Beer drinkers from both the macro and micro side of the spectrum have been lamenting the announcement that two of the biggest producers in the world will be merging, turning the people behind both the Budweiser and Miller products into one superbrand. What that means for beer is an ongoing discussion, but there’s reason to pay attention more than wondering about the fate of your favorite libation. Here’s what the merger means for the business world.
It’s A Big Deal
This merger is no small matter. In fact, it’s the fourth largest acquisition to date with AB InBev shelling out $106 billion to take control of their biggest competitor. If everything goes through, the company would be looking at about $64 billion in annual revenue and a responsibility for 30% of all international beer sales.
It doesn’t just prop up the two parties buying into the deal, either. In 2014, AB InBev led the world’s beer production with 411.5 million hectoliters of beer coming from all its brands. SABMiller sat well behind 187.8 million, with the Heineken brand, whose new majority share in craft giants Lagunitas has garnered plenty of attention on its own, sat not far behind. The mostly North American brand Molson-Coors, meanwhile, was ranked 6th on the list of top 10 brewing groups turning out around 59 million hectoliters between its US brands including Coors and Blue Moon, and the Canadian staple Molson.
SABMiller maintained a 59% stake in Molson-Coors, specifically in the US MillerCoors joint venture within the US. In an effort to appease regulators, SABMiller announced that it will sell its stake in MillerCoors back to its Molson-Coors partner for the price of about $12 billion. In exchange, Molson-Coors gets all global rights to the Miller brand, which would make it the second largest brewer in the nation.
To that end, the face of an industry on a global level changes. A single company will control the bulk of consumption in Asia, Africa, and Latin America, as well as market topping brands in Europe and the US. At the same time, another company is set to get a lot bigger, effectively taking control of the US marketplace.
The Antitrust Issues
Of course, any merger this big comes with a fair amount of scrutiny to ensure that the mega brewer doesn’t get too in control. The worry is that with such unilateral control, especially in areas outside Europe and the US, would drive prices up. The dissolution of MillerCoors is already a given, but a number of other divestments would need to follow, including SABMiller’s 49% stake in CR Snow, responsible for China’s most popular brand, and the potential restructuring of its African operation.
To the other end, the beer giants are pushing for a more thorough consideration of the rise of craft beer in the US and Europe as argument that their structure does not need heavy reform. With the deal already in place, it’s up to the regulators to determine exactly how this will play out, but whether you’re a beer drinker or not, this deal is worth noting as a massive acquisition that will change the face of an industry in a way few others have.