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Budweiser to be Belgian? Big deal

21-Jul-2008

The news that all-American brewer Anheuser-Busch is to be sold to Belgium’s InBev for $52bn has made sports bar patrons across the US weep into their Budweisers. But the idea that an American firm must remain American for all time runs counter to the world of global commerce.

It’s no good getting emotional about overseas dealings when the financials point to better business. After all, Budweiser itself saw fit to sponsor of the UK premiership – arguably as British as British can be – when it saw potential for profits.

AB has reported stagnant sales in the last few years. InBev, since its formation in 2004 out of the AmBev and Interbrew merger, has risen to become the world’s second biggest brewer.

Clearly InBev is doing something right, and if that can rub off onto AB then the shareholders – already clinking glasses over the $70 a share deal – will have even more cause to celebrate.

Having a leg on each side of the Atlantic can only bring benefits to the enlarged brewer, to be called Anheuser-Busch InBev. Analysts have stressed the importance of brewers controlling big brands in today’s market environment, where supermarkets and retailers now dominate sales.

Combining Budweiser, Stella, and other major names in the beer world, the new global firm would have revenues of $36.4 bln (€26.6 bln) and EBITDA of $10.7 bln (€7.8 bln).

Rather than viewing the deal fuzzily through the bottom of a glass, fans should be celebrating the fact it is to be the new company’s flagship brand and is all set for global expansion. This means their beer-drinking brothers in hitherto untapped markets will get a taste of Amercian-style Bud.

“But what if they change something?”, Bud fans will wail.

It doesn’t look likely. Fixing what ain’t broke makes no sense. Carlos Brito, CEO-to-be of Anheuser-Busch InBev, is too shrewd a businessman to tinker with the biggest brand in the AB fold.

He has already pledged to keep all brewing operations in the US operations, and St Louis, Missouri will remain the US HQ. He has even promised to stick with the much-loved marketing strategy that has seen lizards grace small screens everywhere and made ‘Wasssuup’ a household chant.

Although savings of $1.5bln are anticipated by 2011, commentators are not expecting an employee headcount reduction since the two entities presently operate in different global spheres. Rather, they expect savings to come from shoring off non-brewing activities like packaging and theme parks.

(Their jobs may look secure, but AB employees might want to stack up the free crates while they can. Brito runs InBev on a perk-free basis. Reportedly, he does not even have a company car.)

So if consumers and employees need not panic, who should?

As with any major deal, competitors start to look at their own vulnerabilities, and wonder if they might just need to team up to have a better change against the new giant.

Or they may seek to jump into any void they can identify.

In the case of Pabst Brewing Company, that void is in the hearts of patriotic beer-drinkers. It has already started calling itself "the last of the famous iconic US brewers to be fully independent and American-owned”.

It has also kicked off a survey to ask consumers if American ownership flagged on the label will influence their purchasing decisions.

It could swing it presidential hopeful Barack Obama, who called the prospect of AB being sold to a Belgian firm a ‘shame’. (Though he’s not courting Belgian voters, is he?).

But in the great, global scheme of things Anheuser Busch InBev will have the greater clout. Even if Budweiser actually has its roots in the Czech brand Budvar ;-)

Jess Halliday is editor of award-winning website FoodNavigator.com. Over the past decade she has worked in print, broadcast and online media in both Europe and the United States.
If you would like to comment on this article, please email jess.halliday'at'decisionnews.com

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