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Selling The Suds

Added: Thursday, December 1st 2011

Global brewers are being urged to sell beer like soap if they are to hold on to market share and grow sales in emerging markets. A report in the business magazine the Economist says the Big Four international brewers are concerned by flagging sales in what it calls "the rich world" and sluggish sales in the emerging countries.

Sales in 2010 fell by 1.5% in the United States and 2.3% in Western Europe, according to the Japanese bank Nomura. As a result, it's expected there will be further mergers and takeovers among the brewing giants. According to the Economist, the $52 billion merger in 2008 between Anheuser-Busch in the U.S. - the owner of Budweiser - and the Brazilian-Belgium group InBev "saved a fortune". "Cost-cutting through mergers will have boosted global brewers' profits by $3 billion over the five years to 2012, estimates Credit Suisse, a bank," the magazine adds.

Nomura predicts that growth will slow in emerging markets, which are not nearly as profitable as rich ones. Anheuser-Busch InBev, now the global leader, sold a third of its beer in North America in 2010 yet reaped 46% of its profits there.

The Economist adds: "So the 'big four' brewers (which control about half of the global beer market) need to look at home for future profits. The trouble is, boozers in rich countries are increasingly drinking at home. In Britain, for example, about half of all beer is bought for swilling on the sofa. By 2018, thinks Molson Coors, a Canadian brewer, as much as 70% could be. Since the margins in supermarkets are thinner than those in bars, that spells trouble for brewers."

The magazine says that in response the global brewers are changing their business model. "Their dream is to sell beer like premium-priced detergent, using uniform global marketing campaigns organised from head office." Carlsberg, it reports, has been "furiously recruiting managers from big consumer-goods firms. Its boss, Jorgen Buhl Rasmussen, previously worked for Duracell, a batter-maker, and Gillette, a purveyor of razors. ABI has similar plans for a global marketing push for Stella Artois and Becks."

The Economist anticipates further consolidation among global brewers. "The combined market share of the top four grew by 22% by volume in 1998 to nearly 50% in 2010...Investors in breweries are licking their lips as they contemplate a fresh round of takeovers. SABMiller has been talked of as a potential buyer for Molson Coors, Australia's Fosters, Efes, Turkey's largest brewer - though it might find itself in competition with Heineken. ABI, it is said, may seek to take full control of Group Modelo, Mexico's number one beer makers, of which it already owns half."

All this may seem of little interest to consumers who prefer craft beers packed with aroma and flavour. But the Economist underscores what has been discussed on beer-pages recently - the global brewers will also move to buy craft brewers with successful brands. In Britain, Molson Coors recently bought Sharp's in Cornwall, while AB InBev has swallowed Goose Island in Chicago for $39 million.

Mark Hunter, chief executive of Molson Coors in Europe, only mentions Sharp's main brand Doom Bar, which puts a large question mark over the rest of the brewery's beers. And will AB InBev continue with Goose Island's range that includes both wood-aged beers and Belgian-style ales or hone production down to just IPA and Honkers?

Only time will tell. But in the meantime, next time you're in your local supermarket, you may find Stella and Becks's on the same shelf as Persil. The American slang term for beer - "suds" - may take on a deeper meaning.