Friday, June 06, 2008

SABMiller merger with Molson Coors approved

The Wall Street Journal reported yesterday that the US Justice Department has approved the proposed merger of the US operations of SABMiller with Molson Coors. Even so, their combined sales will be still be less than those of Anheuser-Busch, whose sales sit at just under 50% of the US beer market.

The antitrust enforcer's approval, which largely had been expected, allows the brewing giants to form a company that will control nearly 30% of beer sales in the U.S. <...> One major hurdle will be to figure out how to effectively promote both Miller Lite and Coors Light, longtime competitors in the light-lager category.

The merger combines Miller Brewing Co. of Milwaukee, the second-largest U.S. brewer with about 18% market share, and Coors Brewing Co. of Golden, Colo., the No. 3 player with about 11% market share.

[SABMiller, the world's largest brewer in terms of volume, will have a 58% economic interest in the joint venture. Molson Coors will have 42%. They will have equal voting interests.]

The companies aim to pare $500 million in costs over the first three years of the venture, in part through lower transportation costs derived from using each other's breweries to make each other's beers.

In other words, what will be the flavor difference between the two? Then there's this issue, what a smaller beer importer once explained to me as the "real-estate of the shelves":

As one company in the U.S., Miller and Coors will also have more leverage with retailers, which could help them garner more shelf space at bars and stores.

This "leverage" is something the smaller breweries fight against every day. A chain store or large grocery may decide to stock beers from a smaller brewery, but it's actually the distributors for the large breweries that control the stocking on the shelves, or what is known as the "sets". But ...
The Justice Department said in a statement that it determined the joint venture "is not likely to lessen competition substantially." It said cost savings the companies are expected to gain from the deal are "likely to have a beneficial effect on prices" for consumers.

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