InBev Sweet Talks A-B

InBev indicated no brewery closures if it succeeds in A-B acquisition

Carlos Brito, chief executive of Belgian-Brazilian brewing giant InBev, said all the right things in his bid to woo August Busch IV at Anheuser-Busch after InBev made a rather bold unsolicited bid to buy North America’s largest brewer.

“I have a deep respect and admiration for Anheuser-Busch and its management,” he said, adding: “Anheuser-Busch is one of the most recognized and loved brands in the world,” adding”I strongly value the Anheuser-Busch heritage.”

Far from stripping out its offices in St Louis, Missouri, the city would be made the global headquarters for the Budweiser brand and the name of the merged company would reflect its heritage.

While Brito stopped short of guaranteeing there would be no job cuts, he promised there would be no brewery closures.

So far, however, his flattery seems to be having little impact on Busch and his board – not to mention St Louis statesmen, who are united against the bid, and its beer drinkers, who have set up savebudweiser.com to campaign for its independence.

Anheuser is one of a dwindling band of family businesses with a proud heritage. While the founders’ stake is now just 3.5 per cent, it has been led by a member of the Busch family since German immigrant Adolphus Busch married Eberhard Anheuser’s daughter Lily and started working in his brewery in 1864.

But the beer market is changing: consumption in developed markets is falling and the major brand breweries around the world are in a frenzy of consolidation. A-B does have a joint venture with Mexico’s Modello, owner of the Corona brand, and a joint venture in China, but the US still accounts for 80 per cent of its profits. Meanwhile InBev itself is the product of a merger between Brazil’s Am-Bev and Interbrew of Belgium four years ago; Heineken and Carlsberg are in the process of carving up Scottish & Newcastle between them; while SAB Miller – the world’s largest brewer, with brands such as Peroni and Coors – is itself the product of a merger in 2002.

Comments

  1. Jephro says

    I have been following this story for a couple weeks now. I have talked a lot of smack about A-B in the past. I am a craft brewer who grew up in the St. Louis area and have often, jokingly, viewed A-B is the evil corporate beer empire, but dammit they are our “evil corporate beer empire” :p

    From the St. Louis TV station KTVI, a Fox affiliate:

    “FOX 2 has learned that InBev CEO Carlos Brito has quietly slipped into Washington, D.C. to meet with senators and congressmen about InBev’s proposed buyout of Anheuser Busch. “

    Thanks to Sen. Claire McCaskil for meeting with and opposing Mr. Brito’s hostile takeover bids. I think it’s clear who the…-biting my tongue…

  2. jarviw says

    quoted from Bob Weinberg, Modern Brewery Age 2002 Article

    Let’s say there are two investment bankers walking down a street. And they spot a pile of dog manure. And one says to the other, “I’ll give you a million dollars if you eat some of that dog manure.” And the other guy, says, OK, and eats some of the dog manure. And the first guy writes him a check for a million dollars. So they continue on, and see a second pile of dog manure. And the guy who won the bet turns to his friend, says, “I’ll give you a million dollars if you eat some of that dog manure.” So the other guy says “all right” and he eats some too. And his friend writes him a check for a million dollars, And they walk a little further, and one says to other, “you know, we’ve both eaten dog manure in the last hour, and yet our net worth is the same. We’ve neither made or lost any money.” And the other one says, “You’re right, but we had a two million dollar deal.”

  3. highhopgod says

    In-bev has shut down there email, typical of a large company who will not answer to a hostile take over. We do need to let our local reps know we stand behind Bud, as new guy to the craft beer industry I still believe this country needs to hold on to one of it’s last great icons. Please call you local congress man or woman and let them know how you feel. We stopped the sale of the docks we can certainly hold on to our beer company.

  4. gitchegumee says

    Where was all this sympathy when Anheuser-Busch systematically shut down all the small brewer competition? Haven’t they argued that the US was better served by their overwhelming market presence? Last great icons? How about McDonald’s? IMHO, you reap what you sow. I’ll shed no tears.

  5. Moonlight says

    It is inevitable. If not InBev, someone else. The bigger they get, the more consumers need us to step up.

  6. tsewong73 says

    No matter what happens, you can bet there are going to be a lot of people buying pints and six-packs of Bud this summer in an attempt to either “save” Anheuser-Busch or drink as much as they can before Bud is made by “foreigners.”

    Could there be a backlash against small craft breweries? Will there be a perception among beer drinkers that they would be turning their backs on an American icon if they buy local craft beers instead of Bud Light?

  7. SRB says

    gitchegumee wrote: ………..IMHO, you reap what you sow. I’ll shed no tears.

    I’m with ya. They are a publicly traded company. Have they not seen Wall Street?
    Of course unlike Gordon Gekko, InBev is doing nothing illegal. (unless something comes from the claims of anti-trust regulations…which looks unlikely.) A/B have been eating the cake for along time now. Just another reason for North Americans to support local and regional breweries. Think global act local.

  8. fstbttms says

    tsewong73 wrote: Could there be a backlash against small craft breweries? Will there be a perception among beer drinkers that they would be turning their backs on an American icon if they buy local craft beers instead of Bud Light?

    Ask any Detroit automaker if they experienced a similar reaction from consumers when Japenese cars began to dominate the market.

  9. einhorn says

    There may be initial reactions to a takeover or even a pre-takover “one last american Bud” from some groups, but that will fade soon thereafter, as it always does.

    One year after the proposed takeover, things will be back to normal. At least for consumers. People forget very quickly…

    For craft beer, I personally see the most challenging part in what will happen to the AB-owned distributors and their strategy. An old german proverb says, “When a door closes, a window opens”.

  10. Butcher Scott says

    einhorn wrote:

    One year after the proposed takeover, things will be back to normal. At least for consumers. People forget very quickly…

    Along those lines, I’ve heard more than a few people say “Miller will really benefit if Bud becomes foreign owned.” I don’t think it will take long for consumers to forget, it obviously hasn’t taken very long to forget Miller (or just not care).

  11. monkeybrewer says

    I’m with gitchegummee…no tears shed here. This American icon everyone is talking about has helped stifle the development of the craft beer community in so many ways over the years.:confused: They are definitely partly/more-than-partly responsible for the huge cost increases in the craft beer community’s hop supplies as Bud is the largest consumer of Cascade hops in America. Funny they use hops that craft brewers rely on even though you can’t taste or smell them in any of their products. Obviously a strategy used to control raw materials markets and help put the little guy out of business. Also if they played their cards right in the first place and actually valued their “family company” they should have never put themselves in the position of being hostilely taken over (aka when you become a publicly traded company you choose the wealth of the company and yourself over any idea of family business). Maybe if Bud had come to the rescue when this whole hop issue started I would shed a tear but now they are getting theirs and my eyes are dry:)
    just my two cents
    cheers

  12. wildcrafter says

    Price issues of raw materials are real I guess.

    A friend just came back from Vietnam having amazing foods for the cheap and beers at every corner were $0.18 and $0.38 US for a 12oz glass.

    BEERS AT EVERY CORNER FOR CHEAP?. So- how can they do that? Is Vietnam the next new market for the beer conglomerates? How would/could anybody compete with such cheap beers and how could they do that even if the beer is done well or not?

    Maybe it’s the fresh beer with no refrigeration and it’s served with a stick of ice that makes it cheap- I thought it might be the cost of ingredients. Maybe that’s just Vietnam.

    And if A/B is the main buyer for Cascade hops, why are Cascades going out of style an not being planted?

    Is A/B really responsible for the price of raw materials even with massive buying power? If they had bought all of the hops last year, as they probably had the ability to do, then yes.

    My daily world is so removed from such global talk, I act local, grow local hops and food, brew local beer with local water, and try to smile daily.

    ….But beers and food at every corner for the cheap in Vietnam sounds like an adventure train! I wonder if the beers are brewed with Chinese Cascades- any thoughts?

  13. beauxman says

    wildcrafter wrote:

    And if A/B is the main buyer for Cascade hops, why are Cascades going out of style an not being planted?

    Is A/B really responsible for the price of raw materials even with massive buying power?

    (according to legend as I have been told) AB was developing a beer featuring cascades and the growers planted many cascades based on this. AB changed course and the market was flooded with cascades. We all enjoyed $2/pound cascades because of that and now are paying the price (over supply, market corrections). In all reality, cascades have a large increase of acreage in 2008 along with CTZ and other high alphas. The real crime is the other aroma varieties are down in acreage not only this year, but as a very real trend. Scary…..

  14. beertje46 says

    monkeybrewer wrote: I’m with gitchegummee…no tears shed here. Also if they played their cards right in the first place and actually valued their “family company” they should have never put themselves in the position of being hostilely taken over (aka when you become a publicly traded company you choose the wealth of the company and yourself over any idea of family business).
    just my two cents
    cheers

    “Family” business my ass. The Busch family only “controls” 3 1/2% of the company. Who owns the balance? Other families?

    monkeybrewer wrote: Maybe if Bud had come to the rescue when this whole hop issue started I would shed a tear but now they are getting theirs and my eyes are dry:)

    Amen.

  15. brewbong says

    My understanding (and this is from speaking to production people at AB) is that; AB owns most of their own raw material from the earth it is grown on to the trucks it is shipped on, to the product it ultimately becomes. An experiment or test market for a company of that scale, as stated previously, can have a very prolonged ripple through the micro-economies to which most of us subscribe. The thing that should concern us as US citizens is not the pride and heritage of such a company, but rather just how much of this country is still for sale, and just how long is it until we become a Chinese colonial? Which is probably not so bad, we could probably make a small fortune, by todays standards, storing nuclear waste or other industrial by-products, heck we’re paying cash for it now.

  16. Sulfur says

    I have to admit, I never buy Budweiser. Having said that, I do not wish them ill. They may have been part of the movement that drowned out local beers way back when, but they’re also a part of the reason that microbrews/craft beer came back in popularity. AB serves its purpose well and comparing AB with a craft brew is apples and oranges imo. It even gives us a chance to shine.

    I’ve met a few brewers who work for AB as they passed through here on a cruise. I was impressed by their sense of loyalty and how well the company was taking care of them (also partly because of union organization.)

    While AB probably does fall prey to optimization, maximization, and commodification (at the price of character, quality, and solidity – the domain of us craft brewers) like all big companies, they are professional brewers and I respect them for that.

    One personal experience, I was on a trip in the Hallertau and was surprised to come around a hill and see a huge ranch style house with 2 flags planted in front. The Bavarian and the AB flag. They maintain an official presence in the Hallertau and are very well liked by some lucky farmers since they buy up such large quantities. Point being that they do take brewing seriously and do have some standards.

    I also met a brewer from a North American brewery taken over by AMBEV a while back. He decried the rules imposed on them from new management (mostly the Brazilians he said) – the same thing that would happen to AB. I for one hope AB can resist a takeover.

  17. tsewong73 says

    [/QUOTE]For craft beer, I personally see the most challenging part in what will happen to the AB-owned distributors and their strategy. An old german proverb says, “When a door closes, a window opens”.

    I’ve also been wondering about the Miller/Coors merger and how that’s going to play out with distributors. We have two separate distributors carrying Miller and Coors in this area and they are pretty competitive with each other. I just wonder what’s going to happen when they both start getting their marching orders from the same source.

    As for the A-B distributors, I think we might start seeing them push more imports if InBev takes over.

    Anyway, does anybody know of any betting pools on whether InBev succeeds. What’re the odds? I’ll take a piece of the action.

  18. Moonlight says

    “As for the A-B distributors, I think we might start seeing them push more imports if InBev takes over.”
    Just look at the full page ads in the brewing publications.

  19. einhorn says

    “As for the A-B distributors, I think we might start seeing them push more imports if InBev takes over.”

    Well, that’s all that they have. These are the “synergies”, that so many in boardrooms around the world talk about.

  20. jarviw says

    as far as I know, InBev doesn’t have any breweries in the US. gaining A-B will give them access to facilities, not just the market.

    Will they go out of their way pushing for import? probably.
    But the US market is limited — doesn’t matter what you sell, alcohol is alcohol, and people can really only drink so much. actually, as the boomers age, the overall market capacity (particularly for the premium/super-premium category) will shrink for the next few years.

    That said, if they push their import brands heavily, they will cannibalize their “domestic” brands. That doesn’t make whole lot of sense — of course there’s a balance point where they can harvest the A-B market while promote their import brands… probably re-positioning A-B product in different market segmentation. Basically, they will change A-B’s long term strategy completely. Hey, that may not be too bad an idea if they decide to utilize the excess A-B plant capacity to brew their brands! (this may or may not make our life easier, however.)

    On the other hand, Bud also gains new international channels through InBev (not that A-B doesn’t already have international channels)… But we probably will see Bud becoming the “premium import” in South America, Eastern Europe, and maybe Asia countries. InBev in general maintains their brands at relatively premium category.

    What I do worry, however, is the A-B tie with all the regional craft brewers.
    InBev may very well boost these guys, making them the US Hoegaarden and Leffe. That may ultimately reduce our market diversity (within the US) and make our life much more difficult as small craft brewers.

    but in any event, $46 billion can’t be bad for the US economy.

  21. einhorn says

    Whichever direction the marketing folks at InBev want to go with this is probably still not decided. Mixing the marketing and pricing concepts of domestic (mass) vs. import vs. craft never made sense – that’s why the pseudo-craft brands from BMC try to retain their aura of craft breweries. I believe that the import market is stable and has lots of room to grow – albeit not at the present Euro/$ rates. Here at least the selection will change, from (for example) areas where maybe Bitburger and Schneider Weisse is available and they replace it with Beck’s and Franziskaner.

    I return to my original comment on this thread stating that the main concern for crafts will probably be the strategic distribution side of the AB owned houses. If they do de-list (craft) products and try to force their own brands, then the market will regulate itself and an enterprising American will open a distribution with craft brands where there is demand, which is slowly reaching all parts of the US.

    On a side note, I want to also say that in my opinion this thing is not 100% success guaranteed for InBev. The american beer market is totally new for the brazilian Belgiens, and they are getting their feet wet with the market leader. There is lots of room to screw up and not much room for domestic growth. Sure, they are professionals at their jobs, but (another German proverb) “we all cook with water”.

  22. Rob Creighton says

    I am very interested to hear how distribution changes when/if both the Ambev/Inbev/AB deal and SAB/Miller/MolsonCoors deals close.

    As a Canadian, Inbev swept through Canada in 1995 with a big focus on Euro brands and pretend brands from other parts of the country to provide dozens of brand options we didn’t have in the past. Hoegaarden, Leffe, Stella, Boddington and Keith’s all became commonplace on tap here. They ignored the biggest selling brand in the country (Labatt Blue) and built the Canadian version of Bud (with mostly corn, not rice) up to #1 instead. These guys make serious changes. My Labatt chums tell me they (the Brazilians) are ruthless on the bottom line. Brito was the head of Labatt Canada prior to moving to Belgium. He closed Labatt Toronto plant without blinking and has cut out a whole range of perks that management probably didn’t need anyway (1st class air travel, crackberry’s, etc…).

    It would be interesting to be able to guage the changes in the retail level as this moves on. It will be invaluable to craft brewers to understand the distribution changes as there becomes 2 and not 3 distribution houses to deal with.