Takeover bid her­alds growth of me­gabrew

How will con­sumers be af­fected if AB InBev, the largest brewer in the world, takes over SABMiller, sec­ond-largest brewer in the world?

The Reporter (Lansdale, PA) - - FRONT PAGE - By Matt Brasch For Dig­i­tal First Me­dia

Dur­ing the past 20 years the beer industry has de­vel­oped dif­fer­ent de­scrip­tive names for brew­eries based on their size, from “mi­cro­brew” in the 1980s to “craft­brew” and “nanobrew” to­day.

Re­cently, AB InBev, the largest brewer in the world, of­fered $106 bil­lion to take over SABMiller, the sec­ond-largest brewer in the world. If this takeover goes through — and there is ev­ery in­di­ca­tion that it will — con­sumers may now be see­ing the growth of “me­gabrew.”

To un­der­stand the true pro­por­tions of this ac­qui­si­tion, first we have to look at the play­ers. Who is AB InBev? Ac­cord­ing to an Oct. 9 re­port by Morn­ingstar Eq­uity Re­search, “An­heuser-Busch InBev is the largest brewer in the world and one of the world’s top five con­sumer prod­uct com­pa­nies ... Af­ter the Mod­elo ac­qui­si­tion [in 2013], the com­pany’s port­fo­lio now con­tains five of the top-10-sell­ing beer brands and 17 brands with re­tail sales over $1 bil­lion. AB InBev was cre­ated by the 2008 merger of Bel­gium-based InBev and U.S.-based An­heuser Busch,” which in­cluded the Bud­weiser brands of beer.

An Oct. 13 pro­file pro­vided by Morn­ingstar ex­plained, “SABMiller is the sec­ond-largest brewer in the world and has gone through a dra­matic evo­lu­tion since its be­gin­nings as a pro­vin­cial South African

brewer. The com­pany con­trols roughly 10 per­cent of the global beer mar­ket, while op­er­at­ing such top brands as Snow, Miller, Peroni, Pil­sner Urquell, and Grolsch, as well as some lead­ing craft beers such as Leinenkugel. SABMiller has the num­ber-one or num­bertwo spot in more than 90% of the mar­kets in which it com­petes.”

In sum, the largest brewer in the world in­tends to take over the sec­ond-largest brewer in the world. Ac­cord­ing to an Oct. 7 InBev press re­lease, “The com­bi­na­tion of AB InBev

and SABMiller would re­sult in a truly global brewer that would take its place as one of the world’s lead­ing con­sumer prod­ucts com­pa­nies. Given the largely com­ple­men­tary ge­o­graph­i­cal foot­prints and brand port­fo­lios of AB InBev and SABMiller, the com­bined group would have op­er­a­tions in vir­tu­ally ev­ery ma­jor beer mar­ket, in­clud­ing key emerg­ing re­gions with strong growth prospects such as Africa, Asia, and Cen­tral and South Amer­ica.”

An Oct. 15, a joint press re­lease by AB InBev and SABMiller was is­sued that an­nounced that an agree­ment had been made in prin­ci­ple, with the re­sult­ing deal at ap­prox­i­mately $106 bil­lion. Be­fore the deal goes

through how­ever, the U.S. gov­ern­ment will re­view the trans­ac­tion to en­sure that anti-trust laws are not vi­o­lated — in other words, that a mo­nop­oly is not cre­ated. More likely than not, there will be con­cerns about the per­cent­age of mar­ket share that the re­sult­ing en­tity will con­trol, and ac­cord­ing to Morn­ingstar, it is an­tic­i­pated that “One likely an­titrust con­ces­sion in­cludes a breakup of SABMiller’s joint ven­ture with Mol­sonCoors, MillerCoors.”

For clar­i­fi­ca­tion, SABMiller owns beers such as Blue Moon, Coors, Coors Light, Coors Ex­tra Gold, Key­stone, Key­stone Light, Mol­son Cana­dian, Crispin Ciders, Miller High Life, Miller Lite, Fos­ters, Leinen-

kugels, Redds Ap­ple Ale, and Smith & Forge Hard Cider. Imag­ine those lines in the same com­pany as Bud­weiser, Bud Light, Stella Ar­tois, Corona, Beck’s, Hoe­gaar­den, Leffe Blonde, Mich­e­lob Ul­tra, and Modela. This is go­ing to be a huge beer com­pany, to say the least!

So what will be the im­pact of this trans­ac­tion on con­sumers and the craft beer industry?

Po s si bly, con­sumers could be i mpacted by a lack of com­pe­ti­tion be­tween the tra­di­tional U.S. ri­vals, Bud ver­sus Miller, how­ever anti-trust laws could pro­vide some pro­tec­tion from price set­ting in this re­gard. What might be more of an i mpact to

the con­sumer would be the in­creased inf lu­ence and power of the megabrews to ob­tain shelf space in lo­cal stores and dis­trib­u­tors and push out small batch, lo­cal craft brew.

While im­pos­ing at first, as long as lo­cal craft brew­eries con­tinue to pro­duce high qual­ity prod­ucts, the con­sol­i­da­tion of the megabrews may be noth­ing more than a high level cor­po­rate ma­neu­ver. “... [Con­sol­i­da­tion of megabrews] comes as many beer drinkers in the United States and Europe shift their at­ten­tion to craft brew­eries that are in­de­pen­dent of global con­glom­er­ates. AB InBev picks up few craft brands with SABMiller, but the deal is more im-

por­tantly a ge­og­ra­phy play as it expects to gain a sig­nif­i­cant toe­hold in high growth African and Asian mar­kets,” ex­plains An­toine Gara in an Oct. 13 ar­ti­cle at Forbes.com.

So in the end, if U.S. craft beer fans con­tinue to fol­low the ral­ly­ing cry of “20% mar­ket share by 2020” and sup­port lo­cal craft beer, this con­sol­i­da­tion of me­gabrew may have no real im­pact on the craft beer con­sumer.

PHOTO BY MATT BRASCH

Miller Lite and Bud­weiser are shown next to each other on the shelves at Am­bler Bev­er­age Ex­change.

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