First, this deal will have no impact in the u. S. Business and, therefore, no impact on the amount of supplies procured today. In hops we purchased 8 of the hops in the u. S. We manufactured some but in the open market we purchased 12 of the cans available in the marketplace. We placed 25 of the barley available in the marketplace and all those figures will remain the same pre and post transaction. Bottles, we purchased 27 of whats out there. So thats all those numbers will remain the same and no impact because this transaction is about the rest of the world. Thanks, mr. Chairman. Thank you and Ranking Member klobuchar for having this hearing on a very profoundly important topic. I want to thank our witnesses for being here today, all of you with diverse and different viewpoints. Mr. Brito, thank you for making the trip from connecticut today. We welcome you and thank you for your involvement in our community in connecticut. And i want to say that im a nondrinker, so i have to disclose that fact right at the outset although our four children at various points may have imbibed and i have visited a number of our Brewery Companies and have hosted here in washington, d. C. , a number of others, two roads brewing company, stony creek brewery. In fact, im going to ask, if theres no objection, to enter the list of connecticut brewers which is extensive into the record because im very proud of them. Let me be very blunt. What weve seen over the past years is a trend toward mammoth beer behemoths in our market, and the result has not been a happy one for many consumers as you remarked, dr. Moss, what weve seen as consumers is higher prices. Whatever the complex analyses of the market and the legal issues through the eyes of consumers the result has been higher prices. These mega mergers may have been good for shareholders but not so much for beer drinkers. I think we need to be very careful here and to regard with a high degree of skepticism the kind of conventional divestiture that is proposed as a remedy and i would urge the department of justice to think beyond the divestiture that has been proposed to other safeguards for consumers. Because i think this merger has tremendous ramifications for consumers here despite the representations and i take into good faith there will be no impact on the u. S. Market. Maybe not on day one but on day two and three and year two and three the ramifications could be huge, and weve seen this movie before. In the Airline Industry to take one and it may not end all that happily for consumers. So let me just be very direct. Youve heard mr. Purser say that what hes looking at and what im quoting almost directly that there be no termination of independent distributors. Will you commit to this committee that little be no termination. This transaction is not about the u. S. , its about the rest of the world. Nothing that relates to the transaction, to this transaction will impact any distributor. And i dont mean to be impolite but i take that as a there will be no termination of any distributor and no renegotiation that will end contracts. Is that correct . There will be no such thing. Abi intends to own, as you said in your testimony, no more than 10 of its distribution. Can you commit to maintaining no more than 10 . Thats correct. With our wholesalers, our investors, our stakeholders in general, around 10 and today, by the way, senator, if i could expand a little bit, we are between 7 and 8 . We said 10 . It could be up to 12 . That i can commit. 11 or 12 is different than 7 or 8 . Thats why we said around 10 . And let me ask, furthermore, in terms of retail penetration, can you commit that there will be no effort to penetrate the Retail Market . Well, what weve done in terms of material market, and i thank you for the question, the threetier system is regulated at the state level. So different states, different regulations. 15 states brewers can own wholesalers and the others we cant. In other states we can own, in others we cannot. We comply with the law. Weve been only wholesalers more than 100 years. Let me tell you why we do this. 78 of our volume and around 10 . Thats our commitment. Youre able to develop people within the company, our colleagues, that understand the system, that understands the second tier. They are able to talk to wholesalers on an equal basis because they face their realities that our wholesalers face on a daytoday basis. So thats the reason why weve been in the business for 100 years because it provided us the knowledge about being closer to the market. I thank you for that. Thank you very much. And i look forward to the second round. Thanks, mr. Chairman. Thank you, senator blumenthal. Senator perdue . I have a couple quick questions. Antitrust and the consequences on not only consumers but also investors. Without one, the other doesnt exist and also with your employees really fulfill the three stakeholders you as ceos have to deal with. I have a question for the two people who are going to make this deal happen, mr. Brito and mr. Hunter. Id like both of you to respond. Why is the 10 number, mr. Brito, important to you . In other words, i know that number just doesnt come out of the air. When you look at going vertical, theres balance in your own business. When you look at the matrix you have to deal with going across products and across countries, talk to me just a little bit about how that calculation and why thats important. Sure. Thank you. Thank you for the question. If you look at the last few years, senator, our volume done through our company has always been around 7 to 8 , so we set it around 10 . And the reason for having the wholesalers, a company of wholesalers, as i explained to senator blumenthal, we can develop people that understand that business. But the biggest asset we have other than our people is our wholesalers in the u. S. These are savvy business people. They can carry competitive brands, whatever brands they want. Theyre not exclusive, totally open, and they are amazing. They really build brands in the marketplace. So our intention is to continue to have the bulk that is 90 of our volume being done by the savvy, independent entrepreneurs as opposed to our people. Our people, its good because we learn about the business and we can talk to them and exchange best practice in a more direct way. Mr. Hunter, do you have anything to add to that . The only thing i would add is currently we own one distributor, a local distributor in denver, and i can commit at this stage we have in plans to expand our direct ownership or distributor partnership. We rely on those as business partners. They take our brands to market and theyre the face of our company in their local market. Were strong advocates of the threetier system. Under molson coors, there will be no change. In one of the recent communications to your shareholders you talked about the synergies of this deal. Can you explain about what those synergies are from your shareholder perspective . Certainly. Our aspiration is to be a growth business. We want to be a stronger, more assertive competitor in the United States and we believe that under the ownership of one shareholder molson coors we can move with more pace, build our business to be a longterm business in the United States. One of the advantages we have on the back of this deal is we can start to look at our network from a north american business. When it comes to breweries, distribution, procurement, shared services and our ability to move our brands between markets more quickly that will make us a more able competitor in the marketplace. One of the more important pieces of your business, the hops, the barley, et cetera, do you anticipate any impact both ceos on agriculture business by this transaction and have you heard from any of your primary suppliers barley, hops, other Agricultural Commodity providers . Do you want to stop, mr. Hunter, since your light is on . Sure. If im successful and the business is successful and we grow our business on the basis we go to procure more in the United States. We have longstanding relationships with barley owners and a number of states and we have personal and business relationships with the barley growers. This will have no impact in terms of availability of raw materials. There is a pinch point in the hops market. There are about 12 or 13 of the market. Theyre using about 50 of some varieties of hops because theyre very flavor forward beers. Clearly work needs to be done to improve. Some of the supply change management and procurement forecasting but generally theres no issue with availability of hops. As you heard from mr. Brito, theres no issue with supply and aluminum is certainly something thats not controlled by us. The grandson of our founder something that is close to our heart but we receive no pressure in that part of the market from a supply point of view. Thank you. Mr. Brito . Since this transaction will have no impact in the u. S. Market, its about the rest of the world. What we procure today, pre and post transaction so, for example, today we procure 8 of the hops supplied in the u. S. That will not change. Of course as we grow the business, yes. As a result of the transaction will not change. We procure in the open market 12 of the cans. We also selfmanufacture cans. That will not change. We procured 25 of the barley. That will not change. 27 in the open market of the bottles because we also produced our own and that will not change. So no change or pressure in any supply system as a result of this transaction. Thank you. Thank you very much. Youre welcome. Senator coons . Thank you to all of the witnesses for your presence here today and for testifying on this matter. To twin lakes to 16 mile, weve got some great craft brewers innovating new products and brewing some great beer. We all want an open marketplace they can continue to thrive and grow and where we safeguard their ability to compete on a fair and level Playing Field and we maintain access to distribution actions and consumer choice. I want to make sure ive asked relevant questions on that as we consider this very large merger. Mr. Brito, in the wake of increased competition from independent brewers, abi has made an effort to acquire and some suggested abi is using these to constrain some of the Distribution Channels of competitors including craft breweries. How do you respond to these questions, these allegations, and will abi be using a profits from the merger to continue the process of acquiring craft brewers . Well, thank you for the question. In terms of the 4,000 breweries we have in this country and opening two a day we own five and we have a Minority Stake in one. So the reason we do that just like we do our company of wholesalers we can learn from the may mazing entrepreneurs who created brands and how they connected to local constituencies so that we can learn from that. We learn from others so thats one thing. Out of the 500 plus wholesalers that are ab wholesalers we do 78 of our volume through those wds and weve owned them 100 years, has been always to learn and develop so they learn to understand the marketplace. The u. S. Market has never been so competitive and so open. I mean never if you walk down the aisle of your grocery store, i bet youll find more options than you would five or ten years ago. Very open, very fragmented and that craft beers have no issues in finding ways to get to the shelves. 35 states out of the 50 permit selfdistribution of beer. In any market you go, you have at least two, three or four wholesalers. There are many options. 90 carry wholesale brands. What a wholesaler wants is to carry brands that Consumers Want to buy and customers want to stock and thats what they do. Thats why the brewers have been growing. One last comment. Weve been in the business since 1852 so more than 160 years and together with our wholesalers we built a whole system, trucks, warehouses, to get from brewers to shelves and the craft brewers have been enjoying that system set by others. Its a very open market and nothing in this transaction will change the competitiveness of the u. S. Market. Thank you. Mr. Pease, forgive me. Nobody wants to take a seat at a growing. One last comment. Weve been in the business since 1852 so more than 160 years and together with our wholesalers we built a whole system, trucks, warehouses, to get from brewers to shelves and the craft brewers have been enjoying that system set by others. And the impact on consumers. Have you companies faced competition or challenges not only to ownership and distribute ers, but doo to their pressure . Thank you, senator. I think theres again, look at that question for a variety of Different Levels. I think everyone has to keep in mind my member, by and larnl, are required by state based regulation to use a distributor to get their beer. To a retailer. Selfdistribution is an option in some states, but usually, that is very limited. If you want to grow your business as a craft brewer, get it into a chain store, a stadium, you news to huz the anheuserbusch or miller coors distributor. In most markets that have the horsepower to effectively bring your beer to the Retail Market. If the abi distributor is a wholly owned distributor, which it is in nine states, then that option is pretty much effectively shut off for a craft brewer and youre down to the miller coors distributor. At the end of the day we dont feel the existing Playing Field is exactly level and were very concerned that the increased market power of the combined entity will be able to increase the distribution tier to the disadvantage of dog fish head, 16 mile, Companies Like that. Now employing over 200 people in delaware. We want to make sure those american Success Stories are not negatively impacted. Mr. Purser just comment on the same question in closing. I know were running tight on time. Do you agree with the same assessment about the access to Distribution Options . There is a scaleability that comes with the network and the miller coors and the Anheuserbusch Inbev networks are more established. Theyve got that access to scale. Thats part of the economic reality. Interestingly those networks were proceeding 50 years ago with different brewers, built on other brand names that once upon a time were more dominant players. We could wax poetic and open a couple cold ones and talk about the history of beer in america i see someone has a head start there. In all seriousness the outlets and the access needs to be maintained through these channels. When you have a Company Owned distributor that precludes the ability of some of those products to get to market and sometimes, senator, even the presence in the state of a small player can limit the ability of some of those brands to get to market because when some of mr. Peases, they would go into a state and they might make an investment or make a decision based on an entire statewide network with one of the legacy brewers. If some of those brewers are owned by their competitor, they may choose in their mind only have one choice, they may not choose that brewer that doesnt that has Company Owned presence in it. Dog fish head is celebrating 20 years. Were trying to sprefr competitiveness. Thank you very much. Tillis is next. I wanted to comment briefly. Theyre about to call a vote in a few minutes. Ill be leaving in few moments to go vote. Senator klobuchar will be here while im gone. Senator tillis . Thank you, mr. Chair. Thank you for being here. We have nearly 150 microbrews now. Weve also added sierra, nevada, and are about to bring new belgium online. This is very important to our state. Ab state is offering a bachelors degree in fermentation sciences. I want to go to a more parochial issue. I think my colleague has done a good job of covering the broader landscape. Mr. Hunter, id like to start with you. I have a letter signed by about 115 state legislators. Similar letter from the governor that im going to submit for the record provide you with an opportunity to respond to the specific questions. I want to go back and ask one thats a consistent theme from some of the people back from my state. They feel like that the decision to close the eden plant for those not familiar, this is a plant thats been in North Carolina for about 30 years. Employs about 500 people that is going to be closed. Many of them believe theres a curious timing between the announcement of the merger and the announcement of the closing of the plant some time next year. Can you explain the timing of the merger and the decision to close the brewery and when the decision was made to close the plant and whether or not it had anything to do with the merger discussions and, mr. Brito, ill ask you for the purpose of closing the loop on the witness stand. Mr. Hunter . Thank you, senator tillis. Let me start with your last question first. The discussions had no impact at all on the discussions that had been taking place for a long period of time within the miller coors organization with regard to how we manage our Brewing Network and infrastructure. To get to the specifics, the board and executive team of miller coors had been reviewing our brewing requirements for a significant period of time, at least a year as theyve been building the run, through the middle part through the end of 2014 have been discussing and looking at the challenges within the miller coors business. Since the miller coors business was created in 2008, the business has lost about 10 Million Barrels in total volume. If you look at our brewery network, that meant many of our breweries were under utilized, not performing efficiently or effectively and the decision was taken that one of the breweries would need to close to take capacity out of our network to ensure our network was efficient to compete. You can imagine long discussions because these are the last discussion any business wants because it affects our people. We were faced with a discussion we have a very modern brewery in shenandoah away from eaton which has been well invested. We had to look at roots to market and the decision was made as we came into 2015 to close the brewery, months of planning to ensure communication and all of the welfare considerations for employees are put in place effectively. Part of abis intent and their approach to sab. It was coincidence it occurred at roughly the same time abi announced they had approached the board of sab. It was four or six weeks after that date befo