Three cheers for capitalism, right?
Well, if you like your beer options watered down… bottoms up!
The proposed merger unites two of the planet’s biggest beer makers under one giant umbrella (combined, they sell one-third of the world’s beer, including Budweiser, Miller, Stella Artois, Peroni, Grolsch, and Michelob) – and delivers another blow to the craft beer industry.
Indeed, since the deal was announced, BUD has embarked on a beer-buying bender, snapping up no less than three independent craft brewers in the week before Christmas – Colorado’s Breckenridge Brewery, Arizona’s Four Peaks, and London’s Camden Town Brewery.
But is this consolidation coming at the expense of quality?
Is This Deal Actually Any Good?
The Anheuser-Busch-SABMiller deal still has to pass regulatory approval – no easy feat, given the size of the merger and obvious monopoly concerns – but BUD is already working on the numbers.
The company has just raised $46 billion through a corporate bond offering, which is expected to close on January 25. It marks the second-largest corporate bond issuance in history, following Verizon Communications Inc.’s (VZ) $49 billion deal in 2013 to facilitate the buyout of Vodafone Group Plc’s (VOD) wireless operations.
But with massive numbers like this sloshing around the beer industry, what does it mean for craft brewers?
While the mega deal between Anheuser-Busch and SABMiller has grabbed the headlines, does it actually benefit the companies or consumers?
BGC Partners’ Mike Ingram doesn’t think so.
He states, “I really question whether this deal is good for consumers – you’re creating what some have called the OPEC of beer. It will have enormous global market share.”
And for the brewers, their ubiquitous brands are actually declining in popularity.
Small Beer… Big Taste
Consumers are a simple lot sometimes. We want choices.
As the craft brewing industry has flourished over the past several years and offered more beer options, we’ve seen a shift away from big brand-name beers to smaller (and tastier) local brews instead.
Smaller-scale production means there’s more chance to experiment with ingredients and flavors.
Sam Dickison, a brewmaster in London, says he’s been able to do just that: “[I use] cocoa nibs that I’ve roasted in the kitchen. I’ve put raspberry puree into a wheat beer before, and that turned out really nice.”
And brewing on-site means not only are the beers fresher, it cuts down on distribution costs, too: “The beer ferments right here for four to six days after we’ve added the yeast – and are ready to drink.”
Fellow U.K. brewer Dan Hills runs three microbreweries and says there’s a definite trend towards smaller-batch beers: “The market has grown enormously because so many more people are trying it. I think that’s come from having so many accessible products, which are paving the way to the wider range.”
Indeed, U.K. craft beer sales rose for the first time in a decade in 2014, with the trend expected to continue for 2015, with the market share rising at a healthy 15% clip per year.
Craft Beer Continues Strong U.S. Growth Trend
It’s a similar story in the United States, with the craft beer industry enjoying a steady rise.
Craft breweries have averaged 10.9% growth over the past decade and in 2014, the industry grabbed a double-digit market share for the first time ever, with 11% of all beer produced by volume. That was up from 7.8% in 2013, as craft brewers produced 18% more beer during the year than in 2013.
In dollar terms, that resulted in sales of $19.6 billion – up from $14.3 billion in 2013.
The trend continued in 2015, as production volume spiked by 16% between January and the end of June, compared with the same period in 2014, according to the Brewers Association. Craft brewers sold around 12.2 million barrels during the six-month period, versus the 10.6 million barrels sold in the first half of 2014.
But with the Anheuser-Busch-SABMiller deal on the table and the industry consolidating, it may water down the choices for craft beer fans.