Losing San Miguel is a blow for CMBC, and a coup for Budweiser Brewing Group

Carlsberg just can’t seem to keep itself out of the limelight.

No sooner had the dust settled on news of its double bid for soft drinks maker Britvic, its Carlsberg Marston’s Brewing Company UK subsidiary announced its licensed production and distribution agreement with Mahou San Miguel (MSM) would end on 31 December 2024.

The San Miguel brand, it transpires, is to switch allegiances, joining stablemate Mahou in Budweiser Brewing Group’s roster from the start of 2025.

The move marked “a new chapter for Mahou San Miguel in the UK”, said Alberto Rodríguez-Toquero, MD of Mahou San Miguel, adding his belief BBG would “succeed in fulfilling our ambitious plans for the brand”.

Spanish lager’s popuarity boosts San Miguel sales

It’s easy to see why BBG wants to add San Miguel to its portfolio, and why CMBC won’t be best pleased to have lost one of its flagship brands to a direct competitor.

Sales of the brand – buoyed by growing demand for posher, continental, and predominantly Spanish lagers – are up 5.9%, to £272.1m [NIQ 52 w/e 24 April 2024]. It’s the fifth-biggest beer brand in the UK, and closing in on Foster’s in fourth spot.

BBG was also – until this week – behind in the Spanish revolution stakes. Mahou sales are a paltry £2.7m and in decline, so adding the much more established San Miguel gives the brewer a plug in and play option as it looks to see off the threat from the likes of Madrí and Cruzcampo.

San Miguel looks like an obvious contender to replace Beck’s – a brand whose star has faded as consumer interest in German and Czech lagers has dwindled in favour of those from sunnier climes – in BBG’s roster.

Why CMBC will miss San Miguel

For CMBC, the loss of San Miguel will come as a blow. The brewer already lags Heineken, Molson Coors and BBG/AB InBev in terms of UK market share, and the loss of its biggest brand by sales value will make closing the gap harder still.

Analysts at Jeffries suggest the San Miguel contract contributes 1.4% to Carlsberg’s group volumes, and 2% of sales. They note the loss of the brand – which has seen a five-year CAGR of 2.7% volumes and 6.4% value sales – will be “marginally dilutive to growth” at a group level and “takes away some scale” from the brewer in the UK.

“Naturally, we are disappointed by the decision, and are working to mitigate the impact on our business,” said CMBC CEO Paul Davies.

How will CMBC replace the brand?

Of the brands remaining in CMBC’s portfolio, 1664 Bière looks like the obvious candidate to fill the void. The brand had suffered from a lack of attention under previous UK licensee Heineken and sales have dipped by 10.2% to £145.6m [NIQ]. CMBC relaunched the brand in April, and it will likely see further investment after San Miguel’s exit.

Smaller brands like Brooklyn and Poretti could also benefit, Jeffries analysts predict. They add CMBC could also add further premium brands to its UK portfolio – as Heineken has done with Beavertown and Cruzcampo in recent years.

CMBC’s much-discussed move for Britvic also starts to make more sense. Leveraging Britvic’s strong on-trade distribution could help accelerate CMBC’s sales in this channel, but the brewer only has a matter of weeks to come back with a higher offer or look elsewhere with its M&A efforts.

One thing is for sure, losing San Miguel will only have increased Carlsberg’s thirst to complete a deal.