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KAI RYSSDAL: The makers of Coors and Miller have come up with a new brew -- it's called pricing power and market share. SAB Miller and Molson Coors announced today they're combining their American operations. The deal would give the joint venture about 30 percent of the U.S. beer market.
Marketplace's Amy Scott reports the two may face a tough fight with regulators.
AMY SCOTT: Why would two fierce rivals join forces? Two words: Anheuser-Busch. The maker of Budweiser and Michelob controls about half the U.S. beer market. Matthew Reilly follows the industry for Morningstar -- he says the big U.S. brewers are losing business to wine and liquor, as well as to imported beer and microbrews. And the stuff in here:
SOUND: [Beer can opening]
...is getting more expensive.
MATTHEW REILLY: The cost of everything is going up, from hops to barley to gas to distribute the beer. So in that environment, it certainly makes a lot of sense to get bigger, get better scale on purchasing and get better scale on advertising.
Coors and Miller say they'll save $500 million a year in freight and other costs without closing any breweries. The deal would also expand the companies' geographic reach. Reilly says Coors is big in the West, Miller's a favorite in the heartland. But their combined heft might raise the eyebrows of regulators.
Eric Shepherd is executive editor of the trade newsletter Beer Marketer's Insights. He says people have been talking about Coors and Miller teaming up for years.
ERIC SHEPHERD: And the question in the background has always been well, will the government allow the number-two and -three players to merge? Will there be some sort of lawsuit to try and stop it?
But Morningstar's Matt Reilly points to a similar deal three years ago. Antitrust regulators approved a merger between the number-two and -three tobacco giants, R.J. Reynolds and Brown & Williamson. That left just two companies with 80 percent of the U.S. cigarette market.
If Miller and Coors get together, the same will happen with beer.
In New York, I'm Amy Scott for Marketplace.