Part three of our annual review of the year brings us Chris Mercer's look at how 2010 has treated the world's brewers.

Brewers have spent the last 12 months nursing what could be likened to the second day of a two-day hangover. Emerging markets spearheaded a general sense of improvement in the global beer market and we've seen stronger interest in mergers and acquisitions, yet the economic headache continues to twinge.

There was barely time to digest the Christmas dinner before Heineken announced its swoop for FEMSA Cerveza. Many analysts and observers were still naming SABMiller as the frontrunner to buy Mexico's second largest brewer when Heineken sprang its trap. The Netherlands-based group needed to improve its exposure to emerging markets and that meant it simply wanted FEMSA Cerveza more. It handed over 20% of its business to FEMSA Cerveza's parent firm, FEMSA, in the subsequent EUR3.8bn deal. Together with its agreement for a 37.5% share of United Breweries' blossoming beer business in India, Heineken has a strong claim to be the most improved player in the last 12 months.

Any notion that Heineken's tie-up with FEMSA would usher in a fresh round of industry consolidation proved to be a false dawn, however. In terms of mergers and acquisitions, the rest of the year has yielded more speculation than action. This is unsurprising, seeing as most of the major brewers have been concentrating their efforts on cutting costs and consolidating existing operations.

Much speculation has centred on Foster's Group, following its announcement in May that it would demerge its struggling wine arm from its Australian beer arm, Carlton & United Breweries (CUB). Any brewer with cash was immediately thrust into the frame for CUB, which has leaked some market share in the last five years but still accounts for one in every two beers sold in Australia. Wine has for so long protected CUB from predators by operating as a de facto poison pill, but Foster's is intent on splitting the two divisions in the first half of 2011. SABMiller and Japan's Asahi and Suntory are considered frontrunners to swallow CUB. Will it be a case of FEMSA deja vu for SABMiller?

The Peroni Nastro Azzurro brewer has let it be known that it will "run the numbers" over most things that come up on the beer market. One can almost hear the investment bankers salivating over SABMiller's strong balance sheet. More recently, the group has been linked with a move to acquire Castel's African beer operations, but we are still guessing as to its next move.

The world's largest brewer, Anheuser-Busch InBev, has had a quiet year by its standards. So quiet, in fact, that some are wondering what the brewer's Brazilian leadership could be plotting next. There's been a great deal of politicking around Mexico's Grupo Modelo, in which A-B InBev secured its right to a 50% non-controlling stake during the year. Most analysts expect A-B InBev to move in on Modelo at some point. But, the Mexican brewer's ruling families have been keen to distance themselves from the speculation, announcing their intention to retain control of Modelo and seemingly taking every chance to snub the Budweiser brewer, including handing distribution of Corona Extra lager to Molson Coors in the UK. Other observers have suggested that A-B InBev could be plotting something bigger - much bigger. There has been talk of a move on PepsiCo at some point.

Emerging markets in Africa, Asia and Latin America have underlined their importance to multinational brewers in 2010, amid ongoing weak consumption across much of Europe and North America. Africa, in particular, has been a strong focus due to rising competition between SABMiller and team Diageo-Heineken, not to mention a certain football tournament named the FIFA World Cup.

Less than three months before the World Cup kicked off in South Africa, Diageo and Heineken officially opened their first brewery in the country, near Johannesburg. Considering SABMiller has a near-90% volume share of South Africa's beer market, this was a bold statement of intent from Diageo and Heineken and a clear sign that competition between brewers is hotting up in Africa in general. We've seen skirmishes in a number of African markets, such as Tanzania, where Diageo's East African Breweries unit split from SABMiller's Tanzania Breweries Ltd in order to obtain control of rival group Serengeti Breweries.

SABMiller emerged as the apparent winner of the intra-beer wars during the World Cup in South Africa over the summer. It bought up most of the outdoor advertising space in the country and even supplied beer, albeit unbranded, to the ten FIFA fan parks around the nation - because FIFA's official sponsor, A-B InBev, couldn't supply the volumes. As it was, A-B InBev was forced to ship Budweiser over to South African football stadiums from its Stag Brewery in the UK.

Diageo and Heineken's decision to plant a flag pole in SABMiller's South African stronghold was just one example of a trend throughout 2010 that saw brewers seeking to establish footprints in markets dominated by their rivals. SABMiller has sought to unsettle Heineken's honeymoon period in Mexico by requesting that the country's competition authorities examine the beer market duopoly between FEMSA Cerveza and Modelo. The investigation is ongoing, SABMiller's new head for Latin America, Karl Lippert, told just-drinks at the end of November.

We have also seen SABMiller move in on Heineken's homeland in the Netherlands with the launch of Peroni Nastro Azzurro and Pilsner Urquell. The Peroni brewer has also bought Casa Isenbeck in Argentina, where A-B InBev's Quilmes subsidiary dominates. Heineken, meanwhile, is keen to build its namesake brand in Brazil, which again is dominated by A-B InBev. In the thirst for new growth opportunities, all brewers see potential to add value by building premium beer segments in markets largely controlled by rivals.

The proverbial elephant in the room so far in this review has been regulation, whose shadow continues to loom large in several markets. Nowhere has this been more apparent for brewers than in Russia, where the Government tripled tax on beer in January and is still in discussions on ways to restrict alcoholic drinks sales generally in the country. Russia's beer market, once the darling of multinational brewers, had already shrunk in 2009 and the country's leading brewer, Carlsberg's Baltika Breweries, forecast a further 10% drop in 2010 as a result of the tax hike.

However, Carlsberg has largely maintained its market share of near to 40% and has since revised its 2010 estimate to a market decline of below 10%. Analysts believe Russia will return to growth in the next couple of years, particularly as the country's economy recovers. Carlsberg will also be cheering news that the country has this month been chosen by the FIFA demi-gods to host the football World Cup in 2018.

Elsewhere, regulation continues to be a particular bug-bear in the UK, where the new Government plans to "overhaul" licensing laws, ban 'below cost' sales and continue to tax alcohol strongly. Beer sales reported their biggest fall in the British Beer & Pub Association's records in the third quarter of 2010 and have been in decline for most of the last decade.

There is a similar picture, although less drastic, in the US, where the big names of MillerCoors and A-B InBev have relied on cost cutting and price increases to buoy results. The anomaly in both the the UK and US, however, is that small-scale brewers have continued to far outpace their larger rivals. So much so, in fact, that MillerCoors has set up its first dedicated business to 'craft' beer and imported beer, named Tenth & Blake. This will be one to watch in 2011.

It's been a mixed year, then, for the family of global brewers. The vestiges of the global economic crisis have continued to upset the rhythm in several countries and the M&A table, although more plentiful than in 2009, is still a few sandwiches short of a full platter. That said, there is every reason to believe that things are on the up. Emerging markets, from Brazil to African nations to China and India, have continued to grow, while many brewers have used their down-time wisely by attempting to create more efficient businesses in mature countries across Europe and North America.

The next 12 months is likely to see much more takeover activity. While Foster's Group's future is the key M&A news to watch for over the next six months, a fresh round of industry consolidation on a global scale may be closer than one would think.