With inflation on the rise, the Administration and its congressional allies are accusing an ever-expanding number of industries from anti-competitive behavior. Meat processors, gas producersYou can even get it! Supermarkets. Now, the sector of alcohol is under scrutiny.
In a lengthy new Report, the Treasury Department calls for enhanced scrutiny of mergers between alcohol makers and for more aggressive crackdowns on anticompetitive behavior—in an industry overflowing with healthy competition.
Although Treasury raises legitimate concerns regarding anticompetitive tendencies in wholesaling, it does not make the case for alcohol having a wide-reaching antitrust issue that requires federal intervention. Treasury officials actually acknowledged this. ContactAlcohol is an “flourishing” sector that is not common in modern U.S. economies where most markets are dominated only by one, large-scale brands.
It reads as a exercise in bureaucratic dissonance. It was first a sloppy report. NotificationsAnheuser-Busch America and Molson Coors account for 65% of America’s beer market. Two paragraphs later it was. AcceptanceThe number of American breweries grew from just 100 in 1983, to 6406 in 2020. The administration believes enhanced antitrust scrutiny in an industry that has 6,000 new market entry is essential. It’s not hard to imagine which industry it would spare.
Craft beer has exploded in popularity, and large brewers have a larger market share. Reduced Since 2010, the percentage has increased by 5 percent. Treasury understatedly alludes to this, noting that the trend toward premium and super-premium beers—which are predominantly made by craft breweries—has “challenged” Anheuser-Busch and Molson Coors in recent years.
It also claims that the more market share an alcohol manufacturer has, the greater the temptation to raise prices. The report neglects to mention the fact that beer prices have risen over several decades. Significantly lessWe are more than the Consumer Price Index.
It is also feared that macrobreweries could increase market share by purchasing independent microbreweries. It is speculated that large conglomerates of brewing companies could put undued stress on wholesalers and retailers for their alcohol products. They may also take over shelves in grocery stores that are reserved for microbrews.
Craft alcohol producers may face access problems in the market, but it is usually due to competition at the wholesale tier of alcohol and not large brewers purchasing smaller ones. Nearly every American state has a three-tier alcohol system. Wholesalers and retailers must all be legal entities. It is illegal for alcohol producers to sell their product directly to consumers or retailers. They must instead use wholesalers.
This law gives the government-mandated role of a intermediary in the supply chain to protect wholesale alcohol distributors from competitors. The problem is worsened by many state governments. stringent franchise lawsExclusive territory rules that give wholesalers de facto exclusive sales rights to certain brands in several regions. In contrast to alcohol producers, wholesalers have the ability to sell alcohol in bulk. Rapidly consolidating. Small craft alcohol producers often end up being shut out of certain markets.
This problem is not being addressed by the Treasury. The best thing for small alcohol producers is not more federal oversight of brewery mergers, but state-level reforms to overhaul the three-tier system. The most important: Allowing more states to allow distillers and brewers. Directly ship your products to the consumerIt is possible for craft drink makers to circumvent potential collusive wholesalers, who may favor macro beverages over micros.
Although Treasury speaks favorably at points in the report about direct-to-consumer shipping for alcohol, it ultimately stops short of endorsing it, noting that the “balancing of public policy values is best addressed by a democratically-elected legislature.” This is a valid point. This agency needs to heed its own counsel.