Anheuser-Busch InBev and MillerCoors LLC control about 80 percent of the U.S. beer market. Most of the beer distributed by both companies is sold through independent beer distributors who, in turn, sell the beer to retailers, restaurants and bars. Anheuser-Busch InBev, which had been acquired by Belgium-based brewer InBev in mid 2008, soon after embarked on a cost-cutting program. One key cost focus was distributor margins: Anheuser-Busch distributors received about $1.00 for each case of Budweiser distributed to retail channel members compared to $.85 paid by MillerCoors to distributors. By eliminating that 15 cent difference in margin, Anheuser Busch InBev estimated it could save about $200 million per year! But Anheuser-Busch distributors, many of whom had decades-old relationships with the brewer, would not be happy with the lower margins. Should Anheuser-Busch InBev proceed with the margin cut? Why or why not?
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