May 302017

Observes the law beerOver the years of posting stories, there have been a number written about individuals who, for personal reasons, violated either federal, state or contractual law.  Examples of such violations include: selling Old Milwaukee kegs as Schlitz, trans-shipping Coors out of a warehouse to eastern markets, dumping beer in Mexico, changing ABV dates on packages in 3.2 states, and brewery executives filing fake invoices for advertising.   While all these actions were illegal, all were done for individual gain.  And all of the above resulted in either loss of the distributorship, loss of job and fines, or prison time.  All for individual gain.

Much has changed in the beer industry in the last ten years, starting with InBev’s takeover of AB.  More and more ABI’s intent has become apparent in their management of their U.S. business, especially in light of their massive volume losses.  In recent months, AB branches in three separate states have been cited or fined for unfair trade practices.  Anyone see a trend here?

There was the yearlong California ABC investigation of the AB branches which resulted in a $400K dollar fine.  Half the fine will be returned to AB if the branches “behave!”  In Massachusetts, the AB branch was notified of a hearing in June concerning the branches’ activities of providing a” thing of value” to the retail trade. And, finally, in Colorado, the AB branch, American Eagle, was fined the state’s maximum of $5,000, in addition to a 14-day suspension for unfair trade practices.  The branch had to close for five days, with the remaining nine days being held in abeyance for one year, however, the $5,000 was paid in lieu of active suspension.

It seems obvious that AB is either interpreting the state ABC laws to benefit their own interest, or blatantly ignoring the state statues and doing what it takes to gain an advantage over the competition.  When considering the risk of getting fined or caught, versus the reward, AB’s attitude seems to be to move forward and take that risk.

To AB, these penalties are just a slap on the wrist.  If the state ABC agencies really wanted this illegal activity to cease and desist, then the state should make the penalties damaging enough to AB to feel the consequences.  The reality, however, is that it will simply not happen.  Closing a branch for a week is manageable.  The wholesaler can build retail inventories so that out-of-stocks will be nonexistent.  One week off for all employees is also manageable by the branch.

If the penalty was for a branch to shut down for an entire month, however, that could raise some eye brows!  AB products would be out of the market, employees would be out of a pay check for a month, and if the branch is unionized, that might create additional issues.  Imposing such stiff penalties, however, could create a backlash for the ABC.  The state would lose tax revenue and the unemployed workers could potentially become angry and negatively vocal.

Considering AB’s powerful lobbying, tax revenues, and political clout, the industry will continue to see these small penalties assessed.  And because AB owns these branches, there is no risk of a vendor pulling their product for contract violations.

Until the states get tough, the chances of AB continuing to play this game are quite high.  If you’re going to play, you must be willing to pay!


 Posted by at 6:00 am

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