With the recently announced sale of the Anheuser-Busch Brewing Company to Belgian-Brazilian brewer InBev, which creates the world’s largest brewery, it’s interesting to take a second to consider one of the unusual side effects of the deal. Anheuser-Busch has long been the largest American brewery and it has spent a lot of marketing time since the sale of Coors Brewing to Molson Brewing and Miller Brewing to SAB in promoting its ties to America. From Budweiser, the Great American Lager, to other nationalistic appeals, the American in Anheuser-Busch has been a strong selling point for the brewery and its brands. With its sale to a multinational corporation, these appeals will quickly drift away.
In looking to the list of America’s largest breweries, it’s interesting to note that with the recent sales, Boston Beer Company is left as the largest American owned brewery. I am excluding the Pabst Brewing Company, which has a larger production volume than Boston Beer by several million barrels, because it is a beer marketing company with no actual brewing facilities of its own. And while Boston Beer does a fair amount of contract brewing, it owns several of its own facilities and its percentage of in-house production continues to climb. I’m not sure if the achievement of a craft brewery becoming the country’s largest American owned brewery is something to celebrate or just behold. In any event, it is certainly telling of the hyper competitive state of the international brewing scene.
One other consequence of the deal, if it survives regulatory review in several countries and shareholder agreement, is that breweries such as Old Dominion, Widmer Brothers Brewing, Redhook, and Goose Island (less directly through its part ownership by Widmer) will become distant members of the global InBev family.
How the deal will affect distribution channels and craft breweries in particular is going to debated for months to come.
Edit: After reviewing the web a bit, it appears that Jay Brooks has scooped me on the above point, kudos to him for similar thinking.
Anheuser-Busch wasted no time today in crafting a response to potential suitor InBev’s preliminary move to replace the American brewer’s existing board of directors with InBev’s own nominees, including several friendly members of the Busch family. Among the expected discussions about a low-balled asking price and how the company would restructure was this curious tidbit.
Shareholders also should be aware that InBev, through a subsidiary, has a significant partnership with the government of Cuba to produce and distribute products in Cuba. InBev has not commented on how that would impact business with Anheuser‑Busch’s customers, nor on its ability to complete an acquisition under U.S. laws that affect acquisitions of U.S. companies by foreign companies.
Hmmm, that was a little unexpected. A little research shows that the offending, Castro loving beer brand is Bucanero, the second largest brewer in Cuba. The brewery was part of a joint venture between Labatt, which later became part of InBev, and the Cuban government in 1997. That’s right, InBev bought a brewery that several years earlier had set up a brewery in Cuba.
Helms-Burton legalese aside, one would hope that A-B has more defensive options in its pocket than a flat nationalistic appeal to its shareholders, which include many institutional investors. One trade paper suggests that InBev’s Cuban beer business represents a little over three-one thousandths (.0003) of a percent of InBev’s global beer volume.
This may be easier than Carlos Brito first thought.
There is late word from at least two media outlets this evening that InBev has finally made its move on Anheuser-Busch. The Brazilian-Belgian international behemoth InBev has been long rumored to be in the market for a hostile takeover of America’s largest brewery. The deal, rumored at $65 per share, will face regulatory and shareholder review. The prospect of InBev owning America’s largest brewery raises a number of interesting business issues, ranging from whether consumers will continue to accept Budweiser (recently promoted as the Great American Lager, as compared to the damned Canadian and South African competitors) as owned by a foreign entity and whether InBev, notorious for cost cutting, will leave A-B’s brewing operations intact or dismantle select breweries. A very interesting day in the beer world.