With MegaBrew sorted, is MegaBev on the horizon? - Research in Focus
Anheuser-Busch InBev's announcement of its proposed acquisition of SABMiller late last year did not come as much of a surprise, and was the culmination of over a decade-and-a-half of merger and acquisition activity by brewers. However, it raises some interesting questions, not only in how the deal will work, but also what is next for the brewing industry - or, for that matter, the overall drinks industry.
M&A activity has been the key growth driver for brewers. In keeping with the Frank Zappa quote: "You can't be a real country unless you have a beer…", the brewing industry has historically consisted of strongly-established, large, local brands produced near the point-of-sale by domestic brewers. In beer, the business model requires having the capacity to produce large volumes in-market. Unlike in spirits and wine, where volumes are smaller and products more diverse, it is far harder to develop a beer brand from scratch and gain the scale and profitability required.
As a consequence, brewers have expanded by buying up local production and brands, and improving the profitability of the operation primarily through cost-cutting, but also through organic growth and premiumising the portfolio to make the acquisition pay. International brewers have then used the new operations to launch their own 'premium' international brands in those markets, mostly with relatively small improvements.
In its various forms, A-B InBev has been the greatest exponent of this, managing to cut costs more efficiently than other major international brewers with its zero-based budgeting driving the highest margins in the business. This has allowed the company to gain the scale required to do the deals and make it the brewing industry's leading player and to take over SAB.
Following the purchase of SAB, widely expected to complete early next year, there will be limited options remaining for the multinational brewers. Those options remaining comprise smaller players; thus, there will be a need to consider new options. Euromonitor International's recently-published global briefing, "What Next for Beer and Brewers Following the MegaBrew Deal?", considers the immediate consequences of the deal in terms of anti-trust issues. More importantly, the research also looks at the different options that brewers have been looking at to carry on growing, now that the M&A well is nearly dry.
Options could include developing a presence in a market organically, as SAB has done in a handful of markets, through to product diversification such as a move into cider/perry or thanks to similar distribution and production models moving in to non-alcoholic drinks.
This, in turn, could eventually mean the arrival of 'MegaBev', the possible acquisition of The Coca-Cola Co by the enlarged AB InBev.
What Next for Beer and Brewers Following the MegaBrew Deal?
A-B InBev’s acquisition of SABMiller is not a surprise and the culmination of over a decade and half of M&A activity by brewers....read more
Canadean's "SABMiller plc : Alcoholic Drinks - Company Profile, SWOT & Financial Analysis" contains in depth information and data about the company and its operations....
Anheuser-Busch InBev NV has an extensive strategic policy having just bought the American company SABMiller in 2015....
Anheuser-Busch InBev’s top domestic priorities in 2016 are to expand its premium beer offerings whilst elevating consumer sentiment towards core brands....
The report provides a review of the mergers and acquisitions (M&As), partnering deals, and agreements entered into by companies active in the global spirits market during January....
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