In 1970, when Philip Morris bought Miller Brewing Co. neither those within the beer industry or outside the industry, had any clue just what PM would do with the newly acquired company. Phillip Morris put their marketing muscle, which had been so successful in the cigarette industry, into the brewery and the rest is history.
Then when Stroh Brewing bought the Schlitz Brewing Company no one knew what would be the outcome, but many were hopeful that Stroh could turn sales around. Ditto with the G. Heileman Brewing Co. when Allan Bond from Australia bought Heileman.
Moving forward to 2008, InBev bought AB, and once again, no one knew just what InBev had planned for AB. While many thought they knew, the reality was the future was simply just speculation.
Each of these transactions, in one way or another, dependent upon your view, materially changed the beer industry forever. The impact was felt, not only in the US, but throughout many parts of the world’s beer business.
Many recent transactions include: ABInBev buying Modelo, and, of course, Heineken and Femsa to name some other large dealings. Each of these business transactions contributed to the just announced sell out of SABMiller to ABInBev.
Once the SAB Miller/ABInBev deal is finalized, which will probably be early 2017, ABI will represent approximately 35% of the world’s beer volume. So just what will happen next?
Once again, no one can forecast exactly what will happen to either ABInBev or any other brewery or brand as this historical purchase unfolds. Rest assured, there will be plenty of industry pundits weighing in on the deal and giving us their opinion.
What is known is the historical past. What is known is how ABInBev approaches acquisitions. In every buyout, people were laid off, offices were closed and/or gutted, operations streamlined, prices raised, advertising cut, changed or modified significantly, and all resulting in volume losses and eroding market share.
Shareholders were enriched, margins enhanced, costs reduced and the bottom line was increased. And Wall Street would sing praises as stock rose. Finally, the lending institutions will be pleased as their loans will be paid in full.
SABMiller as a company can expect all of this to happen to them as soon as the ink dries. People will be laid off, costs will be reduced, prices will rise worldwide, volume will drop, but ROI will grow and debt will be quickly reduced. This will happen.
Consider the countries where ABI will have 98% of the beer volume. Why would they do anything outside of their business model?
The US and China will be the two countries to watch. Will the companies such as MolsonCoors, who stand to gain the most from this, change their business model and begin to once again chase market share? The same in China with the Snow brand. Where will it go?
We know what ABInBev will do, they will not change, not now, not ever, as long as Brito is there. In fact, expect them to aggressively pursue a larger role in the US three tier system, controlling as much distribution and margins as is legally possible. Craft breweries stand to gain much in the short term, if, and that is a big “if,” they have access to market. Crafts focus should be to grow their category as fast as they can, as soon as they can.
The industry, once again, will change and shift. I have no idea what will happen next. I simply do not have a clue.
Leave a Reply