Sting Operation Reveals Alleged A-B Pay-to-Play Activities

FILED MAY 13, 2016

Dear Client:

The Washington State Liquor and Cannabis Board (yes, they're combined) has slapped Anheuser-Busch with an administrative violation notice seeking $150,000, plus a three day suspension. A-B is able to opt out of the suspension if they pay an extra grand.

A-B is facing the fine for allegedly treating two concert venues in Seattle, Showbox and Showbox Sodo, like tied houses, paying the venues for an exclusive promotional fee for an alleged quid-pro-quo for (wink wink) product exclusivity.

BBD obtained a file of the violation records against A-B. Here's what we gathered from the two evidence reports included in the file.

This was a pretty elaborate sting operation. The official report reads like a "Mission Accomplished" script: "At approximately 1850 hours Officer Reschan and I entered the Liquor Licensed premises……"

In the first evidence report, two undercover WSLCB officers attended the aforementioned venues to follow up on a complaint alleging that "a retail licensed premises had entered into an agreement of 'exclusivity' with a beer distributor to provide 'Budweiser' only products at the premises."

The officers first visited the Showbox acting as regular patrons and found that all the offerings available on-premise were supplied by A-B, per report.

At Showbox Sodo, the two pretended to be interested in hosting "a military gathering" and spoke with the event center's manager on what types of beer brands they offered. The manager responded saying they "maintained an exclusive agreement with Budweiser" and are only able to offer products supplied by the Bud distributor (a branch).

The second evidence report detailed more of the same with another pair of officers claiming they found all of Showbox's 15 offerings to be A-B brands. On their visit to Showbox Sodo the officers said they "observed" A-B to supply "bottled beer brands" and draft, but their list of draft brands included Guinness, which is owned by Diageo.

The pair of officers also spoke with the events manager about hosting a "private party." The manager informed them that they could use their preferred caterer, Wolfgang Puck Catering, or use their own for an additional payment. The officers then inquired on the possibility of providing Coors brands for the party and the manager shook their head 'no' and said "they had an agreement with Anheuser-Busch." Uhh.

The officer later requested beer purchase invoices from Wolfgang Puck Catering for January 1 through June 30 2015.

The officer first received invoices from A-B Sales of Washington in Seattle and found 25 invoices for The Showbox and 16 for The Showbox Sodo.

About a week later, the officer received copies of purchase invoices from competitor blue-silver Columbia Distributing. The copies revealed 13 invoices for The Showbox and six invoices for The Showbox Sodo. The brands listed were Guinness, Deschutes, Georgetown, Strongbow, Mike's Hard Lemonade and Angry Orchard. But…… "I had observed none of these brands offered for sale during my physical inspections at both Showboxes," alleges the officer.

This is yet another case of state regulators taking a more aggressive stance against tied-house violations against distributors/suppliers. This fine is modest and I would assume A-B will pay it and move on. But what does it mean for other states, and other suppliers, and the pay-for-play culture that is getting worse in this industry? State ABCs are waking up, and are not (with apologies to Dylan Thomas) going "gentle into that good night," but continue to"rage, rage against the dying of the light."

A-B's response is that they do "not agree with the allegations in the Notice. AB met with the state this week and will continue to respond to the Board in a timely manner."

Read the agents' report here:


As reported, Budweiser is changing its name to America for the summer months, and naturally it's generated a considerable amount of comment (and some backlash) on social media and in the press, particularly with the London-based Financial Times.
"As a marketing exercise, Budweiser's decision to rename its flagship beer America until the presidential election has achieved its initial aim: buzz," writes the FT.

"A few brand experts have warned that tinkering with a well-known brand is a high-risk gambit. Some glosses on the move have described how complicated it was to adapt the Bud font to a new word. But really, this is another example of how easy it is these days to play with a brand. This is only a temporary change - more like Coca-Cola putting people's first names on its labels than Coke's ill-fated launch of "New Coke". There is apparently no trademark issue."

The FT says it could be risky as "it is possible the US will not cover itself in sporting or political glory this year. If the presidential campaign turns dirtier, as many predict, expect plenty of Instagrammed images of crumpled cans of 'America' in the trash."

But here's the money shot, which we agree with: "Changing the label is never as big a deal as branding gurus suggest. If this effort flops it will be because it provoked a cringe rather than a crisis. What really counts is what is inside the can, a maxim that Americans might also wish to apply to US politics when the presidential campaign proper gets into full swing." Why? Because every major brand changes their labels according to the latest trend-sports teams-holiday-celebrity, etc. It's common. Nobody cares, honestly.


AB INBEV AND AMBEV SWAP SOME BUSINESSES IN SOUTH AMERICA. Anheuser Busch InBev has entered into agreement with Ambev to transfer SABMiller's Panamanian business to Ambev, in exchange for Ambev transferring its business in Colombia, Peru and Ecuador to ABI. The deal would allow Ambev "to initiate operations in Panama through the established SABMiller business and further expand its businesses in Central America." Of course, it's all "conditional on the successful closing" of the proposed ABI-SAB tie-up. Lazard acted as AB InBev's financial advisor.

BI ANNOUNCES NEW DIRECTOR OF COMMUNICATIONS. Recall that Megan Kirkpatrick left the Beer Institute last summer to work for the US Chamber of Commerce. They've just announced her replacement in Dan Roth, new BI director of communications. "Dan comes to use from Capitol Hill where he worked for Congressmember Karen Bass (D-CA) as her communications director. Before that he was the communications director for the Democratic Legislative Campaign Committee where he led communications efforts during the 2012 election cycle," per BI announcement.

ED. NOTE: Did you know, we put the initials "BBD" into every subject line of this publication, so you can easily search for it in your crowded inbox? It was Ken Grossman's idea about ten years ago. Or Steve Hindy's. Or somebody like that.

But also, you can download our iPad and iPod and Android app to read on your device: search app store for SchuPub. Go for it. It's awesome.

Until Monday, Harry

"Everything happens to everybody sooner or later if there is time enough."
- George Bernard Shaw

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