Outside In | AB InBev, SABMiller merger does not offer much beer for thought
Mergers or acquisitions have very little to do with offering better or higher quality goods and services
It’s enough to make you weep into your beer: it is surely an assault on everything a right-thinking drinking man should think good that shareholders have put a U$79 billion value on the merger of AB InBev and SABMiller, which together now account for an estimated 30 per cent of beer sales worldwide. It is like the preposterous nonsense of Facebook paying US$19 billion for WhatsApp: so much money for so little value.
This brewers’ mega-deal is fresh evidence that big is not necessarily good, and that mergers or acquisitions have very little to do with offering better or higher quality goods and services. The main achievement of the AB InBev and SAB Miller merger – apart from being the third-largest merger ever recorded – is to cut costs and shave 5,500 jobs. And of course to generate gargantuan fees for the bankers, lawyers and PR companies that underpinned the deal. Out of fees amounting to almost US$2 billion, Lazard, lead advisors to AB InBev, captured the lion’s share of US$135 million paid for banking and broking advice. Freshfields Bruckhaus Deringer captured the lion’s share of US$185 million in legal fees. PR company Brunswick pocketed fees of US$20 million. They will all doubtless be celebrating with champagne rather than the insipid offerings of their clients.
I have to confess a powerful bias. As a Brit who has for 35 years lived in exile from home shores, perhaps the only thing I truly miss from the old country is fine old English “real ale” – what Americans have come in more recent years to discover as “craft beers”. Compared with these nutty, flavoursome ales that warm many an evening in pubs across the English countryside, the thin, watery fizzy pints offered by the likes of AB InBev and SAB Miller are an offence to the drinking man’s palate, and a betrayal of the fine tradition of brewing nurtured down through the centuries by Belgian monks, who must have spent their lives marvellously inebriated by their Christian endeavours.
AB InBev’s publicity materials betray how oblivious they are to the poverty of their offering. Under the ridiculous broad strap-line of “Dream People Culture”, they say their dream is “to be the Best Beer Company Bringing Together People for a Better World”. Pardon?
As Financial Times reports more soberly noted, the deal has more to do with strengthening presence in Latin America and Africa, “whose markets have not been disrupted by a shift in tastes towards craft beers”.
For me, the true lesson of this merger – apart from the financial engineering efforts at the unhappy heart of 21st century capitalism which reward shareholder returns more highly than product quality – is not their bid for globally dominant market share, but the desertion of drinkers from their homogenised offerings to craft beers and real ales.
At the mass production end of the beer industry, concentration has continued apace: at the turn of the century, around 10 brewers controlled half of the global beer market. By 2014, that had shrunk to five: AB InBev, SAB Miller, Heineken, Carlsberg and China Resources – which has a dominating role in China, the world’s largest, and virtually invisible beer market, with annual consumption of almost 45 million kilolitres in 2014, virtually a quarter of world consumption. This latest merger reduces the brewing behemoths to four.
