Thursday, January 31, 2013

This Antitrust Suit's For You, Bud

The U.S. Justice Department’s trustbusters have brewed one heck of a brouhaha in the beer business, and like the chiseled-muscle buddy who asks you to hold his beer in a barroom brawl, they’ve got your back.

The feds sued Anheuser-Busch InBev, maker of top-seller Budweiser, saying that the Belgium company’s bid to acquire all of Grupo Modelo, brewer of Corona beer, is anti-competitive and will lead to beer prices foaming up like the head on a frosted glass of draft. The case should be of interest to all beer drinkers, who, according to the Justice Department, buy beer close to home and blindly pay whatever the going price is.

While the lawsuit is complex (it took 19 U.S. attorneys to file it), here it is in one gulp: ABI owns part of Modelo and wants all of it, and last year, ABI agreed to pay $20 billion for that pleasure. Modelo is the nation’s third largest beer seller, and No. 2 is MillerCoors. The lawyers at the Justice Department want to stop the sale of Modelo to ABI, claiming Modelo is the only one of the Big 3 Brewers that doesn’t always go along with beer price hikes, refusing to follow when other brewers raise them. The feds say MillerCoors simply follows Budweiser’s lead. The feds contend Corona’s shyness for raising prices will evaporate once Bud swallows Modelo, and as a result, prices at the Big 3 will continue to increase.

These federal trustbusters are born showmen. They really know how to create a buzz. They filed the suit Jan. 31, just in time for all those beer commercials during the Super Bowl. You know when Dynastic Team Bud Light takes on Upstart Team Corona.

Here is a paragraph lifted from the suit about the beer market, and it gives a little flavor of the antitrust case: “Modelo ... has not followed ABI-led price increases in local markets in California. Because of the aggressive pricing of the Modelo brands, ABI’s Bud and Bud Light brands have reported “heavy share losses” to Modelo’s Corona and Modelo Especial. Consumers in California markets have been the beneficiaries of Modelo’s aggressive pricing. ABI rescinded a planned September 2010 price increase because of the share growth of Modelo’s Corona brand,” which the feds say has been “eating (Budweiser’s) lunch” in California.

So what’s at stake, according to antitrust division of the Justice Department? Eighty billion bucks. That’s the amount of beer Americans swill every year. The feds claim putting the stopper on Bud’s bottling of Corona will maintain competition. We should all drink to that. What’s ABI say? Well as far as the suit, they promise to fight rather than switch.

“Stay thirsty my friends.”

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