SABMiller and AB InBev came to an 'agreement in principle' this morning regarding the latter's takeover bid of £44 per share. We talked to the on-trade and other members of the industry for their opinion on the deal:
‘We may have to move away from the world’s biggest brewer…’
Mark Reynolds, Three Cheers Pub Co: 'My only concern at the moment is the brand perception of SABMiller's individual brands. We currently stock Peroni, Pilsner Urquell and Kozel, and although they are mainstream, they do feel more niche and craft-like compared to AB InBev with the likes of Carling and Stella. SABMiller also recently bought Meantime and we do stock the pale ale and lager in some of our outlets.
'The brewery landscape is definitely changing and the over the next few years we will see independents like ourselves looking to differentiate ourselves from the bigger pub brands, which may involve moving away from the world's biggest brewer... watch this space.'
'I just pray they'll dispose of brands like Pilsner Urquell rather than trash them like they've done Stella and Bud.'
Pete Brown, beer writer, consultant and broadcaster: 'AB InBev creates "value" via a ruthless cost-cutting, asset stripping approach to the breweries it buys. It slashes staff costs, slashes ingredients costs, and then shatters the integrity of the beers it has custody over. We see its profits grow as it marches ever onwards, but look at the fortunes of the individual brands it acquires, and they inevitably go into decline. I just pray they'll dispose of brands like Pilsner Urquell rather than trash them like they've done Stella and Bud.
'In addition, this announcement comes just a day after it was announced that AB InBev is under investigation in the US for anti-trust violations, seeking to shut craft brewers out of the market by buying up distributors and closing them off from competitors, large and small. The rest of the world doesn't have the American three-tier distribution system, but we've all witnessed sharp sales practices such as "You can only have Brand X if you also take Brand Y," or "we'll pay you X if you don't stock Company Y's brands." We've never seen how pervasive this kind of thing could become when one company, that seems to actively resent other companies being present in its market, controls a third of global beer production. I can see no benefit whatsoever in this deal for anyone, apart from a few fat shareholders.
Tim Martin, JD Wetherspoon: 'All licensees will be against the consolidation of two of the world's largest brewers. They are not joining forces to help the public, or their customers. This marriage is a bad idea,'
'Product ranges are also likely to be rationalised, allowing greater investment in the retained brands.'
John Colley, Warwick Business School (Professor of Practice, former CEO of a FTSE 100 company, and researcher of large takeovers): 'AB InBev has paid a reasonably full price for SABMiller which certainly passes some of the merger benefits to SABMiller shareholders.
'AB Inbev shareholders will be hoping that it can extract the planned benefits and overall for once I would have said it is a decent deal for both shareholders as AB InBev probably will extract the synergies and consolidate a declining market. I say this because the majority of major acquisitions fail to extract planned synergies and more than half destroy value.
'That said AB InBev does have a good record with previous acquisitions. However, expect substantial redundancies and cost savings over the next year.
'Product ranges are also likely to be rationalised allowing greater investment in the retained brands. However for the customer one in three beers will be produced by AB InBev as a result of this merger, which suggests less choice and less competition.
'It makes consumers want to support small, artisanal companies even more.'
David Bruce, City Pub Company: 'For SAB Miller shareholders, there’s no one out there bigger than AB InBev. The price has been ticking upwards and is a pretty good price. If shareholders don’t take this, they’ll effectively be locked into the company forever.
'For microbrewers, I think this a good thing. Consumers are becoming anti-brand and are more interested in companies that serve a local community. Big global companies are buying up more and more brands, and the world’s big beer brands are owned by fewer and fewer companies. It makes consumers want to support small, artisanal companies even more. The public taste for innovative, interesting, quality beer is being catered for more and more by a happy band of craft brewers. So for small brewers, I think the deal is a good thing.'
'Good beer is not just a commodity to be bought and sold, dumbed down and diluted'
Dave Bailey, Hardknott Brewery: 'My gut reaction is that it isn't good. 30% of the global beer market dominated by one single organisation is going to have an effect on access to market for smaller brands like us.
'It is already difficult to fight through due to various restrictions bigger brands create. Tying in routes to market to particular groups of brands is common practice. The '100% share of mind' that is practised by Budweiser dominates in many distribution markets globally. We stand little chance of making it into many distribution networks as a result.
'The scary thing is the the conglomeration will now own many brands that were previously well thought of, like Meantime and Blue Moon, for instance.
'I remember a time when Boddingtons was considered a fine cask beer. Now it’s been dumbed down and incorporated into this group of brands. Leffe, Bass and others.
'And for the consumer it is not good. After all, 30% of the market making beers that are all bland an uninteresting. The choice is going to be reduced as their market leverage is so strong it will reduce interest and make beer so much blander, more boring and reducing the aspirations of beer in general.
'Good beer is not just a commodity to be bought and sold, dumbed down and diluted to the point of the marketing and label design being the only point of difference.
'I believe drinkers want to know what the ethos is behind the brand, the goals of the people that care about what they make. We care about what we make and we have core values that put true value into our beers. But we can’t get our beers out to the people who want them if the world is flooded with meaningless, bland and emotionless fizzy yellow liquid.