InBev, the Belgian brewer, today hiked its unsolicited bid for Anheuser-Busch Cos. (NYSE: BUD) by a whopping $5 a share, making it all but certain that the King of Beers will sell -- unless members of the board of directors have spent too much time sampling their own product.

The $50 billion offer represents a substantial premium over where Anheuser-Busch has recently traded. InBev clearly wants to avoid the hostile takeover it's threatened. It has vowed to keep its U.S. operations based in the company's hometown of St. Louis. The average drinker of Budweiser probably will not notice a difference in the taste of their favorite brew, which may or may not be a good thing depending on one's beer snobbery.

Shareholders, including Warren Buffett, are ready to head to the exits. The stock, which is up 17% this year, is trading up in pre-market trading. The company has little choice but to take the bid. No other logical buyers exist and I would be surprised if private equity players would be willing to top InBev's offer.

About the only potential losers in this acquisition may be media companies.

When I heard that the CEO of Miller Brewing Co. said Thursday he sees a trend of consumers buying cheaper beers, I was wondering whether consumers might also be switching not just from more expensive beers to cheaper ones, but from more expensive alcoholic drinks to beer, which tends to be cheaper.

Unfortunately for Miller, for which its parent SABMiller PLC reported earnings Thursday, so far the increase in sales of more economic beers has been at the expense of the more expensive ones. So my theory isn't much of one after all. I guess that food and gas still have a higher priority than beer, and we all know how much the price of these have risen lately.

Back in August, I wrote about the 23 state attorneys general that were taking a look at alcoholic energy drinks, concerned that consumers weren't being warned about the dangers of mixing caffeine with beer. Studies have shown that caffeine can lead intoxicated individuals to believe that they are well enough to drive, and can also mask some of the symptoms, fooling those around them as well.

Now Anheuser-Busch (NYSE: BUD) has received subpoenas from New York, Maine, Maryland, Arizona, and Iowa while SABMiller Plc. has received subpoenas for documents from Illinois, New York, Iowa, Maine, and Maryland.

In one of the more idiotic defenses I've seen in awhile, Anheuser-Busch released a statement saying that "If the Attorneys General truly believe that, despite the state and federal regulatory approvals, alcohol and caffeine should not be mixed, then they should use their powers to persuade these authorities to regulate or ban all such beverages, not just the lower-alcohol, prepackaged ones,"

What? Isn't that kind of like saying that the police shouldn't crack down on people selling crystal meth because you can buy all the products you need at the grocery store? Not that I would know ... but if Anheuser-Busch is marketing a product that contains a chemical combination that is more dangerous than the sum of the parts and consumers aren't aware of that, it's worth investigating.

When I first saw the story in The Wall Street Journal (subscription required) that Anheuser-Busch Cos. (NYSE: BUD) planned to sell lime-flavored Bud Light, I thought the king of beers had gotten a little soft in the head. Then I feared for the country when I learned that rival SABMiller Plc. (LON: SAB) is gaining sales with a revolting-sounding beverage called Miller Chill which the Journal described as a "lime-and-salt-flavored light lager modeled after Mexican concoctions know as micheladas."

It seems that at some point in the 1980s or 1990s, people no longer drank beer just because they were thirsty. Instead, they needed to make a lifestyle choice. Smart, sophisticated people needed to show how cool they were by drinking overpriced imports or microbrews. I was not immune to the marketing of the time and wound up drinking a few brews with limes wedged into them until I learned better.

Former advertising executive John Greening, who did work for Anheuser-Busch, raised a more serious issue, pointing out, "their hot hand has always been Bud Light. This takes the attention away from the hot hand."

This week the volatile beer industry this saw two new developments in its trend toward consolidation, a trend that has led to continued speculation that it will sooner or later force Anheuser-Busch (NYSE:BUD) to make a major move such as entertaining the notion of acquisition by InBev.

BUD's rival SABMiller (OTC:SBMRY) announced it will bid $1.2 billion for European brand Grolsch NV, at a huge 80% premium. Grolsch is popular in its home Netherlands, but SABMiller believes it has great potential for expansion to other world markets. The offer will become official in January, but stockholders are already lining up in support of the generous terms.

Ironically, Grolsch is distributed in the U.S. by Anheuser-Busch.

Second, beer makers Carlsburg and Heineken are partnering on a $15.1 billion offer for U.K. brewer Scottish & Newcastle, maker of one of my favorites, Newcastle Brown Ale, as well as Kronenbourg 1664. The two plan to divvy up S&N's business, with Carlsburg taking Russian, Eastern European, French, Greek and Chinese operations, while Heineken would end up with North American, U.K. and Indian market products. This deal is opposed by S&N's management.

If you're a bear, then at least another down beginning may await you in today's session. At least, that's the indication U.S. stock futures are giving this morning. As economists forecast the risk of a recession increased due to the collapse of the housing market along with the credit crunch and as oil prices jumped again on OPEC comments, it seems the bears have returned.

On Friday, U.S. stocks saw volatile session that ended with gains, with the Dow industrials rising 66 points, or 0.51%, the Nasdaq Composite up 18 points, or 0.72%, and the S&P 500 rising 7 points, or 0.52%. On the week stocks finished higher in a week full of wild swings. The Dow ended up 1.03%, the S&P 500 and the Nasdaq ended up 0.35%.

Not much economic data is due today so investors are focusing on rising oil prices, overseas activity and some M&A action.

In the competitive brewing business, sometimes it's just hard to play nice. Over the weekend, Miller Brewing Co. -- a subsidiary of SAB Miller -- launched what appears to be a potential salvo in a ramped-up version of the "beer wars" of yesteryear.

A new commercial for Miller Lite, which debuted during football games and NASCAR events, uses the iconic Dalmatian-and-Clydesdale image -- used for decades by Anheuser-Busch (NYSE: BUD) -- to pay tribute to its own number-two product. The Clydesdale-drawn wagon features a sign advertising "Miller Lite. Half the carbs of Bud Light." At the end of the commercial, the dog exits the wagon for a Miller truck, which speeds away.

BUD advertising officials were quick to respond, taking out a full-page-ad in yesterday's USA Today, imploring Miller to "keep up the bad work." Launching back, Miller representatives revealed plans to continue hammering home the facts that Miller Lite has "fewer carbs and more taste."

The latest sales update from SABMiller PLC (OTC: SBMRY) demonstrates why the company has partnered with Molson Coors to form MillerCoors. In the relatively flat U.S. market, SAB will look to the cost savings of shared operations to sweeten its earnings. SABMiller's North American sales in the first half of 2007 have risen only 1.4%, when the impact of the recent purchases of Sparks and Steel Reserve are backed out. Its Miller Light product fared slightly better, recovering from the damage inflicted in the U.S. market by Anheuser-Busch's (NYSE: BUD) earlier price drop to finish up 2.1% in the first half of this year. New products including Miller Cheleda and Leinenkugel are performed well.

Internationally, the company is looking to the success of new brands such as its popular Hanza Marzen Gold in South Africa to offset the blow of losing the brewing and distributing rights to Heinken's Amstel brand in that country. SAB's growth in Central and South America continued to be strong, up 8% in the second quarter. The Africa and Asia markets, which accounted for 12% of the company's EBITA last year, were also up by 20%, led by a 22% increase in China.

Beer giants SABMiller (OTC: SBMRY) and Molson Coors (NYSE: TAP) took a huge step toward grabbing market share in North America by announcing today their intention to combine U.S. operations into a new company, MillerCoors. The new entity will start with combined U.S. sales of of 69 million barrels of suds, net revenues around $6.6 billion and combined EBITDA of $842 million. The companies expect combined production and distribution to lop off around $500 million from the annual expense side within three years. SAB and TAP also expect the move to boost both companies' EPS within the second year after integration is complete.

Voting interest in MillerCoors will be split 50/50, and the new company will be chaired by Peter Coors of Molson Coors. SABMiller, the larger of the two, will have a 58% financial interest.

In an effort to fight back against shifting consumer trends to spirits and wine, the Wall Street Journal reported that Coors Brewing Co. (NYSE: TAP) has created a new subsidiary to "introduce above-premium beers to the marketplace," according to an email sent to beer wholesalers last week.

The move comes at a time when the American beer business is facing considerable headwinds, including slower growth due to upscale "craft" beers and a strong push for market share by imports. Anheuser-Busch Cos. (NYSE: BUD), the largest American beer maker, and SABMiller PLC's (NYSE: SAB) Miller Brewing Co., the second-largest, have already introduced new beverages to combat these headwinds.

MOST NOTEWORTHY: Getty Images (GYI), Jackson Hewitt (JTX), Electronic Data (EDS), RC2 Corp (RCRC) and Chipotle Mexican Grill (CMG) were today's noteworthy downgrades:

• Deutsche Bank cut Getty Images (NYSE: GYI) to Sell from Hold citing deterioration in its core business. Gabelli downgraded Getty Images to Hold from Buy after the company lowered guidance to reflect the changing industry dynamics.

• Goldman cut Jackson Hewitt (NYSE: JTX) to Sell from Neutral citing near-term risks that include the renegotiation of the HSBC (HBC)/RAL contract, the DoJ/IRS investigation, and decreasing performance in tax.

• Jefferies downgraded Electronic Data Systems (NYSE: EDS) to Hold from Buy to reflect the company's slowing cash flow improvement.

• Wedbush downgraded RC2 Corp (NASDAQ: RCRC) to Buy from Strong Buy on the lower sales forecast for 2007. Soleil cut shares to Hold from Gradually Accumulate to reflect uncertainty over the Thomas recall and increased competition.

• Chipotle Mexican Grill (NYSE: CMG) was downgraded to Market Perform from Outperform based on valuation...

OTHER DOWNGRADES:

• Lazard downgraded Kyphon (NASDAQ: KYPH) to Hold from Buy.

• SMH Capital cut Aventine Renewable Energy (NYSE: AVR) to Sell from Neutral.

• Credit Suisse downgraded AutoDesk (NASDAQ: ADSK) to Neutral from Buy.

• UBS cut SABMiller (OTC SBMRY) to Reduce from Neutral.

• CIBC downgraded Marvell Tech (NASDAQ: MRVL) to Sector Performer from Outperformer.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Coca-Cola Co. (NYSE: KO) opened at $52.98. So far today the stock has hit a low of $52.23 and a high of $52.99. As of 11:40, KO is trading at $52.20, down $0.54 (-1.0%).

Conventional wisdom says that beverage stocks are nice places to be in an economic slowdown. But with US beer sales tanking -- a 17% decline for Miller Lite, owned by SABMiller, and no real growth in Anheuser-Busch (NYSE: BUD), either -- it's time to get out of the group, according to Jim Cramer. If you want a beverage stock now, he likes Coke or Pepsi (NYSE: PEP). Recent technical indicators for KO have been bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider a November bull-put credit spread below the $47.50 range. KO hasn't been below $47.50 since March and has shown support around $52 recently. This trade could be risky if the stock consolidates after its brief upward movement, but even if that happens, this position could be protected by its 200-day moving average, which is at $47.30 and rising.

Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in KO, PEP, or BUD.

This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and watch out for more Battle of the Brands posts.

I'm not ashamed to admit that I've been known to turn up my nose at (free) pitchers of Miller Lite, exclaiming "this [potential explicative] stuff taste like formaldehyde!" Many of my closest friends and family members, however, prefer the "tastes great/less filling" brew to any from Anheuser-Busch (NYSE: BUD). Though everyone is entitled to his or her own opinion, when it comes to the battle of the light lagers, I don't go quietly into the night with this one. Maybe it's because I was born and raised in St. Louis, which would arguably cease to function without BUD dollars. Maybe I simply prefer red to blue. Or perhaps it's because I'm not a huge fan of tasting formaldehyde (I kid!). Regardless, I stand my ground for my right to drink Bud Light, demanding it for shared pitchers and community coolers. In fact, I haven't even tasted Miller Lite in about seven years, but more on that later.

Celebrity Backers: "H.O.V.A." vs. the Nicest Divorced Guy in America

From the real men of genius to the man-law round table, both BUD and SABMiller (LSE: SAB), the London-based parent company of the Miller Lite brand, are powerful forces in the advertising business, and celebrity endorsements continue to roll in. Rap artist Jay-Z emerged from retirement ready to pitch Budweiser Select (a low-carb, 99-calorie offering) while Burt Reynolds, Jerome "The Bus" Bettis, and others sit on Miller's aforementioned round table. While not lending an endorsement in a traditional sense, who can forget Nick Lachey and Jessica Simpson frequently kicking back with ice-cold cans of Miller Lite on the now-defunct (in every-which-way) Newlyweds? The brand allegiance added to Lachey's corn-fed all-American appeal (and I say that honestly as a BUD fan).

In the past few years, American breweries have been competing over who can pollute the pristine flavor of beer with the most noxious flavorings. Now SABMiller (LON:SAB) and Anheuser-Busch (NYSE:BUD) are taking two very different spins on chelada, a beer drink imported from the Caribbean.

In its most basic form, the chelada is a fairly innocuous mixing of beer with lime and salt. Miller's new product, Miller Chill, incorporates these flavors in their new product, which they have slotted as a super premium light beer.

Anheuser-Busch's very different chelada will mix either Bud Light or Budweiser with clamato juice, along with the lime and salt flavors. The drink will be packaged in 24-oz. cans.

Both products are targeted, at least in part, to appeal to the U.S.'s growing Mexican and Central-American immigrant communities. The label art A-B filed with the Treasury Department for its Budweiser version leads with Spanish text, the English subordinate.