Could an AB InBev/SABMiller Merger Be a Good Thing?

If you’re a craft brewer or a supporter of craft brewing, as surprising as it may sound, yes, it could!

While the rumoured merger of the global number one and number two brewers might sound like a small brewery’s worst nightmare, it could actually work to the advantage of smaller-scale brewers in North America and Europe. For the reasoning behind this apparently illogical theory, let’s turn to Tom Pirko, director of consulting for the f&b analysis and consulting firm, Bevmark, as reported by Convenience Store News:

 “Coke and Pepsi shouldn’t merge, and these companies should think of themselves as the Coke and Pepsi of the beer business,” he told the St. Louis Post-Dispatch. “It’s about beating your competition, but also about being sharpened by them. The more you compete against each other, the stronger you both become.”

So, in becoming one company rather than two strong competitors, a merged ABIB/SABM could actually become a more dilute firm, with a strong eye for developing markets in the BRIC countries, but waning interest in established markets. An interesting perspective.

(Note: Like most analysts, I don’t actually expect anything will come of these merger rumours, or at least not any time soon. The companies might be a good fit in terms of territories and strengths — about the only regions of competitiveness concern would the the U.S. and China — but the cultures are such that integration would take years. The Pepsi/Coke analogy is apt, I think, and the merger equally unlikely.)


4 Replies to “Could an AB InBev/SABMiller Merger Be a Good Thing?”

  1. Even if AB InBev acquired SAB Miller (as has been theorized in the financial press lately), it’s my understanding that to have any chance of passing antitrust regulations ABIB/SABM (or whatever that monstrosity might be called) would be forced to sell off ownership of the Miller brand to SABMiller’s current joint venture partner, MolsonCoors. There will still be the Coke/ Pepsi competition in the adjunct lager wars- AB InBev vs MolsonCoors.

  2. But only in the US, Slouch. As noted above, likely the only other area of worry would be China.

    But again, and I must stress, the likelihood, IMO, is very, very low.

  3. Right- should have said in the US only. So you think the likelihood of an acquisition is low even when ABI gets their debt to EBITDA ratio below 2? I wouldn’t put it past them for one more deal-to-end-all brewing deals.

    Either way, I agree with the point that growth for ABI will only come from emerging markets and that’s where their focus will be when it comes to the flagship brands- and they’ll continue to gain footholds in the craft segment through full and partial acquisitions of regional breweries.

  4. Merging two non-growing companies never works. And at least in the US, these two companies are losing market share. Their problem is not that they are each not large enough but that they both really have little idea how to grow or even to maintain the status quo.

    When a strong growing company buys a weaker competitor it can usually be a net plus. Google buying anything for example.

    When two large crappy companies merge (and that’s what they do since their management is clueless), all that happens is two turds become one larger turd. I call that the bigger turd theory. Examples are Sears + Kmart and when GM wanted to merge with Chrysler.

    So I agree, it would be better for the craft beer segment.

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