tv Inside Story Al Jazeera November 27, 2015 1:30am-2:01am EST
>> welcome to "inside story." i'm ray suarez. just about everywhere i've been in the world there's a loam beer. the brand d -- local beer, the brand that sponsors sports teams, shows up on restaurant coasters, is part of a restaurant culture. some of that is an illusion. some are run and controlled on the other side of the planet on many cases and subject to economic forces much broader than ads for your local baseball team. the fall of the berlin wall and the growing reach of international trade agreements drew people who produced a lot of different things into closer ties with each other around the world. one huge yet underrecognized industry caught in the same wave of consolidating is brewing. diane eastabrook has this report on beer and one of the largest mergers in the history of global
business. >> the merger of inbev and ab miller, would acquire sab miller labels which include miller, coorms linengoogle and the combined company would help the brewer grow in latin america, asia and africa. >> our footprints are largely complementary. and where we have geographic overlap we will be proactive in addressing any regent issues. >> says the biggest regulatory hurdle will probably be in the u.s. >> and in the u.s. the combined company will have about 70% market share. it is really a big market share and what i expect, the merged company to divest the miller
coors in north america. >> after in bev produced are sab miller. size matters two big brewers because sales of traditional beer have been flat. right now, when it comes to sales growth, craft beer is where it's at. while they make up only about 10% of the market, sales of craft beers are growing annually in the double digits. and there are a lot of them. this liquor store in chicago covers more than 3200 different brands of beer. 3,000 are craft beers. and they come from as close as chicago and as far away as the czech republic. patrick patrick brophy buys beer.
>> some own wholers, if they don't own them, they control so much of the business end sales there's going to be a fear that they're making demands that can't bring in different beers not sell it if they don't already have it. >> it will be hard to understand what the merger will mean to consumers. then again they admit that didn't happen after the last big merger. diane eastabrook. al jazeera, chicago. >> joining me for a look at the huge global business of suds are ankar kapur, tom pirco, a beverage industry analyst and managing director at bev mart and mart. ankor kapur, when you see a merger of this size
you want the two want something from each other. what's attractive each to the other in this case? >> thanks for having me on, ray, several things are interesting to in bev in particular. librarian businesses, ab in bev doesn't have that kind of presence. and second thing is certainly the miller brand. the ability of a single company to have within its ownership in the u.s. certainly the number 1, number 2 and number 3 brands or even the number 1 and the number 2 brands would give it sufficient market share and pricing power such that it could raise price. and i think you see that when you look at the 50% premium that ab in bev is offering over sab miller price. this is how to do it.
>> we heard from diane eastabrook just a moment ago that beer sales are flat. is that the time we see mergers is when businesses are unable to grow by selling more of their product and need to find efficiencies in the business model instead? >> sure, sure. i think people are entirely understanding what's going on here. in a way you sort of have to elevate above and look at what this is truly about. it's about size. it's about critical mass. and as things are relatively slow you have to compensate, and the way you compensate is by -- let me use the polite word -- reducing the effect of competitors or you could say eliminating competitors. you get bigger and bigger, the more power you have, the more resources you have, the more you can determine how a price structure works. that's what the reergts look at. >> aren't there natural rules and interests as we look across
the country where these businesses operate where they want to stop in the way, block it, make it less able to happen? >> most of us aren't talking about the business aspects or the strategic aspects when number 1 and number 2 combine. there are a lot of various economic factors but we are really talking about the antitrust issues. and where does a government step in to protect the consumers or protect the wholesalers or protect the craft brewers. that's where things get really sticky. and right now we have a political climate that has allowed deals to take please. the biggest one to look at is the a.b. modelo deal that sent to constellation. our company has worked for the ut government but also for constitution.
what's really at high, what the government was looking for in antitrust was coordination of price. the constellation was weak, the constellation would have to follow a.b, it could protect the price of bud light on the shelves. those are the things you get into when you look at whether a deal is going to fly or not when you look at the u.s. internationally, except for china it's not so hard to put this thing together. >> you're a director for a group of restaurants but also, a brewer. what do the little guys do when overhead you see these two giants falling into each other's arrangements? >> well, the little guys don't really have as much to worry about these days as we did in the old days. you know relatively speaking. craft beer is at an all time high. it's 11% of the market share now. people are increasingly
interested in flavor-forward beers that are made locally , tommy typically by artisan brewers. we worry about distributor ships being influenced you about them. at the same time, we are enjoying some great growth. nd the great growth is making ab in bev and sab miller so interesting right now. we have over the last couple of months a number of small craft brewers being purchased by these companies, it could happen at the same time as a giant merger could be going on. the beer numbers are flat for the big brewers but craft is still growing. and $so i think that we're in a decent place right now. so we'll see what happens as time goes on.
>> we're going to continue our conversation in a moment. what is consolidation already underway before the sab miller and ab in bev merger was announced, metropolitan for countries and people involved, brewnanza, when beer giants marry, it's the "inside story." >> every monday night. >> i lived that character. >> go one on one with america's movers and shakers. >> we will be able to see change. >> gripping... inspiring... entertaining. no topic off limits. >> 'cause i'm like, "dad, there are hookers in this house". >> exclusive conversations you won't find anywhere else. >> these are very vivid, human stories. >> if you have an agenda with people, you sometimes don't see the truth. >> "talk to al jazeera". monday, 6:00 eastern. only on al jazeera america.
>> it's like a conveyer belt of storms. >> i felt like i was in a washing machine. >> we're kind of stuck with more than a century of bad choices. >> you're watching "inside story," i'm ray suarez. once upon a time, brewers made product for fairly compact regional areas. even in the united states, if you knew a friend was going to wisconsin you might ask him to bring back a six pack of point beer because the supermarket by your house was unlikely to have it. you couldn't get a shiner in boston or an abida in denver and that's really the way it was. stunningly quickly really, it seemed like you could get everything everywhere. as venerable
brands were available worldwide, as snapping up to become bigger and bigger conglomerates. what did it mean in ireland, japan, milwaukee? we dissect the sab miller, ab in bev merger. these companies have already been getting huge over the years. what has it meant and how does it help us see down the road what's already happened? >> some of this is really quite simple. beer has been a local business and from what you said it sounds like maybe your parents brewed it in the bathtub or something. i mean yeah it's easy. however what we're really talking about here is international commerce, globalization, et cetera, et cetera. everything is about the brand. brands. if you are in the soft drink business it's sort of nice to have coke or pepsi right? same thing in the beer business. the way you attract attention is
modern marketing, the amount of resources you have to devote to this, it is a business of scale, a business of brands. there will still be relatively inexpensive beer but in our capitalistic marketing, it's all about the brand, to be able to buy the brands. >> beers under license or a beer that used to make one brand makes six. is it really kind of the same beer but now with a new distribution model ? >> well, that's a very interesting question, ray. i think way the department of justice which is two of the antitrust agencies and the one that will look at this deal simply because they've historically been the agency that's analyzed the beer market, the way they're going to look at this deal is first from the point of view of the distributors.
what do the distributors need? and as tom very rightly pointed out, the distributors must have the local brands, these are global brands and the distributors need to have theseto in order to survive. they have to have budweiser, miller, coors, and to some degree, corona and heineken. that will give the corporate brewers the ability to leverage better distribution to the seclusion of smaller craft brewers. >> see, greg, you're in both worlds because you've got a deal with the distributors and you're making your own beer. what does bigness do? ask the can they force terms on a small buyer? distributors? >> they can be convincing i guess you could say. it's business. >> that's a nice way to put it.
>> we have things going on in massachusetts. >> convincing is a good word. >> in massachusetts right now there's a lot of investigations going on. and into pay to play things, scald that ar scanned always tha scandals that are going on and they are going to have influence that's for sure. but at the same time right now, most distributor ships in a local market you'll have a big ann anheuser busch and coors fight with each other. if they were part of the same company they could turn their attention solely at craft. the question is going to be back to what the gentlemen were saying, will they have to divest of brands that are made in the u.s? will they have to divest of line
linen googles an googles moon? if they do divest competition will be maintained somewhat and at the end of the day the same reason why these brewers, these big brewers are buying craft brewers is people want change. they want craft more than they used to ever want it and they're just not interested in a lot of these light beers and the big macro-beers anymore. >> there is no evidence benjamin franklin ever said, beer is proof that god loves us and wants us to be happy, and in a business, [ speaking italian in th ] >> will large scale producers who have gotten away with making some really junky beer in the u.s. borrow tips and techniques from their worldwide partners? stay with us. it's "inside story."
>> welcome back to "inside story." i'm ray suarez. let's imagine that the marriage between beer giants ab in bev and sab miller is going through pretty much as proposed. what if you go to a supermarket two years, four years, five years from now what's difference in prices, production, no matter where you live, in durbin, mexico city, and south africa? greg how would you answer that question, if you look down the road what's different? >> so it's very difficult to say exactly how things will be different. i think they will be because -- and the reason it's difficult is because you're really talking about consumers' taste, and consumers taste what's really a personal choice, what beer do they like? and the issue with the merger is it's going to give the merged entity whatever they call it
control over what that future looks like. so i'd love it if ab in bev, sab miller were to embrace craft brewing and give the american public and the global public the kind of beers that we see coming from blue jacket. i can't get blue jacket where i am in new york. i can get a lot of other good beers, i can't get blue jacket. i'd love it if the innovative distribution systems that these brewers have developed would act to the benefit of craft brewing. i don't know if that's going to happen. i do know that if the merger goes through it will let the merged entity control over what that industry looks like. >> greg do you think there's any reason to believe that these big brewers can learn some things from the beers that are becoming more popular? that a bud arguably might be a better beer in three years or five years because it's played
by the same brewer as stella and they might trade secrets and tip and techniques? >> these brewers are incredible breweries, they are the finest breweries in the world. the sab miller brewers the 12 different ab in bev breweries in the united states there's not much they don't know. so it's not as if they are looking to learn trade secrets secretto make their abortions me flavorful. i think they could do it if they wanted to but they would take over the attitude that the craft brewers have first. flavor first, brew what you want to drink and what's left over we sell to others. and you can taste that when you drink these beers. i think that attitude is the one that ab in bev and sab miller are not interested in. they're interested in profitability first. it's a market that needs to be, you know taken over by them.
i don't think that they're ever going to necessarily make budweiser taste hoppier or more like an ipa. i think they're going to use budweiser as long as they can and in 100 years, if people don't want it anymore they'll let it go. >> tom miller, of the whole interests in the world, people outside this group, certain occurrence that have remained outside it who's arguing against it and where do they fit in, in this future world, if the merger goes ahead? >> that's very complicated because there are a lot of people who would naturally oppose it. like greg, there are thousands of small craft brewers. they don't have a lot of power this happen. they don't have the resources to really contended. on the government side, regulatory side the side in which we have worked along with the consumers, the ability of the beer, cost of beer, they're concerned with cost and jobs. but in a way i think we're
looking at this in a wrong way. everything will go forward, everything will consolidate. they can buy craft brewers. away haas really at issue is how much -- what is really at issue is how much bigger they can get. with bud craft which brought hines and their position in these industries, are they going to move over now and buy mandolese the snack portion of kraft? are they going to buy pepsi? coca-cola? these regulatory issues don't stop. we are part of worldwide consolidation of getting big, bigger, bigger. we see a lot of as i said a lot of coordination at the moment, they're not again we've worked on this side. it's complicated but they're allowing deals to go through. higher prices ultimately yes. bigger brands,
yes. world coordination of and where, yes. but how big is big? and where do we go from here? >> ankor, we voanl a couple of minutes left. what about china, what about tsing dao, a big national brand and becoming a bigger global brand? >> behind the u.s. the merge raises the most competitive concerns in china. i would expect them to be as in the u.s. the offer of season divestitures in china as well. >> wow. i want to thank my guests, greg engert, ankor kapur, antitrust law specialist and tom perko. managing director of bev mart. i'll be back with a final thought on beer and the lure of
using it to be a regular guy. stay with us, it's "inside story" and send us your thoughts on twitter @ajinsidestoryam, or following me and get in touch @raysuareznews. tell us what you think about the megamerger and how it might disrupt one of america's favorite pastimes. we'd love to hear from you.
loousive anillusive and hard toe word authentickivity, it can be produced for the price of a beer. hard cider, while very authentically american may be too hard to explain. so our public people when they come down from mount olympus to hang with the rest of us where it's john kerry or scott walker, whose home state has the had a long intimate relationship with one. the president called a beer summit and the news business paid close attention to the brand of suds served, showing there are layers of authenticitauthenticityinside authenticity. xi jinping hosted a pint with
the local boy who's been reelected prime minister of the kingdom. and some of his fellows can't give up the president of the united states is a muslim. beer worked for bill in the 20th century so hillary's trying it in the 21st. and to be a guy you wants to have a beer with, chris christie is also willing to sip some lagger. it turn lager. narrowing set of choices to demonstrate their regular-guy cede. never mind how it tastes. did you get my good side? i'm ray suarez. it's the "inside story."
france and russia agree to close the military ties to defeat i.s.i.l. welcome. you're watching al jazeera live from doha. also ahead in the next 30 minutes. turkey's president hits back at russian allegations that ankara is bank rolling i.s.i.l. by buying oil from them. pope francis visits residents of a sum in the kennian capital. we're there live >> tranat