Ice Cold Beer Here! (in the U.S)


20-jp-BEER-tmagArticleHave you ever wondered, just how much it costs to import the “better quality” beer from around the world like Corona, Modelo or Heineken or where exactly does the beer I drink come from? Most likely you drink a product either made by or distributed by Anheuser-Busch and InBev (ABI) considering they currently have aver 39% of the market share for the American Beer Industry. But just recently ABI has taken actions that will give them a majority of the market share for the American Beer Industry, which includes a 20 billion dollar acquisition of the Groupo Modelo Beer Manufacturing Company of Mexico.  This includes expanding the company internationally to Sounth America and adding the brand names of Modelo, Dos Equis and Corona.  This merger was so large that the Department of Justice filed a lawsuit against the company in fear of them reaching a stage of monopoly and market leader.  The result of this was for ABI to sell a 50% share of Modelo’s share to the Constellation Corporation, who currently owns about 20% market share of the American Beer Market, for only $5.5 billion.  DOJ says that this will allow for less consolidation and more competition in price in the markets.

Rob Sands, president of the Constellation Corp. says that this is the most transformational deal in the company’s 86-year history. The results of this merger range in variety and benefit both ABI and Constellation.  ABI will now have 46% market share after the acquisition as well as gaining all rights over the Brand Corona and its factories in Mexico.  Granted that they Corona accounts for over 20% of beer sales in some regions ABI distributes to, they will being seeing substantial growth in capital output and profits in the coming years.  Constellation also stands to see a similar amount of growth in the coming years.  They have aquired the brand of Modelo. Constellation makes wines from Robert Mondavi and Clos du Bois, as well as Svedka Vodka. Although they have never brewed beer before Constellation is excited about this endeavor. They will build a new state of the art facility for brewing the Modelo brand on the Texas-Mexico border. This will result in the plants capacity doubling in a matter of a few months. How do you think that these actions will affect other beer manufactures output such as Miller Coor’s? Also how do you think that this acquisition will affect beer prices of domestic, imported and micro brew beer companies?

10 thoughts on “Ice Cold Beer Here! (in the U.S)

  1. Wow, shocking post here! Some shocking statistics here that I had not known. It was interesting to read right off the bat that Anheuser-Busch and InBev currently have over 39% of the market share for the American beer industry. I am interested to find out what will result from the recent acquisition of the Groupo Modelo Beer Manufacturing Company of Mexico. It seems that this acquisition of GMBM Company of Mexico is the correct strategic move in order to strengthen their global footprint and help aid their current footprint both domestically and internationally. I again was shocked to read that the Department of Justice actually went as far as suing the company in fear of monopoly like levels of production and market share. It looks like more than just their direct competitors are scared!

    In response to your questions I do want to add that I think the capacity doubling in just a few months time will definitely pose some issue to not just the top down view of the operations but also on the individual worker stand point. It seems that this could overwhelm the current work force if the wrong moves are put into place. I think that in the short-term the competition will not see much difference in the market, though once operations settle down after the acquisition and in the long-term I think the competition will find it hard to compete once the operations are back to full efficiency and all the kinks are worked out.

    Good post!
    Shaun Abraham

  2. AB InBev is a powerhouse. People don’t realize that they own more than just Budweiser and Busch products. They are seriously the Coke+Pepsi of the beer industry. They will continue to buy out beers but companies like MillerCoors are trying to keep some of their cake and take additional pieces when it presents itself. What people don’t know is craft beers are actually taking a lot of money from these large beer companies and refuse to their company or “baby” to Coke-like corporations. The future of beer is still up for grabs but ABInBev is the power house in this situation.

  3. I think it will be interesting to see how, if at all, the quality of beer changes with the integration of Groupo Modelo and the large increase in production planned. As another commenter mentioned, craft beer is growing in popularity. This challenges the business model of large scale brewers. I wonder how quality differs among small and large scale brewers. This integration will improve ABI’s economies of scale but also present a greater challenge to ensure a certain level of quality. Another consideration is how will the two manufacturers (ABI and Groupo Modelo) combine their quality systems into a single system?

  4. I am excited to here about this merger, as Corona is by far my favorite beer. However, what I am concerned about is will this product become worse because of the separation from its original Mexican manufactures. I do enjoy a Miller or Budweiser every now and then, but you can tell that this is a cheap beer, in which the taste is not at all in the same league as Mexican beers. As for pricing, I doubt that the price will fluctuate very much, as it will be an opportunity for ABI to increase sales without the majority of its market even realizing ABI now owns most of the favorite Mexican beers.

  5. I’m actually really surprised that the government finally stepped up to a large corporation instead of making deals with them. I am however concerned with the merger and the quality of the beers. With large mergers comes large expectations of income. This merger may effect the price and quality of the beer. I for one am not looking forward to pay more for these drinks, but on the other side it might get cheaper now that it has a larger company like ABI behind it.

  6. This is really interesting to me because I have been into craft beer for so long that I don’t even consider any products from ABI or MillerCoors (at least, not their mainstream brands) – so your post is relevant because it reminded me that these companies still have the volume share with the American public. As a couple other posts mentioned, craft beer popularity is growing in the US (and abroad), and while overall volume is lower than the big guys there are many craft breweries spread across the country that enjoy regional or national popularity. What many people don’t know is that while during recessions, sales of all alcohol increases, in this past recession the sales of craft beer increased (almost doubled!) while the big brewers saw sales decrease by 3% each.

    So, back to the point of the original post – I don’t think this deal will affect MillerCoors or ABI that much because: 1) Constellation is only getting 10% of the American market, while ABI will increase to ~50% (I think – the post was a little confusing regarding that); 2) I don’t think it will affect prices of micro-brewed beer because it is fairly price inelastic and has always commanded much higher prices regardless of what the brand-name beers have sold for; and 3) These big brands are not just competing with each other but against the collective craft beer industry. Also, generally just the fact that a brand has the capacity to produce a lot of product doesn’t mean they can sell it without a big investment in marketing. I also don’t think it will start any kind of price war among the big brands because their customers still have brand loyalty for some reason, and there are only so many shortcuts you can take to save money while brewing beer.

  7. I feel like this is a huge blow to ABI as they have acquired so much in their history as the top beer producer. On the other hand, Constellation could either fail or flop in the beer industry. As producers of wine and spirits, they have to reach out to a completely different target audience which they are not used to. I think that if they can remain successful then this merger would prove many people wrong that doubt whether they will profit from the merger.

  8. The fact that the company is trying to be successful by expansion is no surprise. Busch an Miller Coors are the two largest beer brewing and distributing companies in the nation. I know that Miller Coors has a selection of international beers, in which include Polish beers as well. Personally, I do not think this will affect domestic beer prices however I believe this puts more pressure on Miller Coors to respond with a plan to compete with ANB in that sector of the market.

  9. Anheuser-Busch is an enormous producer of alcoholic beverages in the United States and all over the world. I think they made a very wise decision to buy up Grupo Modelo, as beers like Corona compete directly with some of their brands like Landshark Lager. Also it has allowed them to expand into the blossoming Mexican beer market, and get a leg up on MillerCoors. However, I am more skeptical of Constellation’s success from this endeavor. While I know that Constellation is a well-known producer of wine and liquor, I am not sure how their first steps into the beer industry will turn out, but I think they made a wise decision with the brand and they got a great deal from Anheuser-Busch. As for the change in prices of beers in the United States, I do not think that they will be affected in the near future. But I do think that this expansion will force companies like MillerCoors to either produce new and different kinds of beer, lower their prices to make their product more appealing, or increase their production and maybe their marketing to augment their sales and compete with Anheuser-Busch’s production.

  10. I think that ABI’s decision to acquire Grupo Modelo was an excellent business decision. This move will allow them to enter into other markets further south, and increase their projected revenues, as well as strengthen their holdings at home. With the strengthening of Constellation’s position, this acquisition may even foster some new competition. However, I am skeptical of Constellation’s success here. Despite being in the alcoholic beverages market, their lack of expertise in the beer market may actually be their downfall. It may not have been an advantage to accept the merger. I believe that beer prices will stay the same, for the most part since Constellation does not have the techniques that make them sturdy competition. If they are successful, I would expect to see prices for beer decrease.

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