GETTING IN BED WITH INBEV

The news announced: “an all cash takeover at $47 billion”, now that sum is reported to be $47.5 billion. I am speaking of course of the buyout of Anheuser-Busch (ticker symbol: BUD) by the Belgian based brewing conglomerate known as InBev.  According to Theresa Howard of USA Today, it just might be that InBev needs to bed A-B, more than vice versa. It is being reported that the hydra-headed brewing concern has squeezed all of the profit margins from their existing portfolio. Sales in Latin America, their biggest market, are now flat. The old adage, get bigger or get out, seems to apply here. InBev’s CEO, Carlos Brito reveals their desire by promising to keep A-B’s headquarters in Saint Louis, along with continuing operations in their 12 regional breweries.
But then, there is the whole matter of marketing, especially sports marketing. InBev known in big business circles for its cost cutting, will certainly change Budweiser’s advertising, what beverage industry analyst, Tom Pirko calls “Anheuser’s carpet-bombing approach”.
Anheuser-Busch, known for making The King Of Beers, is most certainly the king of advertising, spending $475 million in the United States, with $20 million going for TV spots on the Super Bowl. Contrast that with InBev, whose brands include Bass, Beck’s, Stella Artois, spent $58 million in the United States.
Many analysts believe that InBev will cut advertising expenditures and fight competition by cutting prices (so that’s why that 24 ounce Labatt’s costs one dollar!).
Of course there is much controversy in all of this. Objections to the purchase, on patriotic grounds seem disingenuous at best. Since 1852, Anheuser-Busch has been an American-owned and operated business. In addition to great tasting beer, the company has provided thousands of domestic jobs as well as millions of dollars in charitable donations to nonprofit organizations and disaster relief, and has a long history of environmental awareness. Anheuser-Busch is a huge supporter of our military and their families both here and abroad… so intones savebudweiser.com, a web site created to cancel the purchase. Throwing in the military line seems to imply that to be bought by the Belgium based company is somewhat an act of surrender. But what is truly suspect on savebudweiser.com, is when it declares, We don’t want another American icon turned over to a foreign company; we want the motto to remain… The Great American Lager. Funny they just happened to use the latest marketing motto to express their nationalistic fervor. Instead how about “A Bud Never Meets A Stranger” or “When You Say Budweiser, You Said It All” or “For All You Do, This Bud’s For You!”
Putting aside the emotional jingoism, consolidation has been going on in the beer industry for a long time. From a Pitt News editorial on May 24, 2006: Last Friday, Rolling Rock said goodbye to its home in Latrobe. The recipe and label of the green-bottled brew were purchased for $82 million by Anheuser-Busch. Which says nothing of Bud’s relationship with Japan’s Kirin Brewery. Throw in the marketing arrangements with Tsing Tao in China, and what we have here is an American based company with very global concerns.
And then, there are always those people who simply can not stand Buweiser, who couldn’t care less. I find their posts on beer sites: The man who drank 3 Buds at a wedding reception, which produced his first hangover in twenty years. The people who love the Bell’s Brewery, and that’s that. (Well, maybe not, Carlos Brito may one day make Larry Bell an offer he simply can not refuse.)
“Anheuser-Bush is just about as American as can be” said one construction manager, “I just don’t like them being gone and owned by a foreign company.”  I am sure the people of Latrobe, Pennsylvania felt likewise, when the 250 jobs and $300 thosand property taxes evaporated when Anheuser-Busch bought the brand and pulled up stakes… from the glass lined tanks of Newark, New Jersey?
Money does not talk, it screams. The possibility of $70 dollars a share (ticker symbol: BUD) may be impossible to resist.

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