Anheuser-Busch InBev, brewer of Budweiser, Stella Artois, and more than 200 other brands, is already the largest beer maker in the world, controlling more than 20 percent of global sales. It may soon get a lot bigger: This week it reportedly plans to bid for its closest rival, SABMiller, in a deal that could create a company worth some $275 billion.
If this transaction were to occur without either party being forced to sell off too many assets to meet the demands of government regulators—not a sure thing—it could create one of the world’s 10 largest companies by market value. The resulting “MegaBrew,” a term coined by Sanford Bernstein analyst Trevor Stirling, would control as much as 30 percent of total beer sales.
The planned acquisition continues a dramatic trend of fewer and larger brewers dominating the beer industry. Back in 2000, there were 22 major beer makers. A series of mergers, takeovers, joint ventures, and majority purchases whittled that down to just four in 2012. These four giants, which also include Heineken and Carlsberg, are all headquartered in Western Europe and currently account for more than three-quarters of U.S. beer sales.
And soon that could be just three giants.
So what’s driving this intense consolidation in the beer industry? How are these behemoths handling the rapid rise of craft brewing? And what does it all mean for consumers?
The answers to these questions, as I’ve learned over my 17 years exploring food system trends—particularly industry consolidation—and their impact on sustainability, can be as complex as a hoppy IPA.
The Battle for Growth
AB InBev, which has been rumored to be hunting SABMiller for years, is expected to offer $106 billion to buy the maker of Peroni and Grolsch. It would combine AB InBev’s strength in Latin America with SABMiller’s in Africa, where it controls 90 percent of the market.
Heineken rejected a bid from SABMiller one year ago, a combination that had the potential to stave off acquisition attempts from AB InBev, at least for the near future.
Although all four of the top companies are extremely profitable, they are experiencing flat or declining sales in many of their largest national markets. That has left acquisitions—both of each other and smaller regional breweries—as one of the few options available to continue the rapid rates of growth demanded by their shareholders.
Their other main options for increasing profits include cutting costs and raising prices. And that’s where we get to consolidation’s negative impact on consumers.
