PORTLAND, Ore. (TheStreet) -- Ever since the Financial Times dropped the suggestion beer-and-spirits company Diageo might merge with SABMiller, much of the drinks industry has had a great time playing the speculation game.
Almost none of the scenarios mentioned anything about the U.S. beer market.
Yes, it would be a massive combination of Diageo's $80.4 billion market cap and SABMiller's $52.6 billion. Yes, those combined businesses could create nearly $8.6 billion in free cash flow. Yes, it would only tighten SABMiller's grip on the African market by bringing big African brands including Tusker, Senator Keg, Windhoek, Bell, Serengeti, Meta, Harp, Foundry cider and Guinness Foreign Extra Stout into the fold.
Yes, but it's less than those big brands would have you imagine. According to trade publication Beer Marketer's Insights, Diageo's beer brands brought 2.6 million barrels worth of beer into the U.S. in 2012. A year later, that total dropped by 1% as drinkers failed to take to Guinness Black Lager and supply problems hampered Red Stripe's performance. By comparison, SABMiller's and MolsonCoors' North American joint venture MillerCoors produced 58.9 million barrels for U.S. consumption in 2012 and held a 27.6% share of the market compared with Diageo's 1.2%. MillerCoors' total far outpaces that of its second-largest U.S. competitor -- Constellation Brands, with its nearly 6% of the overall U.S. beer marketplace -- while Diageo's share lags behind both regional brewer D.G. Yuengling & Sons (1.3%) and Samuel Adams producer Boston Beer (1.3%). That doesn't mean Diageo's 2.5 million barrels or so wouldn't be welcome in MillerCoors' U.S. portfolio, mind you. MillerCoors has watched production slip from 59.6 million barrels in 2011 to about 57.7 million last year as sales of core brands including Miller Lite and Miller High Life continued their post-recession slump. With MillerCoors developing higher-end, craft-style brands including Blue Moon and Leinenkugel's, adding Guinness, Red Stripe, Smithwicks and other brands to its Tenth & Blake craft and import division would broaden its portfolio and shore up its overall numbers a bit.