Tuesday, August 2, 2016

AB Inbev - SABMiller Merger a Win for Craft Beer

It's hard to believe that it's been almost a year since I first wrote about the Anheuser-Busch InBev takeover of SAB Miller. Well, it's finally official--the Department of Justice has approved the purchase of SABMiller by ABI. I was understandably pretty uneasy about the merger from the start considering the it would put together every macro beer brand in the US into a single company--Miller, Coors, Anheuser-Busch among about 75 other brands--that would control over 70% of the US beer market.

The ABI-SABMiller conglomerate would have controlled over 70% of the US beer market. 

Even more troubling was the implications that this ownership could have had with distribution of our beloved independent craft beer brands because of our three-tiered distribution system. The vast majority of the beer distributors in the US are tied to either Anheuser-Busch or Miller--some are even owned outright by the big breweries (thankfully, this is illegal in KS and MO). If ABI and SABMiller were allowed to merge in the US outright, they would have either owned or wielded enormous influence over the distribution of nearly every beer sold in the country.

But it now appears that my fears will not come true. First and foremost--the Department of Justice negotiated that AB InBev must divest all interest in the MillerCoors holdings of SABMiller in the US. This means that the Miller & Coors will operate completely independently from Anheuser-Busch in the US. This will keep ABI at less than 50% of the market share in the US for the time being (and probably forever considering they're continually losing ground to craft brewers).

Even more important than this are the excellent concessions the DOJ got from ABI in the beer distribution realm. ABI has agreed to end their program that gave incentives to distributors who dropped independent craft beer brands. ABI has also had restriction put on it for distributor ownership. ABI is now unable to purchase further beer distributors if that would lead to them selling more than 10% of their volume through wholly owned distributors. The DOJ further gets to review every purchase of a distributor by ABI regardless of sales volumes to analyze any anti-competitive effects that the purchase may have to the national or local market.

So all things considered, I think this is about as good of a settlement that we craft beer lovers could have hoped for. It should minimize the affect of the merger on the craft market and the US beer market in general.

I still cant get over how awesome this ad is.
But it still rings true today! Right??
My suspicion of why ABI agreed to such hefty concessions is that they don't really give a shit about the US market anymore. From the beginning, the merger with SABMiller was about ABI getting more access to the huge and fast growing African and Asian beer markets. I think that ABI rightly realizes that they are no longer capable of growing in the US market.

People are drinking more liquor and wine, and craft brewers are winning over macro beer drinkers in huge numbers in America. In addition to this, the Millennials are coming of age--the largest generation ever in American is also the least likely in living memory to want beer (or other products for that matter) made by multi-national conglomerates. All ABI can hope for is to keep their investors happy by making up for market losses in the US through overseas growth. So raise a glass of craft beer and toast ABI's long, drawn out demise.

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