MillerCoors will boast a 29% share of the U.S. market, thanks to a large and varied portfolio of brands including Miller Lite, Coors Light, Blue Moon, Leinenkugel's, Peroni, Molson, Miller High Life and Coors Banquet.
Still smaller than A-B
The combination would be significantly smaller than Anheuser-Busch, which holds a 49% share of the market, but it could potentially erode one of A-B's core competitive advantages by giving the combining brewers an exclusive distributor network. Historically, the rivals have had to compete for the attention and priorities of the same wholesalers, while A-B had its fleet's undivided attention.
In a statement announcing the antitrust approval, the Justice Department said the "proposed joint venture between Miller and Coors is not likely to lessen competition substantially." The Justice Department further said it "verified that the joint venture is likely to produce substantial and credible savings that will significantly reduce the companies' costs of producing and distributing beer ... that are likely to have a beneficial effect on prices."
Don't forget InBev
Not to be outdone, a report by a Belgian newspaper today said A-B is holding talks with Belgian-based, Brazilian-run InBev, which has been reportedly mulling a hostile takeover of the No. 1 U.S. brewery. (A-B acquired the U.S. import rights for most of InBev's brands last year.)
When they announced plans for the joint venture in October, Miller and Coors executives said they expected cost savings of up to $500 million in the first three years. It remains unclear where the joint venture will be based: Chicago, Dallas, Denver, Houston and Milwaukee have all been raised as possibilities in various reports.
A-B, for its part, has vowed to capitalize on potential confusion within the MillerCoors system that results from the deal. Particularly of interest will be the impact of the merger on Coors, which has been outperforming A-B and Miller significantly over the last few years.
What it means for agencies
It isn't immediately clear what the deal will mean for the two brewers' agencies. Coors' major agencies include Interpublic Group of Cos.' DraftFCB; independent Taxi; and Avenue A/ Razorfish. Miller's major shops include Bartle Bogle Hegarty, part owned by Publicis Groupe; WPP Group's Y&R; and Publicis' Saatchi & Saatchi, Starcom and Arc Worldwide.
Graham Mackay, SABMiller's CEO, said: "Today's news underscores our strong belief that this combination will not only generate significant growth and cost synergies, but will also create tremendous opportunities for innovations in products and services that will greatly benefit America's beer distributors, retailers and consumers."
Leo Kiely, CEO, Molson Coors, added: "MillerCoors is quickly moving toward becoming a reality, and I'm looking forward to working with the entire team to build on our momentum and grow our leading brands and consumer offerings."