Merger Of World’s 2 Largest Brewers Could Spell Monopoly

Merger Of World’s 2 Largest Brewers Could Spell Monopoly

With craft beers eating into profits in the U.S., Anheuser-Busch InBev — the world’s largest brewing company — wants to expand into Africa and has set its sights on a merger with SABMiller, the world’s second-largest brewer, AP reports.

Belgium-based AB InBev owns Budweiser and five more of the world’s most valuable beer brands including Corona, Beck’s and Stella Artois. U.K.-based SABMiller owns long-time rival Miller Genuine Draft.

Such a deal could mean a monopoly, resulting in a company with annual sales of $73.3 billion and worth about $275 billion — three times larger than Heineken, AP reports.

SABMiller holds about 10 percent of the global beer market compared to AB’s 21 percent, MarketWatch reports. But it’s where that stake is strongest that’s of greatest concern to AB. Growth in beer sales is flat or shrinking in North America, Australia and New Zealand, but rising in Latin American (3 percent), the Middle East and Asia (4 percent) and Africa (5 percent). For big beer, the latter represents the greatest potential.

Taking over Miller would likely draw objections from U.S. regulators worried the deal might lead to higher prices for consumers and stifle competition but InBev is looking to other continents like Africa, AP reports.

Africa is the next beer frontier and SABMiller has a huge presence there, according to AP. SAB owns breweries in Botswana, Mozambique, Nigeria, South Africa, Sudan, Swaziland, Uganda, and Zimbabwe, MarketWatch reports

Craft beers now make up 11 percent of volume in the U.S. market, according to Jonny Forsyth, a global drinks analyst for market research firm Mintel, AP reports. Multinational companies are losing market share and facing competition by — ironically — the little guy, he said.

SABMiller started as South African Breweries in 1895, serving a growing market of miners and prospectors in and around Johannesburg, according to an earlier AFKInsider report.

Two years later, it became the first industrial company to list on the Johannesburg Stock Exchange and the year after (1898) it listed on the London Stock Exchange. After sanctions were lifted against South Africa in the early 1990s, the company started expanding internationally, making several acquisitions in developed and emerging markets. In 1999, it formed a new U.K.-based holding company, SAB, and moved its primary listing to London. In May 2002, SAB acquired Miller Brewing, forming SABMiller.

The big companies are being pushed to consolidate and think long term, AP reports.

“The days of big profits in the U.S. are gone,” Forsyth said. “(The multinational brewers) have to position themselves in the big beer growth market for the next 10 years.”

In Africa, where home brew still dominates, SABMiller offers a foothold, AP reports.

In the U.S., the sheer size of a combined company is expected to push regulators to demand the sale of some brands to ensure fair competition. That could be the case for Miller, AP reports.

“Anytime you have the No. 1 and No. 2 merging, it’s going to be looked at closely,” said Erik Gordon, an expert in antitrust issue at the University of Michigan’s Ross School of Business.