Gillian Tan is a Bloomberg Gadfly columnist covering deals and private equity. She previously was a reporter for the Wall Street Journal. She is a qualified chartered accountant.

Now that the biggest merger in brewing history is a go, get ready for the ripples along the supply chain.

After months if not years of speculation, Anheuser-Busch InBev and SABMiller finally sealed a deal on Wednesday to create the biggest suds purveyor on the planet. For the producers of the brewer's bottles and cans -- Ball Corp., Owens-Illinois, Crown Holdings and their ilk -- that will make for one tough customer.

It's unlikely these suppliers will have to renegotiate their contracts right away. Still, the cost cuts promised by AB InBev and SABMiller suggest that when the beer behemoth does come to the bargaining table,  it will drive a hard bargain. AB InBev has projected some $1.4 billion in annual cost savings in addition to SABMiller’s plan to slash $1.05 billion in costs by early 2020. On a call with analysts Wednesday, AB InBev CEO Carlos Alves de Brito gave a nod to procurement -- including packaging and raw materials -- as one of four key areas that the company will target to deliver those savings.

To a lesser extent, Molson Coors' mop-up of Miller, the follow-on beer deal designed to appease regulators, adds another layer of stress for suppliers: Molson's CFO Gavin Hattersley said on a call Wednesday that he anticipates synergies from "supply chain procurements."  

Dependency Issues
Suppliers may get squeezed by beer merger
Source: Bloomberg

It's true that recent brewing deals like SAB's acquisition of Australia's Fosters and AB InBev's Grupo Modelo purchase didn’t dramatically impact packaging suppliers, but as the stakes grow, so does pricing power. And although future consolidation between suppliers would boost their case, analysts believe there are few sizable deals left to do. Already this year, RockTenn and MeadWestvaco merged  to create WestRock, while Ball is in the process of  buying its rival Rexam.  

So with little ammunition as both beer deals move to completion in the next year, bear a thought for the can makers: crunch time awaits.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Gillian Tan in New York at

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