Brewers merge to battle bud

Tyler Coenen

Last Tuesday, Molson Coors Brewing Company and SABMiller PLC merged into one conglomerate company – MillerCoors.

Coors, based out of Denver, and SABMiller, based out of London, will likely have to make job cuts not just in the factories, but in advertising firms as well. These cuts, in addition to lower freight costs attributed to bottling beer closer to its selling point, is expected to save MillerCoors $500 million a year.

The merged company hopes to used its taller budget to challenge industry king Anheuser-Busch.

“This is bad news for Anheuser,” Nickolaas Faes, an analyst at Exane BNP Paribas in London, told Bloomberg News. “Together Miller and Coors are tiny competitors, but in a joint venture, they are much more formidable.”

MillerCoors’ 69 million barrels of beer produced a year will still not touch Anheuser’s 102 million annual barrels, but the merger hopes to close that gap.

“I think the people on top have probably put a lot of thought into the merger,” said Russell N. Laczniak, professor of marketing at Iowa State. “My guess is that there will probably be great benefits for the company.”

According to Beer Marketer’s Insights, MillerCoors will have an expected $6.6 billion in revenue this year. In 2006, Miller and Coors had a combined market share of 29 percent, and in the same year Budweiser held 48 percent of the market. Most believe the merger will bring stronger value to MillerCoors in the future.

“I don’t want to say it’s a no-brainer, but it’s the most obvious way to create value in the U.S. beer business,” said Benj Steinman, editor of Beer Marketer’s Insights, in a Chicago Tribune interview.

The merger’s effects may take a while to trickle down to the consumer.

“Some people might feel it already, but we will see a true impact in the marketplace a year or two down the road – especially if they put their heads together now,” Laczniak said.

The merger will combine Coors and Miller brewing plants, allowing both companies’ products to be made at any of the breweries around the nation. The new arrangement will also streamline the companies’ advertising.

“The merger has drawn a lot of publicity in the media and might lessen the need for normal reminder advertising,” Laczniak said. “It will lessen the burden on the advertising companies if they stay separate for both beers, but if they are trying to lure away Bud’s market, they might need to combine creative genius from both sides.”

Student reactions to the merger varied.

“I don’t think the prices will change much, but it will definitely increase MillerCoors’ profit,” said Brian Josephson, freshman in liberal arts and sciences-open option.

Michael Kruse, freshman in aerospace engineering, thought differently.

“It’s a nature of good capitalism for big business to prosper, and that is basically what is happening in this merger.”