Industry expertise | November 2024 Consolidation accelerates in the beer distribution space

Distributors learned valuable lessons from Bud Light’s marketing challenges. The brand’s sales haven’t fully rebounded in 2024, and many of the customers who fled may never return. Anheuser Busch (AB) distributors with smaller portfolios lost as much as 30% of their business—coming on the heels of years of declining sales.

Distributors with limited brand diversification were the hardest hit. Whether they were severely affected by the Bud Light decline, or just watched and learned, distributors have been wary of over-concentration on a single brand. AB distributors hope broadening their portfolios will help them recover the one-time loss as well as the long-term downward slide in sales. Those who weren’t directly affected are also counting on greater diversification to expand their revenue sources and mitigate the risk of a similar event re-occurring.

Global mega-beer companies—no strangers to competing using scale—see consolidation in their distribution channels as a step along the path to maximum efficiency. In the past, large producers often favored exclusive distribution agreements. As this practice has become less common, they’ve shifted toward favoring a smaller number of larger distributors to carry out their strategies.

These beer behemoths can’t change the purchase price of a smaller distributorship, but they can influence who acquires it. By encouraging distributors with whom they have an established relationship to make targeted acquisitions, the major beer companies can reshape the ownership landscape. The net effect is a distribution map that, over time, increasingly aligns with their preference for having a handful of substantially sized distributors.

Recent trends show consumers moving away from beer. Gen Z consumes less alcohol in general while non-alcoholic drinks are on the rise, and health concerns are reducing consumption across generations. CBD, THC, and hemp-derived drinks remain a leading-edge phenomenon with opaque legality and enforceability questions, but over the long term this gray space could have a major impact on beer consumption. The ready-to-drink (RTD) beverage market is growing too, but, like THC and CBD products, RTDs often require expanded licensing.

Distributors are looking for brand additions that let them expand into non-alcoholic, energy, CBD, and THC products—along with wine and spirit products that aren’t sold in their territory. Acquiring or establishing sub-entities with strength in these emerging beverages adds separation to protect existing licenses, while helping distributors build a more resilient portfolio that can adapt to consumers’ evolving tastes.