Massachusetts Takes Aim at Budweiser Over Pay-to-Play Allegations
17 May 2017 - 12:43AM
Dow Jones News
By Jennifer Levitz
BOSTON -- A battle is brewing in Massachusetts between state
regulators and Anheuser-Busch InBev NV, over allegations the beer
giant has doled out nearly $1 million in unlawful giveaways to
entice retailers and bars to push Budweiser over rivals.
The state's Alcoholic Beverages Control Commission has issued a
report detailing investigators findings and set a June hearing in
Boston on the matter. The report alleges a subsidiary of
Anheuser-Busch gave out bar equipment as incentives to hundreds of
Massachusetts businesses in violation of a state law meant to keep
beer companies from squeezing out competitors.
Sales representatives "offered the refrigeration equipment to
the retailers at no cost, provided the equipment was only utilized
for Budweiser products," investigators said in the report.
While financial arrangements for visibility are common in some
industries, like the grocery business, they are forbidden in the
alcohol sector in most states. That ban harkens to Prohibition-era
laws aimed at preventing any one large beverage-maker from
controlling the chain of manufacturing and sales.
Anheuser-Busch said in a statement that it has been working with
the alcohol commission since Massachusetts first raised questions.
"We believe that we lawfully provided branded point-of-sale items
to retailers and plan to contest these allegations," the company
said.
The scrutiny comes at the same time that mainstream beer
manufacturers and the exploding craft-beer segment are increasingly
jostling for customers, creating unprecedented tension in the
industry nationwide, said beer consultant Bump Williams.
"Shelf space is limited; display space is limited; cooler space
is limited," said Mr. Williams. "Getting that share of mind and
getting that share of wallets is intense as I've ever seen it."
U.S. shipments of craft beer have soared in the last decade,
hitting 23.4 million barrels in 2016 from more than 7.7 million
barrels shipped in 2006, according to industry tracker Beer
Marketer's Insights. During the same period, domestic shipments of
mainstream beer -- including brands like Budweiser -- fell nearly
13% to 151 million barrels from 173 million barrels.
California leveled similar charges against Anheuser-Busch,
alleging that the company fully or partly paid for refrigeration
units, televisions and draft systems at Southern California
retailers. In March, the state announced Anheuser-Busch agreed to
pay $200,000 and further train staff to settle the case.
"We have fully cooperated with the California Department of
Alcohol and Beverage Control and have addressed issues in a timely
manner," Anheuser-Busch said in a statement, adding that its
increased training goes beyond what is required in the agreement
with the state.
According to Massachusetts investigators, Anheuser-Busch's
exclusive distribution subsidiary in the state handed out free
Budweiser-branded equipment ranging from coolers worth up to $5,700
each to "Budweiser signature draft towers" -- flashy red and chrome
stand-alone brew dispensers -- valued at up to $3,500 each to 441
retail outlets in 2014 and 2015.
Massachusetts law prohibits alcohol companies from providing
stores with "money or any other thing of substantial value" to
induce retailers to buy certain alcoholic beverages.
Nonetheless, the practice "definitely still affects a lot of
people" and hurts access to the market, said Rob Burns, the
co-founder of Night Shift Brewing in Everett, Mass., and president
of the Massachusetts Brewers Guild, an industry advocacy group.
For example, if a bar only has 10 draft lines, and a distributor
buys half of those, a brewer selling to that retailer has a smaller
chance of getting its beer to customers, he said. "Right away your
ability to sell into that account is gone because someone bought
lines," he said.
In Massachusetts, such concerns caught the public's attention in
2014 after a local brewer took to Twitter to denounce Boston as a
pay-to-play city where distributors paid retailers to push certain
beers.
After an investigation spurred on by that complaint, the state
in 2016 slapped a $2.6 million fine on Craft Brewers Guild, the
largest distributor of craft-beer brands in the state, for
"kickbacks" to certain Boston-area retailers.
Craft Brewers Guild is contesting that fine in state court and
didn't respond to a request for comment.
Write to Jennifer Levitz at jennifer.levitz@wsj.com
(END) Dow Jones Newswires
May 16, 2017 10:28 ET (14:28 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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