As beer drinkers in America continue to abandon light bland lagers for more interesting and varied beers (at a small but growing pace), the folks who run the world's largest breweries continue on as if nothing had changed. There is news today (in the Wall Street Journal) that ABInBev -- the Brazilian-Belgian behemoth that is inexorably swallowing everything beer-related -- is nearing a deal to purchase Grupo Modelo, the Mexican brewer of Corona and Modelo Especial. (if you didn't know, these are two very light, bland lagers that sell in huge amounts in America).
This, against a backdrop of shrinking sales of light, bland lager in the U.S.; although it must be said, that while ABIB's volume sales continue to drop, their profits continue to climb as they ratchet up prices and cut costs. Buying a huge Mexican brewery that makes a fairly high-priced brand -- Corona -- and one of the few strongly-growing light, bland lager brands -- Modelo Especial -- must make these guys salivate. A new company to cut fat out of, and two huge brands (three, really; Corona Light does okay too) ripe for the jacking up of the prices! It's like Christmas morning.
Anheuser-Busch InBev NV is close to taking control of Corona Extra beer maker Grupo Modelo, according to people familiar with the matter, in a deal that could be valued at more than $12 billion and would end a contentious history between the two companies. It would also consolidate the Belgian brewer's ownership of Corona Extra, one of the world's top beer brands.
AB InBev currently owns a 50% noncontrolling stake in Modelo, Mexico's largest brewer. The timing of any deal is uncertain, though two of the people said it could come as early as this week. It's also possible that the talks could break down before any deal is reached.
And it's happening around the world, as the WSJ article points out.
London-based SABMiller agreed to acquire Australia's Foster's last year for some $10 billion, and Dutch brewer Heineken NV paid roughly $7 billion for Femsa Cerveza, Mexico's No. 2 beer maker after Modelo, in 2010.
More recently, Molson Coors Brewing Co. (like SABMiller and ABIB, the merged product of two colossal brewers) this year agreed to buy the Central and East European brewer StarBev LP for $3.5 billion, the biggest purchase ever for the company. The business had been owned by AB InBev, which sold it as part of its post-Anheuser deal retrenchment.
To what end? Well, come on: there's still stellar tons of money to be made in the light, bland lager business. You must know that, even if you spend all your waking hours in a brewpub. But what's the foreseeable end? I still think it looks something like this. I don't see any change in direction, though I have noticed that financial analysts have finally caught on: instead of urging the bigs to focus on their reliable core business -- the light, bland lagers that are losing steam -- they've reversed course and are telling them to get on this craft beer thing.
If they do, in a big bold way...that could be a game-changer. Because as current sales figures prove, most Americans don't care that they're buying their beer from a big, soulless, foreign-owned corporation, and if that corporation makes a beer that tastes different, and celebrity chefs talk about it, and it has cool ads...they're probably going to buy it. That day's coming closer, and it's going to be a challenge for small brewers to survive against it.
I could be wrong. But I keep thinking of that Damon Runyan line from Guys and Dolls: “The race is not always to the swift, nor the battle to the strong...but that's the way to bet.”