AB InBev’s Mega-Merger With SABMiller Fails to Deliver Promised Growth

Ten years ago, Anheuser-Busch InBev made headlines with its $110 billion acquisition of SABMiller, a move that created the world’s largest brewer. The deal, led by then-CEO Carlos Brito and backed by Brazilian investment firm 3G Capital, was seen as a bold step to dominate the global beer market. SABMiller brought brands like Pilsner Urquell and Peroni into the AB InBev portfolio, and the merger promised significant growth opportunities through a combined distribution network and new product development.

The strategy behind the deal relied heavily on aggressive cost-cutting measures, including zero-based budgeting, which required managers to justify every expense from scratch each year. Initially, this approach seemed successful. By 2019, Brito had delivered $3.2 billion in promised synergies a year ahead of schedule, even surpassing expectations by $750 million. However, these savings were not enough to offset other challenges that emerged.

Currency fluctuations soon became a major issue. The company’s sterling-denominated bid for SABMiller was hit hard when Brexit weakened the British pound. At the same time, volatility in Brazil’s real and Mexico’s peso eroded earnings when converted to U.S. dollars, making it more difficult for AB InBev to pay down its dollar-denominated debt. With nearly 60% of its EBITDA coming from developing markets, the company was forced to cut its dividend.

The onset of the COVID-19 pandemic brought further difficulties. Lockdowns around the world hurt beer sales and squeezed profits. Inflation added new pressures, raising costs across the board. Over the past decade, AB InBev has lost four percentage points of EBITDA margin and is now worth less in market value than what it paid for SABMiller.

The merger has also failed to deliver on its promise of outpacing competitors. A $1,000 investment in AB InBev at the time of the deal would be worth just $660 today, including reinvested dividends. By comparison, an equal investment in Diageo—maker of Guinness—would have grown to $1,400, while Carlsberg would have doubled an investor’s money. The S&P 500 Index would have returned nearly three times as much.

Michel Doukeris took over as CEO in 2021 and now faces tough decisions about how to move forward. One option is to follow Kraft Heinz—a fellow 3G-backed company that is now unwinding its own mega-merger from the same era—and consider breaking up AB InBev. However, this path is complicated by the lack of obvious business units to spin off for immediate value.

In 2019, AB InBev spun off its Asia-Pacific business in an IPO that raised nearly $5 billion and helped reduce debt. But there are few remaining assets that could be sold for similar impact. The company’s focus remains almost entirely on brewing beer, with little diversification into other beverage categories.

Doukeris could consider selling underperforming regional businesses or doubling down on faster-growing markets like South Africa, where sales grew at a mid-single-digit rate last year. Another possibility is to invest more heavily in non-alcoholic beverages—a segment gaining popularity as consumer preferences shift away from alcohol and toward health-conscious options. Acquiring a fast-growing brand like Athletic Brewing could help AB InBev tap into this trend.

The company is also still dealing with fallout from a Budweiser boycott linked to a marketing partnership with a transgender social media influencer. This episode highlighted how quickly brand loyalty can erode in today’s polarized environment.

AB InBev’s experience offers important lessons for other companies considering large-scale mergers in food and beverage industries. The anticipated benefits of size and efficiency can be outweighed by unforeseen economic shifts and changing consumer habits. As Doukeris works to steer AB InBev through these challenges, industry observers are watching closely to see if he can find a recipe for renewed growth—or if the company will remain a cautionary tale for future dealmakers.