AB InBev and SABMiller anticipate £1.4 billion savings through £71 billion merger

Paul Snell is managing editor at Supply Management
12 November 2015

The £71 billion merger between AB Inbev and SABMiller is expected to generate cost savings of £1.4 billion for the two brewers.

An estimated 20 per cent of these savings will come from procurement and engineering, with economies of scale by sourcing raw materials and packaging together, and reengineering processes.

Brewery and distribution efficiencies are also expected to deliver a quarter of the savings target, with improvements to bottling and shipping, and cutting water and energy use. The remainder of the savings will come from sharing best practice (20 per cent), and realigning overlapping administrative costs.

Under the agreed deal, which will see InBev pay £44 for each share in SAB, the savings will be achieved four years after the takeover is completed. This is expected to take place in the second half of 2016.

In addition to the savings, InBev, whose brands include Budweiser and Stella Artois, said the new merged organisation would be able to create more opportunities in the supply chain.

“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,” it said in a statement.

In October, SAB announced it had saved $221 million in the year to March, and anticipated saving $430 million by March 2016. This would be achieved by increasing spend managed by the centralised procurement team from 69 per cent to 90 per cent, and rolling out procurement operating models to increase efficiency, transparency and cost management.

As part of the deal SAB, the manufacturer of Peroni and Grolsch, has sold its 58 per cent share in joint venture MillerCoors to Molson Coors for $12 billion.

Molson Coors, the owner of Carling and Cobra Beer, anticipates it will be able to make $200 million annual savings, “primarily from procurement improvements, supply network optimisation and operational efficiencies”.

Gavin Hattersley, CEO of MillerCoors, said: “Fully integrating MillerCoors into Molson Coors, given our cost-saving capability and our cash-generating strength, will allow Molson Coors to aggressively pay down debt while investing more behind our brands and simultaneously maintaining our strong dividend policy.”

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