Mark Tran | Friday
SOUTH African Breweries (SAB) has poured cold water on reports of merger talks with Miller Brewing of Philip Morris.
SAB, the world’s fifth-largest brewer, with brands such as Castle and Pilsner Urquell, officially declined to comment on a Wall Street Journal report of a possible $5-billion (R60-billion) deal with Miller.
“We don’t comment on press speculation,” the company said.
But privately SAB officials dismissed the press reports as idle speculation from underworked investment bankers just “twiddling their thumbs”.
SAB has been linked to Miller in a possible merger for months. As SAB has grown rapidly through acquisitions in recent years, there has been speculation that it would try to strengthen its presence in the lucrative American market.
As for Philip Morris, the maker of Marlboro cigarettes and Kraft food, Miller is not a core asset with little presence outside the United States. Even on its home turf, Miller is losing ground to Anheuser-Busch, the market leader from St Louis.
SAB has been expanding in fast-growing markets in the developing world such as China, India and Africa. With 95% of the South African market, SAB is the largest beer maker in the developing world.
Miller would boost SAB’s presence in the US, although that presence is hardly thriving despite Philip Morris’s marketing clout.
Besides, SAB, best known in the West for its premium Pilsner Urquell brand, points out that the only growth in the US market has come from imported beer such as Pilsner Urquell.
On the other hand, Miller would give SAB a business with better profit margins than those in the developing world and a reasonably well-known brand to sell internationally. Earning dollars would also help cushion SAB from the impact of the declining South African currency.
Reports of SAB’s interest in Miller come at a time of increasing consolidation in the brewing market, increasingly dominated by Anheuser-Busch. Belgium’s Interbrew and Heineken of the Netherlands are other major players in the market.
Interbrew, the world’s second-largest brewer, has been particularly active.
The Belgian company recently added the German company Beck’s to its portfolio of brands led by Stella Artois, after swallowing a large draught of the British beer sector.
It was forced by competition authorities in the United Kingdom to sell Carling Brewers of the UK after acquiring Bass for 2,3-billion two years ago. Adolph Coors, the US’s third-largest brewer, acquired Carling.