It's no secret that InBev's $46.3 billion bid for Anheuser-Busch (NYSE: BUD) was aimed so that it could get its hands on the Budweiser and Bud Light brands, two of the top four selling beers in the world. Carlos Brito, Chief Executive of Belgium's InBev, said so quite clearly. Not only that, he also promised Bud would go on to be made in the same breweries, and that none in the U.S. would be shut down should the merger occurs. He also promised to keep most of management in place.Well, for me the big question has always been why? What is this Belgian-Brazilian company fascination with beer brands that are so American -- in recognition and in taste. Well, it turns out that this is only partly true. While it is true that it is mostly Americans who drink light beers, Budweiser has actually captured sizable market share outside the U.S., like 13% in Ireland and 11.5% in Canada in 2006.
So now I understand why the maker of much superior Stella Artois would want to own the low-rated Budweiser. What's in it for Bud then? Lots. Apparently, and amazingly enough, it is in the U.S. of all places that shipments of Budweiser have dropped significantly.
But as companies that have a family or co-founder (read Yahoo's Yang) in charge do, Anheuser-Busch on a whim decided it did not want to sell to InBev. Instead, it turned to Group Modelo, the Corona maker and another company controlled by family. Anheuser-Busch already owns 50% of Modelo and a deal to buy the rest would thwart InBev's attempts as it would make BUD too big. That is too bad. At least for appearances sake, today Modelo's CEO resigned from Anheuser-Busch's board and some might even say it's a good sign as the board has more independent directors who could force the company to consider InBev's bid.
Meanwhile, Anheuser keeps on plowing and Friday said it would acquire the remaining 50% share of Crown Beers India to get distribution there.
I wonder what Buffett -- who (through Berkshire Hathaway (NYSE: BRK.A)) is the second biggest shareholder of Anheuser-Busch -- has to say about all that.
Reader Comments (Page 1 of 1)
6-20-2008 @ 4:08PM
Speculator said...
Bud is a great brand. Warren Buffett-the world best investor-see's a business franchise that is great.
www.theinvestingspeculator.com
6-20-2008 @ 6:31PM
william lindblad said...
This might not be a "done deal". There are both short and long term considerations. Dont count on Buffett siding with InBev.
7-01-2008 @ 1:10PM
crybarcz said...
I believe everyone knows there are two sides ultimately deciding the outcome of ABI brewing. Nope it's not the Britos or the Buffets or the Buschs....really its the Red,white and Blue versus the almighty green. Yes at it's heart this deal is capitalism against patriotism. In my opinion this will be a landmark deal which may finally settle the question in this era whether we are willing to sell ourselves for the almighty dollar. (I can hardly wait for the movie). Choosing the almighty dollar may sound academic but humor yourself a minute and take a look at every American working man’s corner bar, every Nascar event, every Super Bowl, Every Christmas with an appearance by the Clydesdales and every cornsilked hair American girl lining up to be a bud girl at some event. This may sound like Americana nostalgic at its best but in a marketing sense Budweiser beer represents itselft at every corner of recreation and enjoyment in the U.S. Budweiser has built itself up and grown to be as American as the NY Yankees and the Boston Redsox. Honestly, even if no-one feels it’s important to ABI stock to recognize just how important American nostalgia is (sorry Mr. Buffet) there’s no overlooking or untangling the American threads that Anheuser Busch has sewn into the Red White and Blue over the years. As I see it being 100% part of Americana is more of a trademark to them than any logo in history and is an unsolicited renewable resource to them which will disappear from ABI if falls under foreign hands. Don’t count on the American public not to react to this deal. While it very much may be a “go” this deal just may also be the biggest mistake for all parties and a big time first mistake for Warren Buffet. Anyone who’s picked up a bottle of Bud knows it’s not Heineken or a pint of Guinness. What it really is, is 12oz. of America. It’s 12oz. of comfort. Here’s my final thought, instead of selling at this point Anheuser-Busch could pull off the biggest stock jump in history by making the American public think that it’s because of them that Budweiser fought and stayed American owned and operated. ABI could look like the great American Rocky Balboa if they thwart off this sale using the American public and stake its claim as “American brewed and always will be”. Heck why not spin off a new beer or two while they’re at it like “Rebel” or “Patriot” beer. Can’t you just see it …. The eagle, the dalamations the Clydesdales all pulling for the heart of America? Man what a marketing angle it could be. Ok, in all seriousness, If the shareholders at ABI recognize anything about the American public it’s that they have always been behind them because even just one bottle of ABI beer no matter where it is in the world is “America”. But heck if they want to go ahead and dismiss that then let them. It’s America, they can do that. Anyway, like a big beer hangover it’ll hit’em in the morning. Ouch.. now where’d I put that advil….
7-04-2008 @ 11:13AM
Bob said...
Inbev wants Bud because there brands are a very small percentage of the market here and Bud brands are very small in Europe. Both companies are facing a battle with SAB/miller/coors/molson brands, they need to combine to stay ahead. Thats the simple part. The hard part is, what will he actually do to the Anheuser company. What will get broken up? How will he make more money from Bud? I work for Anheuser Busch and it is a good solid company, but they have put themselves into this position to get bought out. Honestly, I dont see anyway they are going to stop this takeover, wait and see if it is friendly or it goes hostile. As far as we are concerned at the brewery, it is a done deal. The other question is, at what price for the stock?