Raft of deals in the offing

24th June, 2011 by Ron Emler - This article is over multiple pages: 1 2

Are we approaching a new round of consolidation among the big drinks producers? The tempo of reports about rivals sizing up assets is picking up.

consolidation.jpgA number of overtures have been made already and if all the rumoured and mooted bids turn out to be based on fact then the landscape could change dramatically.

Battle has already commenced for ownership of Foster’s, Australia’s biggest brewer, following the near-AU$10 billion bid from SABMiller, the world number two. The bid has been rejected and skirmishing is likely to continue for several months as other potential suitors consider their options.

In East Africa, however, Diageo’s efforts to bolster its control of the market have suffered a setback at the hands of the Ethiopian government. Diageo’s East African Breweries is a key route to market for all its products and earlier this month Diageo began to unravel a reciprocal deal with SABMiller by buying the latter’s 20% stake.

That would create extra competition in the region – which Diageo sees as a strategic centre of growth – but that strategy has been dealt a blow by the Ethiopian government’s decision not to let Diageo take control of one its largest brewers for US$200 million, preferring to sell to Heineken.

But Diageo has numerous other irons in the fire designed to bolster its position as the world’s leading drinks group. This year it has already bought Turkey’s foremost spirits producer, Mey Icki; it is still awaiting approval from Beijing for its £624m bid for one of the country’s largest distillers, Shui Jing Fang; it is exercising its option to buy a 50% stake in Guatemala’s Zacapa rum brand; and it is said to be in discussions about buying José Cuervo Tequila, which it already distributes.

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