SAB Miller’s association with Coca-Cola and AB InBev’s tie-up with PepsiCo in Latin America is one hurdle that could halt a mega merger between the world’s two biggest brewers, analysts suggest.
Anheuser-Busch InBev (AB InBev) is Pepsi’s largest bottler in Latin America while SAB Miller is a key Coke bottler, and a mega merger with SAB would likely force the new group to pick a big soda side.
Neither SAB nor AB InBev will comment publically on whispers of a possible merger, but rumors abound that such a deal could happen within a year – with talk of SAB commanding around $100bn.
Industry sources point to a lack of regulatory hurdles stopping such a deal – between world No.1 ABI and No.2 SAB Miller – clear economies of scale and complementary regional strengths.
Mega deal would ‘move the needle’
Societe Generale analyst Andrew Holland told Reuters Monday that any such takeover would “move the needle” more significantly for AB InBev in growth regions such as Asia, rather than taking over a smaller independent brewer such as Thailand’s ThaiBev.
SAB Miller is especially strong in Africa where it covers 15 countries alone and a further 21 via a strategic alliance with the Castel Group; it is market leader in Peru, Panama, Ecuador, Colombia and El Salvador.
In China, SAB is market leader through its CR Snow JV with China Resources Enterprises (circa. 22% market share) – a notable prize for AB InBev – and the second largest brewer in India, while it is also especially strong in Eastern Europe.
Tapping global beer profit pools
AB InBev is the market leader in the US, Canada, Brazil, Argentina, Belgium, the UK and the Ukraine; in China it is No.3 with a circa. 12% share. In its 2012 annual report states: “We have the No.1 and No.2 position in many of the world’s leading beer markets.
“Our presence is especially strong, and growing, in the three countries that represent over 40% of global beer volume and global beer profit pools – the US, Brazil and China,” ABI adds.
SAB’s strength in China is one attraction for ABI, but China Resources Enterprises is a state-owned conglomerate, which would be wary of any tie-up.
The US Department of Justice (DOJ) also imposed conditions on AB InBev $20.1bn full takeover of Grupo Modelo in February this year, given fears that the combined group would control around 46% of annual US beer sales, where Grupo Modelo held a 7% share.
Thus, the DOJ is unlikely to approve any deal that allows SAB/ABI to retain its 50% stake in the Miller Coors JV with Molson Coors, which corners around 29% of annual US beer sales.