The next section of the paper is important because we will define the peer group of the company. The peer group analysis will be used when comparing the performance of ABInBev and SABMiller to competitors.
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9.2 1 Definition of peer group
In this section of the paper, we seek for define the peer group of ABInBev and SABMiller. The reason for this is to create a comparable benchmark group to analyze the relative performance of ABInBev and SABMiller over a period and calculate the relevant multiples for valuation purposes as well as for comparisons among the
companies. A peer group does not necessarily need to consist of direct competitors, but there are several factors that need to be taken into consideration when making the peer group.
While ABInBev now is one of the five biggest consumer goods companies in the world they have one core business which is beer. A peer group does not necessarily need to consist of direct competitors. One could have argued that Nestle the Coca-Cola Company and PepsiCo, Procter & Gamble would have been better peers for ABInBev. However, we do not believe this. They have in common that they are consumer goods companies but sell very different products. Brewing is a business far away from producing Cereal. Carlsberg and Heineken have many of the same goals and regulatory likenesses with SABMiller and ABInBev. The risk profile is similar. One could argue that the risk profiles should be about the same, and there should have been used the same
accounting policies. We believe that even though these two companies are smaller, they are very comparable.
Therefore, and also to benchmark what is possible in the brewery business we chose Heineken and Carlsberg.
9.2.2 Heineken NV
Based in Amsterdam, the Netherlands Heineken is the world’s third-largest brewer. Heineken ranks among the top five brewers in every region except the Asia Pacific. Here too, it is working to build its presence. (Heineken Story, u.d.) (Passport, Oct, 2015)
Heineken turned down an acquisition attempt from SABMiller in 2014. The
attempt was seen as a way to protect them from a takeover from ABInBev. As a family owned company, they said no. Heineken is the leading player in Western-Europe, its largest regional beer market. This accounted for 26% of its global volumes in 2014. Heineken had revenue of 20 billion Euros and beers account for more than 98% of their sales. (Global Brewers’ 2014 Results: Champions and Disappointments,
0 10.000 20.000 30.000
2014 2015
€ million
Financial Performance of Heineken
Consolidated Revenue Consolidated Operating Profit (BEIA)
Net Profit
Figure 25 - own creation. Source: Annual review
Figure 26 - own creation. Source: Annual review
0 10 20 30 40 50 60 70
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March, 2015)
One of Heineken's strengths is the premium focus in their brand group, and they have the world’s number one premium lager beer brand.
They also have many opportunities in other markets with their big market mix of different beer. (Heineken Financial Report - 2015, 2015) As a weakness to the company they do have a very limited economy offer and they do not have the same opportunities to grown among low-income consumers. The company has also
been a very aggressive in the competitive environment versus Carlsberg. Heineken has gone in the direct clinch with Carlsberg and has grown strong the latest years. We see this trend as likely to continue.
Figure 28 - own creation. Source: Annual review
9.2.3 Carlsberg
Based in Copenhagen Carlsberg is the world’s fourth-largest brewer by volume. In 2014 they had revenues of 64,5 billion DKK. (Carlsberg Annual Report - 2015, 2015) The company is the leading brewer in Western Europe, only trailing Heineken and the largest player in Eastern Europe. However, Carlsberg has been having significant challenges in this region. This has led Carlsberg to strengthen its
position in Asia Pacific. Asia Pacific was now the second largest market in 2013. In 2015 Carlsberg announced it would gain full control of Wusu Beer group in Xinjiiang. In 2015 their expansion in Asia was of utter importance
-5 0 5 10
2010-2011 2011-2012 2012-2013 2013-2014
% y-o-y volume growth
Heineken vs Global Market 2010-2015
Global Market Volume Growth
A B C
Figure 29 - own creation. Source: Annual review Figure 27 - own creation. Source: Annual review
0 200 400 600 800 15.500 16.000 16.500 17.000 17.500 18.000 18.500
2011 2012 2013 2014 2015
Million litres
Alcoholic Drinks Volume
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as sales in Europe has staggered, and is down 2% for the year.(Carlsberg, u.d.) Carlsberg has a strong history and is a company that is known around the world. They have had a tradition of making their own products instead of developing new products in new markets. They have a relatively premium-oriented product offer. This could hurt them in the battle versus Heineken as both brands are in the premium segment. The biggest threat for Carlsberg is to lose out to their core rivals as mentioned Budweiser and Heineken as they are expanding their presence.
This in combination with the merger of SABMiller/ABInBev could hurt Carlsberg in their core markets.
(Passport, oct, 2015)
Carlsberg has a big problem with their debt in their balance sheets, further hindering them from doing M&A. In this competitive environment they need to grow if they are to protect themselves from their biggest competitor Heineken. It has been speculated that if not Carlsberg manages to solve their situation with their losses in eastern Europe and their balance sheet they might be a target for a possible takeover by Heineken.