ABI MillerCoors Merger Won’t Harm the Craft Beer Movement
The folks at Food & Water Watch are pissed. And I don’t mean “pissed” as in drunk; they are mad as hell about the proposed merger between two big breweries and demanding the Department of Justice step in and block the deal. Despite the fact that big breweries have been merging and acquiring bits and pieces of each other for decades, F&WW believes that allowing Anheuser-Bush InBev to acquire SABMiller would bring about an end to this golden age of beer we’re currently enjoying. My advice to them is to crack open a beer and take a deep breath.
After months of negotiation, Anheuser-Busch InBev (purveyor of Budweiser, Stella, and now Corona) announced it had reached an agreement to acquire SABMiller (which owns Coors, Fosters, Pilsner Urquell, and Peroni) for a hefty $106 billion. Predictably, self-styled consumer advocates are having a collective conniption about the new “monopoly” such a merger would create. But while this is likely one of the largest mergers of two breweries in price tag and share of the market, it’s not really anything new and probably won’t affect consumers.
The two mega breweries in question are themselves frankenfirms—the product of a dozen (or more) mergers and acquisitions of smaller firms. In 2004 AmBev, the largest brewery in Latin America and fifth biggest in the world (the product of a merger between Brahma and Antarctica breweries) merged with Interbrew—a large Belgian brewery (which had previously acquired Brouwerij Artois, Piedboeuf, and Labatt Breweries), creating InBev—the largest brewery at the time, holding 14 percent market share. When InBev subsequently merged with Anheuser-Bush (which itself owns or has shares in many other large and small breweries, including Grupo Modelo, Redhook, Widmer and Kona Brewery) it became even larger, controlling about 20 percent of the world’s beer sales by 2014 and taking on the name Anheuser-Busch InBev (or its mercifully short abbreviation, ABI). ABI also controls about 45 percent of US beer sales. SABMiller, itself a product of multiple mergers, controls around 30 percent of the American beer market.
So, you might be thinking that if ABI now merges with SABMiller (maybe they’ll be called ABISM?) they’d be the biggest brewery in the world. You’d be right; together they’d sell about 1 in 3 beers around the globe. All hail the king. But, if you’re thinking, like Wenonah Hauter of Food & Water Watch, that the merger “would create a unrivaled beer monopoly, raise prices, and reduce choices,” think again.
Behemoth breweries have been merging left and right for decades, as you can see based on ABI’s history alone. If you look at the top five largest breweries in the world, they’re all like that—all the result of complicated mergers and acquisitions. Even within the craft beer movement, larger breweries acquire or buy stake in successful smaller and regional breweries to gain their customer base and market share while the smaller breweries gain access to more capital to increase production and a national distribution network. What has all this horse-trading done for choice and prices so far? Well, look around.
Today, Americans have more choice in beer selection than ever before. Craft breweries continue to gain market share from the big breweries and the prices get better, not worse, as larger brewers invest in smaller ones. Take Goose Island brewery, for example, in which ABI bought a 58 percent stake in 2011. Fans of the small Chicago brewery had a fit, worried that the takeover would result in a lesser quality beer. However, years later the consensus seems to be that the quality of Goose Island’s beer is better than ever. Writer Paul Schneider declared, “We at Chicagoist and Josh Noel at the Trib agree that Goose Island has done some of its best work since the sale.” Additionally, the merger freed up space and allowed them to create more experimental beers. Of course, there were those fans who squawked about them selling out, but that hasn’t stopped many of them from lining up for Goose Island’s hotly anticipated Rare Bourbon County Brand Stout.
Could SABIMills (or whatever ABI/Miller will call its Megazord brewery) try to block out craft beers from their distribution network? Sure. In fact, they probably will since they’ve tried to push “brand loyalty” in the past. But distributors aren’t stupid. They can get more money moving fewer cases of higher priced craft beers. At the same time, they can have reliable sales by stocking ABI and SABMiller products like Bud and Coors Light. And that’s what they are doing. Small distributors around the nation are jockeying to contract with up-and-coming craft beers because that’s where the money is.
Will the BREWZILLA (another post-merger name option) raise prices? Probably not or at least not by very much. Because they can’t. While Food & Water Watch might want you to believe that MillerCoors and ABI compete with each other, they actually compete with craft breweries, wine, and liquor in addition to other large breweries. As the taste for craft beer spreads, price is the only real competitive advantage big breweries have. If they raise the prices high enough that only a dollar or two separates Bug Light from Dogfish Head, how many consumers will choose Bud Light? Many still would, of course, but many consumers might decide to make a switch.
The Department of Justice will likely prevent ABI from taking over MillerCoors wholesale, instead forcing them to give up some brands to other companies in specific counties (as they did in 2013 when ABI tried to buy Grupo Modelo). But even if they don’t, there’s an easy way to make sure that ABZILLAMILLA (another good name option) doesn’t become a monopoly: continue work to free the market. In the last thirty years, state and federal lawmakers have slowly repealed Prohibition-era laws that hamstrung small brewers and have given them multiple routes to market. So long as brewers can reach their customers (hint, hint: let them self-distribute) they will be able to compete with the biggest breweries in the world as they have successfully done for many years.