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AB InBev just made its third
offer to buy SABMillerCoors, this time offering $104 Billion.
Financial analysts are saying that it's just a matter of time before
an offer is accepted. If you're wondering what this merger will mean
for the world of beer, it might be good to take a look at how InBev
has handled its earlier acquisitions. Their first move was to slash
operating costs. Then, according to today's New York Times, they:
....turned their attention to
the supply chain, replacing higher cost inputs with lower cost ones —
thinner glass bottles, cheaper ingredients — and
pressing suppliers to give them twice as long to pay for goods. ....
Along with cutting costs, they
raised prices for products slightly, so that the additional pennies
from the sale of each can of, say, Bud Light, fall almost directly to
the bottom line.
Those higher prices also help
mask what some analysts now say is the flaw in the model: falling
market share. Anheuser-Busch sold 107 million barrels of beer in
2008 in the United States when the Brazilian investors acquired it,
but it sold just 96 million barrels last year, according to Beer
Marketer’s Insights, a trade publication. In almost every
year, it has lost nearly one point of market share. (emphasis added)
This merger isn't likely to have an immediate effect on craft breweries: we have two shrinking giants joining forces to shrink together. But these huge corporations are unlikely to die in their sleep. They certainly see where the sales growth is and they have the means to purchase that growth even if they can't emulate it organically from their own businesses.
Absent from this article is any mention of AB InBev's purchase of other, smaller and craftier breweries. It seems likely that the new conglomerate will go shopping for smaller, faster-growing breweries. It also seems likely that they will pursue their current strategies for cutting costs. Look for more Faux Craft and Mock Premium labels. Look for jaunty labeling and tongue-in-cheek, flannel shirt marketing directed at both genders and listen for talk of taste, freshness and specific mention of ingredients.
Will the beer get better? Stay tuned.
1 comment:
So interesting and more to come
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