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Rivals see local battles with new beer giant but not a global war

beerCOPENHAGEN/BRUSSELS--The prospect of a new competitor that produces one third of an entire industry's output would normally terrify rival companies, but brewing is different.
  The very local nature of lagers and ales, and the fact that a price war is seen as unlikely, mean global market leader Anheuser-Busch InBev's imminent takeover of SABMiller, the world's second largest brewer, should not destroy the competition.
  "It's been rumoured for a long time, so it's not like we haven't had time to think about it," Laurence Debroux, chief financial officer of world number three Heineken, told a conference at the end of September.
  Debroux said rival brewers should not underestimate the strength of the "animal" that AB InBev would become after the takeover, but beer battles are fought market-by-market rather than globally. "If I look at our three main contributors today, Mexico, Nigeria and Vietnam, those are countries where we were competing with one or other of those two so the fact that they would get together doesn't really change our position on those markets," she said.
  World number four Carlsberg's chief executive, Cees 't Hart, also does not expect much impact in his company's core markets, where the new brewing giant will have a limited presence. AB InBev's strategy in the past decade has been clear: buy up competitors, strip out costs, push up prices at least in line with inflation, and try to persuade consumers to upgrade from cheaper brands to mainstream or premium alternatives.
  At the top of the chain are the higher priced and higher margin international premium or "super-premium" brands, led by Heineken and followed by AB InBev's Budweiser. The quintessential American lager has suffered at home, but made great strides in Brazil and China and is now drunk more outside than inside the United States.
  AB InBev's takeover bid is set to be comfortably above $100 billion and the need to recoup its investment means a beer price war is not expected. AB InBev's greater muscle may allow it to push its global brands harder in new emerging markets, notably in Africa, and it could ramp up investment, but brewing will remain a largely local business.
  "Beer doesn't travel that well over borders. It's not like you're selling Snickers bars all over the world," said a banker.
  In Mexico, Heineken's Dos Equis and Tecate brands dominate the north and AB InBev's Corona the centre and south, and both companies have enjoyed volume growth, higher prices and improved profit margins. "There is a lot of growth around," said Exane BNP Paribas analyst Eamonn Ferry, referring particularly to Africa. "There will be competition in pockets, but it's good news for the industry's profits."
  Observers have called the "megabrew" merger the end phase of consolidation in the brewing industry, with likely disposals required by antitrust authorities in the United States and China presenting growth opportunities for smaller players. In each case though, there is a clear favourite to buy, with Molson Coors expected to take SABMiller's 58 percent stake in their MillerCoors U.S. joint venture, and China Resources Enterprise the remainder of the CR Snow Chinese brewing business.

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