AB-InBev and Molson Coors defend MegaBrew to Congress
It was a sight to behold: the two major players in the U.S. beer market, AB-InBev’s CEO Carlos Brito and Molson Coors’ CEO Mark Hunter amicably side by side at a Senate Judiciary subcommittee hearing in Washington on 8 December 2015. Well, not quite.
Between them sat Bob Pease, CEO of the Brewers Association, Craig Purser, President and CEO of the National Beer Wholesalers Association, Jay Wilson, Minister of Iowa Beer and Diana Moss, President of the American Antitrust Institute.
They had been invited to discuss U.S. lawmakers’ concerns about AB-InBev’s proposed USD 110 billion acquisition of SABMiller, which lawmakers fear would limit competition.
According to U.S. media, Mr Brito put up a good show, effectively saying that the deal would increase domestic beer competition, not weaken it.
Mr Brito reiterated the reasons for the deal: “The purpose of this transaction is to enhance our ability to serve new markets, particularly in Africa, Asia and Central and South America.”
While MegaBrew, as the transaction has been dubbed, would open new markets for AB-InBev, Mr Brito said it wouldn’t boost AB-InBev’s market position in the United States. “If anything, our divestiture of SABMiller’s interest in MillerCoors will create an even more competitive marketplace, building upon what is already a golden age of consumer choice in American brewing.” Clever argument, isn’t it?
The hearing was called to examine the impact of the merger, which would create an entity accounting for about half the industry’s profit and almost a third of all beer sold worldwide. The combined company would hold the number one or number two positions in 24 of the world’s 30 largest beer markets.
The Senate subcommittee has no power to block the merger. That decision lies with the U.S. Justice Department.
Mr Brito went on the explain that the merger would not only keep competition in the U.S. beer industry where it is today, but would in fact boost Molson Coors’s ability to operate.
Mr Brito repeatedly told senators that the deal wouldn’t affect craft brewers and their access to consumers. The U.S. beer market “has never been so competitive and so open,” he said, with 4,000-plus brewers in the 50 states.
Shrewdly, Mr Brito also referred to statistics from the Brewers Association forecasting craft beer will account for around 20 percent of the U.S. beer market by 2020, up from 11 percent in 2014. He called attention to the fact that beer industry is facing increasing challenges from the wine and liquor market and mentioned data showing that beer sales, as a percentage of total alcohol sales, has fallen since 2009.
Naturally, Mr Brito’s comments were contradicted by Bob Pease, CEO of the Brewers Association, which represents the independent craft-beer industry. Mr Pease cited the beer giant’s influence over U.S. wholesalers as an example of the company’s unfair competitive edge over smaller players.
“In communities where AB-InBev or a closely related wholesaler is one of two choices for a brewer to access the retail market, the wholesale tier is simply not competitive,” Mr Pease argued.
Mr Brito disputed the notion that the deal will harm craft brewers. He was joined by Molson Coors’ CEO Mark Hunter in saying that independent wholesalers will remain unchanged after the merger.
MillerCoors currently owns one distributor and Molson Coors has no intention of buying others, Mr Hunter said. In the U.S., the merger will change nothing other than removing one of MillerCoors’ two parent brewers, he said.
As if singing from the same hymn book, Mr Hunter said: “[The deal] will not change consumer choice, it will not change the competitive pricing environment, it will not change our market share or our longstanding support for the three-tier system, it will not change our support of U.S. growers and suppliers, and it will not change the explosive growth of craft brewers or their access to the market through the MillerCoors distributor network.”
