Monday, November 26, 2007

Grolsch Goes to SABMiller

I just ran across the news that Grolsch shareholders have accepted SAB Miller's bid to buy a controlling share of the Dutch brewery.  This story, on its own, doesn't mean all that much to most of us, but the impact of global brewing consolidation is getting more and more apparent.

The buying offer made by SAB Miller was 48.25 Euros per share, which seems to be about 8 Billion total.  The International Trader had a few interesting points on the logic behind this move, along with a few of the risks involved.  However, the thing that caught my eye was this is that Grolsch is called a high margin beer.  I take this to mean that Grolsch is relatively cheap to make and sells for a premium, with its iconic flip-top and green bottle.

The South African Times seems to think, and I would have to agree, that this move will spur A-B to pick up another major brand.  This piece also talks about the long-rumored joining of forces between A-B and InBev - only now they paint the picture to suggest that A-B needs InBev more than InBev needs A-B.  There's a few other good nuggets to be found here, suggest you take a look.

Now, according to the Times UK, the biggest loser in all this could well be Heineken - and this makes sense to me as I consider marketing and shelf space.  If, all of a sudden, we start seeing Grolsch pushed as the Heineken alternative, with a green bottle all its own, that could hurt them in the long run.  The Times also suggests that this move may not be the end of SAB Miller's quest to consolidate, with a potential target found in Scottish and Newcastle.

Something else caught my eye in all this, SAB Miller's offer wasn't for current value, but based instead on 'future profitability'.  In this market, that isn't a gamble I'd want to take.

Again, this is probably something that won't impact you in any immediate fashion (unless you happen to have stock in Grolsch), but eventually all this consolidation will bite craft beer enthusiasts everywhere.  Just a couple of weeks ago, on the Brewer's Assn harvest phone call (discussing hop and barley harvests for the year and what that all means) it was mentioned that with consolidation comes less excess in ingredients - fewer brewers with 'left-overs' that have been so common and so vital for smaller breweries.  As consolidation continues and barley availability becomes more scarce, there could be some very real issues in the coming years, with regards to global ingredients.