Thursday 3 February 2011

A Far Scarier Merger Being Mooted

You've probably already hear that Molson Coors has bought Cornish brewery Sharp's; head brewer Stuart Howe rang to assure me that the specials would continue unhindered and that I might be in danger of seeing him more than twice a year for a beer! All good news for ale lovers everywhere.

I don't think Banksy has anything to worry about...
However, I'd suggest you brace yourself for this news - AB-Inbev is allegedly considering a merger with SAB Miller. Credit Suisse has recommended that the way for the Budweiser owner to battle its current domestic beer market woes in the US is to take on board some SAB's commercial savvy.

Personally I think there's an easier fix - brew better beer. There, that should earn me millions in consultancy fees! Or not...

Anyway, obviously it doesn't only have ramifications for the US market it could create a truly terrifying two-brewer market over here as well.

Let's face it, Carlsberg and Heineken could rapidly lose their volumes solely on the basis that one lager is pretty much like the other to most commodtiy brand drinkers and the new SAB/AB-InBev leviathon would be able to charge a lot less than their rivals 

And more to the point they have few products that engender customer loyalty through a lack of innovation. The 'girly non-beer' from Carlsberg (Eve) seems to have sunk without trace (I presume. No one seems to want to talk to me about it anyway and I've never seen it in a pub) and they are now more of a distribution company than a brand per se.

I'm not aware of any innovation from Heineken in the UK market either, and it does seem pretty intent on buggering up its ale side (which let's remember is the only on trade growth category), I know I'm not alone in believing Deuchars has become a mere shadow of its former self and let's not forget this is the company that moved the brewing of Newcastle Brown Ale to another county!

So, that pretty much leaves you with Molson Coors up against a two-headed giant in the form of a merged SAB & AB-Inbev (which given their giant creativity for their last name change I presume they're just going to call SAB-InBev?).

Molson Coors seems to be the least of any beer lover's worries right now, the company appears to 'get' the craft beer scene, investing in the Worthington brand and tapping into that market in the States and over here with Blue Moon. I also know a couple of the senior brewers who work for Molson Coors in Denver and it would appear they get given quite a lot of latitude to play and experiment and are also well-liked and respected in the industry.

So, why does that two-headed monster of SAB and AB-Inbev worry me?

Well, to be honest, I quite like that AB-Inbev seems to seize every chance to implode its business in the UK (see below) with alacrity. How they've managed to foul up the Stella brand so immensely it utterly beyond me, Beck's which has credibility has taken a back seat and they've ruined draught Bass beyond all recognition, as just a few starting points!

Whereas I consider the guys at SAB Miller to be quite smart as a general rule, measured and fairly immune to knee-jerk reactions.

So, just think what could happen if they got together? AB-InBev could not only own some very powerful brands, they could get some sane leadership in the UK too, which offers a high potential for market dominance.

If nothing else they create a terrifying front of cheap booze in supermarkets, which could easily put another nail in the coffin of borderline pubs. If this does come to pass, I for one will be writing to everyone I can to refer this to the Competition Commission and for it to be knocked back.

How Do You Like Them Apples
Whilst we're on the subject of AB-InBev I can't not comment on their announcement yesterday of a new cider product under the Stella brand.

Seriously, I have no idea what they've been smoking over in Luton but the utter lunacy of their product launches in the last three years alone is truly flabbergasting! They have actually managed to take any form of brand equity Stella had and, frankly, p*ss it up the wall.

The Stella family - that included Eiken, Bock & Peeterman's - sank without trace before even being given six months on the shelves I believe (could be wrong but they didn't exactly get much of a run) and then just last year there was Stella Black, which I finally had the horror of trying before Christmas, and it was fittingly like drinking sprout water - rancid! When I was trying to be so positive that it might actually taste nice in my previous post about it too...

And it never ceased to amaze me that despite proudly touting that it was matured for twice as long, they were never willing to reveal how long maturation was - let alone the whole debacle of calling a blonde lager black - I presume their PR department spent days just banging their heads on the desk in despair.

And, as if that wasn't enough, they've gone and launched a cider - sorry, cidre!

Without a hint of irony the release tells me that it's a Belgian cider, made in Belgium, but solely for the UK market... can you guess what it is yet?

Yep, a completely made up product! For us stupid British who just like shiny packaging! It's not as if we have any cider industry over here already!

Requests to find out what percentage of the drink are pure apple juice have gone unanswered, I presume that this will remain the case for the forseeable future!

If you try it, let me know, I'm not sure I can face doing so...


The Beer Nut said...

Carlsberg more of a distribution company? Really? Aren't Carlsberg Lager (particularly via the Wetherspoon contract) and Kronenbourg still pretty big UK lagers? And Tetley's doesn't look like it's about to go away.

I presume the post-merger macro head-to-head would involve the new company taking back Grolsch from MolsonCoors. It's a bit of an odd arrangement that.

Also, my money is on them giving up on the portmanteaus and acronyms and starting again with a new, modern, forward-looking bullshit name. Blandex and SnoozFiz are both available.

TIW said...

I'm sure i've seen that Jaques 'fruit cider' stuff claiming to be a Belgian cider. Or did I dream that?

Either way, bargepole territory...

Neil, said...

The lack of market knowledge is truly staggering from these multinationals. At somepoint someone within the team must have gone, shouldn't we just make a beer that tastes good and is a quality product? Then they tot up the cost and decide a cheap product plus ridiculous over engineered marketing is a far better option.

The stupidity never ceases to amaze me!

JulieHG said...

What concerns me most about the rumor is the impact to distribution channels for craft brewers. It's already enough of a challenge due to AB-Inbev's market reach, but consolidate that to include SAB's distribution? They could effectively shut out any hope of broad distribution of anything but their own beer.

However, I highly doubt that it will pass the anti-trust scrutiny over here. Together they'd have 80% of the market share, and that alone will force them to divest something out of the deal here in the US.

Sid Boggle said...

Jay Brooks flags up a potential major hurdle for any SAB-ABI merger by noting the entity would have 80% of the US market, which would probably fall within the remit of US anti-trust laws. Wonder how creative they could be in surmounting that? Break up the restrictive distribution networks they own? Who would pick up the slack? What impact would it have on craft brewers who move their beer using them?

Charlie said...

Great post Melissa.

Market share through acquisition is always spun as some sort of consolidation of great minds and tradition which will result in a better deal for the consumer.

Note: deal. Never product.

In any business run by marketing and accounts, the product is always going to suffer.

In effect, the beer is largely irrelevant so long as they can secure exclusive tie-ins to festivals, music venues and Live Nation events in Hyde Park over the summer, while running point digit margins through Tesco volume discounts.

Melissa Cole said...

Hello all, sorry I had a luddite moment with comments and moderation and these have been waiting for me to release them! I was feeling incredibly unloved until I realised it was my own stupidity!

Yes agreed on anti-trust, didn't stop them buying both Bass & Whitbread in the UK and then divesting brands afterwards though - it's how they roll!

@TIW - you're right, Jacques is marketed as Belgian, eep!

@beer Nut - and how long would it take the leviathan that would be created to push that deal out on price?

Anonymous said...

I work for Inbev at one of their U.S. brewries. They are full throttle in their race to bland and bad beer. Changing the recipes for cost savings and slaying the little taste it had.
A case of coporate arrogance exceeded only by ignorance.
Luckily we have some fine local brews to enjoy. Cheers!