Amanda Van Benschoten

avbnky@nky.com

Beer brewing giant Anheuser-Busch wants to move into distribution in Owensboro

Independent distributors%2C wholesalers and brewers are fighting the move%2C however

Kentucky the latest in a string of states where ABI has sought to grow into distribution

The beer wars that have been brewing across the U.S. for several years have now come to Kentucky – and local consumers should sit up and take notice.

On one side: global brewing giant Anheuser-Busch InBev (ABI) which wants to buy a beer distributorship in Owensboro that would give it a corner on nearly a quarter of Kentucky's beer market.

The company brews some of the world's most popular beers, such as Budweiser, Bud Light and Stella Artois. It was formed in 2008, when the Belgian/Brazilian brewer InBev acquired St. Louis-based Anheuser-Busch.

On the other side: a coalition of independent wholesalers, brewers and others who fear that giving ABI a larger share of Kentucky's beer market could drive them out of business and result in fewer choices for consumers at bars, restaurants and on the shelves.

That fear isn't entirely baseless.

Many Northern Kentuckians are clamoring to be able to buy Yuengling lagers south of the Ohio River, for example, but the Pennsylvania-based brewer says it would be much less likely to move into the market if ABI is allowed to grow in Kentucky.

"If and when that times comes, if Anheuser-Busch is able to get larger, that really blocks an opportunity for us," said Yuengling Chief Operating Officer David Casinelli. "My means to a consumer is through the middle (distribution) tier. And if the middle tier is consolidating, there's very few choices left for the brewers."

Smaller local brewers like Wiedemann, however, say they're less worried about changes among "the big boys" than about making Kentucky's regulatory environment more friendly to craft brewers.

In Kentucky – and in all states, in fact – the beer market operates on a three-tiered system: brewing, distribution and retail are kept separate. A brewer can't also be a distributor or own a liquor store, for example. Created after the repeal of Prohibition in 1933, the system is intended to eliminate the monopolies and abuses that led to Prohibition in the first place.

There are exceptions to the system. Anheuser-Busch, for example, was allowed to buy a distributorship in Louisville in 1978 after it successfully took the state to court. It's now the dominant beer distributor in the metro Louisville market.

The company is quick to point out that Louisville's craft beer industry is thriving, despite the fact that ABI does not distribute any craft beers there. (ABI-owned distributors only sell the company's products, unlike independent distributors who sell multiple brewers' products to retailers, bars and restaurants.)

Now, ABI wants to expand its distribution foothold in Owensboro, which is located about 100 miles south of Louisville. That would give it control over nearly a quarter of the state's beer market, since distribution licenses also cover adjacent counties.

State regulators are considering whether to allow the move, and ABI filed a lawsuit in Franklin Circuit Court on Monday trying to expedite that process.

More than a dozen entities – from wholesalers and distributors to brewers like Yuengling – have filed letters in protest. A handful, including the Louisville Chamber of Commerce, have filed letters of support.

ABI, meanwhile, says the Owensboro matter is a private issue between two private companies, one of whom (ABI) employs 165 people in Kentucky and pays the state $10.7 million in taxes. And, the company says, the courts are on its side thanks to that 1978 ruling.

"This transaction has a willing seller and a willing buyer, and is fully allowed under existing Kentucky law and regulations. The people who oppose this simply want to change the rules to suit their own purposes," said Anheuser-Busch Region Vice President Bob Kelley.

Owensboro is the latest in a string of moves by ABI, the world's largest beer brewer, to move into that second tier of distribution. (And a move that makes business sense when you consider that domestic beer sales have been declining in the U.S. for several years, while craft beer sales are on the rise.)

In Illinois, ABI tried to buy Chicago-based distributor City Beverage in 2009. After years of court battles, the Illinois Legislature forced the company to unload its share in City Beverage just last year.

The buyer? The Hand Family Cos., the Tennessee-based beer distributor now trying to sell its Owensboro location to ABI.

And last year, ABI tried to buy C&G Distributing Co. in Lima, Ohio, but the move was also blocked by the Ohio Legislature. (After wholesalers poured boatloads of money into legislators' campaigns.)

The company denies it's trying to take over the American beer distribution market, noting that ABI owns just 17 of the 500 distributors across the nation that sell its products.

And the Owensboro situation isn't a takeover: the Hand family is a willing seller.

But other independent distributors in Kentucky, including the family-owned Chas. Seligman Distributing Co. in Walton, fear Owensboro would be just the beginning, and its ripple effects would eventually reach Northern Kentucky.

"If they're successful in getting this license, they will continue to expand their distribution footprint in Kentucky," said General Manager Jennifer Doering. "I don't think it's right that a foreign company comes in and tries to eliminate a system that works very well. If it starts with Owensboro, it's just going to continue on." ■