Anheuser-Busch InBev announced the completion of its merger with SABMiller earlier this month. The deal will cost AB InBev a reported $106 billion, according to The New York Times. The merger will have major impacts on the beer industry as well as the two supply chains. The two companies combined will have a reported annual revenue of around $64 billion, explained the source.
The joining of the two beer powerhouses is said to also have much to do with AB InBev's ambitions of becoming a "truly global brewer," reported NYT. The merger will give the company new footholds in Africa and a considerably larger dominance in Latin American countries.
There has been much speculation regarding reactions from U.S. regulators, considering the deal would make the new company responsible for a large chunk of worldwide beer sales. The New York Times estimated AB InBev would now have a hold on about 30 percent of revenue in the beer industry.
SABMiller was a step ahead of these worries, however. The company sold its 59 percent stake in U.S. MillerCoors to Molson Coors Brewer. The two companies were joint venture partners for MillerCoors beer products. SABMiller has sold its stakes for around $12 billion, noted the source.
Global rights to the Miller brand were handed over to MillerCoors through this deal. Now, Molson Coors stands as the second-largest brewer in the U.S.
Despite this concession, there is still speculation about whether or not the merger will get the green light from regulators. If the merger does not get the approval stamp, AB InBev will be forced to pay SABMiller a $3 billion fee, according to The Times.
Cost reduction and supply chain consolidation
While the deal (and its potential penalties) will cost AB InBev a pretty penny, the beer company stands to save a considerable amount due to supply chain consolidation. Spend Management contributor Paul Snell reported that the merger is expected to amount in over $2 billion in savings for the companies.
Of these savings, procurement and engineering will make up 20 percent. This will be consist of resourcing from raw materials, consolidated packaging efforts and a complete reengineering process, explained Snell.
Efficiencies in brewing and distribution methods are set to make up most of the cost reduction. Improvements in bottling and shipping, as well as reduced energy and water use will make up around a quarter of company savings.
The consolidation of supply chain practices, sourcing and overall efforts will provide new opportunities for improved supply chain procedures.
"AB InBev believes that by pooling its resources and expertise, the combined group would also make a greater and more positive impact on the communities in which we live and work, by providing opportunities all along the supply chain and aspiring to the highest standards of corporate social responsibility," said the company in a statement, according to Spend Management.
Before the official merger announcement was made, SABMiller had reported $221 million in savings in 2015. The company projected savings of up to $430 million in 2016 by way of increasing spend management and centralizing procurement team efforts, explained Snell.