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Sunday, February 24, 2008

Who's Ready to Dance?: Rumors Swirl About Big Beer Marriages

The world of big beer is likely to get smaller as we move through 2008. No, this is not a prediction that the giant brewers will suddenly give up huge share points to regionals and microbrewers. The fact is that some of the big guys are talking and we are likely to see at least one significant combination in the next few months.

In October 2007, SABMiller and Molson Coors Brewing Co. signed a letter of intent to combine the two companies' U.S. and Puerto Rico operations. That same month, Dutch brewer Heineken and Carlsberg of Denmark formed a consortium to acquire Scottish & Newcastle, the United Kingdom Brewing giant. When moves like these are made they tend to cause shareholders of other breweries to take notice and a few proposals to get tossed around board rooms.

One of the more interesting potential proposals comes in the form of a union between American giant Anheuser-Busch and InBev, the Belgian conglomerate. A-B already handles the U.S. import duties for several InBev beers, including Stella Artois. The new company would pass SABMiller as the world's largest brewer.

Diageo, the London-based drinks firm which controls Guinness Stout and Johnnie Walker Scotch, has been rumored to be looking for a strong beer partner. Names like SABMiller, Heineken and Anheuser-Busch are mentioned in news reports as possible merger targets.

China Resources, which has a partnership with SABMiller, is also on the acquisition trail to keep up with a 20 percent growth in demand for beer in China. While they are more likely to make a domestic purchase, China Resources has to be viewed as having the capacity to look outside of the country as well.

Other international players, such as Lion and Nathan and Foster's Group out of Australia, Turkey's Efes Breweries, FEMSA of Mexico and India's UB Group could play a part on the international stage. Vijay Mallya, the billionaire behind UB Group, controls the Kingfisher beer and airline brands, Mendocino Brewing Co. in the U.S. and acquired Scotch maker Whyte & Mackay in 2007.

The major concern for beer drinkers in the U.S. with any of these proposed deals is the potential impact on distributors. A shift of brands could cause a distributor pay less attention and even drop smaller brands. That has spelled bad news in the past for domestic craft labels and smaller imported brews.

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