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AB InBev promise shows Europe matters little to world's largest beer brewer

May 27, 2016
Consumer Packaged Goods

When the European Commission gave the world’s biggest two beer companies approval to merge yesterday, it did so under extraordinary conditions: Anheuser-Busch InBev must sell off almost all of SABMiller’s holdings in Europe in order to proceed with the transaction.

Commissioner Margrethe Vestager said in a statement, “Today’s decision will ensure that competition is not weakened in these markets and that EU consumers are not worse off.”

The enormous scale of the sell-off shows how much AB InBev is willing to give up in order to capture SABMiller’s hold on — and distribution channels in — Africa and other emerging markets. AB InBev had already negotiated a deal to offload SABMiller’s core brands – Miller, Peroni, Pilsner Urquell and Grolsch – to Japanese beer maker Asahi in France, Italy, the Netherlands and the UK. None of these brands rank in the top ten globally. It will now seek a buyer in the Czech Republic, Hungary, Poland, Romania and Slovakia, where the EC says SABMiller holds strong positions.

But SABMiller’s positions in Africa are even stronger. SAB, which stands for South African Breweries, reported in April that the continent outperformed its other markets both for the year and for the quarter that ended March 31. At the time, the Financial Times reported a 6% increase in volume from January through March and a 12% boost in revenue. In Nigeria, one of its African strongholds, SAB officials told the paper that business there “continued to deliver excellent results.” Revenues were up by 31% and volumes by 27%. According to the paper, Nigeria and South Africa are two of the company’s four primary African markets.

According to AB InBev, Africa’s share of the world’s beer volume will nearly double to 8.1% between 2000 and 2025, growing at almost three times the global rate. This chart lives under the heading, “Africa Will Be a Critical Driver for the Future Growth of the Business.”

In its predictions for a post-merger company, AB InBev shows 7% of its earnings before interest, taxes, depreciation and amortization (EBITDA) coming from Africa, 40% from Latin America, 7% from Asia-Pacific and 28% from North America. Europe accounts for only 9%.

But this map shows just how much it will depend on SABMiller for its Africa revenues. To put it in words, the global map colors primarily SABMiller-held countries in yellow and AB InBev countries in red. Countries where neither holds much influence are white. Africa is almost entirely colored yellow. What remains is white.

Anti-trust investigations and negotiations for approval continue in the United States and elsewhere.

By Tara Nurin

Source: Forbes

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