Anheuser-Busch InBev and SABMiller announced Tuesday they had reached a deal to combine two of the world's largest beer companies. The acquisition, which was agreed to after several failed offers over the past few years, is reportedly worth $106 billion, which would make it one of the biggest corporate mergers in history. As of now, the agreement would create a behemoth that would control nearly a third of the world's beer supply.
Anheuser-Busch InBev, based in Belgium, owns a handful of the world's most famous beer brands, including Bud Light — which accounts for one in every five beers sold in the United States — Corona, Stella Artois, Beck's and Modelo.
London-based SABMiller, meanwhile, sells a number of well-known brands, too, including Castle Beer, Miller Lite and Miller Genuine Draft. The company also has found success with a selection of more localized beers, such as Aguila and Poker, which are popular in parts of Latin America.
Together, the combined reach would be like nothing seen before in the industry. And for that reason, there has been some reluctance regarding what that kind of power could mean for beer markets such as that of the United States, where the two companies control more than 70 percent of sales. But there's reason to believe this deal has more to do with synergies around the world than it does with exerting power over any single market.
"I keep hearing people talk about how this is going to affect the U.S. market, but there will be virtually no impact at all," said Mike Mazzoni, a senior partner at Seema International and longtime beer industry veteran. "Things will literally be just as they were before."
The expectation, according to Mazzoni and others in the industry, is that Anheuser-Busch InBev will have to sell its ownership stakes in companies such as Miller Coors to gain the approval of antitrust officials. As a result, familiar brands such as Miller Lite and Coors Light could end up in the hands of a third party.
"That's the extent of it," Mazzoni said. "I'm told Molson Coors, which operates globally and in Canada, and sells Molson and Coors, is the likeliest buyer."
Gene Kimmelman, president of Public Knowledge and a former top antitrust official, says the buyer probably will have to be large and able to handle a beer company as big as Miller Coors, meaning Molson Coors would make perfect sense. "This comes at a time when the antitrust agency has been very aggressive and forceful in the United States," he said. "They're not only going to have to find a buyer, but also, I think, look for some other substantial entity that can run Miller Coors that's big enough to replace Anheuser-Busch InBev without hurting competition or driving up prices."
The truth is that this deal is much more about filling holes than anything else. Expansion has long been well within Anheuser-Busch InBev's vocabulary — the beer maker, which controls more than 20 percent of the the global beer market, has achieved some of the highest margins in the industry by scaling its business to cut costs, and often by way of big buyouts. Look no further than the company's name for evidence. Brazil's AmBev and Belgium's Interbrew combined in 2004 to become the world's largest beer maker; just four years later, in 2008, the newly formed company gobbled up American beer giant Anheuser-Busch. The company's current name, Anheuser-Busch InBev, is a testament to its merger-driven growth.
SABMiller, by comparison, has built its business by establishing successful local brands, largely in markets yet untapped by Anheuser-Busch InBev.
Combining the two will mean gaining a foothold in a number of beer markets that Anheuser-Busch InBev has been eager to enter, including much of Africa and Latin America. It also will mean doing so efficiently, as the infrastructure is already in place to expand. "You put two large companies together and you create all sorts of synergies, all sorts of cost savings," Mazzoni said. "We're talking about billions of dollars, right off the bat."
At first consumers probably won't notice any difference, but down the road they might. The acquisition could eventually mean a more heterogeneous beer selection around the world. It won't be long, after all, before Anheuser-Busch InBev looks to spread its big money-making brands — think Bud Light and Corona — to places where other, smaller, locally produced beers have historically sold well.
Joe Thomspon, president of industry consultancy Independent Beverage Group, said it might also work in the opposite direction as well. “We might soon see some of these local brands all over the world, thanks to the reach of their marketing and distribution power."