At Rosie McCann’s Irish Pub & Restaurant, an upscale tavern in San Jose, Calif., patrons frequently request Stella Artois, a Belgian lager whose origins go back to the 14th century. But for nearly all of last month the Stella tap was dry. “People were frustrated,” says bartender Fee Bakhtiar. “We’d say, ‘Oops, we’re out. There’s a nationwide shortage.’ It was embarrassing.”
At the start of prime beer-selling season, bars and retailers are facing low inventories of Stella, one of the nation’s fastest-growing imports, as well as Bass, Beck’s and other European beers made by InBev SA, the world’s largest brewer, based in Leuven, Belgium. The reason: Anheuser-Busch Cos. has run into distribution problems since becoming the exclusive U.S. importer of 19 of InBev’s European brands in February.
At the root of the supply problem are the complicated rules of the U.S. beer business. Under a U.S. law dating to the end of Prohibition in the 1930s, brewers generally must sell their beers through wholesalers, who distribute to bars, restaurants and retailers. Anheuser — a giant that had 2006 net sales after excise taxes of $15.7 billion and nearly half of the U.S. beer market — is known for its vast network of distributors, many working exclusively for Anheuser. This was attractive to InBev, which previously imported its European beers into the U.S. under a unit called InBev USA. Anheuser-Busch and InBev haven’t revealed financial terms of their relationship.
Although Anheuser acquired the right to import InBev beers, which companies would distribute them in the U.S. remained to be nailed down. Previously, few of Anheuser’s wholesalers handled beers made by InBev. Now, in many states, distributors who work for Anheuser have a legal right to take on distribution of InBev beers — but that typically means paying the previous distributor for the contract.
These transitions have played a part in disrupting deliveries of InBev beers. Some wholesalers preparing to sell their contracts curtailed orders for InBev beers, while new distributors had to wait to place orders, InBev Chief Executive Carlos Brito told analysts last month. There’s “also lead time involved in shipping product across the ocean,” he added. An InBev spokeswoman said Thursday that the company is “resolving this short-term issue to ensure we can meet the very high consumer demand,” and expects “conditions to improve.”
Anheuser and InBev are working closely “to accelerate deliveries” to the U.S., “and have taken multiple steps to relieve the delays as quickly as possible,” Dave Peacock, Anheuser’s vice president of business operations, said Thursday.
In a number of cases, Anheuser has filed lawsuits against distributors reluctant to give up the highly profitable class of beers. Several cases are still pending. However, more than 60 percent of the InBev beer imported to the U.S. is now distributed by wholesalers who also handle other Anheuser products — better than the brewer expected at this point, Mr. Peacock said. However, much of the remaining InBev beer is distributed by wholesalers that also handle beers from Miller Brewing Co. and Molson Coors Brewing Co. — fierce rivals of Anheuser.
The InBev deal is key for St. Louis-based Anheuser because the company’s domestic-beer business is growing slowly, and imports are hot. In a time of increased wealth and brand awareness, many American beer drinkers are showing a willingness to pay more for flavor or the cachet of a foreign brand. Led by Corona Extra and Heineken, imports accounted for 13.9 percent of the U.S. beer market last year, up from 11.7 percent in 2004, according to Adams Beverage Group, a market-research and publishing firm in Norwalk, Conn.
While many European beer drinkers consider Stella Artois a standard brew, its popularity in the U.S. is rising, especially on the East and West coasts. The brand — typically selling for $2 to $3 more than domestic six-packs in stores and about $1 more per draft pour in bars — jumped to 1.7 percent in the highly fragmented U.S. imports market last year, up from 0.3 percent in 2002, according to Beer Marketer’s Insights newsletter.
The shortages of Stella and other InBev brands are frustrating Anheuser’s distributors, though on the whole they are happy to see the company make an imports deal with InBev as domestic beers, including Anheuser’s Budweiser, have lost market share. (InBev’s Labatt Blue, made in Canada and the company’s best seller in the U.S., isn’t included in the Anheuser agreement.)
“There’s nothing worse than an empty tap handle,” says Fred Dana, owner of Dana Distributing Inc., a Goshen, N.Y., wholesaler for Anheuser products. “If the shortages continue, we’re going to lose accounts.”
Mr. Dana, who distributes beer in three New York counties, says he has been having a hard time getting his hands on Stella and other InBev beers since March, when he bought the wholesale contract from a rival for a price in the millions of dollars. He’s angry because he paid a premium, based on the high rates of growth of Stella and certain other beers. “Now we don’t have the product to recoup our investment,” he says.
Donnie Kruse, co-owner of BB’s, a brasserie-style Chicago bar known for serving InBev beers Stella, Hoegaarden and Leffe, on Wednesday learned that his distributor is out of Stella, his top seller. Mr. Kruse worries his five remaining kegs of Stella will run out by the end of the weekend and that he might have to offer it in bottles.
“I only like Stella on draft,” says Kelly Arst, a 33-year-old advertising executive who stopped by BB’s for a Stella the same night. If it’s unavailable, she says, she prefers another brand on draft to a bottle.
Another Chicago bar, the Pepper Canister, has experienced routine shortages of InBev’s Hoegaarden, a Belgian wheat beer. Because of that, last month the bar switched to Blue Moon, a Molson-Coors brand. “We couldn’t afford to be out of one of our draft beers; we only have eight taps,” explains bartender Rebecca Martin. “We’re coming into summertime and we needed a weissbier on tap.”
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