Yahoo News just reported that the second and third largest brewers in America, Molson Coors and SABMiller, plan to merge their American operations into MillerCoors.
It seemed inevitable. Industrial beer marketers are flailing about desperately trying to come up with something people want. Growth is their imperative. But since they are having a tough time gaining market share, the other logical path to growth is through acquisitions and mergers.
Mega-mergers are a sign of something unhealthy in the industry. Even though they may look good financially on paper, in reality they can easily fall apart. Just look at what is happening with Sprint Nextel right now – they merged to compete against ATT but the strategy is failing. Look at the Daimler Chrysler merger which also fell apart. The bottom line is that these companies where not providing something people wanted, so although mergers may help in the short term, they are really just staving off the inevitable.
Beer has limitations as a corporate commodity. It is inherently a beverage of socializing and community and is best when it is fresh and local. Craft brewers have been growing in the double digits for the past several years — testament to the fact that beer drinkers want more than commodity beer can offer them.
There will be continued growth for industrial beers in developing countries, like China, where people are looking at industrial products as a sign of progress. But trend setters in North America and Europe are putting their beer bucks where their mouths are – in the community, where they can get fresh, local beer that delivers more than a cheap industrial product can ever offer — a sense of community, people behind the products, places to gather over a shared local identity provided by a unique beer made by real people that customers can get to know.
With all the benefits craft beer delivers, it is no wonder that corporate brewers have nowhere left to go but to canabalize each other.
There is a chance this merger won’t be approved by federal regulators. But I can’t think of any major mergers that have been rejected lately. We’ll just have to see.
In the meantime, demand for craft beer is growing so fast that most brewers can’t keep up with demand.
Infinite growth is a failed strategy for society as a whole. Companies that pursue this path will eventually lose out to businesses that are more deeply connected to their communities and customers. Long live craft beer.