Business

Belgian hegemony ensnares the King of Beers

pO157.

Posted to Business on Tue Jul 15, 2008 at 02:07:45 PM EST (promoted by port1080). RSS.

Belgian brewer InBev became the largest in the world with its $52B takeover of American beer king Anheuser-Busch.

The deal is expected to close by the end of the year, and analysts expect very little opposition from shareholders or regulatory agencies in either country. InBev noted that since the companies do not compete directly now that it is likely all of Anheuser-Busch's breweries and infrastructure will remain open under the direction of the new leadership.

The combined company is expected to be so large that it will be able to negotiate low rates for all its supplies, including utilities, simply due to its sheer mass. The expected annual sales for the new company would be almost double InBev's current income, and it is expected to control almost one fifth of the total beer produced worldwide. As part of the deal, current CEO August Busch IV, the great-great-grandson of the company founder would get a "non-executive job" and a seat on the new Board of Directors.

Executives at Modelo Beer (The Mexican company that produces Corona) are considering their response, which may include invoking contract language that allows them to repurchase the 50% share of their company currently held by Anheuser or to block the merger.

On the American side the sale is being met with outrage, although most experts believe it will subside once people forget. However, lawmakers are already blaming the takeover on the weak US dollar and bemoaning the sale of another famous American corporation to Foreigners.

Tags: edited by Port1080, written by pO157, Budweiser, InBev, beer (all tags)

This story: 28 comments (4 from subqueue)
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1

Cry me a river

port1080.

Tue Jul 15, 2008 at 02:15:51 PM EST

5.00 (informative, informative, brilliant)

Budweiser made its hay gobbling up (or putting out of business) smaller American competitors.  Just a year or so back it bought up the iconic Pennsylvania Rolling Rock brand (which, ironically, had been owned by InBev, which had bought Rolling Rock out earlier but had allowed the brand to operate almost independently in its original brewery) and closed down the brewery in Latrobe, Pennsylvania where the beer had been brewed since the beginning and moved production to New Jersey.  Nobody in Missouri gave a shit about those Latrobe jobs when they closed that Pennsylvania plant.  Tell me again why I should care about those Missouri jobs?  What's good for the goose is good for the gander.  If a person really cares about American beer, then he or she should support a good local American craft brewery or brew pub.  That's where the innovation and the quality is coming from these days, and that's where the future is.  Beer sales have been stagnant for decades because the major American brewers all turn out crap.  If they didn't have such a strong oligopoly and such ubiquitous advertising apparatuses they all would have failed a long time ago.

7

^ 1

...that leads to your ocean.

pO157.

Tue Jul 15, 2008 at 05:09:36 PM EST

5.00 (astute)

The problem is that no chickens are coming home to roost. If I recall correctly InBev and AB are sufficiently isolated that there is little overlap. Unlike Rolling Rock (which now tastes like piss in a green bottle) and Bud were pre-buyout their products are not in direct competition.

The C-level execs at AB all insulated themselves by guaranteeing cushy jobs on the board of InBev or buyouts. I'm pretty sure they'll even hook up August Busch V with all the comped Natty light he can drink.

So yeah, this is nothing of like the Rolling Rock situation in terms of damage for the brewers back in the show me state.

8

^ 7

Re: ...that leads to your ocean.

zyxwvutsr.

Tue Jul 15, 2008 at 06:24:43 PM EST

none

The acquisition announcement said that August Busch IV (not V) will have a seat on the board of directors of the new company.

9

^ 8

Re: ...that leads to your ocean.

thefadd.

Tue Jul 15, 2008 at 06:36:26 PM EST

4.00

What about the Natty Light provision?

It is easy to buy small plaster models of what you think life is like.

11

^ 9

Re: ...that leads to your ocean.

zyxwvutsr.

Tue Jul 15, 2008 at 07:20:48 PM EST

5.00 (informative, interesting, interesting)

Just last week,* as part of the effort to fend off the InBev bid, Anheuser-Busch was scrambling to come up with cost savings initiatives that would improve their margins enough to convince their board of directors that InBev's offer was too low. Nearly every cost-cutting idea was being considered, with department heads being told that, with the exception of things that directly affected the quality** of the beer, nothing was off the table. There were possibly as many as 1,000 middle management cuts in the offing, mostly at the headquarters in Saint Louis, but even the breweries were facing management layoffs.

I knew this was going on last week, and everyone involved (at the middle-management level, I mean, where I was an observer) truly seemed to be under the impression that they were engaged in an effort to save this Great American Brewer from slipping into foreign hands.

At the end of last week InBev raised their offer by $5 per share, almost 8%. The board, and Busch, decided that the new offer was too high to pass up. Few people know the full story, of course, but I wonder if the cost-cutting was a failed strategy, or a successful one.

In other words, yes, I'll bet that August will get free beer for life.



*Some of this was in the news, but I don't think it was reported that, for example, A-B was looking at the plush landscaping around some of their breweries and were considering whether or not they needed all those damn flowers.

**Some would snark about the use of the term "quality" to describe Anheuser-Busch products, but brewing on the scale of A-B is a highly technical industrial process, and A-B uses every modern quality assurance method available to ensure that one can of Budweiser is exactly the same as another, no matter where it is made. Their commitment to a consistent product is truly remarkable.

12

^ 8

It may have been unclear.

pO157.

Tue Jul 15, 2008 at 10:17:02 PM EST

none

But nowhere did I state V would be on the board. Just that as a bonus he could get some Natty Light. IV would clearly be the only person on the board, as per the articles.

19

^ 1

Re: Cry me a river

skeeter1.

Thu Jul 17, 2008 at 12:00:57 AM EST

none

" If a person really cares about American beer, then he or she should support a good local American craft brewery or brew pub."

That's why I appreciate

http://www.greatlakesbrewing.com/

Schlitz was ruined when Stroh's took it over, and even more when Pabst bought the brand.  I guess that's the beer business for ya.  Microbrews are the only ones worth drinking any longer.  I've had good ones in Baltimore, Cleveland, Chicago, Denver, San Diego, just about anywhere you go.  The behemoths like A-B just crank out pee-water, so it's no loss.  I hope InBev loses their shirt on the deal.  I couldn't care less.

there's only one way to find out...

3

How this impacts me

delete me.

Tue Jul 15, 2008 at 03:20:41 PM EST

5.00 (informative)

Next time I go to Sea World, I won't be complaining as much about the beer choices.

- derumi (del-me)
"Bobby Fischer? Man, that guy is crazy!" - Mike Tyson

4

^ 3

Re: How this impacts me

port1080.

Tue Jul 15, 2008 at 03:47:36 PM EST

none

I wonder if this will improve the selection or not?  I hadn't thought about how many places have exclusive agreements with A-B (or Miller, or whoever).  My feeling is that it probably won't make much difference though.  When Miller was bought out by SAB, it's not like they automatically started offering the full range of SAB beers at Miller-exclusive locations.  My feeling is that A-B InBev will probably stick with its Bud-only strategies because Bud is a very profitable beer (it's a relatively cheap and easy style to make, plus the high volume reduces overhead costs), and it won't want to cannibalize those profitable sales with less profitable sales of its other brands.

6

^ 4

Re: How this impacts me

delete me.

Tue Jul 15, 2008 at 05:08:28 PM EST

none

...

Thanks.

Now I'm depressed. :(

(AB owns Sea World and a few other non-booze ventures.)

- derumi (del-me)
"Bobby Fischer? Man, that guy is crazy!" - Mike Tyson

5

outrage? really?

songofthepogo.

Tue Jul 15, 2008 at 04:20:06 PM EST

5.00 (informative, astute)

maybe after 100 years, they can make it taste good

i gotta go with thefadd on that one.  anyone "outraged" by this clearly isn't clued in to the fact that beer is better in belgium.  i don't know, though.  maybe somebody out there genuinely prefers the "put that back in the horse" flavor of budweiser.

10

^ 5

Re: outrage? really?

zyxwvutsr.

Tue Jul 15, 2008 at 06:49:56 PM EST

none

Did you know that the Anheuser-Busch brewery in upstate New York is on Belgium Road? Yeah, true story.

13

^ 10

I always knew he was a kraut.

pO157.

Tue Jul 15, 2008 at 10:19:49 PM EST

4.00 (funny)

Did you know that Sam Adams Brewery in Boston is at 30 Germania street?

I'm hoping the great patriot was just a nihilist and not a member of a National Socialist party.

21

^ 5

Re: outrage? really?

skeeter1.

Thu Jul 17, 2008 at 04:55:33 PM EST

none

"anyone "outraged" by this clearly isn't clued in to the fact that beer is better in belgium."

I've got to go with you on that one.  St. Sebastian Belgian Ale is one of my favorites, but at $7/bottle, it's not exactly the sort of thing you swig at a barbeque.  American pee-water has been going downhill in quality for years, but it's relatively cheap, and goes well with a grilled burger after mowing the lawn.  I'd still suggest you search out a good, local microbrew.  

I went through a stint (couple of years) of homebrewing, but it's a lot of work.  Not for the casual beerdrinker.  

there's only one way to find out...

22

^ 21

Re: outrage? really?

tomc.

Thu Jul 17, 2008 at 05:41:00 PM EST

5.00 (funny, funny, informative)

Pee-water always goes downhill, skeeter.

Which is why you should always stand with your back toward the summit.

14

Re: Belgian hegemony ensnares the King of Beers

huxrules.

Wed Jul 16, 2008 at 02:11:01 AM EST

5.00 (interesting, interesting, interesting)

It will end up being just like Damler-Chrysler.  Inbev will not be pleased with the return on AB's cheap ass products and will gain no real technological advantages they can use in europe.  I bet its sold back to the Americans in five years.  Right around the time the dollar is making a comeback.

15

Re: Belgian hegemony ensnares the King of Beers

tomc.

Wed Jul 16, 2008 at 09:41:47 AM EST

5.00 (funny)

I wonder if this means we'll be able to buy Stella in those cute, tiny little cans?

28

Re: Belgian hegemony ensnares the King of Beers

christy.

Fri Jul 18, 2008 at 10:44:12 PM EST

4.00 (brilliant)

so how do we get people to unite when the beer sells out whats left tolit paper

2

The Sale Looks Locked Up.

MayorBob.

Tue Jul 15, 2008 at 03:03:25 PM EST

none

The only question now is what will they end up calling AB In Bev? Will it be a Flemish or a Walloon brewing company?

Illegitimi non carborundum.

16

green bottles in the future?

JimmyHavok.

Wed Jul 16, 2008 at 03:43:30 PM EST

none

Does this mean Budweiser is now a European beer?

But all I really care about is whether Red Hook keeps shipping that IPA.  A-B owns a third of the company and handles distribution, as well as allowing Red Hook to use the A-B experimental brewery (where that IPA was born).

17

^ 16

Irony abounds.

MayorBob.

Wed Jul 16, 2008 at 04:43:13 PM EST

none

One of the commercials for last night's MLB All Star game proudly trumpeted Budweiser as "the great American lager."

Illegitimi non carborundum.

18

^ 17

Re: Irony abounds.

JimmyHavok.

Wed Jul 16, 2008 at 05:01:01 PM EST

none

I think it was Bud that taught me to hate lagers.  It's a rare one that doesn't have that slight yeasty tang that immediately makes me think "Budweiser."

20

^ 18

Re: Irony abounds.

tomc.

Thu Jul 17, 2008 at 11:24:59 AM EST

none

No yeast.  No beer.

23

^ 20

Re: Irony abounds.

JimmyHavok.

Thu Jul 17, 2008 at 06:03:41 PM EST

none

True, however, ales don't have that aftertaste that I associate so strongly with Budweiser.

24

^ 23

Re: Irony abounds.

tomc.

Thu Jul 17, 2008 at 10:59:47 PM EST

4.00 (informative)

I hear you.  I don't think it's the yeast, though.

25

^ 24

Re: Irony abounds.

JimmyHavok.

Fri Jul 18, 2008 at 01:50:32 AM EST

4.50 (funny, informative)

Formaldehyde?

27

^ 25

Re: Irony abounds.

T Slothrop.

Fri Jul 18, 2008 at 04:42:22 PM EST

4.50 (funny, astute)

More likely the goat piss they use for color.

{Insert amusing quotation here}

26

^ 16

Re: green bottles in the future?

skeeter1.

Fri Jul 18, 2008 at 02:38:35 AM EST

none

"But all I really care about is whether Red Hook keeps shipping that IPA."

I don't know about Red Hook, but at one time (~30 years ago?) A-B made one called Red Wolf, and it was pretty darned good.  Whether InBev will have the good sense to bring that one back remains to be seen.  At any rate, the major US brewing companies haven't made anything good for years.  Bland as all get-out.  Get an import (usually stale) or a microbrew (much better).  The Michelob brand was just the same thing as Budweiser, just in bottles with fancier labels and more expensive.  Major-producer American beer is about the worst in the world.  

there's only one way to find out...

This story: 28 comments (4 from subqueue)
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