AB InBev + SABMiller = Newco

The new company will be in a better position to conquer emerging markets in the global South, is the message from the management. “This may be good news for the shareholders, but maybe not for the poor and underprivileged”, comments FORUT’s Secretary General Morten Lønstad. “Beer drinking is already an obstacle to development in many countries and closely linked to development challenges like poverty, gender-based violence and HIV/AIDS”.

On the 11^th of November the two companies AB InBev and SAB Miller published a press release where the long planned mega merger is confirmed. 

The press release explains that “The Transaction will be implemented by means of the acquisition of SABMiller by Newco (a Belgian company to be formed for the purposes of the Transaction). AB InBev will also merge into Newco so that, following completion of the Transaction, Newco will be the new holding company for the Combined Group”.

The ambitions behind the merger are high. Commenting on the announcement of the merger, Carlos Brito, Chief Executive Officer of AB InBev said: “We are excited about our agreement on the terms of a recommended acquisition of SABMiller to build the world’s first truly global brewer… By pooling our resources, we would build one of the world’s leading consumer products companies…”.

In the last years the two merged companies have had what they call “a complementary geographical footprint”. In practical terms this means that AB InBev has been the leading beer brewer in the Americas and parts of Europe while SABMiller has been big brother among the brewers in Africa and parts of Asia, as the comany's own world map here shows.

The Combined Group will now have “operations in virtually every major beer market, and provide more choices for beer drinkers, including global and local brands, in new and existing markets around the world”. It is estimated that this single company now will control one third of the global beer market, which obviously gives very a strong market position.

“Based on experience, we expect that Newco will attempt to translate this economic power also into political influence, nationally and globally. The multinational alcohol producers have been very active in trying to influence policy processes in individual countries and in the UN system. Their aim is to prevent governments from introducing regulations that can restrict alcohol marketing and sales and reduce profits”, says FORUT’s Secretary General Morten Lønstad (picture right, from an alcohol policy conference in Sierra Leone recently).

The branding of the new company was kicked off by the following statement by Carlos Brito, the CEO of AB InBev said: "It has long been our dream to build the 'Best Beer Company Bringing People Together For a Better World'. Comments FORUT: “Creating a better world is a praiseworthy ambition, but we doubt that bringing people together to drink beer is the best strategy. We assume that many women in Africa and Asia would have the same doubt, knowing how harmful alcohol use affects families and everyday lives in many poor communities today”.

The President of IOGT International, Kristina Sperkova, comments in a blog post on the recent beer merger and development.

The new brewing giant is determined to use its strength to sell more beer and earn more profits in the global South. Asia, Central and South America, and Africa are called “hugely attractive markets” in the press release and these regions “will be critically important to the future success of the Combined Group”.

The press release also says that “Africa, as a continent, has very attractive markets with increasing GDPs, a growing middle class and expanding economic opportunities. And, of course, the prospects for the beer sector in Africa are compelling: beer is becoming increasingly popular and the beverage of choice for many consumers across the continent”. Furthermore, Africa is defined as the “critical driver of growth for combined company, building on the strong heritage of SABMiller in the region”.

A few days prior to the merger The Economist commented on the issue by saying that this merger would become the third-largest in history with a value of $106 billion. The new company will earn half the industry’s profits and sell one in three beer bottles worldwide.

Before the merger, AB InBev was the world’s largest brewing company with around 20 % of the global sales in volume. According to BrandZ, the company held seven of the ten most popular beer brands, measured in sales value; Budweiser, Bud Light, Stella Artois, Skol, Corona, Brahma and Modelo.

The market share of SABMiller was around 10 % before the merger. The company had around 200 beer brands, including popular brands like Miller, Grolsch, Peroni Nastro Azzuro and Pilsner Urquell.

The web site InsiderMonkey has more detaiils about the largest brewers of the world, before the mega merger of AB InBev and SABMiller.