Battle brews between beer giant, small makers over free swag

At the Rubicon Brewing Company in Sacramento and St. Stan's brewery in Modesto, small craft beer makers are foaming over a state Capitol power play by Big Bud.

To the average beer drinker, it may not seem like a big deal. But a bid by the Anheuser-Busch Co. – maker of Budweiser, Bud Lite and Michelob beers – to change state law for doling out promotional swag is stirring the microbrewers into action.

Anheuser-Busch hopes to sell more Bud and potentially improve marketing and product placement by giving out T-shirts, caps and other freebies.

So it is asking the Legislature to change California law to allow beer companies and distributors to offer souvenirs worth up to $5. The state currently limits beer promotional items to a value of 25 cents.

But small beer makers are trying to stop the legislation, Assembly Bill 1245. The bill has already sailed through the Assembly on a 75-0 vote and is headed for the state Senate floor.

So Susan Little-Nell, owner of St. Stan's Brewing Co., is writing lawmakers, complaining about soaring costs of hops, wheat and barley used to craft her frothy brews. She said she fears losing retail shelf space and bar tap access in the face of "free-for-all promotional spending of international corporations."

At the Sacramento Brewing Company, where T-shirts for the brew pub's Red Horse Ale amber or Sac-Squatch peat roast malt sell for $17.95, owner George Irwin says he can't compete with big beer companies that can produce and dole out shirts for pennies on the dollar.

"Bud can buy containers full of trinkets from China, but for a craft beer maker it can be a big expense," he said.

Glynn Phillips, owner of Rubicon Brewing, said he fears Anheuser-Busch is trying to buy something else: an increasing share of beer taps to place more of its products in California bars and restaurants.

He said tavern owners may be enticed to assign limited draft space to Budweiser or Michelob Amber instead of his Rubicon India Pale as customers are lured by promotional giveaways.

"There is a intense competitiveness in the marketplace for draft handles," Phillips said. "Even though big brewers say they're not giving away these T-shirts and other free items to get more handle space, go ask any retailer. In order for me to get space, I've got to compete with that."

Andrew Baldonado, Anheuser-Busch's director of governmental affairs, said the brewer is reacting to its own marketing challenge. He said the company wants the same promotional opportunities as winemakers and spirits companies.

Under state law, for example, makers of Jose Cuervo tequila and Smirnoff vodka are already allowed to dole out $5 items.

With 8,500 workers and breweries in Fairfield and Van Nuys, Anheuser-Busch is one of California's major employers. It has contributed nearly $390,000 to state political candidates since 2007.

Baldonado says Anheuser-Busch has made concessions to small brewers worried about its marketing clout. He said the company agreed to amend AB 1245 to phase in increases in giveaways – starting with a $3 limit in 2009, then expanding to $4 in 2010 and $5 in 2011.

Baldonaldo said small brew pubs haven't suffered due to similar marketing giveaways allowed in other states.

"The argument that the tried-and-true beer drinker is going to switch from their craft beer to Bud Light because some sales person gave them a Bud Light T-shirt is ludicrous," he said. "It's not going to happen."

About the writer:

• Call Peter Hecht, Bee Capitol Bureau, (916) 326-5539.