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The Uber-Brew Cometh: InBev's Acquisition Of SABMiller Now Virtually Assured

Beer was a top-trending news item a few months ago, when it was announced that the two largest macro-brewers in the world, Anheuser-Busch InBev and SABMiller, were attempting to merge. The merger - worth over $100 billion Dollars - worried a lot of people due to it giving them control of over 30% of the world's beer production, and near-monopolies on macro-brewing in many areas.

Well, it just won the approval of the US Department of Justice's anti-trust branch, which was one of the major remaining hurdles between them and a merger. At this point, the only major government that hasn't signed off on the merger is China, and very few expect them to put up a serious fight.

There's no doubt that this is bad news for many smaller breweries, since they're now facing a juggernaut so large that direct competition becomes nearly impossible. However, there is some silver lining here, at least for folks in the US. The government put some fairly serious restrictions on the merger which will at least limit the extent to which it can abuse its market position.

The InBev-Miller Merger: It Could Be Worse

So what is the government doing to protect competition in domestic beers? Quite a few things, actually...

The biggest is that InBev will have to divest itself of all US holdings of SABMiller. Which is to say, all Coors/Miller beers in the US will be sold off to Molson-Coors as an independent company, outside of InBev. This is a big concession, since in some areas of the country, the two brands combined would have made up roughly 90% of the local market.

It also says a lot about how much this deal is worth on the global scale that InBev was willing to agree to such a big US divestment. On the other hand, this also means that the Budweiser/Coors duopoly has been basically codified by regulation.

But, the restrictions don't stop there. InBev will also:

  • Need to seek specific approval from the Justice Department before acquiring ANY more brewers of any size, even tiny micro-brews.
  • Likewise, they'll have to get approval before buying any more distributors either, and
  • Have to cease all incentivization programs rewarding distributors for only carrying their brands.

Whether the first two restrictions will have 'teeth' remains to be seen. It seems hopeful that that DoJ is serious about protecting beer competition and won't simply rubber-stamp new acquisitions, but that isn't guaranteed.

The third restriction is a bit nicer, since it removes one of the primary ways InBev could have seriously abused its monopoly power. By controlling so many brands, they could have easily strongarmed distributors into dumping competing products.

(Now if only they could have done something about InBev's ridiculous advertising campaigns...)

In The Grand Scheme

So what this means is that, despite the merger, relatively little should change with the US domestic beer market. Bud and Coors will still be competitors. And in the meantime, with micro-brews continuing to gain market strength, there should be relatively little disruption in that market either.

In fact, the new restrictions on InBev purchases might actually be a boon to indie beers and brewpubs, since the industry was starting to get a bit worried about the rate at which they were being bought out. InBev's sneaky campaign to buy small companies and keep pretending they were independent was ruffling a lot of feathers.

We'll keep following this, although there's unlikely to be too many major new surprises to come. We hope.

Oh yeah... and something something try Duffy's Brew today!

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