The big dough in bubbles

The world beer industry is going through another shakeup. A deal has been done whereby Anheuser-Busch InBev SA (Budweiser, Stella Artois, Corona; “A-B” for short) will acquire SABMiller PLC (Miller, Peroni, Grolsch; “SAB” for short) for more than $100 billion. The combined company will control about a third of the world’s beer production— and half of its profit.

A-B already owns six of the top 10 beer brands in the world. (The top brand is its Bud Light, with a value of $12.5 billion). It will now own eight of them. Voting control of A-B rests ultimately with the same Brazilian investors who control Tim Hortons, Burger King, Heinz and Kraft Foods—so there is an obvious Wellington connection. No word yet on whether or when the company will be listed on the Wellington Stock Exchange.

While there are all kinds of complicated licensing, brewing, distribution and marketing arrangements in place that make it difficult to speak in generalities, the big money must lie in owning a brand rather than in making and selling the stuff by the bottle. For example, number one Bud Light went up in value 16 per cent (in the neighbourhood of $2 billion) in 2014 over 2013. No wonder the beer companies pour such staggering amounts of money to have their brands be ‘the one that you watch Sunday afternoon football at the Legion with,’ or ‘the one that makes a waitress give you the eye just because she is so impressed with your choice of beer, which noone else in the bar has chosen even though it is ranked number three,’ or ‘the one that marks you as a guy who can attract a party at which all the girls look pretty and all the guys look normal, and at which everybody is drinking but no one is getting drunk.’

Moving down a division from the top 10, the sheer number of beer brands out there is staggering. A-B owns over 200 brands, while SAB owns at least 150. That suggests that the world of beer is about to undergo some serious rationalization. How many brands with a less than strong following will be maintained by the corporate cost-cutters?

Will Labatt’s, for example, be forced to stop making and selling Schooner lager, which it already treats as a regional brand? “Introduced in the 1950s, Schooner is a popular Maritime-brewed beer. Unique fruity flavours from the Labatt yeast, and a special blend of North American hops, help deliver a clean, smooth-tasting beer.” Sounds yummy, but perhaps the brew is destined to be thrown overboard. It’s hard to see how its value can go up by anything close to the almost $2 billion by which the Bud Light brand went up—in one year. And from the other side of the barrel, there are craft breweries to compete with. In Ontario, The Beer Store (49 per cent owned by A-B) has agreed to raise the shelf space available to craft breweries to 20 per cent.

Even self-styled national brands may be at risk. How about Labatt 50, for example? “The first light-tasting ale introduced in Canada, Labatt 50 was Canada’s best-sellling beer until 1979, when, with the increasing populartiy of lagers, it was surpassed by Labatt Blue.” Take five for 50 Ale? I don’t necessarily think so. I would not want to stake my retirement savings on having been the number one beer in the Canadian market in 1979 in the face of the Bud Light world juggernaut.

Of course, you can imagine softer and subtler cost cuttings being considered first. Who wouldn’t be tempted, on the grounds of saving the brand from extinction, to at least consider making the contents of a bottle of Schooner identical to the contents of a bottle of Labatt 50? Or just adding a little water to each to keep the cost of production down? In the post- Volkswagen era, no one except a humour columnist.

In the world of brand identity, the one that is getting the attention for the moment is the to-be-consolidated company—its consitutent parts already being the result of mergers. I can’t see the name Anheuser- Busch InBev SA / SABMiller PLC tripping off anyone’s tongue. After all, if the brands the company is going to own have such value, why shouldn’t the brand name of the company itself be recognizable as a brand. The financial press wags have been having a field day with it: suggestions include such killer titles as “MegaKega” and “Beerhermouth.” How about “Omnisuds”? Or “BubbleDough”? Or “ABSAB”? There’s a Timbit on me for anyone who comes up with what proves to be the correct answer.

dsimmonds@wellingtontimes.ca