Friday, 25 July 2008

Is brewery consolidation over?

No.

What? You expect more detail? Usually the complaint is that I provide far too much detail. What a picky lot you are.


Mega deals like that between Inbev and Anheuser-Busch usually concentrate the minds of those suddenly confronted with an enormous competitor. I expect a reaction.

Currently, assuming the AB-Inbev merger does go ahead, there are 5 serious global players:

AB-Inbev
SABMiller
Carlsberg
Heineken
MolsonCoors

I expect that number to fall by at least two. Who will join forces with whom? Assuming Inbev will be occupied for some time digesting AB, that leaves us just four.

From a US point of view, combining SABMiller and MolsonCoors would make sense. They've already combined their North American operations. Like AB, the activities of MolsonCoors are mostly concentrated in America. Which puts them at a distinct disadvantage. The only growth in the US is in imports and craft beer.

SABMiller, Carlsberg and Heineken all have a good geographical spread around the world. Though only SABMiller do serious amounts of brewing in the USA. Are they about to start fighting over MolsonCoors?

Yes.

Let's have a look at the possibilities for mergers.

SABMiller-Heineken
Carlsberg-MolsonCoors
Heineken-Carlsberg
Carlsberg-SABMiller
SABMiller-MolsonCoors
Heineken-MolsonCoors
SABMiller-Heineken-Carlsberg
Heineken-Carlsberg-MolsonCoors
SABMiller-MolsonCoors-Heineken
Carlsberg-MolsonCoors-SABMiller

Which is your favourite? Mine has to be Heineken-Carlsberg. Give me a few minutes and I'll think of the reason why. Or SABMiller-Heineken-Carlsberg. How about that for world-domination?

That should be all the permutations. I'll be able to say "I predicted that" no matter what happens.

2 comments:

Laurent Mousson said...

Well, the way Carlsberg and Heineken shared the spoils of the S&N takeover, and announcing the way they would split the assets, so as to keep the European Commission out of the way, is IMHO the shape of things to come.

With the European Commission and US antitrust authorities scrutinizing takeovers and mergers, concentration among global players is due to grind to a halt eventually.
Because any takeover or fusion will mean the new entities would have to put part of what they own back onto the market if their market share is deemed too high by competition authorities in one given country. (you may remember the way Interbrew, having bought the brewing arms of both Bass and Whitbread, found itself forced to resell a sizeable bit of its british assets to someone else, which turned out to be Coors)

This alone means some of those permutations you list already would be difficult to get away with (for instance Carlsberg-Heineken, all the more because Carlsberg is owned by a foundation).

On the other hand, if global players come to a point where they can't swallow one another, they'll try and maintain growth by taking over national players on the markets where they can still grow without incurring the wrath of the relevant competition authorities.

Which would create a bit of a vacuum on those markets between global players and smaller breweries, and probably boost some regionals in those countries into becoming nationals etc.

e.s. delia said...

Carlsberg-Heineken would be my guess, too. They've been gobbling up smaller brewing outfits or subsidiaries in different parts of the world, specifically Eastern Europe. Once that takes place, and InBev gets the A-B acquisition up and running, I think they'll come together. They've already been cooperative with each other in the past.

The other very likely one is SABMiller and MolsonCoors officially merging. They'll be fighting with InBev over stakes here in the Western Hemisphere in some form or another, you can bet.

As I've mentioned, the Mexican market is looking rather lucrative over here, much like Eastern Europe/Russia is to these European-based conglomerates.

Good times aplenty.