NAME:



NAME: ECONOMICS/ Markets & Advertising

CHS SOCIAL STUDIES Conroy/ Denton

1. Forbes

It's Final: AB InBev Closes On Deal To Buy SABMiller

OCT 10, 2016 @ 07:55 PM Tara Nurin   

• The long-anticipated more than $100 billion merger between Anheuser-Busch InBev (AB InBev) and SABMiller closed early evening Monday,

• Though observers never really questioned the ultimate outcome of the merger negotiations, they didn’t always proceed smoothly.

NEW YORK, NY - OCTOBER 09

And then there were two. The long-anticipated more than $100 billion merger between Anheuser-Busch InBev (AB InBev) and SABMiller closed early evening Monday, leaving Coors Brewing Co. the last of the former “Big Three” beer companies to stand apart from the other two. (Coors is not independent, however; as a result of the merger, Molson Coors took over SAB Miller’s American Coors holdings and already owns the company internationally.) SABMiller ceased trading on global stock markets last week; starting Tuesday the new company will trade as one under the name Newbelco.

After what the Financial Times says is the third largest acquisition in history and the largest ever in Britain --  where SABMiller remains headquartered until its main corporate functions merge with AB InBev’s in Belgium --  the new company will boast annual sales of $55 billion. That’s up from $44 billion before the closing.

Because the merger combines the world’s two leading beer companies, shareholders had to agree with courts around the world to spin off many popular beer brands before proceeding. According to published reports, Japan’s Asahi has expressed interest in following up its purchase of Peroni, Grolsch and Meantime with the purchase of additional brands. Kirin, also from Japan, and China’s China Resources Enterprises are also said to be among those eyeing the brands, which include the Czech Republic’s Pilsner Urquell. Though the merged company will divest itself of many brands in order to comply with anti-trust laws, the deal brings AB InBev a much larger presence in developing countries and continents like China, South America and Africa, where SABMiller enjoys much stronger holdings and access to markets.

Though observers never really questioned the ultimate outcome of the merger negotiations, they didn’t always proceed smoothly. Recently, small SABMiller shareholders challenged the value of the cash they’d receive in exchange for their shares, causing AB InBev to raise its offer to reflect the fallen post-Brexit pound. It seems, however, that the small shareholders may have lost some of the value they thought they’d gained from their compromise with AB InBev; according to Business Day, a slide in the value of the pound Friday brought the per share value down to pre-compromise levels.

AB InBev  will cut its global workforce by 3% post-merger, and advocates for independent breweries have also been watching the proceeding with concern. Not only do they fear the merger will flatten the market, they caution it can make AB InBev's anti-competitive distributor network even more powerful. And AB InBev just can’t seem to stay out of trouble. In the latest of a string of disciplinary actions by the federal government, late last month the corporation agreed to pay $6 million to the Securities and Exchange Commission to settle bribery charges in India.

But none of pushback or punishments ever really seem to stop the world’s largest beer manufacturers. Speculation has grown lately that AB InBev could make Coca-Cola its next takeover target.

2. USA TODAY

AB InBev to cut thousands of jobs after merger

Nathan Bomey, Published 8:29 a.m. ET Aug. 26, 2016 | Updated 1:40 p.m. ET Aug. 26, 2016

The combined beer giant resulting from the mega-brew merger of Anheuser-Busch InBev and SABMiller is expected to shed several thousand jobs globally as it seeks to capitalize on cost-saving opportunities emanating from the deal.

Budweiser maker AB InBev will cut about 3% of the combined company's workforce after the deal is finalized, according to transaction documents filed Friday with regulators.

The company expects to make those cuts "gradually" over the course of three years, according to the documents.

It did not say exactly how many positions it would shed or where the cuts would occur, but AB InBev had more than 150,000 employees at the end of 2015 and SABMiller had about 70,000, according to their annual reports. Some of those positions are associated with assets that the companies agreed to sell to win regulatory approval for the deal.

AB InBev's headquarters in Leuven, Belgium, will remain as the company's new base, and its "global functional management office" in New York will also retain that role.

That means SABMiller's headquarters in Woking, England, will likely face job losses, according to Friday's filing.

"AB InBev will work to mitigate the impact of this by making alternative roles available in integration and business continuity teams that will remain at the SABMiller" headquarters "with some of these roles being filled by current AB InBev employees," the company said in the filing.

An SABMiller office in London will be shuttered within 12 months after the deal's closure. The company's regional office in Miami will be relocated to Bogota, Colombia, and its offices in Hong Kong and Beijing will be shifted to Melbourne, Australia.

Jobs based in South Africa are protected from cuts for five years as part of a deal the companies struck to win regulatory approval there.

AB InBev said it's also still examining how to overhaul its purchasing operations following the merger.

Inc.

Beer Wars: An Industry Insider Makes a Film about the Beer Business By Nitasha Tiku

For her first documentary, Anat Baron focused on a subject she knew well: the craft beer business. In Beer Wars, Baron, who once worked as the general manager of Mike's Hard Lemonade, looks at how the founders of Dogfish Head Craft Brewery and New Century Brewing operate in a world known for red tape, archaic distribution practices, and brass-knuckle competition.

 

There are nearly 1,500 craft brewers in the United States. But for all the passion of their devoted consumer base and the artisanal quality of their product, revenue from craft brewers only represent 6 percent of the $101 billion domestic market. Anat Baron, former general manager of Mike's Hard Lemonade, decided to find out why. Her documentary, Beer Wars, looks at the lobbying machine of the distributors, the strong-arming tactics of the corporate brewers, and why craft brewers are afraid to speak out. Baron, an entrepreneur in her own right, invested $750,000 into the making of the film, which will premiere in 440 theaters across the U.S. on April 16. Afterward, theaters will simulcast a panel with the co-stars of her film: Rhonda Kallman, co-founder of the Boston Beer Company, and Sam Calagione, founder of Dogfish Head Craft Brewery. Inc. reporter Nitasha Tiku recently spoke with Baron about her film and why she was drawn to tell the stories of the entrepreneurs in the craft-brewing industry.

Inc: How did you decide which brewers to focus on?

Baron: I started at the Annual Beer Industry Convention in 2005 and booked appointments with 15 different brewers. One of them was with Rhonda Kallman, who had been the queen of beer. She co-founded Boston Beer, which makes Sam Adams. She started talking about this new beer she was launching called Moonshoot and my crew was really intrigued. After the convention, I went to The Great American Beer Festival. I was like Alice in Wonderland at this thing. I mean I showed up in my Prada pumps with my big fancy yellow purse--but the minute I met Sam I was like, okay he's it. He was the only person who when the camera was rolling was willing to speak the truth. Beyond that he also had a story, which was that he and his wife were in the process of taking out this $9 million loan to expand their business. Sam's world has taken off like crazy, where Rhonda's story was not as happy. I thought that those two really spoke to the bigger picture of entrepreneurs in America.

Inc: The craft beer industry grew 10 percent last year, yet it's still only 6 percent of the overall market. Do you ever foresee that changing?

Baron: The big guys are really nervous about what the craft-beer movement means for their brands. But with the barriers to distribution and access to the market, it's really tough for a craft brewer to grow. Even today, Sam Adams and Sierra Nevada are the only national craft beer companies. If you ask the small brewers they say, "Oh we like it this way. It's good to be regional." But in reality it takes not just money to grow, but access to the market. How do you get to your consumers? How do you get more distribution? How do you get on supermarket shelves? These are all things that prevent you from getting bigger.

Inc: One of the issues in the industry, according to your film, is the antiquated, Prohibition-era distribution system. Producers must sell beer to distributors who then sell it to retailers. How has that system limited entrepreneurship in the beer industry?

Baron: The three-tier system was supposed to facilitate a separation of church and state. The brewer is supposed to stay away from the retailer and to avoid providing them with any incentives. But in truth, big brewers do provide incentives. For example, Anheuser-Busch is the category captain in most supermarkets. They help decide what goes on the shelf and they're not giving up a Budweiser spot for a Dogfish Head, even though Budweiser sales are down and Dogfish sales are up. The three-tier system started out as a mechanism to separate the taverns from the brewers, but it's created these extremely successful and powerful distributors whose political action committee in 2006 outspent tobacco and guns combined. One of the craft brewers in the film was almost put out of business by the big brewers who offer the retailers free cases and exclusivity.

Inc: Are there laws that favor the bigger players?

Baron: There are two sets of laws that I think craft brewers themselves will tell you are at issue. One is the three-tier system, which they're afraid to talk about because if you say anything bad about the system, you're not going to get distribution. Then there are franchise laws, which were set up to protect the small distributor from a big franchiser, like McDonald's. But the law has flipped to protect the distributor, and the little guy has very, very few rights. In some states, it's like an unbreakable marriage. When I ran Mike's, sometimes I went into a store, and saw that our product was expired. But you still can't fire your distributor for it.

Inc: What can an entrepreneur take away from your film?

Baron: You can have all the passion in the world and you can have all the credentials, but you have to work really, really hard, which these guys do, in order to get ahead. Sam, the founder of Dogfish Head, travels like a maniac, just selling, selling, selling. That's something else that differentiates entrepreneurs from kind of the impersonal corporation -- you can get to know the person behind the brand. So if you really want to be successful, you need to get out there with the people that you're trying to get your product to. And I think that's how corporations lose touch. They have focus groups, but with focus groups you're still sitting behind the glass.

Inc: Was this film itself something of an entrepreneurial venture?

Baron: Absolutely. I decided, maybe because I'm crazy, to fund it myself, which is kind of unheard of. I wear so many hats that my hat collection reaches beyond the ceiling. But when it came time to release it, the traditional distribution system for independent films is pretty much dead, or at least on life support and so I had two choices: I could give up my copyright to a distributor who would give me no upfront revenue, or I could try something like I'm trying, which is to work with Fathom Events to create an event around it. I wanted to start the conversation and to get it out to more people, but I am taking a huge risk. The satellite that the simulcast panel is being beamed from-I'm paying for that. I took out some loans, but I mean, I don't have a house. This movie is my house. I am actually the classic crazy entrepreneur who does what you're not supposed to do.

Inc: Last question: Is it true that you don't drink beer?

Baron: I am completely and utterly allergic to alcohol. When I was making the movie, the brewers would say, "This is the freshest beer you're ever going to have." And I'd be like, "Mmm, smells great, but I can't drink it." Two of them cried. But it made me really objective and I was able to focus on the intellectual and business part of it, which is entrepreneurship versus corporate America.

Inc.

Why Craft Brewers Are Winning the Beer Wars

By Graham Winfrey

Despite a probable merger of the world's largest beer companies, craft breweries still have an edge in the U.S. Here's why.

Craft beer has no reason to fear a beeropoly.

While Anheuser-Busch InBev's proposed $104 billion acquisition of SABMiller would undeniably create a behemoth in the highly consolidated beer market, the potential merger can also be viewed as a victory for the craft beer industry. Why? The move comes as both companies have lost market share to craft brewers. Here's why craft breweries have an edge over the big guys.  

1. Craft beer continues to grow like gangbusters.

Craft brewers accounted for 11 percent of U.S. beer production volume in 2014, up from 5 percent in 2010, according to data from the U.S. Brewers Association. Last year marked the first time that independent breweries accounted for 10 percent or more of the annual U.S. beer production market. Craft brewers also grew annual sales to $19.6 billion last year, a 22 percent increase between 2013 and 2014.

What accounts for this growth? Millennials would rather support small, local brewers, even if they have to spend a little more money, according to Jason Wilson, founder of Alabama-based craft brewery Back Forty Beer Company, which grew annual revenue to $2.2 million in 2014 from $52,000 in 2010. "The new drinking-age adults grew up in a world where they had the ability to research companies," he says. "What's driving craft is this idea of a local, sustainable product where you know the people who are producing it." Meanwhile, older generations are increasingly looking at craft beer as a culinary treat, Wilson adds.

2. Craft beer entrepreneurs are cashing in--without completely selling out.

Last month, Heineken bought a 50 percent stake in California-based Lagunitas Brewing Co. for an undisclosed sum. The deal gives Lagunitas access to the resources of the world's third-largest brewer, which has a plan to take craft beer to the global market. MillerCoors also recently acquired San Diego-based craft brewery Saint Archer Brewing Co., while Anheuser-Busch bought Golden Road Brewing, the largest craft brewery in Los Angeles.

3. Craft brewers are making money for investors.

Craft breweries have become attractive investment targets for private-equity firms. In 2012, New York-based PE firm KPS Capital Partners made nine times its money by combining small brands including Labatt USA, Magic Hat and Pyramid into a single entity and selling the combined company for $388 million.

While it remains to be seen whether an approved merger of Anheuser-Busch and SABMiller will have a negative impact on craft beer, chances are good that a more dominant player in the global market will lead to new challenges for some smaller breweries. 

"As these entities start to merge and get larger and larger, their ability to influence their wholesalers becomes more and more of a concern," Wilson says. 

FILM: “BEER WARS” (2009) Available on Amazon Prime Video and Netflix

Global Craft Beer Market Will Reach USD 92,230 Million By 2025: Zion Market Research

According to the report, the global craft beer market was valued at USD 37,540 million in 2018 and is expected to reach USD 92,230 million by 2025, at a CAGR of 13.7% between 2019 and 2025.

New York, NY, Jan. 25, 2019 (GLOBE NEWSWIRE) -- Zion Market Research has published a new report titled “Craft Beer Market By Type (Specialty Beers, Ales, Pilsners, and Pale Lagers, and Others) and By Distribution (On-Trade and Off-Trade): Global Industry Perspective, Comprehensive Analysis, And Forecast, 2018—2025”. According to the report, the global craft beer market was valued at USD 37,540 million in 2018 and is expected to reach USD 92,230 million by 2025, at a CAGR of 13.7% between 2019 and 2025.

Craft beer is a beer type made by a brewer that is independent, small, and traditional. It is generally made by using traditional ingredients, such as malted barley and sometimes non-traditional ingredients are also added for distinctiveness. Craft beer has a majority of its beverage alcohol volume in beers whose flavors are derived from innovative or traditional brewing fermentation and ingredients. Increasing consumer preference for low alcohol and premiumization aspect and its exotic flavor profile is expected to drive the global craft market in the future.

Browse through 55 Tables & 28 Figures spread over 110 Pages and in-depth TOC on “Global Craft Beer Market Size & Share 2018 Report: By Type, Industry Trends, Growth, Analysis and Forecast, 2025”.

The craft beer market is classified into type and distribution. By type, the market includes specialty beers ales, Pilsners and pale lagers, and others. Ales held the largest market share in the year 2017, owing to the growing product popularity among the youngsters. By distribution, the market includes on-trade and off-trade. On-trade distribution is referred to sealing or offering drinks in pubs, bars, restaurants, clubs, etc. The rapid growth of pubs and bars across the globe is anticipated to strengthen the growth of craft beer through on-trade distribution. Nevertheless, the high cost of craft beer through on-trade distribution than off-trade might create hindrances in the growth of the global craft beer market over the forecast period.

Europe is anticipated to account a major share of the global craft beer market in terms of both volume and value in the years ahead. Consumer preference for flavored brews coupled with large product consumption is anticipated to drive this region’s craft beer market growth within the forecast period. UK and Germany are the largest consumers of craft accounting for around 22% of the global revenue share.

North America is estimated to exhibit significant growth in the market in the future, owing to the increasing preference for customers of craft beer over mainstream beer variants. The U.S. is anticipated to hold a dominant market share of the North American craft beer market in the future.

The Asia Pacific is expected to witness significant growth in the craft beer market, owing to the rising purchasing power and changing consumer lifestyles. Moreover, the growing product demand in China and India is likely to further fuel this regional market. A considerable rise in the consumption of craft beer has been observed in India, owing to an increase in beer preference by youngsters. Growing consumer preferences and lifestyle changes are anticipated to further boost the adoption of craft beer in the region. Additionally, the rising working population and increasing disposable income of the regional population has led to increased adoption of high-quality and premium beers, thereby driving the region’s craft beer market.

The Latin American craft beer market is anticipated to be the fastest growing region over the estimated timeframe, owing to the increasing penetration of craft beer in Mexico and Brazil. The wide range of flavors with Low Alcohol by volume (ABV) is estimated to be the major driving factor for the craft beer market in these countries. The Middle Eastern and African craft beer market is anticipated to show sluggish growth over the forecast period, owing to stringent regulations over the consumption of alcohol across Islamic countries.

Some key players of the global craft beer markets are The Gambrinus Company, The Lagunitas Brewing Company, D.G. Yuengling and Son, Anheuser-Busch InBev, New Belgium Brewing Company, The Boston Beer Company, Sierra Nevada, Stone & Wood Brewing Co., Sam Adams, and Bell's Brewery Inc.

All answers must be typed in order to receive full credit.

QUESTIONS

Based on the articles, how do consumers benefit from more competition in markets? Provide examples (15 points)

Discuss the market merger as it applies to the beer market. Positives, negatives, does anyone win or lose? Provide Examples (15 points)

What goals should governments have in mind when regulating markets? (10 Points)

What goals are apparent in the government’s regulation of the beer market? (10 Points)

How do oligopolies protect and expand profits? Are there other desirable goals than just profit margins? Explain by providing examples (10 Points)

Discuss some of the challenges facing entrepreneurs seeking to enter the beer market. (10 Points)

Are regulations in markets good or bad? Explain why you feel this way. (5 Points)

In your opinion, should the government increase, decrease or maintain its current regulation attitude towards the beer industry? Explain your answer in detail. (5 Points)

Discuss the current trend vs. the past trend of the Craft Beer Market. What is the long range outlook for this market? (10 Points)

Analyze whether the merger of major beer markets has been a positive or a negative for the craft beer market. Why or Why Not? Provide specific examples. (10 Points)

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