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.

Conclusion
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.

Related Articles
  1. Investing Basics

    How To Invest In Private Companies

    Owning a private firm means sharing more directly in the underlying firm’s profits.
  2. Entrepreneurship

    How to Run a One-Person Business

    Learn how to get a successful one-person business up and running with a business plan, financing, time-management tricks and delegation of tasks.
  3. Budgeting

    Beer of the Month Subscription Review: Is It Worth It?

    Learn how you can get access to some of the best craft beers produced in the world, delivered right to your front door every month.
  4. Entrepreneurship

    Top Legal Tips for Starting a Business

    Before you launch a new business, make sure you're on top of the key issues that most startups face.
  5. Stock Analysis

    The Top 10 Small-Cap Stocks for 2016 (ATI, ARCB)

    Discover the top 10 small-cap stocks expected to grow in 2016, complete with summaries and growth outlooks for each company and its expected price target.
  6. Investing News

    The 10 Fastest Growing Green Startups in 2016

    These social entrepreneurs adopt triple bottom lines that champion urgent environmental problems while generating returns for shareholders.
  7. Retirement

    Roth IRAs Tutorial

    This comprehensive guide goes through what a Roth IRA is and how to set one up, contribute to it and withdraw from it.
  8. Entrepreneurship

    Multilevel Marketing Isn't Always A Scam, But It Often Is

    Nerium and Amway are popular direct sales companies that recruit new buyers and sellers to make a profit. Sadly, many direct sales firms are scams.
  9. Entrepreneurship

    10 Characteristics Of Successful Entrepreneurs

    Do you have the qualities of a successful entrepreneur? Those who do tend to share these 10 traits.
  10. Investing

    5 Up and Coming Social Media Startups

    Although the days of Facebook's dominance aren't close to being over, here are some new creative platforms gaining traction on the worldwide web.
RELATED FAQS
  1. Is the Netherlands a developed country?

    The Netherlands is a developed country. A developed country is typically defined as one exhibiting economic security and ... Read Full Answer >>
  2. How long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
  3. What are some common accretive transactions?

    The term "accretive" is most often used in reference to mergers and acquisitions (M&A). It refers to a transaction that ... Read Full Answer >>
  4. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>
  5. What are some ways to make a distribution channel more efficient?

    While there are many ways to make a distribution channel more efficient, the three high-level ways to increase the efficiency ... Read Full Answer >>
  6. What are the benefits of prorating expenses?

    When a person prorates expenses between personal and business expenses, he is able to capture the maximum amount of tax benefits ... Read Full Answer >>
Trading Center