
How the Anheuser-Busch InBev-SABMiller Deal Will Affect Your Beer
NEW YORK (MainStreet) –- It's tempting to look at a huge deal like Anheuser-Busch's accepted purchase of SABMiller and think that it's far too big to affect U.S. drinkers.
It's wrong, but tempting.
The $104.5 billion deal still faces regulatory hurdles, both here and abroad. It will also have to hold up to antitrust scrutiny, which A-B InBev's $20.1 billion deal for Mexico's Grupo Modelo didn't when it came before the Department of Justice. Grupo Modelo's products, now brewed for the U.S. at a separate facility and sold by Constellation Brands, have a roughly 7% share of the U.S. beer market, according to Beer Marketer's Insights. SABMiller's joint venture with Molson Coors, MillerCoors commands 26% of the U.S. beer market.
And the language of the MillerCoors agreement states that MolsonCoors is to increase its share of MillerCoors from 42% to 50% if SABMiller is sold. It also gets the rights to the first and last offer on the remaining 50% and to the naming a new chief executive. So there's a chance that, for consumers, everything stays just as they know it.
But there's also a chance that it won't. MillerCoors saw sales in the second quarter sit flat from a year ago at $2.2 billion. Its chief executive, Tom Long, retired in June and left MolsonCoors chief financial officer Gavin Hattersley as the joint venture's interim leader until he assumed those duties full time a month ago. That month, MillerCoors took two steps: it bought San Diego craft brewer Saint Archer for its Tenth and Blake specialty beer division, and it announced plans to shut down its 9-million-barrel plant in Eden, N.C., and lay off more than 500 employees.
Even before this deal, MillerCoors was getting leaner and shifting focus. The Miller Lite brand -- which still accounts for 7% of all U.S. beer volume, compared to 11% for all craft brewers combined -- has seen production, sales and market share slide steadily for a number of years. The Miller High Life brand has also sputtered, with sales slumping by more than 5% a year for the last three years, on average. Even low-budget Keystone Light, which saw growth in the years following the recession, saw sales slip 7.4% last year.
In fact, the only brands seeing consistent growth for MillerCoors are its Blue Moon and Jacob Leinenkugel craft-style beers, its Redd's fruit-flavored malt beverages and its Coors Banquet -- helped out largely by packs of nostalgic stubby bottles. As a result, MillerCoors has worked at making its brewing facilities in Milwaukee and Virginia more efficient and, more importantly, more nimble and able to brew different kinds of beer.
If A-B takes the Miller parts away, it would gain tools that would fit nicely alongside Chicago's Goose Island, Long Island's Blue Point, Seattle's Elysian, Oregon-based 10 Barrel, Michigan's Virtue Ciders and Los Angeles brewer Golden Road in Anheuser-Busch InBev's growing craft portfolio. That gives A-B yet another way to carve out more space on store shelves and bar/restaurant taps, which applies even more pressure to Blue Moon, Saint Archer, Leinenkugel and craft brewers.
It would also give A-B yet another growing portion of a U.S. beer industry that's otherwise shrinking. Beer sales have been flat or in negative territory since the recession, with the industry's 0.5% growth in 2014 masking 17.6% growth among craft beer brewers and a 6.9% uptick for imports. That's not to mention that and A-B would get more of those by adding SAB's Pilsner Urquell, Peroni, Grolsch and other imported brands to a stable that already includes Stella Artois, Leffe, Kirin, Hoegaarden and others. Basically, if A-B decides it needs more space in the import aisle from, say, Diageo's Guinness or Heinken's Dos Equis (or Heineken and Amstel, for that matter) it has even more means of taking it.
By pushing established brands like Coors and Heineken closer to the margins, an SABMiller-empowered Anheuser-Busch InBev can jostle even smaller brewers out of the picture altogether. While larger craft brewers including Samuel Adams brewer Boston Beer Company, Sierra Nevada and New Belgium have the distribution systems, recognition and leverage to weather the storm, smaller brewers may have an even more difficult time navigating a marketplace in which Anheuser-Busch InBev exerts such power. That's made craft brewers more creative in the past -- introducing brewpubs, growlers, independent bottleshops, taprooms, brewer's dinners and even self-distribution as alternative means of getting beer to the masses.
However, the most important thing this deal may do to change beer in the U.S. is to encourage smaller brewers, drinkers and independent distributors to lobby for changes within the beer industry itself. Already, the Justice Department and the California attorney general's office are investigating Anheuser-Busch InBev's distribution practices in that state, while spirits-driven Kentucky enacted a law earlier this year forbidding brewers to own distributors.
If any of those initiatives is enacted on a grander scale, beer drinkers could see a future where the distribution playing field is leveled and beer sellers including supermarkets take a more wine-style approach that groups beers by style rather than by distributor or brewer's whim. With this deal poised to give Anheuser-Busch InBev 50% or more of the U.S. beer market and nearly a third of global beer sales, something is going to change for U.S. beer drinkers. It may be up to them to decide whether it changes for better or for worse.
This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.








