After several proposals by Anheuser Busch InBev, SABMiller has accepted terms for a $105 billion takeover that will create the world’s largest beer company holding roughly 30% of the global beer market. The deal will face antitrust scrutiny throughout much of the world, with Anheuser Busch InBev facing its biggest challenges in the U.S. and China.
In the United States, AB InBev controls roughly 45% of the beer market through its Budweiser macro brews, as well as an increasing number of craft brewers across the country. SABMiller holds a smaller share in the market, but it’s MillerCoors partnership with Molson Coors Brewing Company holds a 25% share leading many analysts to expect AB InBev to sell MillerCoors off in an effort to finalize the merger.
Meanwhile in China, SABMiller controls a 23% market share through its joint venture with government-supported China Resources Enterprise Ltd, and AB InBev holds a 14% share, giving Anheuser Busch a 37% share of the 71 billion liters of beer sold annually. While AB InBev’s stake in China’s market would be significantly lower than in the U.S., analysts anticipate the Chinese authorities to be hesitant in allowing a foreign company to control over a third of the market, and could force AB InBev to sell SABMiller’s 49% stake in China Resources Enterprises Ltd.
The proposed merger comes at the heels of a craft beer revolution that sees independent breweries controlling an increasing percentage of the U.S. market (currently 11%). AB InBev has long been at war with independent brewers, buying up distributers across America and purchasing craft brewers such as: Goose Island, Elysian, and 10 Barrel. The new mega merger between the two beer giants would remove the fierce competition between Budweiser and Miller, and unite them against the budding craft beer market.
The sky isn’t falling quite yet for craft brewers according to University of Kentucky economics professor, Frank Scott, who says, “Despite the concerns from small-scale brewers, the merger might end up making craft beer more attractive to consumers — because if the merged company starts raising prices on Bud and Miller Lite, craft beer isn’t going to look so expensive.”
Only time will tell how the merger will affect the local and global beer markets, but in the meantime we can sit back, relax, and wait for the next Clydesdale commercial.