Reuters Hinting At Possible ABI/SABMiller Merger

abib sabmiller
Rumors and discussions of a possible merger between Anheuser-Busch InBev and SABMiller are nothing new, it’s been talked about by the business press off and on for a number of years now. But it had been quiet lately, most likely because of the deal by ABI to buy Grupo Modelo. But yesterday Reuters fanned the flames of merger once again, in a piece of speculation: Bets on for mega brewer merger as virgin ground shrinks.

With the acknowledged bullet points that “Asia main area with assets left to buy,” and that the ABI and SABMiller would combine the “growth markets” of Africa and Latin America,” they put the price for ABI to buy SABMiller at at least $100 billion. According to Reuters:

Now, with AB InBev planning to return to a comfortable pre-deal debt-to-EBITDA ratio of below two next year, industry experts are betting on a combination of its Budweiser and Stella Artois brands with SABMiller’s Peroni and Grolsch. Some expect a deal within a year.

“It’s more a question of when, not if,” said a banker who has worked on drinks deals. Others, also speaking on condition of anonymity, cited AB InBev’s record as a serial acquirer and the need for a target to match or surpass its $52 billion purchase of Anheuser Busch in 2008.

Asia, they claim, is the next frontier, though many of the bigger breweries are state-owned (which means expensive). Interestingly, while they admit that SABMiller would also be expensive the Reuters’ business analysts believe “a tie-up would be straightforward with antitrust issues relatively easy to fix and immediate benefits of scale.” Other analysts, however, do see potential problems with the merger from “regulators is in the United States and China” because of the market overlap in those countries.

Price, not surprisingly, is the elephant in the room, and the estimated $100 billion ticket price would make such a deal the “fifth-largest corporate acquisition ever.” Reuters places the current value of SABMiller at $84.5 billion and believes it’s in ABI’s best interest “to move fast before SABMiller gets more expensive.” But would SABMiller be interested in selling? “SABMiller’s two top shareholders — cigarette maker Altria Group and the Santo Domingo family of Colombia, which own 27 percent and 14 percent, respectively — ‘may think this is as good as it gets,’ said another banker.” So that suggests that the people behind the curtain might be amiable to the buyout. A couple of years ago, writing about this very possibility of a merger, I recalled that when the AB/InBev merger went down, someone joked that eventually there would be just one international beer company and it would just be called “Beer.” I remember laughing at the time, but truth really is stranger than fiction. So who knows? It should be an interesting year.

ABI Beer Brands …

plus …

SABMiller Beer Brands …

Equals = ?

SABMiller Testing Beer Brewed For Women

Depending on your perspective, there’s good and bad news for women who love beer. Yesterday, Marketwatch casually mentioned that “SAB Miller, the world’s second largest brewer, is testing a new line of lighter and sweeter beers. Executives are also planning new ad campaigns geared towards women.” Other CBS affiliates, such as WREG Memphis, picked up the story but added little, apart from saying the new line will be “brewed especially for the ladies.” That’s all the information there is, so far, not even the SABMiller website has any additional information or a press release, at least not yet.

But if you’re one of those of the female persuasion that can be reduced to the stereotype of only liking sweet flavors, and don’t mind being pandered to, this just may be the beer for you. But if you’re a real person, like pretty much every beer lover I know who also happens to be a woman, this is probably just going to piss you off. I honestly don’t understand why the big beer companies keep trying this. Has it ever worked, anywhere in the world? People who understand and can appreciate the complex flavors of a good beer, will like it, irrespective of their reproductive organs. So just make good beer, educate your customers about it, and beer lovers — male and female — will drink it. Why is that so hard?


It’s Done: ABI & Modelo Merger Deal

The inevitable approval of the merger between Anheuser-Busch InBev and Grupo Modelo moved one step closer today, according to Harry Schuhmacher’s Beer Business Daily, who writes that a “consent decree has been filed with a federal judge today seeking court approval of the ABI-Modelo-Constellation deal with the DOJ. News of the settlement agreement comes before the April 23 court deadline to report to U.S. District Court.”

Apparently, “[t]he agreement is close to the one A-B revised in February, selling the big Piedras Negras brewery to Constellation and allowing them to some time to expand that facility to brew all of US Modelo beers (and any others Constellation wants to brew there). But the agreement also includes ‘certain distribution guarantees for Constellation in the United States.'”

Constellation Brands released a statement, Anheuser-Busch InBev and Constellation Brands Announce Revised Agreement for Complete Divestiture of U.S. Business of Grupo Modelo, outlining the deal, and the transaction website, Global Beer Leader, also has a statement.


Here’s part of ABI’s press release:

Anheuser-Busch InBev and Constellation Brands Announce Revised Agreement for Complete Divestiture of U.S. Business of Grupo Modelo

AB InBev to sell Piedras Negras brewery and grant perpetual rights to Constellation for Corona and the Modelo brands in the U.S. for USD 2.9 billion

Constellation to acquire 50% of Crown it does not own for USD 1.85 billion

Terms and merits of combination between AB InBev and Grupo Modelo relating to global deal remain unchanged

AB InBev synergy projection revised to approximately USD 1 billion from USD 600 million

Anheuser-Busch InBev (Euronext: ABI) (NYSE: BUD) and Constellation Brands, Inc. (NYSE: STZ, STZ.B) today announced a revised agreement that establishes Crown Imports as the #3 producer and marketer of beer in the U.S. through a complete divestiture of Grupo Modelo’s (BMV: GMODELOC) U.S. business. The transaction establishes Crown as a fully owned entity of Constellation, and provides Constellation with independent brewing operations, Modelo’s full profit stream from all U.S. sales, and rights in perpetuity to the Grupo Modelo brands distributed by Crown in the U.S.

As part of AB InBev’s acquisition of the 50% of Grupo Modelo it does not already own, AB InBev has agreed to sell Compañía Cervecera de Coahuila, Grupo Modelo’s state-of-the-art brewery in Piedras Negras, Mexico, and grant perpetual brand licenses to Constellation for USD 2.9 billion, subject to a post-closing adjustment. This price is based on an assumed 2012 EBITDA of USD 310 million earned from manufacturing and licensing the Modelo brands for sale by the Crown joint venture, with an implied multiple of approximately 9 times. The sale of the brewery, which is located near the Texas border, would ensure independence of supply for Crown and provides Constellation with complete control of the production of the Modelo brands for marketing and distribution in the U.S.

AB InBev and Constellation have agreed to a three-year transition services agreement to ensure the smooth transition of the operation of the world-class brewery, which is fully self-sufficient, utilizes top-of-the-line technology and was built to be readily expanded to increase production capacity. During this 3 year timeframe, Constellation plans to invest approximately USD 400 million to expand the Piedras Negras facility, which will then enable it to supply 100% of Crown’s needs for the U.S. marketplace. Today, Piedras Negras fulfills approximately 60% of Crown’s current demand.

As previously announced on June 29, 2012, AB InBev has agreed to divest Grupo Modelo’s 50% stake in Crown, the joint venture between Modelo and Constellation, that currently imports and markets Modelo’s brands in the U.S., to Constellation. The transaction value remains USD 1.85 billion, providing Constellation 100% ownership and control of Crown.

Carlos Brito, Chief Executive Officer of AB InBev, commented, “The AB InBev and Grupo Modelo transaction has always been about Mexico and making Corona more global in all markets other than the U.S., where the brands will be owned and managed by Constellation. We are pleased to have reached this revised agreement that preserves the merits of the Grupo Modelo transaction while allowing us to move expeditiously to the Modelo integration process and the capture of approximately USD 1 billion of synergies, up from our original estimate of USD 600 million.”

Rob Sands, President and Chief Executive Officer of Constellation Brands, said, “The revised agreement with AB InBev will make Constellation’s Crown beer division a fully independent competitor and the third largest producer and marketer in the U.S. beer industry. This is a transformational acquisition for our company as we will hold perpetual rights to Corona and the Modelo brands distributed by Crown in the U.S. We will have autonomous control of production, distribution, marketing and promotion of these brands in the U.S. Bill Hackett, President of Crown, and his management team have decades of experience in the beer industry with the iconic Modelo brands. I am confident that all Constellation and Crown stakeholders, including our valued wholesalers, shareholders and employees will see the benefits of this amended agreement.”

Should be all over but the shouting at this point.

NOTE: This NOT their official new logo, I made this up as a parody.

Olympia Beer Offers Million Dollar Prize For Finding Bigfoot

In what has to be one of the most unusual marketing efforts by a large brewer, Olympia Beer has offered to pay $1 million dollars — in increments of $25,000 a year for the next four decades — to anyone who can find conclusive evidence of a live Bigfoot. The contest is the brainchild of Evan and Daren Metropoulos, who recently bought Pabst Brewing Co., which also owns the Olympia brand.


Full details and rules can be found at, but here’s their “Mission Statement” for finding Bigfoot:

Olympia Beer and Bigfoot have been leaving footprints together in the Pacific Northwest since 1896.

We have been sharing the same backyard for over a century and we believe it’s time to do what has never been done, and that is to offer a one million dollar reward to anyone who can ensure the safe capture of Bigfoot. When we say safe capture that means Bigfoot has to be alive and breathing folks, with no wounds. That’s right you can’t use any act of violence, no guns/knives/boxing gloves/nets/etc, only sugar or sweets to lure him in.

You must register to participate in the search. To report your discovery of irrefutable evidence of the existence of Bigfoot, click on the “Submit Capture Report” link on the left and follow the instructions to report your evidence. You participation in the search is subject to the complete Official Rules.

To aid us in this adventure, Olympia Beer is partnering with The Falcon Project

The Falcon Project has been identified as “the most penetrative search for Bigfoot ever conducted in the United States.” They will conduct an aerial search for Sasquatch employing an unmanned airship with high definition thermal imaging camera equipment.

Sure, it’s a publicity stunt, but it’s a funny one. And what if someone actually does it? Apparently 14% of all Americans believe Sasquatch to be real, while another 14% say they’re not sure.


Winners must provide “irrefutable evidence” of Bigfoot’s existence and, according to the rules, may include “DNA Evidence.” From the rules:

“Bigfoot” refers to a previously undiscovered species of upright, bipedal hominid, native to North America existing contemporaneously with the Contest Period or the twenty-five (25) year period immediately prior to the Contest Period. There is no set type or amount of evidence required to establish proof for purposes of this Contest other than that all evidence presented must satisfy the Judging Panel. Evidence may include, but is not limited to DNA Evidence. DNA Evidence may include hair, blood, tissue or saliva that proves the DNA sequence of the donor shows that said donor resides in the primate evolutionary family tree, among other apes or hominids, but does not have the same genetic markers and DNA sequence as any known species. Evidence may also include “Visual Proof” of a live physical body. Physical remains may be considered as evidence provided that it can be conclusively demonstrated that the date of death pre-dated the Contest Period. Visual Proof shall not include footprints, bone fragments, inconclusive skeletal remains, or any other non-definitive evidence of the existence of Bigfoot. Any photo or video taken with photographic or video equipment is not sufficient to qualify as evidence in and of itself for consideration in the Contest, but may be considered as supporting evidence.

The Top 50 Annotated 2012

This is my seventh annual annotated list of the Top 50 so you can see who moved up and down, who was new to the list and who dropped off. So here is this year’s list again annotated with how they changed compared to last year.

  1. Anheuser-Busch InBev; #1 last seven years, no surprises
  2. MillerCoors; ditto for #2
  3. Pabst Brewing; ditto for #3
  4. D. G. Yuengling and Son; Same as last year
  5. Boston Beer Co.; Same as last year
  6. North American Breweries; 3rd year on the list, same position as last year
  7. Sierra Nevada Brewing; Same as last year
  8. New Belgium Brewing; Same as last year
  9. Craft Brewers Alliance; Same as last year
  10. Gambrinus Company; Same as last year
  11. Minhas Craft Brewery; Up 3 from #14 last year
  12. Deschutes Brewery; Down one from #11 last year
  13. Lagunitas Brewing; Up 3 from #16 last year after jumping up 10 from #26 the previous year, having been at #36 three years back
  14. Bell’s Brewery; Down 1 from #13 last year
  15. Matt Brewing; Down 3 from #12 last year
  16. Harpoon Brewery; Down 1 from #15 last year
  17. Stone Brewing; Up 1 from #18 last year
  18. Brooklyn Brewery; Up 2 from #20 last year, after jumping up 5 the year before
  19. Boulevard Brewing; Down 2 from #17 last year
  20. Dogfish Head Craft Brewery; Down 1 from last year, after being up 5, 9, 5 and 4 the four previous years
  21. Abita Brewing; Up 4 from #25 last year
  22. World Brew/Winery Exchange; Up 4 from #26 last year, after jumping up 11 the previous year
  23. Shipyard Brewing; Up 1 from last year, having moved up 4 the prior year
  24. Alaskan Brewing; Down 2 from #21 last year, their second drop in as many years
  25. August Schell Brewing; Down 2 from last year, also their second drop in as many years
  26. New Glarus Brewing; Up 2 again this year from #28 last year
  27. Long Trail Brewing; Down 5 from #22 last year
  28. Great Lakes Brewing; Down 1 from last year, after jumping up 4 the previous year
  29. Firestone Walker Brewing; Up 4 from #33 last year, after rising 3 spots the year before
  30. Anchor Brewing; Up 2 from #32 last year
  31. Rogue Ales Brewery; Up 5 from #36 last year
  32. Summit Brewing; Down 1 from #31 last year
  33. Full Sail Brewing; Down 4 from #29 last year
  34. SweetWater Brewing; Up 1 from #35 last year, having rise 3 the year before
  35. Victory Brewing; Up 4 from #39 last year
  36. Oskar Blues Brewing; Up 5 from #36 last year, having jumped up 8 the previous year
  37. Pittsburgh Brewing (fka Iron City); Down 7 from #30 last year
  38. Mendocino Brewing; Down 1 from #37 last year
  39. Cold Spring Brewing; Down 5 from #34 last year, after jumping up 13 the prior year
  40. Flying Dog Brewery; Down 2 from #38 last year
  41. Founders Brewing; Not in Top 50 last year
  42. Ninkasi Brewing; Up 2 from #44 last year
  43. CraftWorks Breweries & Restaurants (Gordon Biersch/Rock Bottom); Down 3 from #40 last year, after the two merged during 2011 and were #42 and #48 in the year before the merger
  44. Odell Brewing; Down 2 from #42 last year
  45. Bear Republic Brewing; Up 2 in their second year on the list
  46. Stevens Point Brewery; Down 3 from #43 last year
  47. Blue Point Brewing; Down 1 from #46 last year
  48. Southern Tier Brewing; Not in Top 50 last year
  49. Lost Coast Brewery; Same as last year in their second year on the list
  50. Karl Strauss Breweries; San Diego CA; Not in Top 50 last year

Not too much movement this year, except for a few small shufflings. Only three new breweries made the list; Founders, Southern Tier and Karl Strauss.

Off the list was BJs Restaurant & Brewery, Narragansett Brewing and Goose Island Beer, which had plummeted 30 from #18 the year before, after selling their production brewery to Anheuser-Busch InBev.

If you want to see the previous annotated lists for comparison, here is 2011, 2010, 2009, 2008, 2007 and 2006.

Top 50 Breweries For 2012

The Brewers Association has also just announced the top 50 breweries in the U.S. based on sales, by volume, for 2012. This includes all breweries, regardless of size or other parameters. Here is the new list:

  1. Anheuser-Busch InBev; St Louis MO
  2. MillerCoors; Chicago IL
  3. Pabst Brewing; Woodridge IL
  4. D. G. Yuengling and Son; Pottsville PA
  5. Boston Beer Co.; Boston MA
  6. North American Breweries; Rochester, NY
  7. Sierra Nevada Brewing; Chico CA
  8. New Belgium Brewing; Fort Collins CO
  9. Craft Brewers Alliance, Inc.; Portland, OR
  10. Gambrinus Company; San Antonio TX
  11. Minhas Craft Brewery; Monroe WI
  12. Deschutes Brewery; Bend OR
  13. Lagunitas Brewing; Petaluma CA
  14. Bell’s Brewery; Galesburg MI
  15. Matt Brewing; Utica NY
  16. Harpoon Brewery; Boston, MA
  17. Stone Brewing; Escondido CA
  18. Brooklyn Brewery; Brooklyn NY
  19. Boulevard Brewing; Kansas City MO
  20. Dogfish Head Craft Brewery; Miilton DE
  21. Abita Brewing; New Orleans LA
  22. World Brews/Winery Exchange; Novato CA
  23. Shipyard Brewing; Portland ME
  24. Alaskan Brewing; Juneau AK
  25. August Schell Brewing; New Ulm MN
  26. New Glarus Brewing; New Glarus WI
  27. Long Trail Brewing; Burlington VT
  28. Great Lakes Brewing; Cleveland OH
  29. Firestone Walker Brewing; Paso Robles CA
  30. Anchor Brewing; San Francisco CA
  31. Rogue Ales Brewery; Newport OR
  32. Summit Brewing; Saint Paul MN
  33. Full Sail Brewing; Hood River OR
  34. SweetWater Brewing; Atlanta GA
  35. Victory Brewing; Downington PA
  36. Oskar Blues Brewery; Longmont CO
  37. Pittsburgh Brewing; Pittsburgh PA
  38. Mendocino Brewing; Ukiah CA
  39. Cold Spring Brewing; Cold Spring MN
  40. Flying Dog Brewery; Frederick MD
  41. Founders Brewing; Grand Rapids MI
  42. Ninkasi Brewing; Eugene OR
  43. CraftWorks Breweries & Restaurants (Gordon Biersch/Rock Bottom); Chattanooga TN/Louisville KY
  44. Odell Brewing; Fort Collins CO
  45. Bear Republic Brewing; Cloverdale CA
  46. Stevens Point Brewery; Stevens Point WI
  47. Blue Point Brewing; Patchogue NY
  48. Southern Tier Brewing; Lakewood NY
  49. Lost Coast Brewery; Eureka CA
  50. Karl Strauss Breweries; San Diego CA

Here is this year’s press release.

Ignoring Economies of Scale

As the news keeps swirling around the possible — I say inevitable — buyout of Grupo Modelo by Anheuser Busch-InBev in a breathless “will they, won’t they” kind of coverage, I’m utterly fascinated by the theater of it all. It’s especially interesting to see the many “business experts” weighing in with no real understanding of the history of the brewing industry or how it all works. These “instant experts” all seem to assume that general economics or business principles apply equally well to every scenario, yet fail to grasp that alcohol has always navigated a different path through the economic world, with extra layers of taxation, legislation and law, its moral or anti-alcohol critics, and has to abide by at least 51 sets of laws (federal laws plus one for each state). I brought this up last month in The Beer Monopoly, but this morning an economics reporter from the New York Times, Adam Davidson, weighed in with his own take on the shenanigans.

In his It’s the Economy column published today, Are We in Danger of a Beer Monopoly?, he gives his own version of reality. In his world, where there are nearly 2,400 American breweries, he at least admits many of them are “tiny,” but goes on to claim that a few “have become large national brands.” National, yes, but “large” is a somewhat relative term. They’re large compared to a tiny nanobrewery or even an average sized brewpub, but the volumes of beer manufactured by ABI and SABMIller are in another class altogether. All 2,398 of the other breweries represent much less than 10% of the total beer produced in the U.S., meaning there’s a fairly wide chasm between the two groups, even if “a handful” of them have been successful. Measured against the domination of the biggest two, even the most successful seem modest by comparison.

But this is an argument that many economists seem to make, and indeed it’s the same argument that ABI always makes when they’re trying to buy another global company. How can there be a monopoly with so much competition? Just walk down the beer set in an average grocery store and, if you know who owns or controls what, you’ll easily see who’s winning the beer wars. The power wielded by ABI and SABMiller is so far above that of any smaller brewer, or even the total of all of the smaller ones, that it really is a true David and Goliath relationship. Sure, the big guys throw a few crumbs to the little guys nipping at their heels, but they don’t feel seriously threatened by them. Lately, they’ve been paying closer attention because they’re losing incremental marketshare, but they’ll respond to any such loss, because it hurts the share price. But saying they’re on equal footing is the economic equivalent of pretending that employees and employers have equal bargaining power, as most economic textbooks continue to insist.

But here’s Davidson’s takeaway from recent events as ABI tries to win approval for buying Grupo Modelo. “So I was surprised to learn that the Justice Department is worried that Anheuser-Busch InBev, the conglomerate that owns Bud, is on the cusp of becoming an abusive monopoly.” That’s almost spit take worthy. “On the cusp?” ABI has been a de facto monopoly with one or two others for decades, all but controlling the marketplace, not that anybody has been particularly concerned in the business world.

Anyone who hasn’t had their head buried deep in the sand for last few decades has to have noticed that we live in a society utterly dominated by business interests. Business power is the only power that matters. Political power takes a back seat to it and the will of the people is something politicians invoke only when they’re trying to get elected. How else can you explain that corporations have all the benefits of being a person, with none of the responsibilities or consequences? How else can money be considered free speech to influence politics? How else can you explain the many businesses deemed too big to fail while the same individuals those corporations ruined are left swinging in the wind, with no life raft for the ordinary flesh and blood person.

Davidson goes on to give a flawed history of the brewery business, and seems to think that mergers are a relatively new phenomenon. Of course, brewery mergers and acquisitions have been going on in brewing since the late 19th century, and stopped only briefly for about thirteen years, during Prohibition. Then he says we’re “still in the very early stages of what appears to be a global version of the scale-based consolidation we’ve seen in the United States over the past century.” I can’t tell if that’s a joke? The global beer world has been dominated by an ever-shrinking group of very large conglomerates for at least the last three or four decades. It’s hardly a new thing. In 2010, the four largest beer companies accounted for over half of all beer worldwide, and according to another source the Top 5 were about half. Heineken, Carlsberg, and a few others are very large companies, indeed, and they, too, have been gobbling up breweries around the world for many, many years.

It’s probably not a coincidence that Davidson has his own S.H.A.M.E. profile. Why the New York Times continues to let him shill for big business, well’s that’s a whole other discussion, but it’s obvious he’s defending the pro-business position. It’s also clear that he’s part of the theater that will ultimately end in the DOJ’s approval of the deal between ABI and Grupo Modelo. Here’s my prediction of what will happen next. As always happens, the two parties will hammer out a compromise that was probably the deal everybody wanted in the first place, but this way both parties look good in the public eye. The DOJ will look like they’re being tough on big business and are protecting the public while ABI will look good because they were able to get the deal done, and their share price will shoot up. Everybody wins. As Shakespeare observed, “all the world’s a stage.” And we’re the audience. I just wish they’d stop pretending we’re all idiots.


Two Beer Companies, 210 Beer Brands

ABI sabmiller
Today’s infographic is an interesting one, created by NPR. Entitled Two Beer Companies, 210 Brands, it shows all of the beer brands owned by Anheuser-Busch InBev and SABMiller across the globe. Below the map, there’s also a list of brands by country, color-coded by which beer giant owns or controls them. How accurate is it? Hard to say. It doesn’t appear to include line extensions, which would balloon the chart to many times its current size, but glancing at the list for the United states, it looks like it may be missing some, though to be fair I didn’t do a line by line comparison.

Click here to see the chart full size.