LONDON (AP) — It’s no fun being in the middle.
Heineken, Molson Coors and Carlsberg are storied brewers that trace their roots back hundreds of years and have loyal drinkers around the world. But the merger of their two biggest competitors leaves such mid-size brewers without a clear way forward.
They find themselves squeezed between a Goliath that will produce almost a third of the world’s beer and a growing army of craft brewers.
Some experts say the mid-sized brewers should respond by pursuing takeovers of their own. Others argue that would do little good because the underlying problem is that consumers are increasingly drinking craft beers, not mass market brands.
“There are so many craft beers out there,” said Jonny Forsyth, a global drinks analyst at Mintel. “They can’t buy them all up.”
What about Oregon?
Oregon US Sen. Ron Wyden hosted a roundtable discussion at Ecliptic Brewing with Oregon brewers on Friday morning to hear their concerns over the merger. The senator said he wants to make sure the big beer merger leaves Oregon’s craft brewers on a level and competitive playing field.
“It is unacceptable to go forward with a merger this large without giving full and fair attention to the concerns I’m hearing about from craft brewers and distributors,” Wyden said.
Craft brewers said they are worried about the deal because everything from hop prices to access to taps and retails shelves could be on the line.
“If there’s a company that large globally they can control access to market place,” said Brian Butenschoen, the executive director of Oregon’s Brewers Guild. “They can control access to raw ingredients but they can also have incredible buying, too.”
Wyden sent a letter to US Attorney General Loretta Lynch and the chairwoman of the FTC, Edith Ramirez to make sure they knew Oregon is home to 230 brewers which employ 7400 people and pay living wages.
Craft beer is a $2.8 billion industry in Oregon.
“An anti-competitive merger, particularly one that forgets the concerns of our small craft brewers and industries, would be a real body blow to Oregon’s economy,” Wyden said.
Across the globe
Discussions about world domination heightened Wednesday when Budweiser maker Anheuser-Busch InBev agreed to buy SABMiller for 71 billion pounds ($107 billion). That combination would account for 29 percent of the world beer market, making it three times bigger than its nearest rival Heineken, with a mere 9 percent, according to the market data firm Euromonitor.
Beer makers looking to bulk up in response will have few options because some of the likely targets are privately held and not interested in selling, said Jeremy Cunnington, the senior alcoholic drinks analyst for Euromonitor.
“There isn’t that much else to buy or acquire,” Cunnington said.
Heineken N.V has public shareholders, but the family owns 50.5 percent of the shares, “retaining family involvement and vision.” Carlsberg is also controlled by a foundation, which has 75 percent of the votes.
To ease regulatory concerns in the United States, SABMiller will sell its 58 percent stake in a venture with fellow brewer Molson Coors for $12 billion.
But AB InBev would still be the No. 1 player in North America — as well as Australasia, Latin America, the Middle East and Africa. In Europe, it would lag behind only Carlsberg in the east and Heineken in the west, according to Euromonitor.
AB InBev was attracted to the deal because it wants to grow sales through SABMiller’s brands in Africa and Asia, where drinkers are expected to increasingly buy brand beers as their wealth increases.
In developed markets, by contrast, the big companies are seeing sales decline and trying to fight off an onslaught of craft brewers. Consumers, bored with the previous offers, began fleeing the big brands in the 1980s in favor of more complicated craft brews.
“Beer drinkers … these days are far less brand loyal,” said Duane Stanford editor of Beverage Digest. “There’s a lot of room to play.”
Beer companies have tried to counter the trend by buying craft brewers. They have also tried to replicate what the craft brewers have done or at least evoke their ethos. Carlsberg, for example, calls their founder “probably the first hipster,” and said he opened his first micro-brewery in 1847.
AB Inbev’s deal is far from completion, facing regulatory hurdles in the United States, China and South Africa. Craft brewers are among those watching things closely.
The Brewer’s Association, the trade body for America’s 4,000 small and independent breweries, urged the Department of Justice and Congress to closely examine the merger’s “potential effects on the U.S. marketplace and American consumers.”
“The beer drinker wants variety. (Beer drinkers) want choice. They want quality. They want authenticity. All of those things are delivered by the American craft brewer,” the association’s CEO Bob Pease said as he described his concerns.
Ironically, the craft brewers should want the new combination to be as big as possible, argues Erik Gordon of the Ross School of Business at the University of Michigan. That’s because economies of scale discourage behemoths from doing niche and special run beers, “leaving those spaces open to the craft brewers,” he said.
“In the U.S., the test of a merger is not its size considered alone,” Ross said. “It is the potential effect on competition and therefore on prices.”
Anheuser-Busch released a statement to KOIN 6 News regarding the merger. It reads:
“Within the U.S., the beer market is already highly competitive, and nothing in these transactions will change that. Indeed, the Brewers Association predicts that craft brewers’ market share will hit by 20% by 2020 in the U.S. The Association has been quoted as saying that many of its members would view this transaction as ‘not relevant’ to their businesses and will keep on doing what they do.’ We agree. In Oregon, craft brewers are experiencing explosive growth. Additionally, nothing in these transactions will change beer distribution in the US. We have been distributing beer for nearly 100 years in places like Denver and Boston, markets with some of the most successful craft brewers in the country. Clearly our distribution has not held them back from significant growth.”
KOIN 6 News reporter Brent Weisberg contributed to this report.