Big Beer Gets A Little Smaller
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At the end of January, 2008, Scottish & Newcastle
agreed to be acquired by a consortium made up of
Carlsberg and Heineken for approximately $15.5 billion.
The tipping points for this deal were S&N’s 50% of Baltic
Beverage Holdings (the other 50% is owned by
Carlsberg) and distribution for Heineken in the UK. The
breakup of S&N’s various divisions makes two stronger
breweries out of the consortium partners, but at the
moment has little effect on the US. If the deal goes
through, the main piece in the US is Newcastle Brown,
which will become part of Heineken USA in one form or
another.
Also recently, Grolsch was acquired by SABMiller,
making that London based brewery the largest in the
world. While Grolsch is not seen as a bigger player here
in the US, Anheuser-Busch had been making strides with
the brand recently. This deal also serves to give
Heineken some competition in its home market. And
SABMiller and Coors agreed to a joint venture for the
US and Puerto Rico, giving the venture a decent amount
of clout for the future (this has not been approved by
regulators yet).
However, industry observers are starting to wonder if
this is just dominoes starting to fall. Since January, one
rumor (and I stress rumor) that is starting to gain steam
is that Anheuser-Busch will merge or be acquired by
InBev. A-B is the importer of InBev’s brands into the
US, including Stella Artois, Bass and Beck’s. Until the
Grolsch/SABMiller deal, A-B was the largest brewer by
volume and InBev the largest in gross profit. Neither of
these brewers has appreciated dropping down the list in
recent times. InBev has been strong around the world
with a varied portfolio, but Budweiser and Bud Light are
A-B’s focus worldwide.
Neither of these should be things that force an
agreement between the two companies, but when you
add in the fact that 1) beer sales are being driven by the
craft and import segment; 2) premium and sub-premium
lagers are flat or declining; 3) A-B’s import portfolio,
excluding the InBev products, are not major players yet
in the category; and 4) the US is a major player in total
worldwide beer consumption; then a potential deal starts
to have larger implications.
There is exception to this. If A-B were ever able to take
full control over Grupo Modelo (i.e. Corona), that would
give the company a larger international brand. A full
SABMiller/Coors merger would also give impetus to A-B
and InBev combining just to compete with a company
that size.
But what is the bottom line you ask? There may be some
cost savings as breweries ease getting certain products
to market. You will probably also see some fallout as the
bigger breweries trim some of the brands they bring to
the US if volume does not justify any support for them.
Craft beers will continue to grow, but also face much
increased commodity pressures for hops and barley,
leading to price increases. And there will also be a
continued effort by smaller importers and breweries to
cut volume from the Heinekens and Coronas of the
world. All in all, we’re starting to see the effects that
craft brewers are having on the beer industry as the big
producers circle their wagons to help slow the loss of
market share to these rising stars.
agreed to be acquired by a consortium made up of
Carlsberg and Heineken for approximately $15.5 billion.
The tipping points for this deal were S&N’s 50% of Baltic
Beverage Holdings (the other 50% is owned by
Carlsberg) and distribution for Heineken in the UK. The
breakup of S&N’s various divisions makes two stronger
breweries out of the consortium partners, but at the
moment has little effect on the US. If the deal goes
through, the main piece in the US is Newcastle Brown,
which will become part of Heineken USA in one form or
another.
Also recently, Grolsch was acquired by SABMiller,
making that London based brewery the largest in the
world. While Grolsch is not seen as a bigger player here
in the US, Anheuser-Busch had been making strides with
the brand recently. This deal also serves to give
Heineken some competition in its home market. And
SABMiller and Coors agreed to a joint venture for the
US and Puerto Rico, giving the venture a decent amount
of clout for the future (this has not been approved by
regulators yet).
However, industry observers are starting to wonder if
this is just dominoes starting to fall. Since January, one
rumor (and I stress rumor) that is starting to gain steam
is that Anheuser-Busch will merge or be acquired by
InBev. A-B is the importer of InBev’s brands into the
US, including Stella Artois, Bass and Beck’s. Until the
Grolsch/SABMiller deal, A-B was the largest brewer by
volume and InBev the largest in gross profit. Neither of
these brewers has appreciated dropping down the list in
recent times. InBev has been strong around the world
with a varied portfolio, but Budweiser and Bud Light are
A-B’s focus worldwide.
Neither of these should be things that force an
agreement between the two companies, but when you
add in the fact that 1) beer sales are being driven by the
craft and import segment; 2) premium and sub-premium
lagers are flat or declining; 3) A-B’s import portfolio,
excluding the InBev products, are not major players yet
in the category; and 4) the US is a major player in total
worldwide beer consumption; then a potential deal starts
to have larger implications.
There is exception to this. If A-B were ever able to take
full control over Grupo Modelo (i.e. Corona), that would
give the company a larger international brand. A full
SABMiller/Coors merger would also give impetus to A-B
and InBev combining just to compete with a company
that size.
But what is the bottom line you ask? There may be some
cost savings as breweries ease getting certain products
to market. You will probably also see some fallout as the
bigger breweries trim some of the brands they bring to
the US if volume does not justify any support for them.
Craft beers will continue to grow, but also face much
increased commodity pressures for hops and barley,
leading to price increases. And there will also be a
continued effort by smaller importers and breweries to
cut volume from the Heinekens and Coronas of the
world. All in all, we’re starting to see the effects that
craft brewers are having on the beer industry as the big
producers circle their wagons to help slow the loss of
market share to these rising stars.
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| Former Heineken brewery in Amsterdam |
| The Consolidation of Big Beer by Jon Davidson |
