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What will AB InBev buying SABMiller mean for pubs?

By Jessica Mason , 13-Oct-2015
Last updated on 13-Oct-2015 at 14:41 GMT2015-10-13T14:41:45Z

AB InBev swoops in to own a bigger share of the beer market
AB InBev swoops in to own a bigger share of the beer market

This morning, SABMiller, which owns brands such as Peroni, Grolsch, Fosters and, more recently, Meantime accepted “in principle” an offer from brewing giant Anheuser-Busch InBev, which owns brands including Stella Artois, Budweiser, Corona and Goose Island.

Now, although there are a lot of reports online about how much the deal will be worth (approximately £70bn and £44 per share for those interested), what is not currently being discussed is how all of this will affect pubs. What are we likely to see happening on the bar, in the back fridges, with the distribution deals, to the supplier and operator relationships, to prices? What does this kind of consolidation actually mean for licensees and all of the thirsty people who enjoy going to a British pub for a pint?

The answer is: Things are about to change. Nothing stays the same when big beer companies take over the land. Here are a few speculative answers to how things may begin to pan out.

What factors will affect my beer range?

Distribution will become empowered for the new super group beer company. This means that most of you will be able to gain access to any of the brands within the all-encompassing portfolio wherever you happen to be located. Also, there are likely to be bulk deals of which you can readily take advantage if you so wish. This will also include a better selection of prices, potentially. Mintel senior analyst Chris Wisson said that this may be "optimistic" but “theoretically this could mean better buying prices for landlords."

For those who currently stock various premium mainstream lagers, the option to migrate to another brand within the new all-encompassing portfolio is also likely to be touted. Especially if there are others that appeal more because of their superior brand equity.

“AB InBev clearly feels that SABMiller brands such as Meantime and Peroni can really help it at the premium tier,” Wisson hinted. It may have been what a lot of the industry had already been thinking.

But what does that say for Stella, Pilsner Urquell, Brahma, Corona, Fosters? Will they receive the same amount of love? We shall see. Pubs might need to get ready for the new beer offer to include a range of ‘authentic craft beers’ in the form of Meantime and Goose Island and a range of ‘stylish premium’ lagers in the form of Peroni and Stella Artois.

But there are always casualties to any kind of buyout too. At this stage, we do not know if AB InBev will make any disposals – or rather – whether they will have to ditch certain brands in various countries leads to be seen.

What will the beer market share in the UK look like following the deal?

In the UK, across the off-trade the new deal will see the newly combined AB InBev and SABMiller together leading in terms of market share with around a fifth of the beer market, but in the on-trade it will still own just under an eighth of the beer market. The total UK on-trade beer market sits at 20,248,910 HL (MAT to 05/09/2015 according to CGA Strategy) and suggests that Heineken will continue to dominate the pub beer landscape in terms of volume with 24.2%. This will be followed by Molson Coors with 22%, the new AB InBev and SABMiller group with 13% share, Carlsberg with 11.9% and Diageo with 6.2%. However, this ups the game considerably for AB Inbev in the UK and says nothing for the company's influence across the globe.

Why has this happened in the first place?

Some say that the craft beer movement has, to some degree, lead to this because with more people being interested in independent brewers and micros, the only way the bigger corporate companies know how to respond is by simply buying things up to gain more control of the changes sweeping across beer.

Wisson explained: “There is sense in consolidation but arguably we need to look more widely to really understand it - it has come about largely because the Western markets (i.e. US and Europe) are struggling from factors such as reduced beer consumption and the preference for craft beer over mainstream brands.”

Could this just be the start of AB InBev’s spending spree?

“It is still quite curious that AB InBev have not been as proactive with craft acquisitions to date as they have been in the US. Perhaps we will see more acquisitions under the joint brewer, given that Meantime is already within SABMiller,” said Wisson, but warned it could also make the company more powerful than we ever considered it could be within the beer industry, giving it the propensity to use its connections to influence and enable it in the UK.

“Many of the company's brands are already seeing a mixed sales performance but I think this joint strategy will give the company greater spending power and flexibility. Carlsberg's near-total de-listing from Tesco just last week shows the risks in the market, and a joint company would make them even more competitive against such a hit. This could also be beneficial within the on-trade and enable the new company to pool resources and networks.”

Unfortunately, for most, there will be a suck it and see approach to how this affects individual pub businesses as well as the craft beer movement as a whole. Stay alert.

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