Canadian craft breweries fear mega mergers could dry up their taps

The proposed consolidation of the world's biggest beer companies in recent weeks has given rise to concerns that it could be harder for Canada's small brewers to sell their brands in your local watering hole.

• Molson Coors to double in size after big beer deal
• AB InBev, SABMiller reach final deal for massive beer merger
• Labatt Breweries of Canada buys Mill Street brewery

"Traditionally, big companies merging to become even bigger companies tends to have a little bit of a chilling effect on innovation and small companies," said Jason Fisher, owner of the Indie Ale House, a Toronto brewhouse that's been in operation for three years.

"You want to go to a sporting event, they own that venue. You want to go to a concert, they own that venue. You want to buy beer at a store, they own those too."

Large brewers use their financial firepower for marketing and sponsorships to increase awareness of their brands. In exchange, those companies can buy up more beer tap lines to dominate distribution in bars and restaurants.

"That makes it a lot tougher for a smaller brewery to go into a bar and say: 'I have a brand that's better than yours,"' said Stephen Beaumont, a veteran beer industry watcher and author.

SABMiller recently agreed to a US$107-billion takeover by Anheuser-Busch InBev in a merger of the world's two largest brewers. The deal would see Anheuser-Busch InBev control 31 per cent of the global beer market.

Molson Coors is poised to nearly double its size after agreeing to spend US$12 billion for SABMiller's share of U.S. joint venture Miller Coors and Miller's International brands, including those sold in Canada.

In Ontario, bars and restaurants are required to pay a 30 per cent premium above the retail price at the Beer Store, a fee charged by many of the big breweries. But after establishing its Canadian division earlier this year, Miller eliminated that charge, which works out to be about $10 per case of 24 beers.

James Rilett, Ontario vice-president of Restaurants Canada, fears that Molson Coors will abandon that incentive once its purchase for Miller brands goes through.

"We had originally hoped that the Miller decision would go to other brands, but I think that hope is in jeopardy now," he said.

Molson Coors declined to comment, saying it is premature to talk about changes when the deal is far from closing.

Molson Coors and InBev together control about 71 per cent of the Canadian beer market, according to market research firm Ibis World.

It said the craft brewing phenomenon that has taken the U.S. beer market by storm has not been as significant in Canada, largely because it is more difficult to enter the market with provincial regulations about distribution and greater costs.

The popularity of craft beer has been on the rise across Canada for years. While overall beer consumption declined by six per cent in 2014, craft beer servings grew by seven per cent, according to recent findings from data research company NPD Group.

Beer giants have responded by buying up craft beer companies. Over the last decade, Molson Coors has acquired Creemore Springs and Granville Island, while Labatt's recently bought Mill Street Brewery and Turning Point Brewery.

John Hay of the Ontario Craft Beer Association said competing against even larger global brewers has risks. But he said it also presents an opportunity for craft brewers to leverage their small size to appeal to customers who like to know where their beer is made, where the barley and hops are grown and talk directly to the brewmaster.

"The bigger you get, the more distant you get from all of those strategic elements," he said. "We're going to focus on doing what we've been doing and what the consumer seems to be responding well to."