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USA: Brewers facing a quandary Nation's top producers must grow or be bought. Domestic beer sales have stagnated once the leader in the global market, the U.S. has fallen behind china in market share, The Denver Post wrote on July 22. Stagnant domestic beer sales and increasing pressure to expand have forced the hands of the nation's top brewers - get bigger or get bought out.

In 2002, South African Breweries Plc bought Milwaukee-based Miller Brewing Co. for $5 billion, making the combined company, SABMiller, the second-largest brewer in the world. In November, San Antonio-based Pabst Brewing Co., the No. 4 U.S. beermaker, put itself on the block.

And this week, Golden-based Adolph Coors Co., the No. 3 brewer in the country and No. 8 worldwide, said it was in advanced merger talks with Montreal-based Molson Inc. "The beer industry, like almost every other industry, is becoming more global," said Eric Shepard, executive editor of Beer Marketer's Insight, a Nanuet, N.Y.-based trade publication.

Once the world leader in beer sales, the United States has fallen behind China in terms of market share.

In 1998, the United States accounted for 17.8 percent of worldwide beer sales, compared with 14.2 percent for China, according to research firm Euromonitor International. In 2003, China's share jumped to 20 percent, while the United States' grew slightly to 18.4 percent.

At the same time, countries such as Russia, Poland and South Korea have also experienced market-share growth greater than that of the United States. Experts attribute the United States' sluggish growth in beer consumption to a number of factors, including changes in drinking habits, with younger consumers choosing alternative drinks such as flavored alcoholic beverages.

That trend has forced U.S. beermakers to find ways to grow by increasing their presence elsewhere. In 2001, Coors acquired the No. 2 beer brand in the United Kingdom when it bought Interbrew SA's Carling business for $1.7 billion.

"It's a matter of survival," said Paul Gatza, director of the Boulder-based Association of Brewers. "If (Coors) sat back and did nothing, they would get further marginalized in the market."

Even if Coors and Molson merge, more deals may be in the works, Gatza said. The combined company could look to acquire other brewers. "The two countries that really haven't consolidated a whole bunch in the beer world are China and Germany," he said. "In both of those countries, there's a whole lot of small, regional and large brewers that could be bought up or partnered with." Gatza also said Coors and Molson, which is battling Labatt to become Canada's No. 1 beermaker, could target Pabst to increase U.S. market share.

Analysts speculate that the merged company could be the target of a buyout by Heineken, which had been rumored to be interested in Coors in the past. Amsterdam-based Heineken declined to comment. "The global consolidation of the beer industry is probably going to continue for another five years," Gatza said.

Brian Morgan, a U.S. beer analyst with Euromonitor International, said the Coors-Molson merger would benefit both companies.

The merger would make it easier for Coors to expand its brand in Canada and help Molson revive its brand in the much bigger U.S. market, Morgan said. "A merger would also give each company access to another well-established global brand portfolio as a way to hedge against the possible failure of their newest products," Morgan said. "These brands could help them boost their domestic market share past the thresholds they have maintained for the last few years."

The combined company would be the world's seventh-largest beermaker. It would rise to sixth after the $11 billion merger between No. 4 Interbrew and No. 6 AmBev is completed. The combined Interbrew, in Belgium, and AmBev, in Brazil, would replace Anheuser-Busch as the world's largest beer company.


23 July, 2004