Roberto A. Ferdman (c) 2014, The Washington Post.
There’s a global beer behemoth in the works. Anheuser-Busch InBev, the world’s largest beer maker by volume, is preparing itself to offer as much as $125 billion for SABMiller, which sells Castle, Miller, Peroni, and Foster’s. The beer giant is currently discussing the financing of the deal with banks, according to reports by The Wall Street Journal. A merger between the two would create one company that controls nearly a third of the world’s beer supply.
Anheuser-Busch Inbev brews a number 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, which it sells nearly 2 billion liters of each year, Stella Artois, and Modelo.
SABMiller sells many familiar brands, including Castle Beer, Miller Lite, and Miller Genuine Draft, but also a handful of highly successful localized beers, like Aguilar and Poker, which it sells in parts of Latin America.
Speculation of a deal between the world’s two largest beer companies is nothing new — the two have been rumored to be discussing such a deal in the past, and industry analysts have long fantasized what a joint company would look like. But there are many indications that this time the merger might actually happen. “There are strong indications that Anheuser InBev not only wants to acquire SABMiller, but is actively pursuing the buyout,” said Amin Alkhatib, an industry analyst at Euromonitor. “It’s really just a matter of whether they can afford to do it.”
SABMiller, which is publicly owned, is susceptible to a buyout because there is no majority shareholder capable of preventing such a purchase. The company recently made an offer to purchase Heineken, which is still privately owned, but the offer was rebuffed.
Expansion is well within Anheuser Busch InBev’s vocabulary — the beer maker, which currently controls more than 20 percent of the the global beer market, has achieved some of the highest margins in the industry by successfully 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.
Acquiring SABMiller would mean gaining a foothold in a number of beer markets that Anheuser-Busch InBev has been eager to enter, including much of Africa. The acquisition could also lead to the quickened spread of international brands like Bud Light and Corona at the expense of local brands like Carling Black Label, Aguilar, and Poker. “The merger might lead to less options for consumers in various emerging markets, and a greater emphasis on global brands,” said Alkhatib. “You will definitely see the Budweisers and Coronas of the beer world introduced into smaller markets in Latin America and Africa.”
While anticipation for a deal swells, there are still several realities that could thwart, or at the very least complicate, an agreement. For one, a joint company is likely to run up against antitrust legislation in both the United States, where Anheuser-Busch InBev already has a nearly 50 percent market share (together, Anheuser-Busch InBev and SABMiller control more than 80 percent of the beer supply), and China, where SABMiller has a significant stake in China Resources Enterprise, which sells Snow beer, the largest brand in the world by volume. The speculation is that any merger between the two would entail the resulting company letting go of Miller Coors and Snow beer in the U.S. and Chinese markets, respectively.
There are even complications that exist outside of each company’s beer venture. Anheuser-Busch InBev holds the license to sell Pepsi in certain parts of Latin America, while SABMiller holds a similar license to distribute Coca Cola in Africa. “That will likely present itself as a conflict of interest,” said Alkhatib.
Still, the upside to such a deal is likely to outweigh any concessions Anheuser-Busch InBev might have to make in order to ensure that it is approved. It would, after all, effectively expand the company’s dominance to most of the world. “Combined, the new company would have an essential monopoly on many regional levels, including across most of Latin America,” said Alkhatib. “One of the only remaining holes would be Europe, where Heineken and Carlsberg are still the leaders.”