SABMiller rumoured to sell Italian unit to AB-InBev
It’s one of those rumours that seem too far-fetched to be true, but the Italian brewing industry has been abuzz with speculation for a few weeks that SABMiller will exit Italy and sell most of its Birra Peroni assets to AB-InBev.
When SABMiller bought Birra Peroni in 2003 from the Peroni family owners in a deal, which valued Italy’s number two brewer at over EUR 560 million including debt, thus beating rival offers from Interbrew, Carlsberg and Scottish & Newcastle, the acquisition was met with a chorus of disapproval from drinks analysts who argued that it made neither financial nor strategic sense.
The critics were right. Although SABMiller said at the time that Italy’s beer market would be growing at 3 percent per year, ten years down the road it still hovers around 29 litres per capita, while Birra Peroni’s beer output has declined to 3.3 million hl in 2012 from 3.7 million hl in 2008, according to figures published by Assobirra, Italy’s brewing industry body.
Many Italian observers have long wondered if SABMiller makes much in terms of profits since Birra Peroni is said to sell 70 percent of its volume in the off-premise, but only 15 percent in the more lucrative on-premise and another 15 percent in exports.
Even SABMiller’s high hopes for the Peroni brand internationally have not really materialised. Although it joined Pilsner Urquell in what SABMiller called its portfolio of "trophy brands", Peroni is only a focus brand in a handful of markets, most prominently in the UK and the United States. When compared with other international premium beer brands like Heineken, Corona, Carlsberg and Budweiser, Peroni must be considered a laggard despite the millions of dollars SABMiller has spent on pushing it.
Having said all this, it would still come as a surprise should SABMiller sell Birra Peroni because AB-InBev must be to SABMiller what Linux is to Microsoft: enemy number one.
But in view of the fact that all brewers have to put up with declining volumes in western Europe, perhaps SABMiller decided that it was better to exit Italy than to keep on fighting an uphill struggle.
From what we at BRAUWELT International have heard, the deal is beyond the stages of due diligence and is structured thus that the Peroni family buys back the Peroni Nastro Azzurro brand with AB-InBev taking the rest. That would allow SABMiller to continue using the Peroni brand in markets where it is doing well.
For AB-InBev, buying Birra Peroni and its three breweries in Italy would make sense. At present they have no production facilities in Italy. All their beers (1.3 million hl in 2012) are imported, either from Belgium or from Germany, which is costly.
Despite having lost a protracted court battle with the Czech brewer Budweiser Budvar over the use of the Budweiser label in Italy last year, we at BRAUWELT International think that they would be keen on having Budweiser brewed in Italy again. It used to be produced by Birra Peroni under licence before Peroni was sold to SABMiller. Never mind the skirmishes with Budweiser Budvar, their Budweiser brand is growing strongly internationally and we are sure they already have revised packaging etc. "in waiting" for the re-launch.
Besides, AB-InBev are in a spot of bother across the Alps. The rent they pay on their Munich brewery is going to increase massively in coming years. A significant amount of beer produced in Munich is the Beck’s beer brand for export to Italy. If that could be shifted to Italy and the rest of their Munich volumes to their other breweries in Germany, AB-InBev would be able to decamp from Munich.
As you can see, a transaction between SABMiller, AB-InBev and the Peroni family might make sense strategically, even if only from a perspective of cost reduction. Now, whether there is anything to this wild rumour, we will have to wait and see.