Only one month into 2014, large drink companies are spending three times as much money buying their competition as they did in all of 2013. As companies start to put more of a focus on Asia, analysts are seeing more companies coming through the pipeline.
After 2013 was the slowest year for alcoholic beverage business deals in 20 years, Anheuser Busch stated this month that it was going to spend nearly $6 billion to buy the Oriental Brewery in Korea. That is occurring right after the $16 billion buy of Suntory Holdings of Beam Inc.
According to an analyst at Mirabaud in London, this is a sector where M&A makes a lot of sense. There probably are more options to do deals this year as opposed to 2013 because these beverage companies are deleveraging quickly.
Japanese firms such as Suntory are looking for more growth abroad to fight an aging population in their home countries, so European drink firms are looking to target Asia as they try to lock down economic control of an area where beer and liquor markets still are growing. That could cause the largest brewers’ shares of beer sales in Asia to increase.
The top 10 brewers in the whole world now control a total of 65% of beer volumes, that dominance tends to be skewed towards more developed markets. In Asia, the top beverage companies have 43% of the current beer market, compared to 88% in the US and North America overall.
Another analyst states that the industry still is fairly unconsolidated, and the top four or five beer brewers are joined by about 40 others.
That analyst notes that in beer and liquor, major companies are generating cash and are trying to deleverage. The market has consolidated a lot in the last five years, but there are still more opportunities to come.
Suntory is the third biggest liquor maker in the world after its agreement last week to buy Beam bourbon. It now has gained new brands, including Maker’s Mark and Sauza tequila.
The analyst also pointed out that the population in Japan is getting smaller and is aging. This means that Suntory is looking beyond its backyard, where it is selling drinks that range from beer to canned coffee. The demand for various types of alcohol in Japan is dropping, but the sales of whiskey and other spirits around the world are climbing 5% per year through 2017.
The purchase of Beam by Suntory is sparking new speculation that companies such as Diageo and Pernod Ricard SA could turn their attention to family organizations such as Brown Forman Corp, which makes Jack Daniels. Diageo did not buy the Jose Cuervo brand from the Beckmann family in Mexico recently. The two parties were not able to agree on a price.
Overall, large beverage companies have the cash to make new acquisitions after many years of austerity and cutting back on investments. Experts think we are poised to see bigger deals in the drink industry in 2014.
Here’s a quick glimpse into the top players in the space and also who might be ripe for a takeover. This list is just the Top 10 of each from a list of 50 recently released by the Brewers Association.
Top 10 Overall U.S. Brewing Companies
(Based on 2012 beer sales volume)
|1||Anheuser-Busch Inc. (a)||St. Louis||MO|
|3||Pabst Brewing Co. (c)||Los Angeles||CA|
|4||D. G. Yuengling and Son Inc.||Pottsville||PA|
|5||Boston Beer Co. (d)||Boston||MA|
|6||North American Breweries (e)||Rochester||NY|
|7||Sierra Nevada Brewing Co.||Chico||CA|
|8||New Belgium Brewing Co.||Fort Collins||CO|
|9||Craft Brew Alliance, Inc. (f)||Portland||OR|
|10||The Gambrinus Co. (g)||San Antonio||TX|
Top 10 U.S. Craft Brewing Companies
(Based on 2012 beer sales volume)
|1||Boston Beer Co.||Boston||MA|
|2||Sierra Nevada Brewing Co.||Chico||CA|
|3||New Belgium Brewing Co.||Fort Collins||CO|
|4||The Gambrinus Co.||San Antonio||TX|
|6||Lagunitas Brewing Co.||Petaluma||CA|
|7||Bell’s Brewery, Inc.||Galesburg||MI|
|8||Matt Brewing Co.||Utica||NY|
|10||Stone Brewing Co.||Escondido||CA|
YouTube Special Feature
The Brewers Association has just released its annual lists of the top 50 craft and overall brewing companies in the U.S. (based on 2012 sales volume), and the top of the rankings holds little surprise. Led by its Budweiser and Bud Light brands, Anheuser-Busch (Anheuser-Busch InBev (NYSE: BUD)) is No.1. MillerCoors (Molson Coors (NYSE: TAP)), Pabst Brewing, D. G. Yuengling, and Boston Beer (NYSE: SAM) round out the top five.