In the Future, Will We Buy Coca-Cola From Budweiser?
A novice beer drinker might think they’re purchasing Stella Artois from a tiny distributor in Belgium, when in reality it’s owned by beer giant AB InBev, the beverage behemoth that also owns Budweiser, Beck’s, and Corona. And if the world’s largest beer distributor finalizes a merger with second-largest distributor SABMiller, there’s no telling what dominos will fall next — perhaps even the keys to the Coca-Cola kingdom.
AB InBev and SABMiller released the details of a $106 billion merger in mid-October, which if approved would mean AB InBev continues to add brands to its company letterhead. For the company that’s losing new potential customers to the craft beer market, this would be a big win.
To prevent Rockefeller-like anti-trust violations, AB InBev will probably have to sell off the MillerCoors line that SABMiller controls, as well as another line popular in China. But it could retain bottling rights in Africa, where SABMiller has historically held the corner on the market. It would be great for the company’s bottom line to add to its alcohol portfolio, but the merger would also open the door to another option, which could eventually mean you buy your Coca-Cola from the beer giant.
How do we jump from a beer merger to Budweiser and Diet Coke being stepbrothers? The answer isn’t simple, nor is it anywhere close to a guarantee. But the pending merger does leave a lot of questions for Coca-Cola to answer, and several predictions from beverage experts about the future of the beverage industry.
Ab InBev has reportedly had Coca-Cola in its acquisition crosshairs for a while, so much so that Coke’s chief executive has warned that the beer distributor might try its hand at distributing the other kind of carbonated beverages. Such a takeover is far away, especially since AB InBev will be mired in paperwork and legal battles until the SABMiller merger is complete. There’s plenty of people who aren’t happy to see the two largest beer distributors joining forces, so it will likely be a lengthy process. But if and when it’s finished, it could be a gateway to numerous other takeovers, Coca-Cola included.
The reason is because SABMiller is a primary bottler for Coca-Cola in Africa, and is part of an agreement that produces 40% of Coke’s products for the entire continent. If Coca-Cola keeps the status quo, AB InBev would be able to take over that relationship and open doors for more partnerships, or even a takeover, later down the road. Soft drinks comprise one-fifth of SABMiller’s volumes, according to The Economist, so the road would be paved for future expansions.
Coca-Cola has a right to be wary, especially since AB InBev is already a major bottler for Pepsi products in Latin America. Companies have bottled products for competing brands before, but not typically to this magnitude. Coca-Cola has a right to sell that distribution to another bottler, but it’s unclear if there are other viable options that won’t disrupt supply to a growing African market.
Ian Shackleton, a beverage analyst in London with Nomura, told The Wall Street Journal that InBev solidified a bottling distribution agreement with Anheuser-Busch before acquiring the brewer. The company’s done it before, and could do it again with Coca-Cola if conditions remain the same. It’s definitely not an “ideal” situation for Coke, Shackleton said, who predicted the beer giant could try to acquire the soda company within three to four years.
Seem crazy? Maybe. But we’ve seen huge mergers in the past several months, and all have implications for your bottom line. It will likely be a while before AB InBev makes a serious move to bring Coca-Cola under its umbrella, but it’s worth it to keep an eye on these types of business moves, even if you couldn’t care less about mergers and acquisitions.
The reason is that the prices of Coca-Cola could be impacted. Coke and Pepsi will always go head-to-head in large markets, but with the force of AB InBev behind it, the soda giant could have an even larger leg up on its competition. It wouldn’t be an all-out monopoly on beverages, but it would get much closer.
Regardless of whether that merger happens, it’s clear that AB InBev is increasing its power to determine how much you pay for a pint — and maybe your can of soda.
Follow Nikelle on Twitter @Nikelle_CS