‘Everyone has their price’: Analyst reflects on SAB Miller’s Heineken approach


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Peroni Nastro Azzurro on display in a UK supermarket
Peroni Nastro Azzurro on display in a UK supermarket

Related tags Sab miller Sabmiller Miller brewing company Beer Heineken

Despite Heineken’s stated desire for independence after it knocked back an approach for SAB Miller, one financial analyst believes a deal could still be done.

Phil Carroll from Shore Capital told BeverageDaily.com: “I’d never say never. Much as Heineken has pushed back there are ways around these things. Heineken wants to remain independent, but it doesn’t stop them [SAB] changing name, and Heineken having a family representation on the board.”

Carroll said he agreed with fellow analyst Chris Wickham from Oriel Securities, who recently suggested that SAB Miller – Miller Genuine Draft, Peroni, Pilsner Urquell – lacks a truly global premium beer brand.

Miller Genuine Draft

“I think that is the case – it would help, although it’s not everything. At the top end it would make them an even stronger proposition. That’s why the tie-up with Heineken was quite interesting,”​ Carroll said.

ABI needs material M&A to fuel growth?

In a note sent to clients on Tuesday, Carroll said Shore Capital thought an approach by Anheuser Busch InBev (ABI) for SAB Miller was some way off even prior to recent market chatter, and that this remains the case due to the complexity of any deal.

“We believe ABI’s growth without further material M&A is likely to wane and the business could then potentially de-rate as it starts to be perceived as a ‘cash cow’,”​ he wrote.

Returning to SAB, which released its Q2 2015 trading statement on Tuesday, the brewer’s strategy of growing above-premium portfolio sales to offset overall volume declines appears to be working.

Premium light retail sales fell low single digit in H1 – Miller Lite and Coors Lite – while premium regular brands fell saw a similar decline due to a double-digit fall for Miller Genuine Draft that slight growth for Coors Banquet failed to offset.

SAB accepts lack of mainstream beer innovation

But the quarter saw high single-digit sales growth for above premium brands including Miller Fortune and Forge Hard Cider – enabling SAB to grow US revenues 2% in H1 2015 and 1% in Q2.

“With US mainstream beer it’s a case of lost interest really, while you’ve got craft beer in the background – which is effectively above premium,”​ Carroll told this website.

“You’ve got that massive weighting in the middle ground. Certainly now ‘craft beer’ is a bigger portion of the pie – every mainstream brewer has brands involved,” ​he said.

Concurrently, Carroll said SAB has accepted there is a lack of innovation in mainstream beer, with the brewer extending the category beyond ‘men in a bar’ to women and changing taste profiles.

“All the craft options I think are also targeting women, as are cider offerings. It’s not just Smith and Forge Hard Cider, they’ve got Crispin Hard Cider as well, while Redd’s Apple Ale is more of a hybrid-type cider,”​ he said.

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