Battle over beer: Justice Department lawsuit targets big breweries' merger
(CBS News) The Justice Department is getting into a battle over beer. The government is taking on the largest beer company in the world, which could have a big impact for drinkers and much smaller competitors, fighting for every drop of business.
Small beer companies are encouraged by the Justice Department lawsuit. They say the bigger the big companies get, the harder it is for them to get a foothold in an increasingly competitive beer market.
At Port City Brewing Company, as soon as one of its four specialty beers is brewed, it's out the door. Bill Butcher, founder of the of Port City Brewing Company, said, "We're in a fortunate position in that we're selling all the beer we can brew and we struggle to keep up with demand."
Butcher founded the company two years ago, tapping into a nationwide boom in craft beers. The growing industry represents only 6 percent of the market, but as sales of large domestic beers decline, craft beers are up 11 percent.
Butcher said, "It's very similar to what happened to the wine business 15, 20 years ago. People stopped ordering just a generic glass of white wine and they started ordering Chardonnay. It cost a little bit more, but it tastes better and people were willing to pay a little bit more."
There are 2,000 local breweries like Port City across the country. As they multiply, the opposite is happening with the big beer makers, which are consolidating on a march to global domination. Even Budweiser is now owned by a Belgian company, Anheuser-Busch InBev. It controls nearly 50 percent of the U.S. beer market, with brands like Budweiser, Bud Light, Stella and Becks.
Now Anheuser-Busch InBev is trying to get even bigger by merging with the Mexican company that brews America's most popular import -- Corona -- a deal worth $20 billion. But the Justice Department has sued to block the deal, arguing it would lead to higher prices and fewer products.
Butcher says the deal would hurt his industry by putting the squeeze on small specialty brewers. "There's a limited amount of shelf space out there and the big suppliers have influence over what goes into the set," he said. "If one supplier gets too big, then they ultimately can have the opportunity to limit that choice in the market and that's bad for consumers and it's interesting the Justice Department agrees with that view."
Port City is about to expand a second time. Their niche: quality over quantity. They're sold in three states and the District of Columbia, including a Washington, D.C. restaurant called Churchkey that only sells craft beers -- 555 of them. There's not a Bud or Bud Light in sight at the restaurant. Erik Bergman, of Churchkey, said, "We've been steadily busy for going on four years now here. I think that the craft movement in general in the country is growing."
And that growth could be seen as a threat to big beer. In 2011, the company that owns Budweiser scooped up the small Chicago brewery Goose Island. Now the target is Corona. But with the Justice Department standing in the way, could have that deal in danger.
However, according to lawyers following these types of cases, the merger will likely go through eventually, but conditions will probably be imposed on the company so that it won't be such an anti-competitive merger. Of course, that's anyone's guess. Right now, the company is fighting the lawsuit, some people say they're negotiating behind the scenes to strike a deal with the Justice Department. Crawford noted that it's interesting that the Justice Department is seeing the potential anti-competitive effect of some of these big global beer mergers. This time at least, they're initially, aggressively moving to try to stop it.
For Jan Crawford's full report, watch the video in the player above.
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