AB InBev, the world’s largest brewer, has approached SABMiller with the intent of buying the world’s second largest brewery. It would be an unprecedented merger for the beer industry and it would control about half of the world’s beer profit and form what one analyst called a “megabrew” company.
SABMiller’s American company MillerCoors, which recently made it’s first foray into the craft beer world with the purchase of California’s St. Archer’s Brewery, could be the only hurdle standing in the way. It is thought that to meet regulatory standards, they would have to let go of MillerCoors to allow the merger to happen.
AB InBev brews the likes of Budweiser and Bud Light. It’s 2014 revenue was $47 billion. SABMiller most popular beer is Peroni with headquarters in London. It is also a major bottler of Coca-Cola. Its 2014 revenue was $22 billion, which was just slightly more than the entire craft brewing industry of $19.6 billion.
With all the talks of AB InBev struggling to regain market share in the US, the company is actually doing incredibly well on a global scale. It has boosted revenue 5 fold to $100 billion in the past five years. But it is thought that their growth will slow over the next five years because of a drop in beer consumption, as the result of weakening economies, in two of it’s biggest growth markets, China and Brazil.
What does this mean for the craft brewing industry? It means the US’s largest beer maker will have that much more working capital to purchase more craft breweries and hasten the consolidation of the craft beer market. With over 3,800 craft breweries in the US and thousands more in planning, they will have plenty to choose from. Many talk about fear of consolidation in the craft beer market, with even midcap craft breweries buying out smaller breweries (for example Oskar Blues.) It turns out the entire beer market is in the midst of consolidation and we can expect more in the future.