Miller and Budweiser are two of America’s most well-known and consumed beers. While each inspires brand loyalty among beer drinkers, they have many things in common, including the way they both embody domestic brews. Now, they may be about to share even more—the company that owns them.
A long-rumored deal between their parent companies, the world’s two biggest beer breweries, ABInBev and SABMiller, seems to be more than just bluster. ABInBev has been trying to buy SABMiller and this week, SABMiller appeared to reject an informal offer of about $100 billion, giving ABInBev until next week to sweeten its takeover bid.
News of the offer has been brewing for a few weeks and the takeover price (which some have put a little higher than $100 billion) would be financed primarily with $70 billion in loans and corporate debt. Purportedly, SABMiller believes it can fetch more than ABInBev is currently offering.
This is the latest in a disturbing consolidation trend in the food industry. In fact, America’s biggest breweries were absorbed by global companies years ago. Even though Miller and Budweiser are quintessential American beers, their parent companies are based overseas.
Further, ABInBev and SABMiller now control most of America’s major beer brands including Budweiser, Bud Light, Stella Artois, Bass, Becks, Busch, Goose Island, Michelob, Rolling Rock, Blue Moon, Fosters, Miller, Milwaukee’s Best, Peroni and many, many others.
The merger would create a powerful beer baron controlling nearly one-third of worldwide sales and 70 percent of American beer sales. Combined, ABInBev and SABMiller accounted for about 38 billion of the 54 billion pints of beer sold in America in 2014.
But it is about more than just hyper-consolidation in America’s beer market. There are a growing number of innovative craft and microbreweries offering a wider range of choices, and giant companies are squeezing them out of the market. The beer duopoly has effective control over the delivery of beer to supermarkets, liquor stores and bars through alliances and contracts with so-called independent distributors that obey the big boys’ suggested retail-pricing levels to get preferential deals. Those that don’t can face unanticipated shipment delays or other commercial retaliation. And distributors are discouraged from supplying large volumes or large varieties of craft beers to local retailers.
Today, distributors tied to ABInBev or SABMiller deliver about 90 percent of all beer, and it is very hard for local and craft beers to get onto store shelves. There may be a handful of these six-packs in a sea of SABMiller and ABInBev brands. It is just like most of the food choices at the supermarket — the illusion of choice conceals corporate food consolidation, leaving shoppers with few real options.
If this deal actually comes together, ABInBev would likely sell off many of the domestic Miller brands, perhaps to Heineken or Molson-Coors. But the stranglehold the two firms have over domestic distribution is something the federal antitrust cops should have never allowed to occur in the first place. This deal is just too big—even the Wall Street Journal suggested it is probably too big to succeed. The Justice Department must put its foot down and block this beer company merger.