I'm sure that there are many beer connoisseurs here on WallStreetOasis, and I don't claim to be one of them -- after all, there is a reason that PBR is my avatar. But, being that I'm interested in F&B, I bring to you today a story of two large companies, vying for eternal partnership, and a big bad DOJ who isn't quite sure about the merger.
Anheuser-Busch InBev sought to acquire Group Modelo to the tune of $20.1BN...what happens is certainly TBD.
Together, AB InBev and Modelo would control about 46% of the market for brews. As someone who only drinks craft brews, I have to say I don't sympathize with those out there whose Bud Light might increase in price, but I digress.
According to the department’s complaint, the U.S. beer market is already highly concentrated, and prices are increased by strategic interactions among the largest brewers, including ABI and MillerCoors. ABI generally acts as the price leader, implementing annual price increases in the sub-premium, premium and premium plus segments of the U.S. beer industry. MillerCoors and other brewers have typically joined the ABI price increases, while Modelo has not.By pricing aggressively, Modelo–through its importer, Crown Imports–puts pressure on ABI to maintain or lower prices, especially in certain parts of the country. As a result, Modelo has become a particularly important competitor in the U.S. market.
More importantly, however, the Department of Justice -- rigorous as always -- gave us all some great insight into what beer is, specifically:
“‘Beer’ is comprised of a wide variety of brands of alcoholic beverages usually made from a malted cereal grain, flavored with hops, and brewed via a process of fermentation,” DOJ wrote. “Beer is substantially differentiated from other alcoholic beverages by taste, quality, alcohol content, image, and price.”
Ah, so that's what it is.
And continuing in its rigorous fashion, the DOJ has now provided us with the enlightening information of the prestige of beers. I'm kidding...sort of...
Beer is generally grouped into four distinct segments by industry participants–sub-premium, premium, premium plus and high-end. The sub-premium segment includes: Busch (owned by ABI); and Keystone (owned by MillerCoors). The premium segment includes: Bud Light; Coors Light; and MillerLite. The premium plus segment includes: Michelob (owned by ABI); and Modelo Especial (owned by Modelo). The high-end segment includes: imports such as Corona (owned by Modelo) and Heineken; and a variety of craft beers.
That's right boys and girls, that Bud Light you're sipping is "premium" beer. And please hold on to that Corona -- apparently it's on the level of GS/MS/JPM in the beer world. Hell, what does that make BL/CL/ML (Bud, Coors, & Miller Lite)?
Where do you guys see this going? Do you agree with the DOJ's beer rankings?
Lol. Funny post
Premium wines prices begin in low teens $s. You have to think about what the typical American drinks/can afford on a regular basis.
I still don't understand why it's the government's business to begin with...
Like all industries beer is highly regulated. High regulation creates incentives to concentrate the market in a few large firms, because its too expensive for many small firms. So to counter the negative side effects of high regulation the government also regulates when businesses can merge. Not saying I agree with it at all but that is how it works.
Government has a regulation to counter its regulation.
So what's my go to shitty beer, Steel Reserve 211? Below-Sub-Premium?
Re: the ruling, the large companies are already doing all they can to force craft beers off the shelves or into low visibility areas of the beer aisle. I would assume this would make their efforts more aggressive, which I wouldn't enjoy.
Not sure if the DOJ is really concerned about saving craft beers but I am glad they're being so diligent with their beer clasifications.
I feel very wealthy since all i drink is premium to high end beers now.
I suppose Eric Holder sees this as a priority instead of say, fast and furious? DOJ is a joke.
You're a racist.
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