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AB InBev buying SABMiller “devastating” for Lion: Analyst

September 21, 2015

Carlton & United Breweries (CUB) may reclaim its mantle as Australia’s biggest brewer in the event of a successful takeover of SABMiller by AB InBev, Euromonitor has predicted.

The UK’s ‘put-up-or-shut-up’ takeover rules require AB InBev to back up its approach to SABMiller with a formal offer by October 14, in which case the transaction would still face many hurdles, completion of which may take years.

In that event the knock-on effects may be significant for Australia’s two biggest brewers, Euromonitor International senior research analyst Daniel Grimsey told Australian Brews News.

He said the deal would likely result in Lion losing AB InBev brands including Corona, Stella Artois and Beck’s to SABMiller-owned CUB.

“When looked at in terms of beer overall, the impact of switching brands such as Corona, Stella Artois and Beck’s from Lion to CUB might look rather small,” said Grimsey.

“However, this works out as 45 per cent of the highly profitable imported premium beer market. This segment grew by 14 per cent in value terms in 2014, and is expected to grow at a compound annual growth rate (CAGR) of 4%, in value terms, over the next five years. This is during a period when beer overall is only expected to grow by a CAGR of 1%.

“This would be quite a devastating loss for Lion, at least in terms of its pride.”

Agency brands come and go
In fairness to Lion however, it’s the very nature of agency distribution that brands will come and go, often in circumstances beyond the licensee’s control.

An earlier consolidation event, the 2011 takeover of Foster’s by SABMiller, was the catalyst for Stella and Corona to join Lion’s stable in the first place.

Industry sources suggest Lion’s contracts with AB InBev have years left to run – the Corona deal was only renewed in June this year.

Should AB InBev opt to terminate them, Lion would be due reasonable notice and compensation.

Nevertheless, Euromonitor’s Grimsey points out that a significant portion of the gains made by Lion in recent years have been due to the growing popularity of its imported brands.

“With the beer category volume share of both Lion and CUB so close – at 40 per cent for Lion versus 37 per cent for CUB* – the switch of these AB InBev brands to SABMiller, and therefore from Lion to CUB, may be enough to allow CUB to take the mantle of market leadership once again,” he said.

Lion spokespersons declined to comment.

*According to Euromonitor’s figures, which also include market share for private label beers coming out of Coles, Woolies and Aldi (both locally manufactured and imported).

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