Wednesday, 16 September 2015

Bad Day at Black Rock

The news today that the world’s biggest brewing group, Anheuser-Busch InBev, has made a takeover bid for the world’s number two, SABMiller, might not have come as much of a surprise to industry analysts, as the deal has long been anticipated. A merged group would have a market value of around $275 billion at current prices.

A series of deals over the past decade have transformed AB InBev and SABMiller into the world’s two biggest brewers and the two, along with Heineken and Carlsberg,  produce half the world’s beer. If the deal goes through, the merged company would produce one third of the world's beer. A merger would combine AB InBev’s dominance of Latin America with SAB Miller's strong presence in the African market where it is dominant in 15 countries, and is represented in a further 21. Both continents are fast-growing markets.

AB InBev said it had approached
SABMiller's board about a "combination of the two companies". However, it added that there was no certainty the approach would lead to an offer or an agreement. Earlier, SABMiller said it had been informed that AB InBev was planning to make a bid, but that it had no details as yet

AB InBev and other top brewers are trying to move into new markets as they look to shrug off weakness in North America and Europe, where drinkers are increasingly moving either to craft beers, or to more traditional beers made by independent local producers. It is therefore somewhat ironic that the industry is looking to consolidate further, just as consumer tastes in beer are fragmenting.

For consumers in general the idea of such a merger is unwelcome to put it mildly, as it will inevitably lead to plant closures, culling of brands, job losses and other associated cost-savings. The knock on effect will ultimately mean less choice for the drinker and a loss of the heritage associated with any losses that occur as a result of this deal going through.

Sources: BBC News; Financial Times; Reuters.

AB InBev is the largest brewing group in the world and includes Budweiser, Stella Artois and Corona amongst its brands. The group is controlled by 3G Capital, a private equity fund run by a group of Brazilian investors.

SABMiller is the world’s number two brewer and maker of more than 200 beers including Peroni, Grolsch, Pilsner Urquell and, most recently, Meantime of Greenwich.


Neville Grundy said...

The BBC described SABMiller as a British company, which is stretching a point: perhaps they don't realise that SAB stands for South African Breweries. I dislike ever larger mega-corporations because the consequences always include a worse deal for the public, local products displaced by insipid international brands and job losses on a large scale.

Any real ale or craft beer drinkers who wonder "What's this got to do with us?" should remember Sharps (owned by Coors) and Meantime (owned by SABMiller).

Paul Bailey said...

You are right Nev; SAB is South African, and Miller are American. Perhaps the company headquarters is in Britain? Whichever way you look at it, this is a bad deal, not just for consumers, but for brewery workers and local economies in many parts of the world.

I speak from personal experience, as I’ve been made redundant several times, following mergers and/or takeovers.