Two major beer brands in the U.S. will combine forces. Molson Coors Brewing Company (NYSE:TAP) and London's SABMiller plc (LON:SAB) agreed to combine their U.S. operations. The joint venture will be called Miller Coors. What creativity!

Together, Miller Coors will produce annual revenue of $6.6 billion – that is 69 million barrels of beer. The combination came together in an effort to create a stronger business that could better adapt to changes in the U.S. alcohol beverage industry and as a direct challenge to the leading U.S. brewer, Anheuser-Busch Companies, Inc. (NYSE:BUD). Anheuser-Busch, brewer or Budweiser and Bud Light, owns more than 40% of the U.S. beer market.

Molson Coors Vice Chairman Pete Coors, clearly articulated the reasoning behind the combination. According to The Street,

 "This transaction is driven by the profound changes in the U.S. alcohol beverage industry that are confronting both of our companies with new challenges"

• "Consumers are broadening their tastes and are increasingly looking for greater choice and differentiation;
• wine and spirits companies are encroaching on traditional beer occasions, and
• global beer importers and craft brewers are both taking a larger share of volume and profit growth.”

Miller Brewing CEO Tom Long added, "Many important stakeholders will see clear benefits from the new company. Distributors will benefit from a robust brand portfolio, strengthened marketing investments, reduced complexity and costs, and enhanced relationships and coverage with large chain retailers."

In addition to the strategic reasons for a merger, there are distribution and market synergies as well as cost savings. The business combination of Miller Coors is expected to generate annual cost savings of $500 million from

• optimization of production over the existing brewery network
• reduced shipping distances, economies of scale in brewery operations, and
• the elimination of duplication in corporate and marketing services.

Undoubtedly, cost savings also mean layoffs and reduction in duplicate facilities, job function and employees.

At issue in any merger is how the leadership (and power) of the two combining companies will work together in a new entity. According to Advertising Age,

“Miller and Coors executives will split voting power equally in the new venture, with SABMiller getting a 58% financial stake in the entity. Pete Coors, vice chairman of Molson Coors, will serve as chairman of MillerCoors. Graham Mackay, SABMiller CEO, will serve as vice chairman of MillerCoors. Leo Kiely, current CEO of Molson Coors, will be the CEO of the joint venture, and Tom Long, current CEO of Miller, will be appointed president and chief commercial officer.”

One thing probably won’t change. Entertaining and creative beer advertising. Beer ads have always been some of the most entertaining ads. Perhaps because the target audience for beer is males aged 21-35 and that audience is easily entertained.

Some of my favorite beer ads

From Miller

From Coors

From Anheuser Busch