23 Jun 11 Stand by for a bar-room brawl over Foster’s
SABMiller CE Graham Mackay says ‘it’s early days’ in the pursuit of Fosters, but the company may have to increase its offer that failed to impress the Australian brewer’s board. This commentary by The Economist...
Australians, in the popular imagination, are reckoned never to be too distant from a cold beer. But although they drink a respectable 82 litres per head each year, around the same as in other rich countries, Aussies’ thirst for the amber nectar is hardly growing at all.
However, this has not discouraged SABMiller, the world’s second-largest brewer, from offering A$9.5 billion ($10 billion) for Australia’s biggest beermaker, Foster’s, on June 21st. The approach was swiftly rebuffed.
The tendency for greater wealth to go hand in hand with a preference for popping the cork on a bottle of wine is troubling for the world’s largest brewers. Between them the big four — Anheuser-Busch InBev (ABI), SABMiller, Carlsberg and Heineken — already brew one out of every two beers sunk around the world, but the diminishing prospects for organic growth in their home markets are forcing them to seek further consolidation.
The choice is either to buy brewers in fast-growing emerging markets or to expand by snapping up still-profitable rich-world brewers and attempting to cut costs. Opportunities to do the latter are drying up.
So SABMiller’s failure to offer a substantial premium for Foster’s may seem puzzling, especially given that the country’s beer market, split between two big brewers, Foster’s itself and Lion Nathan, owned by Japan’s Kirin, is particularly profitable.
The offer may well be the first round of a longer bar-room brawl. Speculation that one of its big rivals would bid for Foster’s grew after the Australian brewer spun off its struggling wine business earlier in the year.
Doubtless SABMiller’s close competitors have cast an eye over Foster’s too, but none seems likely to make an offer. Mexico’s Groupo Modelo (part owned by ABI) and Japan’s Asahi were also touted as possible bidders but both seemed to have cooled to the idea recently.
SABMiller will be back with an improved offer. The brewer doubtless believes it can make Foster’s more profitable and its boss, Graham Mackay, who built the company from a small South African brewer to a global powerhouse, is thought to be keen on doing one more big deal before he retires, probably in the next year or two.
SABMiller – New brewery in Nigeria
While SABMiller was making a US$10bn play for Australia’s biggest beer brand, Fosters, new developments were brewing in Nigeria, reports Business Day.
Though Fosters has rejected SABMiller’s advances, saying it isn’t that cheap, the world’s number two brewer is not in a froth. It has decided to build a new brewery in Nigeria, arguably Africa’s thirstiest market, and break the Guinness-Nigerian Breweries duopoly.
SABMiller could still secure a deal with Fosters, which has undeniable charms, with a 50% share of a highly profitable Aussie lager market. But it is Nigeria, with a growing population of about 140m, that could move the needle for the R420bn market cap beer giant chasing global dominance…..