Here's the whole article from the Tribune: Roger Deschner rogerd(a)uic.edu =================== "Draft beer, not people!" - Anon =================== THE CHICAGO TRIBUNE Goose Island may partner with maker of Budweiser By Ameet Sachdev Tribune staff reporter Published December 21, 2005 Change may be brewing at Goose Island Beer Co. The beer industry has been buzzing for weeks about talks between Chicago's largest microbrewery and Anheuser-Busch Cos., fostering speculation the St. Louis beer giant may be interested in buying an ownership stake in Goose Island. Goose Island president and founder John Hall confirmed that the maker of Honker's Ale and other brands is in talks with Anheuser-Busch, but those discussions have been limited to "distribution issues," he said. He declined to comment further on the nature of the talks. Anheuser-Busch, brewer of Budweiser and Bud Light, declined to comment, citing its policy not to discuss potential business partnerships or other transactions. The negotiations are a sign of challenging times in the beer industry. Consumer interest in beer is waning, as more drinkers turn to wine and spirits. At Anheuser-Busch, which controls roughly half of the U.S. market, domestic sales to wholesalers declined 1.4 percent in the third quarter. A bright side in the industry is that microbrews, also known as craft beers, have enjoyed a resurgence this year. Through the first six months, volume, as measured by number of barrels produced, was up 7.1 percent compared with the same period a year ago, according to the Brewers Association in Boulder, Colo. Goose Island has become a local favorite since opening its first brewpub in 1988. It later expanded by adding a second brewpub and building a brewery and bottling plant on the West Side. It produced about 50,000 barrels last year--peanuts compared to the more than 103 million made by Anheuser-Busch--and its beers are distributed in eight states. But Honker's Ale, Goose Island's best-selling brand, has trailed category growth. In 2004, its retail sales fell 5.4 percent, to $1.46 million, compared to the year before, according to Information Resources Inc. Through the first 11 months of 2005, sales were up 1.4 percent. Some of Honker's sales this year may have been cannibalized by the company's newest beer, 312, a wheat ale, which has become the company's third-biggest seller, with sales of nearly $440,000. IRI only tracks sales at grocery stores and mass merchandisers, excluding Wal-Mart Stores Inc. Goose Island's distribution has been somewhat unsettled since it terminated its relationship with its sales and marketing agent last year and brought that function in-house. The company had been using United States Beverage LLC since 2000 to help with marketing to retailers and bars and also to assist in contracting deals to use excess brewing capacity at the West Side plant. But parting with United States Beverage was not easy. The Connecticut-based company sued Goose Island, accusing it of unfairly ending its relationship. Goose Island settled the suit for an undisclosed amount, according to a Goose Island investor. Forging distribution ties with Anheuser-Busch could expand Goose Island's reach in the Midwest by bringing more clout to retailers and bars. "They will get better coverage at the retail level," said Jim Doney, president of Chicago Beverage System, which distributes Miller beer products in the Chicago area. "It means more trucks on the street and more sales people. That's what matters." For Anheuser-Busch, adding a small brewer would satisfy its wholesalers' thirst for new products. "Its wholesalers are clamoring for high-margin, growth brands," said Benj Steinman, editor of Beer Marketer's Insights, an industry newsletter. "Anheuser has promised to deliver them, but they can't just create them." This would not be the first time Anheuser-Busch has struck a deal with a microbrewery. In 1994, it formed a distribution alliance with Redhook Ale Brewery Inc., based in suburban Seattle. But the beer giant also purchased a 25 percent stake in Redhook, leading to speculation that Anheuser-Busch might be seeking a similar deal with Goose Island. One potential sticking point in the negotiations looks to be Goose Island's existing distributor relationships. Union Beverage Co., which has been Goose Island's distributor in Illinois for the last decade, is aware of the talks and has no plans on relinquishing its distributor rights, said Bob Collins, vice president of sales and marketing. "We are doing a phenomenal job with their brands, and our plan is to be a long-term Goose Island distributor," Collins said.