Molson Coors and SABMiller, the nation's number two and three brewers, have formed a joint venture to better do battle against the King of Beers.
The combination, to be called MillerCoors, will control about 29 percent of the American market, compared with 49 percent for Anheuser-Busch. Miller Brewing has about 19 percent share, and Molson Coors, about 11 percent. Under the arrangement, SABMiller will have 58 percent of the joint venture, and Molson Coors, 42 percent. The merger does not include SABMiller's large international operations nor the Molson Coors business in Canada.
The merger comes amidst flat domestic beer sales as consumers have switched to wine, spirits and craft beers and imports. The two sides said they will be able to invest more in marketing their brands to consumers and compete more effectively with larger brewers like Anheuser-Busch and InBev NV S.A., which imports a large number of global beers into the U.S. and is the world's largest brewer by volume.
"This makes us a much more capable competitor up against the really changing landscape," W. Leo Kiely III, chief executive of Molson Coors, said in a statement. "It is clear Miller and Coors will be a stronger, more competitive U.S. brewer than either company can be on its own."
Besides annual cost savings estimated at $500 million, the merger promises to bring U.S. consumers more choice, greater product availability and increased innovation. MillerBeer's portfolio will include domestic brews like Coors Light and Milwaukee's Best; imports including Peroni, Molson and Pilsner Urquell; craft varieties including Leinenkugel's and Blue Moon; and specialty beers like Miller Chill and Killian's.
Benj Steinman, editor of Beer Marketer's Insights, told USA Today he believes MillerCoors will be able to better capitalize on growing demand for craft and premium beers.
"They are each playing a little more effectively in the high end of the portfolio, which is where the market seems to be going," said Mr. Steinman. "You can bet they will be going after that segment more."
But the biggest benefit appears to be gaining more muscle to negotiate better deals from advertising all the way to retail.
"It's going to give them substantially more scale, which helps them with their retailers and their distributors and helps erode Anheuser Busch's No. 1 competitive advantage, which is their 50 share," Kaumil Gajrawala, an analyst at UBS Securities, told The New York Times.
But the greater scale - combined with Budweiser's dominance - is one reason some believe gaining antitrust approval for the merger may be difficult.
"What does the consumer get out of this? Less selection and probably higher prices," said Tom Pirko, president of the beverage consulting firm Bevmark, told the Times. He said beer pricing has long been driven by "hellacious" competition among the three competitors. "People are sailing along blindly, thinking that this is going to be easy."
Discussion Question: What benefits do you see from the merger of Miller and Coors? Do you think it puts them in a better position to compete against Anheuser-Busch? Should retailers and consumers be concerned about the prospect of two companies controlling almost 80 percent of the beer market?