Four main brewers control approximately 50% of the global market for beer. For these large producers, the concentration means a bigger share of the market and profits, but does all this consolidation just water down choice for consumers?
The Path to Consolidation
By volume, AB InBev is the world's largest brewer, followed by SABMiller and Heineken. These mega-brewers came to dominate a huge chunk of the world's beer market by way of a series of mergers and acquisitions. The M&A activity spans the globe, as well as the full spectrum of beer brands. (Learn more about beer market in Beeronomics: Factors Affecting Your Pint.)
AB InBev – Belgium
On the basis of volume, Anheuser-Busch InBev is the world's largest brewer, capturing approximately 25% of the global market. The lineage of the company can be traced back as far as 1366. AmBev was created in 1999 when Brazil's two largest brewers merged. Interbrew was created in 1987 after the merger of Belgium's two largest brewers. In 2004, AmBev merged with Interbrew, to create InBev. InBev then acquired U.S.-based Anheuser-Busch (popularly known as Budweiser). The resulting company, AB InBev has a portfolio of close to 300 brands, 14 of which generate over $1 billion in annual revenue.
SABMiller – Britain
SABMiller originated in South Africa in 1895 and remained concentrated there until the 1990s. The company began investing in Europe, and soon after its investments trickled into the United States, South America, China and Canada. In 2002, SABMiller acquired Miller. Six years later, SABMiller completed a merger with Molson Coors. (Mergers don't always work. Read about it in Biggest Merger And Acquisitions Disasters.)
Heineken - Netherlands
Breweries now included in the Heineken family date back to 1592, but the Heineken family got into the beer business in 1862. Heineken acquired Amstel in 1968. Throughout the 1990s, Heineken acquired brewers in multiple countries including Poland, Bulgaria, Hungary, Slovakia, Italy and France. Spain's largest brewer, Grupo Cruzcampo, was also acquired by Heineken in 2000.
What does consolidation mean for these super-producers?
By acquiring smaller brewers, mega-brewers stand to gain in many areas. They can take advantage of existing marketing and distribution channels of the firms they acquire. This can be particularly helpful in emerging markets with growth potential. Instead of trying to enter a new market, the big brewers can aim to increase their share in existing markets.
With rising prices for commodities, having fewer, larger power players can provide the big brewers with leverage against their suppliers. This leverage can also be used to negotiate rates for other heavy expenses such as advertising. (Read more about investing in this industry in Parched For Profits? Try Beverage Stocks.)
What's on tap for consumers?
Luckily for consumers, it appears the portfolio of beer brands hasn't been affected much by industry consolidation. However, doubts have emerged regarding the quality of the products. In light of economic conditions and industry trends, it is no secret that brewers have been looking for ways to cut costs. All three have announced job cuts in recent years.
In regards to product quality, some brewers have already cut the amount of time they take to mature beer, and critics fear some brewers may resort to using cheaper inputs, such as lower quality grain.
Mergers and acquisitions can be good, but too much of anything can be trouble. Since much of the activity is still fresh, it will take some time to determine the depth of consequences which may spill over to consumers.
According to Heineken's CEO, the consolidation trend is going to continue. In December 2009, Jean-Francois von Boxmeer said he expected to see a quarter of the beer market absorbed by the world's four largest brewers. He also said Heineken would participate in the process. Just one month into 2010, Mr. von-Boxmeer has kept his promise. Heineken purchased Mexico's second largest brewer, FEMSA, for $5.5 billion.
EntrepreneurshipLearn how to make a successful pitch to investors. Regardless of your industry, size or market, there are some questions all investors need to have answered.
EntrepreneurshipLearn how these multibillionaires built their fortunes to stand out from the crowd of the countless ultra-rich who call Los Angeles home.
Investing BasicsThe reality TV shows "Restaurant Impossible" and "Kitchen Disasters" offer lessons not just for restaurateurs, but for all business owners.
EntrepreneurshipLearn about some of the most successful crowdfunding campaigns on Indiegogo, which raised millions of dollars for everything from electric bikes to beehives.
EntrepreneurshipFind out which factors you should weigh when searching for income-producing real estate.
Wealth ManagementDiscover how the richest "Sharks" on the hit TV show amassed their vast fortunes, and learn how much they have to offer eager entrepreneurs.
EntrepreneurshipDiscover a number of different options available to support small business growth, including crowdfunding campaigns and shopping locally.
Investing NewsSEP and Keogh plans each have their pros and cons. Here's how to choose which one is right for you.
EntrepreneurshipAre you hoping to launch your own business and work for yourself? If so, here are the top 10 tips for entrepreneurs.
EntrepreneurshipLearn how to craft the vital components of a loan package for your startup small business, and how to package it to be as appealing to the lender as possible.
The Netherlands is a developed country. A developed country is typically defined as one exhibiting economic security and ... Read Full Answer >>
Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
The term "accretive" is most often used in reference to mergers and acquisitions (M&A). It refers to a transaction that ... Read Full Answer >>
Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>
While there are many ways to make a distribution channel more efficient, the three high-level ways to increase the efficiency ... Read Full Answer >>
When a person prorates expenses between personal and business expenses, he is able to capture the maximum amount of tax benefits ... Read Full Answer >>