of the liquor industry has accomplished what?
Comment by Liberty_First Monday, Apr 18, 11 @ 2:44 pm
===All the government regulation of the liquor industry has accomplished what? ===
What? They’re impoverished?
Comment by Rich Miller Monday, Apr 18, 11 @ 2:46 pm
AB InBev, Bud’s corporate parent wants to buy their distributor City Beverage which is Chicago based but from what I’ve heard has a distribution territory covering more than 50% of Illinois’ population. Definitely one of the 20 largest beer distributors in the US.
Much of City Beverage is now owned by an entity controlled by Bryan Trott, once described in Crain’s as “Warren Buffett’s favorite banker”.
So yeah, there’s just a little bit of money at stake here.
Comment by Chicago Bars Monday, Apr 18, 11 @ 2:58 pm
Just discovered Big Muddy brewery in Murphysboro…good stuff.
Comment by D.P. Gumby Monday, Apr 18, 11 @ 3:15 pm
{It’s always easier to kill a bill than to pass one}
I’ll drink to that.
CHEERS!
Comment by Quinn T. Sential Monday, Apr 18, 11 @ 3:16 pm
Thats an easy fix, get rid of the midle man and bar brewers from owning bars
Comment by Ghost Monday, Apr 18, 11 @ 3:35 pm
I can see “High Life - State Street” or “High Life - Wacker” featuring only Miller products opening soon. Maybe “Busch Gardens - LacLede’s”?
Comment by danimaniac Monday, Apr 18, 11 @ 3:37 pm
Ghost- That would kill the great brew-pubs though
Comment by Crow04 Monday, Apr 18, 11 @ 4:02 pm
Then there’s the number of bar owners skirting the laws to buy retail beer/liquor because that’s cheaper than buying from distributors. So bar owners pay more for the beer they sell than what people or bar owners can buy from the grocery store and the arcane laws require that… go figure.
Wasn’t Illinois one of the last State’s to get Smirnoff Ice because of the messed up distribution laws?
Comment by Shemp Tuesday, Apr 19, 11 @ 2:30 am