Morgan Dumps Craft Chumps in Wake of Buyout

Sometimes the beer business is creative comedy. Sometimes tragedy. Sometimes it's a mix of both. You just never know what crazy and insane chain of events is coming down the pike. I suppose that's one of the things that keeps it interesting.

Sure thing

When I reported on Anheuser-Busch's buyout of Morgan Distributing a couple of weeks back, I did not know what the fallout would be. It's probably fair to say no one knew. We suspected the buyout would lead to Morgan being more active as a pusher of AB products. We didn't know the rest.

Thanks to reliable industry sources, we now know. There's no sugarcoating it. Within days of AB taking over, Morgan terminated its craft brands. Yep. Fired them. They later rescinded the termination letter and told craft brands they were up for "assignment"...a nice way of saying for sale to other distributors.

There are a couple of things to keep in mind.

First, Morgan was not exactly a bastion of craft beer. Its short list of craft brands included Three Creeks, Silver Moon, Gilgamesh and Uinta. The Commons was a recent, hot addition, which I'll get to. I'm leaving out the CBA (Widmer, Kona, Redhook, etc.) brands, which Morgan already pushes heavily, because the CBA is distributed by AB and wasn't going anywhere.

Second, Morgan likely would have lost its craft brands in the wake of the buyout due to the way Oregon law works. When distributor ownership changes, contracted brands have the option of renegotiating new deals with anyone they want. Firing them just made that point official with an exclamation point..

All of Morgan's former craft brands are looking for and will soon have new homes. The Commons will go back to self-distribution, which is what they've done from the outset. It's almost comical to consider that Morgan worked diligently to sign these guys then dumped them days into the relationship. That's pretty funny in a sick sort of way.

The more significant point to consider is this: The new bosses at Morgan had ZERO intention of retaining their craft brands. They wanted them gone, the sooner the better. I'm told Morgan has so much going on with its AB portfolio that it has no room for craft brands. They have given other distributors the green light to go after their former brands and expect no compensation at all.

What are they up to? AB-owned Morgan will clearly become a bastion of AB brands. As I said in the earlier post and as Ezra outlines in his post on how the three-tier system works, self-distribution laws in Oregon allowed this takeover to happen. Anheuser-Busch will essentially be distributing its own beer via Morgan. Perfectly legal. They are also reportedly looking to purchase Maletis, which has a far more significant craft presence than Morgan ever had. This is how AB intends to address declining market share in Oregon.

The danger of this arrangement is clear. Buying up distributors is part of an effort to push craft brands into a corner while stuffing AB products down the throats of consumers. These guys are anti-craft beer. Period. Distributors have extensive control over what appears on store shelves, in taverns and other retail settings. You can bet AB intends to use that leverage to the fullest extent possible. If you haven't heard of Shock Top or Bud Light Platinum, you will.

In my mind, what's going on should be illegal. Oregon's self-distribution law was intended to help small brands. Many small breweries need the dollars that would otherwise go to a distributor when they're getting started. No one apparently considered the possibility that gigantic companies would use the self distribution law to buy up distributors and bully the market. Ye gods!

This is not good news if you're a fan of good beer. Trust me.

Wheels Keep Turning: Morgan Distributing Sells to AB

In what may be seen as an effort to bolster its failing brands in Oregon, Anheuser-Busch has purchased Morgan Distributing, one of the state's largest independent distributors. The news was first reported in St. Louis and became known in industry circles on Wednesday.

If you're wondering what prompted the move, consider what's been happening to AB in Oregon. Their brands have been trending downward since 2008, losing 14 percent share along the way. The purchase of Morgan means they will effectively sell some 70 percent of their in-state volume via distributors they own. 

Morgan had evidently been for sale for a while. It seems Maletis, AB's other Portland distributor, was also vying to acquire Morgan. In the end, AB decided it would rather own Morgan than have it owned by Maletis. Terms of the sale have not been made public. The deal leaves Oregon with only four independent AB distributors, including Maletis. 

Morgan distribution areas

A little history. Morgan Distributing has been around since 1959. It was founded as a family business dedicated to providing professional beer and beverage distribution services in the area. They aligned themselves closely with Anheuser Busch in 2000. Prior to that time, Morgan was a multi-brand distributor. They purchased several AB distribution territories to expand their reach in ensuing years.

Morgan does not have an extensive craft portfolio. The Craft Brew Alliance (Widmer, Kona, Redhook, Omission) brands are part of of their AB portfolio. They also distribute Silver Moon (Bend), Three Creeks (Sisters), Gilgamesh (Salem), Uinta (Salt Lake City) and a few others. A hot new addition is The Commons (Portland).

In the wake of the buyout, Morgan's craft partners will all have the option of jumping ship. This will be a little less interesting than it would be if Morgan had a large craft portfolio. Nonetheless, it will be educational to see where the craft brands go, if they go. The Commons is just coming on board and may choose another path.

Why did AB buy Morgan? Speculation is cheap. AB clearly did not purchase Morgan for its craft brands. That would have been stupid and they aren't stupid. More likely, this as a sort of rear action designed to maintain the position of AB products by keeping craft brands out. The deal definitely enhances their ability to push their own products in Morgan's territories.

Wondering how this can be legal? So did I. How can a gigantic beer company own distributors when we have three-tier laws on the books? Well, beer laws vary from state-to-state. In Oregon, our laws allowing self-distribution, which have helped many craft brewers, also enable a behemoth like AB to own distributors. As noted, that's not the case in every state, but it is the law here. 

So the wheels of business keep on turning. We'll have to wait and see what it means for consumers...or victims, if you prefer.