The Beer Monopoly by Ina Verstl Ernst FaltermeIer

Author:Ina Verstl, Ernst FaltermeIer
Language: eng
Format: epub
Publisher: Hans Carl
Published: 2016-11-15T00:00:00+00:00

Australia’s beer profit pool beckons

Luckily, SABMiller was the only bidder for Foster’s, as several of its competitors were too stretched financially to be able to consider such a large deal. On the face of it, Foster’s did not fit SABMiller’s original predatory pattern, which focused on brewers in emerging markets. Like Miller before, Foster’s was a first-world brewer in a market where beer consumption was in decline. A large chunk of Foster’s profits came from selling imported Corona Extra – a licence, everybody knew, that would be revoked as soon as SABMiller’s people walked through Foster’s doors and given to Foster’s rival Lion, owned by Japan’s brewer Kirin.

With or without the Corona licence, Foster’s was a high-margin business. After all, in 2011 Australia’s beer profit pool on sales of about 17 million hl beer was larger than China’s with sales of an enormous 490 million hl beer. For SABMiller, the rationale for the deal was mainly about running Foster’s better and more efficiently. Analysts estimated that the combination could produce some $150 million in cost savings per year. Compare that with Foster’s alleged profits from the Corona licence – $65 million in EBITDA – and it’s easy to see why SABMiller was not too fazed by having to relinquish this brand. In his famous dead-pan fashion Mr Mackay acknowledged at the time: ‘Foster’s has an enviable portfolio of local brands and that’s where there’s been some undermanagement.’

It must have been around the time of the FEMSA sale that analysts began to tout the endgame scenario and wondered when AB-InBev would take over SABMiller. This deal had been on the cards since the mid-2000s, when it was rumoured that Anheuser-Busch was InBev’s Plan A and a tie-up with SABMiller InBev’s Plan B. As we found out in 2012, there were meetings between InBev and SABMiller to discuss a merger as early as 2007. However, discussions foundered because at the time InBev was unwilling to pay a significant bid premium and favoured a merger, while SABMiller was uncomfortable with the strong controlling position of InBev’s core shareholders in any potential merger and felt that they could not sell such a structure to their shareholders. 32 Therefore InBev chose to pursue Plan A and bought Anheuser-Busch instead. Once AB-InBev had this transaction and the follow-up one with Mexico’s Modelo – announced in 2012 but only completed in 2013 because of complex anti-trust issues – wrapped up, the takeover of SABMiller became a question of when, not if. After all, AB-InBev was already looking around for targets. In the brewing industry, there were only a few companies that caught its eye – and the biggest was SABMiller. Heineken was family-controlled, Carlsberg was in a world of trouble with its exposure in Russia, so this left SABMiller as the most viable target.

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