Planet Budweiser
Mike Laur - June 14, 2008
Holy Consolidation - what’s a beer drinker to think?
The US Justice Department gave its blessing to Coors and Miller combining forces last week. And this week, InBev announced an unsolicited takeover bid for Anheuser-Busch.
Wait a second. Somebody wants to commingle Coors, mess with Miller, and buyout Bud? Has the world tilted on its axis, or is this just some weird hangover?
While this all might seem to be big business as usual - large corporations expand, contract, buyout and consolidate operations all the time - the fact that it’s beer we’re talking about makes it your business, and there is nothing usual about any of this.
Coors, with its flagship brewery in Golden, Colorado, was already wedded with Canadian brewer Molson (eh?) by its “merger of equals” announced in 2004. Officially called Molson Coors Brewing Company, the world’s fifth-largest beer company has dual headquarters in Denver and Montreal.
Miller, in Milwaukee, Wisconsin, was acquired by South African Breweries in 2002. That giant is today called SABMiller, and is the world’s second-largest brewer with headquarters in jolly-old London.
The Coors/Miller matchup will combine their operations in the United States and Puerto Rico in order to save barrels of money - about 500 million dollars in the first three years. According to various reports, they will brew each others beer and trim transportation and sales costs by distributing their products together. The primary goal was to become more competitive with Anheuser-Busch, which sells just under 50% of the beer in the US. The new Coors/Miller combine hopes to sell about 30% of the beer in the US. You can check out these links for more info, but none of them will make you any happier.
Wall Street Journal.
Miller’s spin on beer.
Molson Coors - how’s that for a URL!
But just when you thought it was safe to open up a beer cooler, another internationally intriguing development happened this week. Mega-beer producer InBev makes an unsolicited bid (“hostile”, to a Bud fan) to buy Anheuser-Busch for about $65 a share, or a whopping $46.4 billion. That’s more than the total GDP of most of the countries on the planet, including Croatia, Qatar and Ecuador.
A-B wasn’t exactly thrilled about the invitation, but with slowly eroding market share, escalating costs and a big, fat target on it’s backside, the world’s #1 brewer found America’s #1 brewer to be irresistible fiance material. A-B is looking for some potential support from Mexican brewer Grupo Modelo to thwart the takeover, but this bid is not about sharing mash tuns, delivery trucks and cooler space, like the Coors/Miller joint venture. This is about controlling as much of the market as possible. Again, some sobering links.
Great read from the St. Louis Post-Dispatch
“This Bud May Be For The Belgians” - love that headline!
The take from [1]InBev[1] - {1}http://globalbeerleader.com/index.php{1}
What does Miller think.
Carlos Brito's letter to August Busch IV (a pdf file worth checking out).
It’s going to get more confusing, so put your beer down and concentrate for a moment: Coors is Canadian, Miller is South African, and the Belgians want to get their hands on Bud. Got it?
These companies aren’t joining forces to make your beer taste better. They are powwowing to lower their costs, and better compete on a global scale. The giant, highly-competitive US brewers have proven to be juicy if unwilling takeover candidates for foreign investors, and foreigners realize that the American consumer is the one willing to spend ten dollars on a six-pack of beer.
Of course, beer lovers (like you, dear reader) aren’t spending ten bucks on six-packs of Keystone. They’re buying Fat Tires, and Winter Warlocks, and any of the other 1200 craft beers made here in Colorado, and thousands more from every place else. Craft beer sales have been growing substantially in the last few years, but they still only command around a tiny sliver of the total beer pie - about 6% of total sales, according to Boulder-based Brewers Association.
While craft beer has slowly eaten away at the huge market share of Big Beer, it’s more revealing to see that the mega brewers have realized “if you can’t beat ‘em, join ‘em”. As they come out with specialized, unique beers that appeal to the high-end craft beer consumer, Big Beer is trying to be all beer for all beer drinkers.
And maybe that’s the problem. Or, in the case of InBev, an opportunity. Mega-brewers may have begun to cannibalize their own core consumers - the ones who buy the low-cost, high-margin brews over the high-priced, lower-margin beers - and in the process, lose market share bit by bit until another Big Beer company comes along, taps ‘em on the shoulder, and asks, “Can we dance?”
