Is SABMiller Next in the Great Beer Rollup?

The brewing world, on the heels of InBev’s acquisition of Anheuser-Busch, contemplates future industry consolidation

July 15th 2008 | |InBev’s (INTB) $52 billion acquisition of Anheuser-Busch (BUD) seems like the merger to end all beer mergers, the climax of several decades of industry consolidation. What could possibly top it?

Well, how’s this: A few years from now, after it has digested Anheuser-Busch, InBev joins up with other brewers such as Heineken (HEIN) and Carlsberg (CARLB) and makes a joint bid for giant SABMiller (SAB.L). The companies carve up SABMiller’s portfolio, with InBev taking over SAB brands in regions such as Africa, where it is weak.

The scenario may sound far-fetched, but analyst Gerard Rijk at ING Wholesale Banking (ING) in Amsterdam points out that SABMiller, which markets Miller beer in the U.S., is the one big brewer still vulnerable to takeover. Heineken’s family owners are unlikely to sell, and Carlsberg is controlled by a foundation. The London- and Johannesburg-listed shares of SABMiller, which will lose its status as the world’s biggest brewer after the InBev-Anheuser deal, are widely held. “The big one that’s left that can be taken over is SABMiller,” Rijk says.

Setting Precedent
There’s already beer industry precedent for such a combined bid. Earlier this year, Amsterdam-based Heineken and Copenhagen-based Carlsberg finalized their joint takeover of Britain’s Scottish & Newcastle (, 1/25/08). Heineken will take S&N’s assets in markets such as Finland and India, while Carlsberg will take S&N brands in France and Vietnam, among other places.

The fact that people in the industry are even talking about who might buy SABMiller is a sign that pressure to get bigger remains. With little growth in overall beer volumes, the companies are focusing on operating more efficiently, and marketing their most profitable premium brands in as many countries as possible. In a conference call with analysts July 14, InBev CEO Carlos Brito said the Belgian-Brazilian company wants to market Budweiser as a premium brand in fast-growing markets such as China and Russia, while saving $1.5 billion annually by 2011 by combining duplicate operations and other measures.

Obstacles to Further Deals
Before there are any more big deals the big brewers will need to spend a few years restocking their war chests and paying off the debt they have built up. InBev is borrowing a cool $45 billion to buy Anheuser-Busch. And InBev won’t be doing any more dealmaking unless it gets the Anheuser-Busch merger to work. That won’t be easy, says Michel de Carvalho, a member of the Heineken supervisory board and husband of Heineken heiress Charlene Heineken.

InBev will have to overcome Anheuser-Busch’s focus on the U.S., where it has almost half of the beer market. “They don’t feel comfortable going outside the U.S.,” says de Carvalho, who is also vice-chairman of investment banking at Citigroup (C) in Britain. “When you have such a wonderful business, you don’t want to take the risk of going into emerging markets as we did.”

In fact, InBev’s competitors almost seem to welcome its play for Anheuser-Busch. The job of combining the two companies will keep InBev management busy for some time. In addition, InBev, which is known for cost-cutting, may be tempted to pare the advertising budget for Budweiser and Bud Lite. “Miller might in fact benefit from the fact there will be less competitive pressure from mainstream brands,” says ING analyst Rijk.

But if InBev manages to successfully integrate Anheuser, expect the dealmaking to resume.

Ewing is BusinessWeek’s European regional editor .