My name is Barry Lynn and I direct the Markets, Enterprise, and Resiliency Initiative here at New America and I wanted to thank you all for coming today. And you know we have we're gonna have two panels today and it's just I'll just give you a sense about how the day will work. We'll run this panel till about 1.50 or so and then we'll also have a break and we'll have some coffee and I think there might be some cookies. And then we'll have a second panel and as you probably noticed these panels there it's a great mix of people. I mean one of these that we have, well actually we'll see who they are over time, but it's a it's actually a big honor to have this the people who are on our panels here with us today. But we're here today to talk about some things that's been too long ignored in our country which is the structure of our markets for beer and alcohol. You know and whether sort of extreme concentration of economic power poses any kind of threat to the traditional structure of these markets. You know actually just to give us a sense of what we're dealing with I thought it might be useful to travel back about 45 years and this is to a Supreme Court case that was heard back in 1966. It was the United States versus Papst brewing. And what had happened there is that the Department of Justice had stopped a deal in which Papst was going to take over a brewer called Blatz. Now just consider these figures. At that time Papst had about was the 10th largest brewer in the United States. Blatz was the 18th largest brewer in the United States. Combined they would have become the fifth largest brewer in the United States and the regulators blocked the deal. They said that this combined firm would be too powerful nationally and especially in certain localities within the United States. They said three states in particular would be really affected by this. It was Wisconsin, Illinois and Michigan. But how much power are we talking about? This is in 1966. In Wisconsin they would have had 23.95% of the marketplace that combined entity. In Michigan, Wisconsin and Illinois together they would have had 11.32% of the marketplace. Nationally they would have had 4.49% of sales. And the government blocked that deal and the Supreme Court upheld that action by a 9-0 vote. This is in 1966. The justices also felt compelled to add a few comments when they did so. Justice Hugo Black said these facts show a very marked 30-year decline in the number of brewers and a sharp rise in recent years in the percentage share of the market controlled by the leading brewers. If not stopped this decline in the number of separate competitors and this rise in the share of the market controlled by the larger beer manufacturers are bound to lead to greater and greater concentration of the beer industry and to fewer and fewer hands. Justice William O. Douglas in a concurring opinions that every time you pick up the newspaper you read about one company merging with another. Of course we have laws to protect competition in the United States but one can't help thinking that if the trend continues the whole country will soon be merged into one large company. Thirty years ago in United States the when the Reagan administration first entered office they essentially stopped enforcing antitrust law in the traditional ways. These imperfect ways that the the justices were talking about and what they feared back in 1966 we now have today. Two firms and Haja Bush M. Biff and Millicorps control depends how you do the numbers but if you do it certain ways 90% of the marketplace in the United States. Two companies. Locally in certain neighborhoods the concentration levels are higher. These two firms have floated the idea of merging together into one firm. Yes we have 2,000 breweries in the United States today compared to maybe about a hundred in 1966. But we have to be honest about where these 2,000 breweries you know how much power they actually have. 1,995 of them are squished together in about five to six percent on the marketplace. They're marginalized. They exist only at the edges of the the marketplace and the fact is that both ABI and Miller Coors are pushing aggressively against them. Here's a sum of the names of companies of brands that look like craft brews or small brews that are run by the big guys or owned either directly completely or partly. Red Hook, Widmer, Goose Island, Old Dominion, Lean and Cougal, Blue Moon, Shock Top, Terrapin, Rolling Rock. This is a revolution that has taken place in this marketplace. It is part of a revolution that's taken place within the political economy of the United States. Of course not all revolutions are bad or entirely bad and one of our main question today is whether this revolution that we face here today has taken us too far or not. To help us answer that a few points before we get to our panel a few points under these issues of I think it may help us to look at sort of the intersection of markets and morality because there's you know in the United States today you have a lot of folks on the right who say that markets are moral. Whatever they comes out of market interactions that's a moral outcome. A lot of folks on the left say whatever the markets are doing it's immoral. We have to act if you want to have something more we have to isolate it from the actions of the marketplace. I think when we look at the market that exists for beer and alcohol in the United States that was put into place 80 years ago what we have is an instance that proves that markets are indeed moral if you make them so. Before prohibition American society had this huge problem. You know the alcohol interest as they used to call them the alcohol interest had captured the power to overwhelm the local market makers the regulators. They had the power to push their products on the communities they had the power to push their products across the lips of individuals and the problem was sufficiently grave that the American people this incredibly well lubricated people at that time they managed to pass a constitutional amendment prohibiting alcohol sales in the United States. That was a huge lift that gives you a sense of how massive the problem was how grave the problem was that they were dealing with. The experiment failed during you know the result of prohibition we know the story the result was that we ended up with a collapse of law and order we had a collapse of respect for for for for government. And so people decided well we're going to have to abandon this experiment. Then after prohibition citizens had the opportunity to make markets for alcohol for beer entirely anew it was a tabla rasa. And how did they do so the citizens back in the 1930s they established first they established what their aims would be and their aims were to do something very very conservative. It was to establish the responsibility for drinking to seed it not in the state in the central state was to establish it in the community to establish it in the individual citizen. The goal was not control the goal was self control. It was not controlled by the government was controlled by the individual. John D Rockefeller who funded the publication of a book that was very influential at that time called Toward Liquor Control in the forward to that book wrote men cannot be made good by force we've learned that from this this experience. So this the point was not of these regulations the point of this marketplace was not to force people to do anything it was the exact opposite. So how did we achieve how do these people achieve this aim of community responsibility of individual responsibility they did so first by distributing power. Among the states the twenty first amendment this is what it reads section to the transportation or importation in any state territory or possession of the United States for delivery or use therein of intoxicating liquors and violation of laws thereof is hereby prohibited. They also achieve their aim by distributing power among different business activities they prevented vertical integration among the brewer the distributor and the retailer brewers were not allowed to own or control distributors or retailers distributors are now allowed to own retailers or brewers. The result was a true diverse vibrant marketplace one that achieved its primary moral aims which was to return responsibility to the community and to the individual. This new marketplace also yielded two byproducts one of the byproducts was a little complicating for the people who were seeking to create some control reasonable control and this byproduct was reasonable prices. This three tier market system was not inefficient in fact it was remarkably efficient which shouldn't be surprising given that you had a bunch of small enterprises competing with each other it was remarkably efficient the result was low prices. So to achieve what people wanted the balance of prices that people wanted the communities instituted pricing controls if they wanted they can institute a taxes if they wanted. The other byproduct of the system was an incredible diversification incredible variety of beer the modern American craft brewing system we believe is a result precisely of the fact that this power to regulate was distributed so widely across America every state had its own hand in this. The diversity that we see just in that little 5% of the marketplace where the brewers operate the small brewers the craft brewers is greater than any place else in the world in many ways it's greater than any other sector in the United States of America. It's a result of this marketplace that was put into place back in the 1930s. Today we're at these two panels that we're hosting you know the first one is focusing on the interests of Americans as consumers the people who care about greater varieties of beer higher qualities of beer and alcohol. The second panel is going to focus on something quite different which is the interests of society. Issues of health of self-control it's sort of the second panel departs from the idea and this is a quote from Dr. Babour who's going to be on the second panel that alcohol is no ordinary commodity that you do you can't just sell it the ways you sell socks. As I suspect we'll see from these panels these folks the folks on both of these panels which have very different interests one thing they both will end up supporting is the three tier system local control. Two quick last points we're not here to bash anybody we're not here to bash any big brewers we're not here to bash any big retailers we do not at any point intend to say that anybody is breaking any kind of laws. People in business do what they do I mean their job is to go out and and push the envelope their job is to go out and sell more stuff that's what we expect people to do. No one is acting in any way that we want to condemn them for. What we want to shine a light on today is bad law or especially bad enforcement of law. The fault in this lies in no big company it lies in us the citizenry we the people have failed to perform our most fundamental moral political and civic duties which is to regulate this extremely complicated set of marketplace to ensure that no power ever becomes sufficiently great to be able to once again overwhelm local control to overwhelm to push alcohol into our markets to push alcohol across our lips. The fault also lies in our elected representatives. The Obama administration should understand that sort of brewing five gallons of homebrew in the White House is not a sufficiently powerful action if the administration is to serve the public interest it is to do if the administration's do what the public elected it to do it must use this power that is in that office and in the administration to assist us in reestablishing open and competitive markets again free from domination by any private very large companies and the last point I want to make is this event in the report that we're releasing today is funded entirely by the new America Foundation. We have received zero funding for this zero funding from any brewers large or small zero funding from any distributors large or small we have not received any money from any trade association why are we doing this we're doing it with our own money because we believe it's the right thing to do we believe it's the right economic thing to do it's the right political thing to do and it's the right social thing to do that's why we're holding this this event that's why we're promoting this discussion we believe that this debate will serve the interest of all American citizens anyway today we're going to discuss three documents just going to give you a sense of what they are the in the second panel we're going to be discussing a recent article by a writer named Tim Heffernan this is in the Washington Monthly the name of that article is called last call industry giants are threatening to swallow up America's carefully regulated alcohol industry and re make America in the image of booze soaked Britain that piece if you haven't seen it you can read it on the Washington Monthly website we're also going to be talking about a recent document that was written by Sandy Faheeson this was for the American Antitrust Institute it's called halting beers marched to monopoly the likely anti-competitive effects of Anheuser-Busch Imbev's proposed acquisition of Grupo Modello this is on the AAI website and then we also we're just releasing right now our own report which is called a king of beers question mark concentration of power over America's alcohol markets is bad for consumers it also imperils constitutional and moral balances that is now available in the new America website anyway the what we have now is this panel and we're going to have the members of this panel are just to my immediate right it's a Sam Collagione who some of you may recognize Sam had is a TV show for a while he's a the the founder and president of Dogfish Head Brewery out in Delaware Sam founded Dogfish Head back in 1995 and bruise a pretty good beer and the next to Sam is a fellow named Steve Higginbotham Steve is a former state senator out in Arkansas he is now the executive director of the Arkansas Wholesaler Beer Distributors Association Steve a couple years back sort of led a successful effort to ban price discrimination in Arkansas and he's going to talk about this this effort because you know as we mentioned the the key battleground for a lot of these regulatory efforts is in this at the state level or the local level and then Sandeep Fahezen is a research fellow at the American Antitrust Institute here in Washington and he's the author of the report I just mentioned and he's going to talk about this issue of whether you know what from an antitrust lawyers point of view is there should the government take action against to prevent this proposed deal that would cement complete control by ABI over the Mexican Grupo Modelo so anyway I'm going to turn this over to Sam and and let Sam talk for about 10 minutes about his view of the beer market okay yeah I'm Sam present founder of Dogfish Head craft brewery in Delaware also the chairman of the board of the Brewers Association the trade group that represents the vast majority of the small brewers in America but I want to make it very clear that I'm here today with my Dogfish Head cap on fact I got one for each of the panelists over there basically we as small brewers at Dogfish Head support the current state-based regulation and a strong independent middle-tier model for beer it's about consumer choice the fact that the craft brewing segment is growing is about consumer power it would not have happened if it weren't for a consumer power you know our industries only as craft brewers about 31 years young and it basically came about when Carter administration reversed laws to make home brewing legal and you know as a result of prohibition the amount of consolidation by a few large brewers kind of took all the diversity and color out of the commercial brewing landscape in America pre-prohibition every city and every every state had really unique diverse breweries that their beer kind of reflected the color of the people in that community for example sample up the road and Philly a lot of German settlers so they brewed awesome loggers further up the road in New Amsterdam what became New York lots of Dutch and English settlers they brewed really beautiful ales but post pre-prohibition with all that consolidation so much of that color and diversity got drawn out of our industry and it was the home brewers who then decided to turn their hobbies pro and open the small breweries that changed the direction and it was the consumers who kind of had to fight through the difficulty in accessing those beers that made our movement less of a fad and now it's recognized as a trend that's going to be here for a long time so this is about consumer choice and we want beer lovers to have access to the widest range of beers made by licensed brewers in all shapes and sizes you know the successor failure of a beer should depend on how great that beer is and what the beer drinker thinks of it instead of artificial restraints to distribution and dogfish heads poster boy example of that I opened my brewery in my restaurant in 95 brewing 10 or 12 gallons in the corner of my restaurant and the second year I was wanted to get into distribution start hand-bottling my beer and my first call was to the biggest distributor in the state the anhyzer bush distributor in that era it was the around 97 or so the hundred percent share of mind era and it was a literally a one sentence column so I were not picking up any new brands and to get to market I went to a sort of third player in that marketplace and since then you know we've grown from doing a hundred barrels a year to this year will do about a hundred and seventy-one thousand barrels of beer and you know I have a little pub in Rehoboth but besides that 99% of the dogfish had beer sold from coast to coast in like 26 states goes through independent distributors and we think that at dogfish you know we believe state laws should support indie distribution and that you know it's not smothered by undue influence or ownership or control by the largest brewers so that we can ensure access to market for all brewers recently was at the NBWA conference out west and meeting with our distributor from New York who was talking about a district a brewery that started as small as we did and they decided they wanted to get into distribution but what was nice is in New York there's laws that allows small breweries up to a certain size to self-distribute and that is a big issue for small brewers there are while we certainly believe in state level whole hardly lawmaking that affects us as small brewers there are still challenges to navigate one of which is the right to self-distribute which we believe small brewery should have up to a percentage of business whether it's 20,000 barrels capped for that right 200,000 2 million it should be up to the wholesalers and the and the brewers in that state to figure that out but in essence this is like a farm league in baseball when you think of the fact that you know the two big brewers that control the number you use was 90% and their distribution networks and they have a growing level of influence on what's supposed to be an independent tier in terms of pressuring those distributors to prioritize their brands and their affiliates it becomes very very difficult for a craft brewer to get a legitimate distribution opportunity in a lot of markets around the country and this right to self distribute kind of acts as a farm league meaning the big brewery the big distributors that might not want to spend their their resources on a tiny little startup can allow that startup to prove itself kind of economic Darwinism in their own local market and if they prove there's demand for their beer then that distributor once they see there's an opportunity for growth can work with that brewery and allow them to come into their portfolio well the challenge there is some states don't allow self-distribution but really the greater challenges even those that do those independent distributors are receiving more pressure from the big breweries on prioritizing those brands and that pressure kinds of kind of materializes in in different ways the hundred percent share of mind program I mentioned from the late 90s has morphed into something called a anchor wholesaler model that the ABI uses now which has similar intentions in terms of emphasizing their expectations that their distribution network will prioritize the brands that are either wholly owned or affiliated with Anheuser-Busch and the other large brewery isn't so different they have talked recently about the need for distributors to have a balanced portfolio and that balance is really a euphemism for paying more attention to our brands and our affiliates than the craft brands that are in your house the other issue besides self distribution that's facing us you know at Dogfish we've had this in our own state is you know that small small brewers and distributors should agree on contracts and legislation that are fair and equitable we believe that where franchise laws exist it should be up to the small brewers and the distributors in those states to decide what is fair but we also think there should be a carve out that if you're below a certain percentage of a distributor's business or a certain barrelage you're exempt from those franchise laws with the understanding that if your brand moves from one distributorship to another fair market value should be paid and it's not like the distributor just walks away we know and we understand that distributors contribute to a craft brewers brand equity by by choosing to to carry our beers so that's another big concern of ours another big big concern of ours at Dogfish head is this potential medello ABI deal I'm not saying that we're 100% against it just that we have grave concerns that the results could be that distributors have less ability to bring independent craft brewers to market and again this goes back to consumer access when you think of the finite amount of as a re as a as a as a consumer you guys know there's a finite amount of shelf space in a liquor store there's a finite amount of tap handles at a good beer bar you need to also know and this isn't as transparent at the consumer level that there's a finite amount of cubic feet on a beer delivery truck and if the largest brewer is is aligned with the largest importer and their their their interest in brands overlaps in something like 80% of the distribution houses in America it's very difficult for me to see a way that that doesn't adversely affect small independent craft breweries ability to get to market so as Dogfish head as a brewery a family owned company that's in the midst of a 52 million dollar expansion I have tremendous anxiety yes there's demand for our beer today the question is will there be a market will we have access to market five ten years from now considering the direction these challenges are going very I appreciate the opportunity to come today and thank new America Foundation for sponsoring this very call me a few weeks ago and ask me to come up and talk a little bit about our uniform FOB fight that we had in Arkansas four years ago I've only been involved in this business six years and it seemed like a sleepy sleepy little business until I got involved in it and with the major mergers of an underbushing in Bev and Miller Coors the thing the landscape begin to change a little but I'm here today not to not to talk bad about anybody I've got a call won't know what are you what are you going up there for what are you gonna talk about and a little paranoia out there I think but I'm here not to talk about about big brewers small brewers or anyone but basically to highlight my members who are independent beer distributors and their work on behalf of brewers retailers and consumers what they do for their for the for the beer industry Arkansas has approximately 30 different beer distribution outlets in Arkansas we employ about 2,000 people directly and are through our through associated with the distribution system but nationally the over 50 states the beer wholesalers employ 130,000 people and they add $54 billion to the GDP of this country obviously the beer business is big business and these jobs that they provide are quality jobs they provide good wages they provide health care and they they provide retirement so protecting the independence of my members often often expressed a different form of policy necessarily than the people that they distribute their beer for our partners we have big partners we have small partners we have the mega brewers and we've got the small brewers and so many times our ideas conflict with their ideas Arkansas we had a uniform FOB fight and that is one example of how we had conflicts the suppliers were able to discriminate and pricing to their own like wholesalers my guys distributors really didn't realize so much there was so much price discrepancy because they didn't really know what what the pricing of the other the other distributors were being sold to but the retailer certainly picked up on it very quickly so we had a situation where like retailers who might be on a county line in different different franchise areas were paying as much as two and three dollars more for a case of beer and obviously we had a lot of retailers who were who were very very very unhappy and they came to us and said you know we got a we've got a we've got to solve this problem because it's a severe disadvantage for me to have a liquor store across the street or just a few few blocks down and I'm paying two dollars more for my beer so when a supplier discriminates in pricing and variable pricing among their own wholesalers it creates an atmosphere where like hosts wholesalers become competitors with each other this business is competitive enough without you having to compete against your own product the important points and results of our non-discriminatory legislation were it prevents us some plot a supplier from picking favorites in other words a supplier can't come in charge different prices to their wholesaler because that is a huge disadvantage it can enforce involuntary consolidation as as Barry mentioned there's there's that attitude out there of consolidating the wholesalers but when you price your beer at a different price to like wholesalers it presents very very very big problems with uniform FOB basically it prevents that also uniform FOB which is basically selling all your beer products to your like wholesalers at the same price also prevents reach back pricing and reach back pricing is sometimes very difficult to produce but if a if a wholesaler goes out and sells their beer for more than what their supplier feels like they should it's it was not uncommon for a supplier to reach back and say oh wait wait just a minute you got you got more than a recommended pricing to retailer so we're going to take a little piece of that pie back but in uniform FOB the price is what you receive when it comes to your warehouse so there's no there's there's no changing of that I don't know of any businesses hardly franchise business particularly that operate any differently from that I think general General Motors pretty well is going to sell their cars to their their people pretty much the same price in a certain territory or area cars trucks insurance McDonald's hamburgers and we felt like beer should be the same way and when I say independent beer distributors I'm not talking about breweries owning wholesalers the Anasur Bush in Bev branching that they have is illegal in Arkansas it's it's legal in some states but it's illegal in Arkansas and when one when the largest brewer in the world owns two tiers of the three-tier system we feel like that that's not appropriate the Supreme Court is many times suggested and stated unquestionably that the three-tier system is the legitimate form of distribution in America independent distributors like ours are also they're they're part of their communities they they are reflections of their communities their members are local they know their communities and they consist both state and local officials in preventing some of the worst kinds of abuses of alcohol as we know alcohol is a different product it's not shampoo and it's not toothpaste and unfortunately there's some some some disadvantages in society when alcohol is abused we are one of the few industries that spends money and discourages overconsumption of our product and a lot of that comes every every portion of a sale to have a distributor goes to some form responsible consumption of alcohol independent distributors may be united many times on policy but believe me it is a very very very competitive business there are lots of brands out there that they are all vying to get that they want they want to distribute so they may agree generally in policy but it's it's it's a very very very competitive business in fact several of my members asked me to get Sam's car today because they're all interested in maybe getting some of his beer down to Arkansas he goes to Texas but he didn't quite get down to Arkansas he forgot his card so I'm gonna be in trouble when I get back but I do think you might have a problem in Arkansas Sam because I think that when you're Sam's choice beer they're gonna think it's Sam Waltons because obviously he's the best known Sam in Arkansas so you may be second fiddle to Sam Walton there independent distributors as well as most retailers and most suppliers recognize that having a well-funded state regulators to enforce the laws related to retailers distributors and suppliers is very important the Arkansas uniform FOB act that we brought forth this issue would have never come to pass if it hadn't been from complaints about pricing in adjacent territories that was brought to our ABC regulator by the retailer just like the NFL has experienced this last fall that your referees need to be paid well and they need to be trained well I think the alcohol industry needs to understand that making sure their alcohol referees are properly funded and trained it is very important to have good regulations in every all 50 states we could have never passed uniform FOB if our ABC director had not been sitting in our legislative committees when the major suppliers came and denied that they were discriminating in their pricing and when they they denied that is that he said she said deal so he subpoenaed all of their pricing information and it was it was it was a blind deal no one knew whose prices were what but when he subpoenaed that that information the battle was virtually over because we we proved we were we were telling the truth and fortunately we have a strong ABC regulatory department in Arkansas but the authority of the regular leaders is most important for them to keep independent all three tiers your retailer your distributor and your supplier all three of those tiers need to be separated and also it needs to protect all three tiers from unfair trade practices such as nondiscriminatory pricing the results of strong regulators in an industry are where the results of strong regulators are an industry where local family owned liquor our convenience stores can compete on a level playing field with the Walmart's and the Costco's of the world can you imagine how this industry would change and how devastating it would be if if or if if an Isarbush and Miller Coors or any other breweries could discriminate in their pricing by pushing back the little guy and only catering to the big guy that's that's a scary scary situation it would be devastating to any small community distributor independence is by far the best policy for the beer consumer and the general public very thank you for giving me the opportunity to speak today and thank you to the new America Foundation for organizing this interesting event I'm Sandy Boheson from the American Antitrust Institute we're a non-profit organization dedicated to promoting competitive markets and the vitality of the antitrust laws I'll be speaking about the big transaction that's currently pending in the US beer industry in late June Anheuser-Busch in Bev announced its intention to acquire the 50% of Grupo Modelo Mexico's largest brewer that it currently doesn't own at present a bi owns a 50% non-voting interest in modelo a bi brands include among others Budweiser Bud Light Stella Artois and Bex modelo produces corona and modelo especial just to name a few along with being acquired by a bi modelo will sell its 50% interest in crown imports to constellation brands which currently owns the other 50% of crown crown is the exclusive us importer of corona and other modelo brands given the somewhat unusual structure of this transaction there are two fundamental questions for the Department of Justice to analyze before it delves into the competitive effects first following the transaction will a bi have a greater strategic interest in modelo's brands or to put it more concretely by swapping its indirect interest in crown for a full interest in modelo will a bi capture a larger fraction of profits on every bottle of corona sold in the United States and secondly will a bi have significant control of the point of sale marketing of corona and other modelo brands through the cat through the category management process for those of you who might not be familiar with category management this is the practice under which retailers outsource particular product categories typically to the leading or second leading manufacturer in a category for example Safeway may entrust a bi to manage its beer aisle or Colgate to manage its toothpaste shelf given the American anti-trust institutes exclusive reliance on public information the analysis in our white paper is intended to be suggestive rather than definitive and exhaustive ultimately there are many questions that only the DOJ with access to proprietary information as well as a variety of industry stakeholders can answer with these caveats we analyze the transaction assuming it amounts to a de facto merger between a bi's and modelo's product portfolios and examine the possible competitive effects that may arise at a national level the two large brewers a bi and sab Miller will increase their market share from 80 percent 85 percent and these are using somewhat conservative numbers as very indicated by other measures their current market share may amount to 90 percent out of the 2010 horizontal merger guidelines put out by the Department of Justice in the Federal Trade Commission this transaction is presumptively anti-competitive and already highly concentrated market will become even more concentrated as a result of the transaction in many local markets these share numbers are likely to be even higher for example in Los Angeles Miami and other markets with large Latino populations the shares of a bi and modelo are probably even higher than they are at the national level multiple surveys have shown that Bud Light and Corona are the two most popular beers among Latino beer drinkers in terms of competitive effects the deal could lead to a significant loss of both price and non-price competition Corona sales have thrived at a time when the beer industry on the whole has experienced stagnant sales growth on account of Corona success a bi and sab Miller have been forced to improve their own part product portfolios most notably in 2007 a bi launched Bud Light Lime as a direct head-to-head competitor with Corona and this brand has done remarkably well over the past five years furthermore modelo is currently building the world's largest brewery along the Texas Mexico border the pietrus negris facility just to give you a sense of its scale when it's completed in 2013 this beer will this brewery will be large enough to meet 10% of annual US beer consumption given its rapid sales growth in the US over the past decade and its imminent capacity expansion modelo appears poised to remain a vigorous competitor in the beer market if a bi acquires modelo an independently controlled brewer that has been an important source of both price and non-price competition will be removed from the market for instance a bi will have less incentive to continue developing the Bud Light Lime brand any improvements in the sales of this brand will likely come at the expense of Corona given that they're both in the same product category furthermore diminished price competition is also likely with pietrus negris being controlled by a bi instead of independent modelo in effect a bi is trying to preemptively neutralize a disruptive facility in addition to this reduction in horizontal head-to-head competition the transaction could increase a bi's incentive and ability to exclude craft brewers from the market craft brewers while still representing a small fraction of the market have been a rapidly growing segment in an otherwise stagnant beer market they have succeeded on account of their novel brews and higher quality ingredients because of the mandatory three tiers distribution system in nearly all states brewers must use distributors to sell their beers to bars and retailers as such craft brewers like all brewers must have access to effective distribution channels due to a bi's larger market share following the transaction it may have an increased ability and incentive to impose exclusive dealing on its distributors that is it could tell distributors in many local markets that they must carry only a bi brands if they want to remain with a bi given a bi is large market share which will be even larger following the transaction this is a credible threat to most distributors a bi can use exclusive dealing to prevent to tie up the most efficient distributors and prevent them from carrying rival brands if rivals cannot access comparably efficient distribution their beers may have greater difficulty in reaching bars and retail shelves leading to reduce product choice for consumers and this would come at an especially an opportune moment for American beer drinkers a time when American beer is being hailed for its rich variety in fact the economist magazine described the American beer industry as experiencing a renaissance and the possibility of exclusivity over distribution is not merely a theoretical possibility high level executives at a bi have indicated that they strongly prefer that their distributors carry only their brands and not those of rivals in 2011 a bi CEO Carlos Brito said that he was quote unquote offended when he learned that one of its distributors had helped facilitate Yingling's entry into the Ohio market and on a similar note Dave Peacock the former head of the Anheuser Bush operations endorsed the so-called anchor model of distributors and called for greater quote unquote alignment between a bi and distributors in Peacock own words aligned distributors would carry only brands would only bring in brands that compete in segments underserved by our current portfolio in theory the underserved language offers an out for distributors who want to carry craft brands in practice though it's really not that significant with a bi's expansion into craft brands through for example the launching of the shock top line or the acquisition of the goose island brewery in Chicago the number of segments underserved by a bi is steadily shrinking as with many recent beer mergers this merger is being premised on the notion of delivering significant consumer benefits in the medium and long term recent experience however suggests that make the mega mergers of the past five years have in fact heard American beer drinkers as with the current merger the mega mergers of 2007 and 8 Miller Coors and a be in bed respectively promise significant consumer benefits through cost-saving efficiencies in both in both transactions the parties claimed that they'd eventually generate several hundreds of millions of dollars worth of efficiencies that would ultimately be passed along to consumers the empirical evidence however suggests that these lofty promises have not been borne out over the past five years beer prices have risen at a time and beer sales have declined on account of the recession and continued sluggish growth in the job market in contrast the price of wine and spirits have remained fairly steady furthermore the gross margins for a bi and Miller Coors have risen significantly at the same time although take although this does not can constitute conclusive evidence that these mergers have been anti-competitive these facts taken together do suggest circumstantially that recent mergers have harmed American beer drinkers and it's worth emphasizing that when the DOJ evaluates merger efficiencies it takes a consumer-centric approach does not merely look for efficiencies to enhance the bottom lines of the merging parties instead merger efficiencies must offset any anti-competitive harms flowing to consumers and in the case of the recent mega mergers any efficiencies arising from them haven't offset the harm to consumers by all public accounts given this recent history a bi and modelo should have the burden of showing a skeptical agency and public why this transaction is different thus far I've spoken in terms of probabilities not certainties and it's worth remembering that probabilities are the hallmark of merger enforcement merger enforcement by its very nature is a predictive enterprise the Department of Justice in the Federal Trade Commission will try to examine how a mergers likely to affect competition in the future certainty and definitiveness are not possible furthermore section 7 of the Clayton Act the relevant statutory provision reads that it prohibits transactions whose effect quote may be substantially to lessen competition or tend to create a monopoly the word may is significant it doesn't indicate will substantially lessen competition or tend to create monopoly simply may for the reasons I've discussed this transaction appears likely to reduce competition in addition it seems to tend to create a monopoly a series of transactions have left the u.s. beer industry with two dominant players a bi and s a b Miller and even though a bi has not completed its acquisition of modelo speculation has already begun that a bi will next seek to acquire s a b Miller and establish a de facto monopoly in u.s. beer as with many contentious mergers the parties will seek to obtain DOJ approval by proposing certain structural remedies for example that divesting certain facilities or brands in the beer market it's worth remembering though that the identities of the remaining market players will matter just as much as their market shares a divestiture of one or multiple ABI brands could preserve existing market shares in national and local markets but such remedies unlikely to replace the loss of an independently controlled modelo and brands like corona if the DOJ finds through its investigation that the proposed acquisition is likely to lead to the described anti-competitive effects it should seek to enjoy the deal in court to preserve a beer market that delivers both competitive prices and rich variety and halt the industry's march to monopoly very stole my thunder earlier by quoting justice blacks famous words in the United States versus Papps Brewing Company but I think it's worth reiterating just because his prescience is quite revealing and it's still not too late for the Department of Justice to heed his words justice black writing for the majority wrote if not stop this decline in the number of separate competitors and this rise in the share of the market controlled by the larger beer manufacturers are bound to lead to greater and greater concentration of the beer industry into fewer and fewer hands well that was great I want to thank all three of you for those presentations and in a moment we're going to actually I don't know sort of take advantage of my position in the front of the room and ask each of these guys a question but then we're going to open it up and allow folks in the audience to ask questions of anybody up here before I do that I just actually there's something I should have mentioned before which is that this event is a co-sponsor of this event is the Washington monthly it's a partner close partner of ours and a number a lot of the work that we do here at New America and there were the publishers as I mentioned before of Tim Heffernan's recent article also wanted to note the presence here of Bernie Asher who's down here in the front row Bernie wrote a study of the very detailed study of the history of the American market for beer for the also for the American Antitrust Institute you can find that on the American Antitrust Institute website but anyway I just wanted to sort of do a couple of quick questions and I'm going to actually start with Sandeep and I just want to make sure that we are absolutely clear I mean you recommend in your essentially in your paper or in the AAI American Antitrust Institute is recommending that the deal the proposed deal be blocked that's correct we propose that the DOJ should block the transaction provided that their investigation reaches the same conclusions that we do of course given their superior access to information and industry stakeholders they may find that the transaction doesn't lead to the competitive anti-competitive effects we described so I would offer that qualifier and then would you or you know either you individually or the AAI if you're in a position to speak for them for say that there might be sufficient reason to actually roll back the amount of concentration that is in the market at this point I guess in theory there would be a good case to be made for that given how recent mergers have played out but in practice the agencies whether it's the Federal Trade Commission or the Department of Justice very rarely challenge mergers once they've been consummated so as a practical matter it probably wouldn't mean much to recommend rolling back recent consolidation in the industry okay next this is for Steve and you know Steve talked a lot about something that is very very important which is price discrimination and in our work at New America the markets enterprise and resiliency initiative in New America we've done a lot of work looking at price discrimination and this is where either a producer charges retailers distributors different prices for this exact same product or it could be when someone controls access to a market where they pay the producers that are under its power different prices for more or less the same product we actually had a recent paper by our colleague Lena Khan there's actually an article in the Washington Monthly that looked at price discrimination various forms of discrimination among the people who bring chickens to market where you have very large powerful companies pilgrims pride for instance Tyson's that pay farmers different amounts of money for the same quality same pound of chicken flesh and actually just wanted to sort of say use that as a set up for Steve politically what is the political importance not just the economic importance but the political importance of very large companies being able to sell one product the same product to one company at one price and a different company at a different price well it's any time you they do that they're they're dictating who's who's gonna they're picking favorites and you pick favorites and so they're those that you pick favorites are gonna be successful so that's that was our concern is in the beer business was they had certain wholesalers they were charging less and certain more so it was basically we all know that you can have forced consolidation because you can literally price anybody out of business when their livelihood is your product and are they able to sort of gain friends for whatever they're promoting well I call it picking picking favorites and obviously that that's the end result and and then Sam I just a quick question and this is just to get you in trouble with your colleagues in the brewing industry are there among your sort of the other brewers a small craft brewers are there a couple that you really favor you know I'm a I'm a beer geek I'm not a beer snob and so it's usually whatever beer I'm drinking when somebody asked me that and since I'm having water I guess I don't have a good answer other than to say I I I try to support other independent small craft breweries when I'm when I'm drinking beers there aren't dogfish and you know going back to your comments about sort of the role of the the distributors and what you know how they sort of help out small players you know we've done a lot of work that looks at the book industry and publishers a lot of people there's a couple of very large powerful really one extremely powerful company that's trying to squash the public publishing industry in this country and as a writer I know that publishers play an extremely important role these middlemen within the system play an extremely important role helping to capitalize projects helping to groom projects books helping to ensure that a really good book gets to market and is treated with as much respect as it deserves in the market and you know looking at the distributors you know they to me they look a lot like they do a lot of the same activities as publishers I mean they do things that if you're trying to get into Arkansas you could really couldn't do it without Steve I mean you because Steve's got trucks Steve has refrigerators and I mean it provides services that you rely on to get to market I just want to I mean could you imagine a way to grow your product without this kind of support from the middlemen you know I can't because you know the craft brewing industry unlike say software industry where you come up with an awesome idea and you can just exponentially grow it brewing industry is incredibly bricks and mortar intensive and the investments that we have to make in stainless steel and in bottling capacity you know eats so much of our profitability that's left over after excise taxes and payroll and labor that to then have to fund also trucks and logistics and you know forklifts and routes and additional labor to get to market that's not our strength the small brewers that said oftentimes very small brewers don't have choices in distribution and that self-distribution model allows them to get their feet underneath them until they prove their viable business at which point the marketplace should take care of that and provide them opportunities to to go into distribution and again that's a big concern of ours because while it should provide that opportunity the two dominant brewers are putting more and more pressure on the independent distributors to to not be as welcoming to the small brewers I want to state clearly I'm not there I want to see the big brewers right the ship on on their flagship light loggers being stagnant or not not growing and I want to see beer stop losing market share to spirits and to wine but I just think we're in a totally frankly different industry than those those big breweries are it's there's 2200 of us and it's interesting that while we are relatively successful only one craft breweries is public and that's Boston beer and that's a little bit of unique situation because Jim controls the the voting stock so he can still make decisions with his brewers hat on instead of the max maximizing shareholder value every quarter decision making that goes into effect with the biggest public companies and I think often time with that short site the the opportunities for entrepreneurs gets marginalized very quickly and actually and actually if you could just say who you are and introduce yourself hi I'm Clark and I guess I'll step down if I as a as a beer advocate and as a consumer so thank you Sam for all of York and a huge fan of dogfish head and the work that you guys do I want to ask you a kind of similar question that was just posed by the moderator I'm having a hard time kind of jiving your narrative of the past you know 80 years and you know your own history of their company with the importance of this state mandated three-tier distribution system while I get the answer you just gave to his last question about it being important to help get beer to place you couldn't otherwise get it to it seems like a real impediment to me as a beer consumer I want to drink the best beer I can at the cheapest price I can it I want to be as close to the beer producers as I can be in my home state of Michigan we don't have a lot of diversity on a beer selection especially around Detroit where I'm from I would talk to retailers and I can get some dogfish head they don't even know what I'm talking about because it seems to me like it's an impediment to put this artificial middleman in between the consumer the retailer then the middleman then the producers I can see why there might be a use for the for the kind of beer distributor you know if you guys get your beer across the country but I don't see this kind of need for this state mandated system where the small guys who are trying to get a start a perfect product they're passionate about they want to get consumers they have to kind of work the way through this very politicized three tier system which you know is very politicized I also spent some time in Lansing working in the state legislature my guy I was working for treading to use the bill to reform the three-tier system and three-tier system dumped money on him to destroy his campaign so again just all these impediments to the little guys getting their beer to the consumers I and if you can talk to that thank you you know like I said I feel it's really important for a small brewery to have access to market and oftentimes that means self-distribution and that model is very difficult to take around the country by virtue how small we are so oftentimes it usually means within your own state and it's a starting point but if you look at the you look at the pressures if there was no three-tier system and you look at sort of that Costco scenario and where that could be frankly if that if that model took took effect I really think it'd be game over for a craft brewing in America very quickly you'd get into you know a wall Walmart similar situation I think where you just have you know one player delivering beer with 1% margin on top of it and the retailer selling that for 1% margin on top of that until the obliterated all competition and then where would pricing be and then would where would the marketplace be so you know for us the smaller guys without three-tier distribution it's a really scary picture Steve you want to add anything to that well when you when you start trying to distribute outside a small parochial area it becomes very difficult but you the three-tier system has proven a separation of control and which is which is sorely needed and I we have in Arkansas we allow craft brewers to have small self-distribution but the owner of that company told me very quickly when he gets outside of a metropolitan area it just not economically feasible for him to go without a distributor hi I'm David balltime an antitrust lawyer Sam when the Justice Department looks at mergers like this oftentimes they require just the divestiture of a brand would you be satisfied or would other craft brewers be satisfied if the Justice Department solution was just the divestiture of something like Bud Light Lime and as an alternative thinking about your distribution concerns and some of the things Sandeep mentioned would your concerns be you know alleviated or better addressed if there was a prohibition on exclusivity or a prohibition on Anheuser-Busch owning building its strength and distribution I mean personally I don't think I have the perspective to speak to exactly what the DOJ's decision should be and neither am I sitting up here saying that I adamantly think the deal shouldn't go through I will say that as a small brewer I have very deep concerns with it as it's written and as I understand it particularly when a brand like Corona sells at roughly craft retail prices and again what does that mean for the finite amount of shelf space for small brewers and also frankly yes the the proliferation of branch ownership is extremely daunting from a small brewers perspective you know right now I believe ABI controls 50% of their own distribution and yet we're all talking about how wonderful it is to have an independent middle tier how really independent is that and so that too to me looks threatening our future so I can't suggest a remedy with the with the perspective that they'll need to make their decisions I'm only voicing concerns and Sandeep do you have a yeah as I mentioned in my remarks I think in a divestiture that is especially in a market like beer the identities of the independent players matters just as much as particular share numbers so the DOJ could accept a remedy whereby current market shares are preserved in all in the national market as well as all affected local markets but it would still raise the question of will these divested brands be able to replace Corona and given Corona's recent history I'd be very skeptical right next to David Paul Glazer speaking Steve you mentioned many of your constituents of the 30 whole sailors wanted to give their cards to Mr. Kalanjon most of them all of them more or less half of them they're defending their one of the big two well your your SAB Miller Coors distributors have a lot of craft beers our ABI guys don't have much craft beer so it doesn't sound like there's any issue with getting distribution in Arkansas as your issue would be in other states where I hear that the situation where ABI owns half their distribution system yeah and again there are some great we're with some in Hyzer Bush houses so it's not just a black-and-white or blue-and-red discussion there are a number of ABI houses that have told the corporate folks at ABI thanks for their recommendation on how I should run my business but I'm gonna make my own choices and bring the own the brands that I believe in into my fold and there are awesome examples of that in the blue network as there are in the red network so not being in Arkansas I can't speak to what our options would be there but you know the other thing I realized dogfish is very lucky where the now the 13th largest craft brewery in the country and to some extent our reputations even bigger than our sales and I feel very fortunate for that you know but I also remember that the average size craft brewery in America is a 5,000 barrel brewery and what would their opportunities look like without having the profile that dogfish has if they were to go into Arkansas Sandy would the Arkansas model work in the rest of the country then in terms of Miller independence of the distributors from the big two I guess one thing I'll say is each market is going to be very unique the DOJ will have to study watching DC Baltimore little rock on their own because the distribution patterns vary from market to market as Sam said it's not black black and white so as to the independent distribution question I'm sort of agnostic on whether it promotes or hinders the growth of craft brewers I learned enough about the three-tier distribution system to write this paper but not enough to comment on the merits of the system as a whole actually just one comment could we did write in the paper that we are putting out today we spend a lot of time looking at sort of the relationship between the very power companies like ABI and Miller cores and the distributors and it's important to understand it's not a static situation you know what exists today even if it's still working at some level it's not necessarily going to be what exists tomorrow and and one of the you know like last year just for instance I guess it was late 2011 I may be wrong in my details ABI put out what they call the consolidation guide and they sent this out to their distributors and they basically said and you can read more about it in our report you guys there's going to be fewer of you in the future and you're going to have to figure out how to do two things merge with each other and you know compete with each other and figure out who who's going to end up on top in this kind of game of musical chairs and you're going to have to figure out how to align yourselves even better than you already are with us and that means making sure that to a greater degree than you do now you're not carrying any sort of competitive competing products so anyway that's what we're looking at you know what we could see two years five years from now could be a much less sort of robust system than we have now and the system today is much less robust than it should be actually right hi is this working I'm a Bernardo Schwartz fellow here at New America I cover US-Mexico relations I'm originally from Canada and I want to preface this a couple of points and get your comments on them not so much about the Canadian model but about the practices of the beer companies many years ago Coors came in took over Molson and Interbrew came over and took over LeBats and some very interesting thing happened over the year over the years the Canadian brands that were presented by Molson LeBats were trumped by the brands that the corporations who came in took over came in and the quality of the beer went down I preface everything to say is I love beer I love beer a lot I travel all over Europe I'll go to a bar with a micro brewery just to try their beer the next thing that happened is you'd go into a bar you'd say hey can I have a whatever brand they say sorry bartender would say we only carry LeBats products we only carry Molson products so you couldn't get that beer at that bar anymore because the corporation would come in and say hey we're gonna give you a distribution deal these are all the beers we brew and if you do a deal with us and only carry our stuff we're gonna give you a special price and that's the way the bartenders explained it to me so I wonder if you could talk about those practices and what your thoughts are on that you know I would just say what you're talking about is generally referred to globally as sort of tied house scenarios where the retailer is to some degree indebted or aligned with a particular supplier if it's an industry that doesn't mandate middle-tier distribution or with a distributor and that too is something that is regulated or exists with different realities on a state-by-state basis often times what a brewery like ours will come up against is yes XYZ chain wants to do business with us but they mandate that we underwrite the payment for their menu system or we pay for airplane poles up down the beach or we pay for umbrellas out in their deck and then if it's legal it just becomes a reality of who has deeper pockets so I guess I can't fault the largest breweries for playing that game in the states where it's legal do I wish those games weren't legal to be played of course I do but I don't know you know I don't know how the UK is faring any different where so much of the the tied house laws have been eroded I do know there is a burgeoning craft beer seen there so I'll stay hopeful in red Michelle Minton from the competitive enterprise Institute so I challenged that last person who just spoke to go back to Canada now and look at the look at the bars that you can go into is there more craft beer on taps now than there's ever been anytime ever if you look at DC for example in the last five years which is it's booming and I know that's not the same all over the country but this is happening even as the two biggest suppliers the brewers are dominating the market by all accounts 80 90% whatever it is but the craft beer movement is still picking up steams the demand is there so I feel like saying that the two big breweries getting even bigger and having more power over the middle tier or even muddling the middle the three tiered system is a threat I think if we allow craft brewers more opportunities to become distributors themselves clearly the demand is there let's say AB does tell their distributors that they can only distribute theirs for one thing they're independent distributors they can say no the demand for craft beer is there if they're smart like apparently sad Miller is they'll keep craft beer as part of their portfolio so just I don't see why the large brothers getting bigger is such a threat if we allow small brokers more liberty that should allow for the market demand to just take take over I'll comment real quickly on that one because it's something pretty fresh in my mind I was reading one of the beer trade publications recently where an executive for the for the business unit a hundred percent owned by Miller cores that plays in the in the same category that craft exists in gave an interview where he told craft brewers we come in peace when there was some anxiety about Miller cores pressuring their distributors to focus on their either wholly owned or partially owned brands and then a few weeks later that same executive was on a stage and said that his goal was to own the high end of beer the craft category and to me those two ideals don't jive so while they might say they're coming from an altruistic perspective and just want to see all craft grow there's a difference between all craft and her what we call real craft frankly and fake craft and the idea of a blue moon or a shock top having the same access to market issues that we do the same access to ingredient issues that we do is just a completely unlevel playing field so it is you know it is it is a reality I'd like to respond to that comment as well as Barry mentioned at the opening I think it is possible to sometimes overstate the significance of craft brands given how so many of the craft brands are actually made by one of the big two shock top and blue moon for example so there's that to bear in mind and in addition the success of the craft brands is dependent on distribution remaining open and available to craft brands and also the big two not manipulating the category management process to keep craft brands off retail shelves so the power of the big two shouldn't be understated and just to put it somewhat more concretely if distributor has to choose between carrying a bi brands and craft brands it's a no-brainer the volume of a bi brands just completely dwarf the volume of craft brands and so just because a distributor may have personal preferences doesn't mean anything the economic incentives often forced them to favor the big two over the craft brands if that happens then there's a vacuum in the distribution market then there's nobody distributing craft beer and since there's such clearly demand that one would think that some other distributor would come up and say well you know I'll just distribute craft yeah when we're seeing that in Arkansas but you're also you said market share and it's all about if that brand it can can get some market share if it's real quality but we're seeing independent craft distributors right now they've just come into our association handling nothing but craft beers and also we're seeing our a bi some are a bi wholesalers over the last three years have realized the market share and so they have gone non-exclusive so we're about half non-exclusive now and half exclusive in a bi side the Miller side is is all you know non-exclusive I'd also say that just to quickly add when the antitrust and agencies are looking at particular transactions they also have to deal with market realities I agree it's possible what you predict could come true but that's merely a theoretical possibility and so the Department of Justice in the Federal Trade Commission have to take into account how likely that is to happen we have about five more minutes so let's get a few more questions I guess I'm having the same there's a microphone okay I'm Jake Hasselsword I'm in the Political Science Department at George Washington University I'm also beer lovers so I my wife and I visited Sam's brewery for our fifth anniversary so I can establish my beer geek credentials now I've even done a little sporadic home brewing so definitely my interest here is also in consumer choice but if I take a step back and I just put on sort of a the hat of someone who studies policy and political economy regardless of what the product is the federalism angle of this I was thumbing through the report and there was a lot of praise for the 21st Amendment solution of having a lot of state and local control over this my perspective is if you take a product that is heavily regulated you know pretty much every stage and there's a lot of licensing and taxes and rules over who can sell what where and you say we're gonna put control of that at the state and local level I'd say that's a recipe for rent seeking for businesses capturing and using these tools of government to you know to for anti competitive practices and so for me that will be part of the star story of how we got here and when I read you know at the end of the report that this solution is to sort of reinvigorate regulation at the state local and federal level I don't know that I have a lot of faith in that I think I would probably this to me sounds like something that probably should be handled more at the national level where you have a larger scope of conflict so to speak and institutions that are more capable of standing up to entrenched interests like these sort of increasingly large entrenched interests so I guess that's more of a comment anyone can respond comment on the comments well I know I know the people of Arkansas have different values to our thoughts toward alcohols and say someone up in the north or say in New York California so I think each individual state they states want to regulate how alcohol is handled in their state and just like in Arkansas about 40% of the geographic area is dry I mean you know we got this great diversity where the whole east side of the state's wet and then the middle portion kind of the Bible belt there is dry and now we're seeing a trend to where everything's beginning to go wet but I think states rights states like to be able to control the norms of how alcohol is consumed it just as a sort of add to that I mean I think that there's a you know just from our own work you know I don't think you can set up any market place whether it's regulated at the state level local level or national level or global level where you don't have rent sinking I mean it's just it's just part of life that's the way people are and you know the key thing I think with this and we'll hear more of this one on the second panel is that the you know the state level regulation and the three-tier structure one of the main reasons is precisely to allow because this is not as we said before it's not an ordinary commodity is to allow to make sure that power is distributed sufficiently so that the local community has the ability when necessary to get into the marketplace and do what it desires to do and when the local community does that it's really just affecting the community it's not affecting the national landscape what's done in Arkansas is not affecting what happens in California so I think you know it's like the purpose of this was not efficiency it wasn't to it wasn't to ensure that we you know had the cheapest beer but one of the outcomes one of the secondary effects of this is we is this incredibly wide variety of beer maybe we have two more questions my name is Phil Peters I'm the general manager Smith Commons and I also order the beer we're a craft beer establishment so clearly from my standpoint I'm always trying to put on what is the highest rated beer advocate right beer com type type beers the argument that's been I guess given to me with this AB and Bev Goose Island thing is it's really for a wider distribution and in planting their year-round brands say 312 to get a wider distribution of that and then therefore opening up the ability to do more of the craftier barrel-aged stuff as like the Bourbon County Stouts and stuff like that and creating a wider distribution for that therefore getting a better beer out there so from my standpoint as an account I see that's great I'm gonna be able to get this great beer and people gonna want to come to Smith Commons and have this beer but therefore I'm supporting that aspect of things what's difficult for me on my level of things is to have the consumer like you were saying where we see craft beer growing and we see the consumption of craft beer and educating that craft beer to the point where people are consuming more of it to end up in a situation where it's not you know you're not you're not getting the full support from all of those craft breweries like like we're talking about here so how is it for me as an account in this three-tier system being on the bottom am I gonna be in a situation where I'm able to support what we're talking about now but still putting putting the best beer that I possibly can on because now there's an increased distribution from like a goose island for example and then the other kind of aspect of this is where does the Brewers Association and obviously with CBC coming up in the spring and whatnot at some point on the Brewers Association and the craft beer community has got to educate the consumer on this kind of conversation to kind of find our direction as to where the consumers eventually gonna go to either they're gonna continue to support the ABN Bev craft beer you know stuff or they're gonna start to slide themselves away from it and support more of the smaller guys as we talk about you know I mean and that's ultimately that supply and demand is gonna be what's gonna drive this greater argument for what we're talking about now and then ultimately for me as an account is the direction that I'm eventually gonna go so where is the Brewers Association this point I'm kind of staying on it at some point time I guess down the road here as craft beer continues to grow and the Brewers Association says here's the parameter that defines craft beer at some point time are we gonna say that we're getting larger and larger now where do we go what's the next step to really be competitive with this you want to handle it yeah the craft the Brewers Association does have a definition of a craft brewery and it's small independent traditional small being less than six million barrels traditional meaning their their core brands are made with all malt not corner rice and independent meaning less than 25% owned by one of the large breweries so in the example that you gave of Goose Island that would fall most definitively outside of our definition and you know with that definition or with other breweries like Kona Red Hook that fall outside definition some great brewers work at these breweries some talented brewers some passionate beer people work there but you know when you made the example of okay well by being 100% owned by Anizah Bush it means that they can make more of their core brands around the world and then you know that leads to them more their specialties being out there but if you play that argument to the extreme and you know that ABI's recent meeting they said to their distributors their goal is to have Goose Island be a million barrel brand I think within three years and you put that in the context of them also telling their distributors you need to focus more on the brands we own and we're affiliated with they only have so many resources and so many eyes which means if that's a mandate that could if they don't hit it they make it consolidated by the guy who did that's an Anizah Bush distributor that means they're going to focus on Goose Island instead of those independent smaller breweries in their house so while there's no you know there's nothing wrong with the people that work there and their sub passionate beer people the way that these once independent breweries will be used by these big breweries will further their goal of demanding more and more of their distributors share of mine. I just want to ask one question is has anyone had their hand up who is actually from the industry from ABI from Miller cores who we didn't call on if we're going to move on to the next panel but I just want to make sure that we're not leaving anyone out and especially from the industry. I guess I'll take that one concern with the transaction as it's currently structured is that crown will control marketing for corona and other modelo brands but the interests of crown and ABI will still be very much aligned because crown will be dependent on ABI to obtain beer and so in so far as crown succeeds it also means that ABI is selling more beer to crown and since their interest will remain intertwined ABI for example might have less of an incentive to target corona through Bud Light Lime or new brands then it would if corona were still an independently controlled brand so I do think there are problems with the current transaction because the incentives are not really independent. The supply agreement ensures that crown will have enough beer to maintain corona as a vital brand but the problem is for every bottle of corona that crown sells ABI is selling more beer to crown so ABI doesn't have much of an incentive to directly target corona because it'll be shooting itself in the foot and until you have the clear independence between the two companies you'll have you will have serious competitive effects resulting okay so we're gonna move on we have a little break we have coffee I believe out there and maybe some cookies and then in about ten minutes we're gonna have the second panel but anyway just think we should say thanks to these panelists


Hi, I'm Eric Barstis, Conservation Agronomist with the Natural Resources Conservation Service. I'm Erin Cordes, SDSU Extension Specialist. Welcome to this IGRO podcast, which is here to explain soil sampling for nutrient management. What we're going to talk about is how to take a composite soil sample using a handheld probe. So why sample in the first place? Soil sampling is a critical part of a comprehensive nutrient management plan that makes most out of your fertilizer. Whether your fertilizer is manure or a commercial fertilizer. What it helps is achieve better yields, reduced production costs, and reduced water pollution. With sampling, what we're trying to do is determine the existing soil fertility levels because those soil fertility levels vary by area, by time, and also by practice, management practices. Also these samples can be required by some different permit programs like a CAFO general permit program. So it is an integral part of a comprehensive nutrient management plan. So you might be wondering, when do I take a sample? Sampling at approximately the same time each year helps get consistent results. You also want a sample in the fall, gives you a longer window to sample, and also gives you time to analyze those results and develop a fertilizer program. Collecting soil samples after the soil temps are 50 degrees or below will reduce the amount of any changes in mineralization in the nitrogen of the soil. And again, before any nitrogen requiring crop, we suggest taking a sample, that'd be corn, small grain, things like that. And every two to four years for immobile nutrients seems to be adequate. Before you go out to take a sample, you want to make sure that you have all the equipment you need. This would consist of your soil sampling probe, probe brush to clean out the probe, two buckets if you're taking deep sample for immobile nutrients, and penetrating oil or lubricant, some sample bags to collect the samples in, and a means to transport yourself across the field, whether using a four-wheeler or pick up, make sure you have adequate equipment like bungee cords to hold or secure the buckets down, things like that. So here's all the material I need to take a good soil sample. I have my sampling buckets, small bucket for zero to six inch. Larger bucket for the six to 24 inch sample. Penetrating oil to keep the probe sampling good. I'll spray that in between each sample, or kind of as needed. A material kind of like WD-40 seems to work well. Sampling bags to put myself samples in, and a pen to identify those samples. When taking deep samples for immobile nutrients, you want to make sure to remember that there's two sample bags will be sent to the lab to equal one representation for that field. When you're planning the route, you can do either a zone sample, grid sample, or composite sample, and you want to capture the variability within that field based on your sampling technique. So if you're doing a composite sample, you want to make sure you're zigzagging across the field in a random pattern. Make sure you avoid the very top part of the hills and the very lowest spots, and make sure you just keep sampling until you get a good representation. Typically takes 15 to 20 cores for an 80-acre field. And when you're collecting that sample, zero to six inches for immobile nutrients like phosphorus potassium, six to 24 inches for mobile nutrients, nitrogen, sulfur, things like that. And in some situations, a deeper sample may be required up to 48 inches for high leaching soils and for some permit requirements. OK, we'll try taking a sample here in this spot and see if we can get a sample taken. I should spray the probe, put a light layer of WD-40 on, front and back. I'm going to try to go down 24 inches. I was very careful to keep the hole exactly there. Didn't let any dirt fall in. So I've got my top six inches. My mark is right here, so I'll put that in one bucket. Six to 24 inches will go in the other bucket. And now my probe isn't 24 inches long. So I need to go down the same spot again to get the rest of my sample. Scrape off that top soil, clean that off. That was just a little bit of dirt there that did fall in to the hole. And I can easily see that from the different color of the soil there. So that will make up the rest of my sample. If I do have any dirt left in here, I will clean it with this cleaning brush and get ready for the next sample. And always remember to complete your soil sample information sheet. This is what the lab needs to know what nutrients to include in the analysis and it helps them to identify the fields and gives your contact information so where they can return the analysis to. And proper handling of the sample would be the last step. Make sure that you either freeze the sample and keep it frozen until sending to the lab or you can air dry the sample at room temperature. Just lay it all out and put a fan on it to air dry it and then collect it back up and send to the lab at that point. We hope that these steps have helped you identify how to collect a good representative sample from your field. Now that you have that sample, what do you do with it? We recommend that you send this sample to the lab on a Monday. This helps reduce the amount of change in that sample from its frozen or its dried state in the mail. If you send it on a Monday, it has better chance of reaching the lab during that week and getting to that analysis stage. Finally, when you do receive your results, make sure you use those analysis results in conjunction with the crop requirements to determine the fertilizer needs. Put this soil analysis and the results to the best use possible. Thanks for participating in our podcast. We hope we provided you with some useful information on how to take a composite soil sample using a handheld probe. For more information, here are some documents that you can refer to at a later time.


Good morning, John. On this, the sixth day of pizza-ness, I would like to introduce you to the manual, or palace's cat. It's a wild cat that is roughly the same size as cameo, my cat. But while they may look similar, they are not. Spread across Tibet, China, Pakistan, India, Mongolia, Iran, these solitary, grumpy, temperamental cats. He got a living on small rodents and birds, keeping warm with the longest hair of any cat, hunting not through speed, but through stealth, with fertility windows as short as one day per year. But the thing that makes them so cute is what I want to talk about today, their eyes. And you may be noticing that this cutie is a little less cute than the other manuals I've showed you so far. That's because I photoshopped house cat eyes onto it. Here's the real boy. There's something about those eyes. We've gotten used to the eyes of our cats, but they are a little bizarre. These vertically slitted pupils are complicated mysteries that have evolved separately, not just in cats, but in foxes, alligators, snakes, even some birds and sharks. And not all cats have these vertical pupils. Big cats don't have them, but most small cats do. And the European lynx, which is of moderate size, actually has intermediate pupils. And animals that have vertical pupils tend to have a few things in common. They're all hunters, they all deal with low-light conditions, and they're all ambush predators. But Palace's cat fulfills all those conditions. They're low-light ambush predators. So how do they end up with these adorable, relatable eyes? I don't know, and neither does anyone, but I found this whole thing fascinating, so let's walk through it. There are three theories as to how vertical pupils help ambush predators. First, vertical pupils rely on a curtain of stranded muscles to contract, while circular pupils rely on a sphincter. Yes, you have sphincters in your eyes, and that more complex musculature allows them to contract and expand more. But, as the Loris has shown us, this is not a hard and fast rule. Second, we have distance judgment, which is, as you might expect, pretty important for an ambush predator. There are three ways animals use sight to tell how far away something is. The first is parallax, where objects farther away appear to move more slowly than objects close up. The second is binocular stereopsis, which is the fancy way of saying normal depth perception when two eyes feed the brain slightly different images that are interpreted into a three-dimensional image. But last, and least noticed, is blur. When you look at something, especially something fairly close up, things closer to you and farther away from you from that point appear blurry. And when you're close to the ground, like a small cat or a snake, this matters more because you're closer to your prey, and thus the depth of field is shallower. Vertical pupils seem to conserve horizontal blur, which animals use as a distance judging technique, without sacrificing the vertical contrast necessary for stereopsis.  But basically, if you want to focus on something close up with a really wide aperture, like if your pupils are super dilated because it's dark, the ability of a lens to focus kind of breaks down. Different wavelengths of light, so different colors, pass through the lens medium at different angles, so the image will never be sharp. To get that sharp image, some animals, including cats, have actually evolved to have lenses with focal gradients. The middle optimized for green wavelengths, and then red, and then blue. This works, but if you have a circular pupil, then when you contract, the area of the lens optimized for blue gets completely blocked. A vertical pupil, on the other hand, preserves all of the color optimization. Now, as is often the case when it comes to how animals perceive the world, we're not 100% on any of these things, but we do know that with its lifestyle, a vertical pupil would be advantageous to Palace's cat.  An adorable mystery. They shouldn't be there, but they are. So love it. The manual, or Palace's cat, is the Bizarre Beast of this month, and I have great news. The Bizarre Beast Pin Club is opening back up just until the end of Pizzamas. So if you want this Palace's cat pin, which is very good, you can join right now! You'll also get another pin every month with a different Bizarre Beast and information about it on the card. And there are more Bizarre Beasts on their way. Pizzamas also continues. John, I will see you on Tuesday.