The Beer Monopoly

The unnecessary capitulation of Foster’s Group to foreign ownership made it the only true loser from the globalisation of the beer industry, argue the authors of a new book.

The Beer Monopoly: How brewers bought and built for world domination, explores how AB InBev and SABMiller each spent billions of dollars on acquisitions around the world, eventually arriving at their own combination in September this year.

“Unlike other industries, for example soft drinks and spirits, which revolve around brands, the brewing industry tended to deal in national markets, each with their own players, dominant brands and beer styles,” say authors, brewing industry analysts Dr Ina Verstl and Ernst Faltermeier.

“This particular feature played into the hands of acquisitive brewers. If they bought the leading brewer in a country, they controlled that market.”

First wave: Elders and Bond
Verstl says Foster’s took “a near fatal battering” during the first wave of beer industry globalisation in the 1980s, when its then owner Elders and fellow corporate raider Bond Brewing clinched a series of acquisitions that catapulted bothinto the world’s top ten brewing groups.

“Ironically, although the Australians may have grasped the fundamentals of the game of Beer Monopoly, they came at it too early. They only bought domestic brewers in markets which had not yet fully consolidated into duopolies,” the book says.

“Moreover, they did not know how to run these companies so that profits would surge immediately. Because of this managerial failure on top of other mistakes, they ended up drowning in debt.”

The book says Foster’s survived the Elders fallout only as “a very much pared down version of its former self, with sales whittled down from a high of $15 billion in 1989 to $5 billion in 1994”. But it couldnot survive its decision to diversify into wine.

“When big holes opened up in their wine business, shareholders pulled the plug and had the beer unit sold to SABMiller,” says Verstl.

“If Foster’s had not made the fateful decision to move into wine, a decision which was supported by the shareholders at the time, it is possible that Foster’s might still be around today as an independent company.

“Strictly speaking, there has only been one loser [from globalisation] so far, and that is Foster’s.”

Heineken and Carlsberg safe
Verstl and Faltermeier argue their book coincides with the peak of globalisation in the beer sector, because “there is simply nothing meaningful left to buy in the world of beer”.

“Unlike SABMiller, the next-ranking Heineken and Carlsberg are well-protected from being taken over,” the book says.

“Heineken has repeatedly stated its desire to remain independent. Among the world’s leading brewers it sticks out not least because it is one of the few still in the hands of the founding family – an achievement that is an act of courage and ingenuity.

“Similarly, Carlsberg has a clear shareholder structure (it is owned by the Carlsberg Foundation) to defend itself from unwanted attention.”

But they question how long Carlsberg will be able to hold onto its number three spot on the brewing industry league table.

“Vying for this title is China’s CR Beer… Another contender could be Molson Coors, whose volumes sales (sic) will rise significantly once it consolidates SABMiller’s share in the US joint venture MillerCoors,” the book says.

The Beer Monopoly is available to purchase here.