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Look east for beer's next consolidators, says Stephen Beaumont |
This month, we welcome a new beer commentator to just-drinks. In his first outing, Stephen Beaumont considers whether Asia's brewers are best placed to feast on the scraps from Anheuser-Busch InBev's table as it devours SABMiller.
In his pioneering 1977 book, The World Guide to Beer, the late beer writer Michael Jackson speculated that a Japanese brewer, perhaps Kirin, might someday become the world's largest. This has proved to have been optimism writ large, of course, with Kirin ranking ninth globally last year, in terms of total beer production. While this was four places ahead of its closest Japanese rival, Asahi, Kirin still fell well behind fellow Asians China Resources Snow Breweries and Tsingtao, and with but a small fraction of the production of global numero uno, Anheuser-Busch InBev.
That said, after having been more-or-less left out of the many rounds of reorganisation and consolidation that have swept through the brewing industry over the last couple of decades, it looks like Asian breweries may be now ready to step boldly into the acquisition sweepstakes.
That's not to say that the Japanese breweries have been entirely dormant for the last decade or more. It was ten years ago that Sapporo purchased Canada's Sleeman Breweries for around US$263.3m; Kirin bought the entirety of Australia's Lion Nathan in 2009 for $2.6bn and added to that with the $1.34bn acquisition of Brazil's Schincariol just two years later; Suntory entered the ranks of the global distillers with the snagging of Beam in 2014 for $16bn; and most recently Asahi has agreed to spend $2.87bn the ex-SABMiller brands Peroni, Grolsch and Meantime if and when the AB InBev megadeal goes through.
Save for that big Suntory spirits purchase, Asia's brewers have been largely left out of the big money deals of the last decade, particularly when it comes to companies outside of Asia and Australasia. Asahi's stepping up for the soon-to-be-former SABMiller brands, however, suggests that this trend may be coming to an end.
The next big deal, of course, is AB InBev's sell-off of SABMiller's Central and Eastern European assets, estimated at a value of between $5bn and $7bn. The breweries and brands involved include Tyskie and Zubr in Poland, Dreher in Hungary and the shining star of the group, Czech's Plzenský Prazdroj, brewer of the Pilsner Urquell brand.
While Asahi will have its hand already full with what it has already agreed to purchase from AB InBev, and Suntory having made an obvious commitment to spirits over beer, there remains every possibility that other Asian brewers will be interested in entering the fray, perhaps not for the entirety of the assets, but as part of a collective deal that will split the breweries and brands between them.
Such deals are hardly unheard of, albeit perhaps more so in distilling than in brewing. Though its Brazilian unit is currently going through some difficult times, Kirin's Australian unit, Lion, is faring well and gives the company a strong distribution network through which to funnel some premium imported brands, which could provide incentive for the Japanese. Equally, though smaller than Kirin by some measure and long thought to be in search of a US craft brewery purchase, Sapporo could easily change its tactics and opt for an established money-maker at the top of its market in place of the growth potential inherent in American craft beer these days.
Other Asian breweries that could be part of a coalition purchase include San Miguel in the Philippines, Boon Rawd in Thailand and South Korea's HiteJinro, the last of which is experiencing increased competition in its home market since beverage producer Lotte Chilsung joined Hite and AB InBev-owned Oriental as a third major brewing company in the country.
Perhaps of greater interest and potential, however, are the big Chinese breweries, who have been all but invisible in the global marketplace dealings to date, save for China Resources Beer agreeing in March to buy back SAB's share in the JV in the country for $1.6bn. With volumes finally slowing in China after years of accelerated growth, the time could be right for the Chinese to finally look beyond their borders for continued growth.
Arguably the most likely participant would be the Chinese brewer with the largest existing presence internationally, Tsingtao. Although 2015 saw declines in both volumes and profits for the global number six brewer, this could serve as an incentive for Tsingtao to turn its gaze internationally, beyond what it is already doing with concerted export development in places such as South Korea.
Additionally, there is a push towards premiumisation ongoing in China these days and it's worth considering whether this might well be laying fertile ground for the arrival of European imports. If any of the big players in the world's largest beer market decide this is indeed the case, then the likelihood of them entering the acquisition fray will grow significantly.
In the end, the biggest reason to look to Asia for possible buyers of AB InBev's latest garage sale of breweries and brands might be the competition concerns that would surely rise should big European brewing powers such as Heineken or Carlsberg show interest. Without those companies involved - and with Molson Coors busy in North America - outside of private equity firms, the Asians would seem to be the likeliest of the remaining contenders.
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