A-B InBev, SABMiller Merger Could be a Positive for the Craft Beer Market

A-B InBev, SABMiller Merger Could be a Positive for the Craft Beer Market

First, a little pat on my own back, because I called this one.

Good call, John!

Good call, John!

Reports have surfaced this last week that Anheuser-Busch InBev, the world’s largest beer producer with almost 20% of the world market in beer, has been exploring the possibility of purchasing its next –largest competitor, SABMiller.[1] Naturally, beer fans and market analysts alike are in frenzy over the mere rumor of such a merger. Before I throw down my own opinions of the matter, though, here are a few facts that the average beer fan should know about even the possibility of such a deal going through.

  1. This is not the first time these rumors have swirled, and there is every possibility that this could be yet another false start. Probably the most compelling argument that this is a legitimate threat, however, is the fact that SABMiller reportedly just made an offer to purchase Heineken International, the 3rd largest beer company in the world. The deal was apparently rejected, but it seems that a merger of some kind amongst the world’s biggest brewers could be in the near future.[2]
  2. This almost certainly would not mean that Budweiser, Miller, and Coors would all be owned by the same company. MillerCoors is a separate entity owned by SABMiller in joint venture with its partner Molson Coors. In the event of a merger with A-B InBev, SABMiller would probably have to divest itself of its MillerCoors assets (as well as its major Chinese assets) to avoid antitrust lawsuits. The combined market share of such a company in the United States would be roughly 80% of the total beer market, clearly violating antitrust laws.[3]
  3. Moreover, the purpose of the deal for A-B InBev would not really be about the United States at all. A-B InBev products already control 46% of the American beer market, a number which is actually smaller than it has been in recent years. Regardless, the “big beer” battle in the U.S. is essentially solidified, but that isn’t a good thing for the beer giant, because growth in America and other developed nations has stagnated and started to retreat. The goal, then, would be to give A-B InBev much wider access to markets in developing nations, where SABMiller is currently much stronger, and where future growth promises to be extremely lucrative.[4]
  4. The deal would reportedly be worth roughly $122 billion.[5]
  5. Consolidation is the name of the game at the highest levels of mega-brewing these days. For reasons I’ll get into below, this move would just be a continuation of a long running trend throughout the world. Within the last few decades we have seen brewing giants AmBev and Interbrew combine to form InBev, followed by their acquisition of America’s largest brewery (by leaps and bounds) Anhueser-Busch to then form A-B InBev. Similarly the combination of Miller and South African Breweries to form SABMiller was then proceeded with their joint venture with Molson Coors (itself a merger of two brewing giants) to make MillerCoors in the United States. Confused? Me too! But here’s the point: this would not be unprecedented, and in fact it’s probably more of a question of when, rather than a question of if.

Ok, so now that we’ve lain down the facts here is my opinion as a Craft Beer lover, industry follower (note: not an industry analyst or an industry expert), and a student of the history of beer production in the United States:

This is a good thing for Craft Beer.

The American beer market as it stands today is headed in one direction and one direction only: craft is winning, and the big guys know it. This is why we have seen companies like Coors (now MillerCoors) start Blue Moon Brewing Company. It is why A-B InBev recently purchased Goose Island and has invested in the Craft Brewer’s Alliance. The numbers don’t lie, the beer industry as a whole has been shrinking for a number of years now, and the only segment that is growing is craft.

Bar Gifts

In 2013, according to the Brewer’s Association, the overall beer market shrank by 1.9%, with imports falling 0.6% in the same year. Craft Beer, however, grew by 17.2%, and its market share by volume had almost reached 8.0% by the end of the year.[6] Craft has now surpassed the 8.0% mark after an incredibly stellar first nine months of 2014. Through August 10th of this year Craft Beer sales were up another 23%, with companies like Sierra Nevada and Boston Beer Company leading the charge, growing at a ridiculous rate for breweries that are already so large by Craft Beer standards.[7]

2013 US Beer Sales, as reported by the Brewers Association. Source

The reality of the situation is that this is ground which “Big Beer” will almost certainly never make up. I have only my own opinion and conjecture to weigh in on this subject, but let me lay out my logic and see if you agree. There are two kinds of craft beer consumer: I’ll call them the opportunistic consumer and the dedicated consumer.

The opportunistic Craft Beer consumer will drink a craft brand if it is convenient, say a friend buys one for them, and they will enjoy it or at the very least be challenged by it and experience its flavor differences from the mass produced beers, but still turn to their mega-brew regular in most situations. This type of consumer would appear to me to be a convert-in-waiting. From my experience a person reaches a kind of critical mass of flavorful beers and begins to appreciate the nuances and bold expressions of the ingredients. From that point on light lagers begin to look more and more like a waste of money spent on a less enjoyable beer.

Aside from strictly economic reasons (which of course are a major consideration) the difference between a dedicated Craft Beer consumer and a non-craft drinker is just a matter of time, opportunity, and exposure. As the craft segment continues to grow, and more beers are available more widely, the number of people in the process of the transition is growing exponentially. Once a person has made the value judgment that a flavorful beer is preferable to a mass produced light lager, they are not likely to return to drinking something which in their own consideration is now an inferior product.

All of this brings me back to why I think this possible merger is a good thing for Craft Beer and Craft Beer fans. Big beer survives on marketing, branding, and an extremely consistent product, and they thrive off of consumers who identify with their brand so much that it is all they drink. The experienced beer drinker knows that the differences between the largest mega brands are almost indistinguishable; they are all making virtually identical beer. Their only recourse, therefore, is to sell the brand, the image, rather than the liquid itself.

For decades this helped build these massive breweries into the behemoths that they would become, but we live in a different era now. The very size and strategy of these companies are now working to push consumers into the Craft Beer camp. They have some of the most powerful movements in the food/beverage markets working against them. New trends in consumers have a growing number of people looking for the local, the artisanal, the organic, the personally relatable, and the socially and environmentally responsible product. This leaves behind the mass produced, faceless, slick-marketed, mega corporatized products of companies like A-B InBev, SABMiller and other beer giants. Every move these companies make toward becoming even bigger, even more disconnected from the consumer, and even more reliant on the omnipresence of their brands makes them less appealing to the new age consumer.

To put it another way, all of those billions of advertising dollars will be falling on more and more deaf ears as it becomes increasingly obvious that there is nothing really authentic about the largest brands of beer. The advertising campaigns used to sell them don’t reflect the actual attitude of the company, they are simply saying whatever they feel has the best chance of increasing sales.

Our research indicates that boobs sell beer

Our research indicates that boobs sell beer

When a single organization holds the rights to more than 300 brands of beer, it becomes harder and harder to convince a consumer that the values which they once related to in that brand (if they ever existed at all) are still important to the producer. In the eternal words of Fritz Maytag: “small is beautiful”. As long as there is an A-B InBev and/or SABMiller to be compared to, even large Craft Breweries like Yuengling and Boston Beer Company will continue to look small and artisanal by comparison, not to mention the thousands of even smaller breweries across the nation.

For the fan of Craft Beer, what is good for the craft as a whole is good for us. What is good for the craft is to have more people continue to make that transition away from the big guys and start to discover what real beer tastes like. While it might help A-B InBev’s investors’ stock portfolios, and give them access to new markets where they can peddle their near-beers, this merger could very easily bring even more impetus to the flourishing success of the Craft Beer market worldwide, and that’s something we can all raise a glass in celebration to.


[1] Eisenberg, David. “A-B Reportedly Trying to Finance SABMiller Deal.” Brewbound Newsletter 15 Sept. 2014. Web. http://www.brewbound.com/news/2014/a-b-reportedly-trying-to-finance-sabmiller-deal?utm_source=Brewbound&utm_campaign=50d4ee5ecd-mailchimp&utm_medium=email&utm_term=0_6026cb3473-50d4ee5ecd-168786513
 
[2] Id. Eisenberg
 
[3] Ferdman, Roberto. “Nearly One in Every Three Beers in the World Could Soon Be Sold by the Same Company.” The Washington Post 15 Sept. 2014, Wonkblog sec. Web. 20 Sept. 2014. <http://www.washingtonpost.com/blogs/wonkblog/wp/2014/09/15/nearly-one-in-every-three-beers-in-the-world-could-soon-be-sold-by-one-company/>.
 
[4] “’Beer Behemoth’ Merger Could Happen.” CBS This Morning. CBS Interactive Inc., 16 Sept. 2014. Web. 20 Sept. 2014. <http://www.cbsnews.com/news/anheiser-busch-inbev-sab-miller-beer-merger/>.
 
[5] Id. CBS
 
[6] “National Beer Sales & Production Data – Brewers Association.” Brewers Association. Brewers Association, 1 Jan. 2014. Web. 22 Sept. 2014. <http://www.brewersassociation.org/statistics/national-beer-sales-production-data/>.
 
[7] Furnari, Chris. “IRI: Craft Beer Sales Up 23 Percent Through August 10.” Brewbound Newsletter 27 Aug. 2014. Web. http://www.brewbound.com/news/2014/iri-craft-beer-sales-up-23-percent-through-august-10?utm_source=Brewbound&utm_campaign=cd8ff9fe8c-mailchimp&utm_medium=email&utm_term=0_6026cb3473-cd8ff9fe8c-168786513
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