By Randy Agness
The King of Beers, Budweiser, grows its worldwide beverage empire. SABMiller finally accepted a takeover by InBev after the fifth attempt by Anheuser-Busch, the world’s largest brewer. The deal worth an estimated 106 billion US dollars will create a brewer controlling almost 1/3 of the world beer market share and would rank in among the top five of corporate mergers in history.
The fifth time was the charm for Budweiser as the two largest beer manufactures will be combined after 70 billion in debt financing has already been secured for the merger. The deal will allow beer giant Anheuser-Busch access to the important growth market in Africa, Asia and Latin America where Miller has a much stronger market presences. The parties have agreed that AB InBev would pay a break fee of $3 billion to SABMiller in the event the transaction fails due to the significant regulatory issues or because AB InBev shareholders do not back it.
The reason behind the merger has a direct relationship to the growth in craft beer sales in the US. Craft beer sales now represent 17.6% of US production overall. Additionally, exported craft beer sales has risen 36%, along with a 22% growth in sales to 19.6 billion dollars in the US, while total beer sales growth overall has increased by a mere 0.5% according to data gathered on the 2014 National Beer Sales and Production by independent Brewers Association.
Despite a long history of television commercial ads and attempts to stamp freshness dates on its product labels, reports indicated that Budweiser sales dropped steadily since 2003, and as of 2013 craft beer sales exceed those of Budweiser beer. It seems as if Bud has become basically a beer without a purpose, except for the generation of older Americans who drink it out of habit and maybe a sense of brand loyalty.
The craft beer industry has been able to tap into the American public’s desire to have more unique choices available in terms of alcohol beverage as reported in the Times of Wayne County article “Hard Cider making a Comeback.” In a statement reported by CNBC, Bart Watson, chief economist of the Brewers Association, “Industry growth is occurring in all regions and stemming from a mix of sources including various retail settings and a variety of unique brewery business models.”
According to 2015 mid-year data now available, it appears that American craft beer production volume rose an additional 16% when compared with the same time period last year. In terms of barrels, roughly 12.2 million barrels of craft beer sold versus 10.6 million barrel during the first half of 2014.
In New York with the passing of legislation to allow the formation of farm brewery operations has fueled explosive growth as the number of Craft Breweries has double from 2012 to 2015 and production of craft beer increased 59% within a single year as announced by Governor Cuomo.
The recently adopted New York State 2015-16 state budget included Governor Cuomo’s proposal to expand tax exemptions for tastings conducted by New York breweries, lowering costs for hundreds of craft producers, and allowing them to better market their products and reinvest in their businesses. The tax credit went into effect on June 1, 2015.
“We have said time and time again that New York produces some of the best craft beverages anywhere, and this report backs up exactly why we are focusing on growing these breweries,” Governor Cuomo said.
