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Jeff Horwich: Following major business mergers as we do, we keep you pretty well briefed on what you might call the “beer wars.” It seems like one merger after another for global beverage companies. Today it’s a battle to supply the beer buzz for Southeast Asia. Heineken has offered $6 billion to buy the rest of Asia Pacific Breweries, which makes Tiger beer. Their giant bid was meant to elbow out a play by a billionaire from Thailand.
With more on why the beer wars are so frothy these days, I’ve got Tom Pirko, president of BevMark Consulting, hello.
Tom Pirko: Good morning.
Horwich: Why is there such a rush these days to get into Southeast Asia?
Pirko: It’s numbers. The population is young, it’s growing very fast, the middle class is rising, it’s really just the market. It’s not just Asia, it’s also Africa. The beer companies are kind of in this extraordinary power game. It’s like speed chess, they are all going around, especially the top three — Heineken being the third biggest in the world — they are dashing around the world trying to close out joint ventures and buy the best assets left.
Horwich: I guess they figure Americans and Germans maybe drink as much beer as they are going to. How is the consumption of alcohol changing in these other places as countries develop?
Pirko: Alcohol is always a badge, it’s a symbol an emerging lifestyle, if you have more money to spend, you have a better life. One of the first things you buy is a premium or super premium bottle of beer or some Johnny Walker scotch or something like that. It kind of defines how an emerging population sees itself.
Horwich: Are the effects different across different kinds of alcohol? Here we’re talking about beer predominantly, but there’s also wine and all kinds of other spirits.
Pirko: It’s really interesting, there’s this kind of a melt down, in some ways, in the alcohol business. Diageo, the world’s biggest by far, the worlds biggest spirits maker, has gotten together with Heineken in Africa, which is the hottest game of all. It rivals Asia right now in terms of acquisitions. They’ve come together to team up against SABMiller, so the market is growing, you know, across this spectrum of anything alcholic.
Horwich: In these developing countries where the big brands, because of transactions, are only getting bigger. Has there been any kind of counter reaction? I’m thinking of the equivalent of micro-brewing here in the States.
Pirko: We’re not at the stage of the evolution yet. There’s a huge business in countries like China, but the issue is not that. In fact, the top three brewers in particular are looking at the future and how, as the economy changes, the local beer will not be as interesting to the population. What people are looking at is disposable income, so you see the local brewers getting edged out by the big brands.
Horwich: Tom Pirko, BevMark Consulting, bottoms up.
Pirko: Thank you.
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