Mergers and acquisitions involving major bev/al suppliers and wholesalers may be prohibited or restricted depending upon what the Justice Department and Federal Trade Commission conclude after reviewing and possibly revising antitrust guidelines.
In a request for information on merger enforcement released yesterday, the agencies raise the question of how many “significant” competitors should remain after a merger. In the bev/al wholesaler space, for example, it’s not just a question of how many wholesalers create competition with each other, but of fostering competition between the brands each wholesaler represents. Should a wholesaler who represents Diageo also represent Pernod Ricard or Brown-Forman? Likewise, should a wholesaler who represents Anheuser-Busch, for example, also represent Harpoon Brewery?
At one point there were 10-20 wine and spirits distributors in a state. Today there are typically only three significant wholesalers in a state. How many wholesalers do you need to promote competition between brands? Should the top two or the top three in a state be prohibited from acquisitions of other wholesalers in a state? Or even nationally? This would seem to pose a threat to future acquisitions of wholesalers by at least Southern Glazer’s Wine & Spirits and Republic National Distributing Co. and maybe by Breakthru Beverages.
Likewise, should major suppliers be restricted from acquiring other suppliers? Anheuser-Busch and Molson Coors have both snapped up craft brewers. Would competition in the beer space be best served by prohibiting the Big 2 (or Big 3 if you include Constellation) from acquiring craft brewers?
The downside of restricting acquisitions of other suppliers by the largest players in the bev/al market, of course, is that many craft brewers are counting on an exist strategy that looks to the biggest players to take them out. But there are other strategies, ranging from an employee buyout to selling to another relatively small competitor.