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?
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.