Kentucky Craft Brewers Fret Over Budweiser-Miller Merger – 89.3 WFPL

Stephen Jenkins watches a timer count down to the exact moment when he’ll drop a bucket of hops into a batch of what will become an amber ale.

“This one’s about nine pounds of a couple different kinds of hops,” said Jenkins, brewer for West Sixth Brewing in Lexington.

He’s perched on top of a catwalk overlooking a vat of wort — the primordial ooze that will be strained, left to ferment with yeast and eventually canned or kegged.

“It makes 40 barrels at a time, which is about 80 kegs, 80 half-barrel kegs, and we do two brews a day. So we’re going to do about 80 barrels of amber today,” Jenkins said.

West Sixth Brewing made about 2,000 barrels of beer in its inaugural year in 2011. This year, the company is on track to make 12,000 to 13,000 barrels.

Despite the brewing company’s rapid growth, it’s still a tiny carbonated bubble floating in an ocean dominated by two global breweries — Anheuser-Busch Inbev, the maker of Budweiser; and SABMiller, which makes Miller Lite.

Those two companies are now poised to merge, with AB-Inbev agreeing to buy Miller for $104.2 billion — about 10 times the annual state budget of Kentucky. The companies announced the plans on Tuesday. The move is seen as a shift for AB-Inbev to adapt to a changing market, the AP reports.

Ben Self, one of the founders of West Sixth, says the merger is “certainly intimidating.”

“To think that all of that money they’ve spent fighting each other, they’re now going to spend directly trying to fight craft beer. And don’t get me wrong, they do fight craft beer every chance they get,” Self says.

With craft beer taking up a growing share of beer sales in the U.S., Anheuser-Busch has gone on the offensive, targeting craft beer companies in their ads.

During a commercial from this year’s Super Bowl, Anheuser-Busch poked fun at craft beer drinkers who, the ad suggested, “fussed” over their beers. The ad featured hipsters with mustaches, with a superimposed message reading: “Let them sip their pumpkin peach ale, we’ll be brewing us some golden suds.”

Louisville’s Against The Grain Brewing co-owner Adam Watson says he expects the merger will lead to more aggressive marketing against craft beer and brewers.

“Just because they no longer have to say, ‘I’m Bud Light, I want to take a Miller Light tap away from this bar,’ they no longer care about that, that’s not an issue,” Watson says. “Now they’re just trying to get both of those on in place of craft products.”

Breaking into a small market could become even more of a challenge in a world with a merged Budweiser-Miller, too, Watson said. Craft breweries already have trouble breaking into rural markets normally dominated by two types of distributors: those that carry AB-Inbev and those that carry SABMiller.

“If they do end up combining, there’ll just be one house that carries all that beer. Anheuser-Busch will not carry any non-Anheuser-Busch products,” Watson says. “So there potentially will be no one to distribute, and in Kentucky we can only distribute if there’s a third-party distributor.”

Frank Scott, an economics professor  for the University of Kentucky, says it’s unlikely that a total merger of the companies would be approved by the Department of Justice because it would violate antitrust laws. Anheuser-Busch was similarly forbidden from acquiring Mexico’s Modelo brand before first selling off nearly $3 billion in assets.

Scott says despite the concerns from small-scale brewers, the merger might end up making craft beer more attractive to consumers — because if the merged company starts raising prices on Bud and Miller Light, craft beer isn’t going to look so expensive.

“The people that would be hurt by such a move would be the everyday blue-collar beer drinker who likes his Budweiser or his Coors or her Miller,” Scott says. “All that would end up doing for the craft brewers is increasing demand for their product.”

Meanwhile, West Sixth Founder Self says the proposed merger wouldn’t change the way craft brewers makes their products.

“If they combine together and become the one biggest brewery, it’s even easier for us to make the differentiation between what they’re doing and what we’re doing on a local level,” Self says.

(Image via Cyril Caton/Creative Commons)