Anheuser Busch sold to InBev for $52 billion

[monkeyrotica]

Upon approval of AB stockholders. Seems to me that InBev would be foolish to tamper with the brand. I assume they'll continue to expand the brand overseas. This can't be good news for smaller brewers, as they tend to be crowded out of the marketplace by the big brands.

http://www.cnn.com/2008/US/07/14/anhe...

[niquejim]

the best op-ed cartoon of this whole ordeal
http://caglepost.com/carprint.aspx?id...

For some reason this site may set off your firewall(print option) but it is harmless

[SuzyInChains]

That's a lot of money for InBev to spend to buy back Rolling Rock (they're just throwing in all of the other brands).

[joshlane4]

just another reason to avoid Miller, Coors, and now Budweiser...if I want cheap I'll drink PBR. Otherwise, it's American micro-brews (and macro in the case of Sam Adams)

+ all the great beers of the world!!

[Jimbosox04]

This sale is bothersome to me as am employee of Saint-Gobain Containers which provides the glass bottles for AB or now InBev. Although where I work supplies most of the NorthEast including Merimack, NH and Newark, NJ, there is always the possibility that my plant wouldn't be needed. InBev is known for cutting the workforce whether it be Union or not. Look at what they did to Labatt's

[Jim Dorsch]

I'll return to cynical mode shortly, but this morning, reading an article about this in the St Louis Post Dispatch made me sad for the Busch family. It must be terribly distressing for them to see their identity torn to shreds. Sure, barrels full of money will ease that! But money isn't everything.

[JessKidden]

Yeah, I agree- it's probably a very sad time for many of the Busch's- went over to the St. Louis paper's site and read some of the many stories at http://www.stltoday.com/stltoday/stat...

BUT, if I get too teary-eyed, I just think about all the brewing families and breweries, all the jobs and pensions, destroyed in the pre-craft era in large part due to A-B's aggressive marketing, which saw them go from being the #1 brewery with 3% of the market to about 50% in the 75 years after Repeal. (I wonder if Augie IV's getting phone calls from the Stroh's, Cleary's, Coors', Ortleib's, etc., saying "Hey, Buddy, we know *exactly* how you feel...").

I also have mixed feelings about the new position of Boston Beer Co.now being the largest US owned brewing company. This designation disregards Pabst, of course, and is based on the fact that they don't brew beer, only market it.

I haven't always been a fan of some of Jim Koch's "hucksterism" but I gotta give him credit for his amazing growth. Still, the "largest US brewer" has around 1% of the market? ALL of the US owned breweries have, what, at best about 8% of the market? (Figuring 80% for A-B & M-C., 12% imports.)

That's kinda sad, too, regardless of one's recognition that brewing, like everything else, is a global industry.

[Jim Dorsch]

You're correct that the Busch family is getting what they served to many competitors over the years, although they didn't buy them out.

[LStaff]

I won't be shedding any tears for their "loss". If they didn't want to be subject to the same things public companies have to deal with, they should have never taken the company public. And in the age of consolidation, they should have known that eventually something like this could happend to them and been more agressive at protecting themeselves. But I don't know the circumstances behind their going public in the first place, maybe our resident industrial brewer expert JessKidden can fill us in.

[JessKidden]

Yeah, I have been wondering when A-B went public, but it's probably better left to a Wall Street type to research it- investigating those sort of documents make my head hurts.

But here's are my two favorite quotes from August Anheuser Busch, Sr., who ran the company during Prohibition. In discussing changing the Volstead Act to allow beer of either 2.75 or 3.2% ABW before the complete Repeal of Prohibition, on Dec. 4th, 1932 he was interviewed by a national news service:

"If we start up to make a beer with a 2.75 per cent content of alcohol, it will be just a farce. In a nutshell, here is the whole proposition: A beer with less than 4 per cent of alcohol is simply an insipid slop without life or snap to it. People won't drink it. I ought to know. We have been brewers here for seventy-five years... (The pre-Prohibition Budweiser)...was 4.5 to 4.7 per cent. We built a world-wide reputation on that beer. Now, do you think we want to start to cheapen that brand by making a weak 2.75 per cent slop? No. We want to make a beer that will be worthy of the Budweiser brand. It is not intoxicating. A man could not get drunk on 4 per cent beer unless he were a hog and wallowing in it."

On Dec. 7, 1932 however, he was quoted as saying:

"I hope it will be 4 per cent beer. This 2.75 beer is belly wash- a substitute for wholesome beer. I wouldn't make 2.75 beer IF I DIDN'T HAVE TO CONSIDER THE FACT THAT THIS COMPANY HAS STOCKHOLDERS."

(Emphasis mine.)

Always enjoyed that about face.

(Note that discussion of alcohol content of beer from that era is often confusing because speakers seldom specified ABW or ABV. The eventually 3.2 ABW (which is equal to close to 4.0 ABV) that was the eventual "Legal Beer" until full Repeal seemingly was picked BECAUSE it sounded lower to appease those still trying to salvage some form of Prohibition or Temperance.)

[DiveFan]

"..... IF I DIDN'T HAVE TO CONSIDER THE FACT THAT THIS COMPANY HAS STOCKHOLDERS."

I wonder if he said that Before adding all of the rice to the brew; just shows you the power of marketing.

joshlane4, when has Bud been cheap? For >20 years I've been able to get better microbrews, imports and good house brands (say TJs) cheap than A-B catpi**.

IMO the Budweiser brand has always been Poor value. Of course, I had Anchor Steam and Sierra Nevada at a young age.

InBev should consider some price cuts that won't be soaked up by the distribution chain. Suuuure. Maybe they won't screw with Budvar or the upcoming American Ale (whatever that will be). Hmmmm.

[joshlane4]

here in the southeastern US, Bud, Miller & Coors products are cheapest, with the exception of my beloved PBR & the much lesser 'Natural' Light, 'The Beast' and a variety of other monstrosities...

we don't have a TJ's in my town, and microbrews/imports are at least $1 more per six pack than the aforementioned "domestics"

[JessKidden]

"I wonder if he said that Before adding all of the rice to the brew;"

Well, the quotes date (as noted) from the period just before the return of legal beer and Repeal, in 1932, so that'd be about 60 years or so *after* A-B - then run by the above mentioned Busch's father, Adolphus Busch- first started using rice (in it's "St. Louis Lager" and then Carl Conrad's "Budweiser").

A-B's "Budweiser" was always a rice adjunct beer, but they certainly were "anti-corn". A 1909 ad for a number of their beers (Michelob, Muencher, Faust, Anheuser, Pale Lager along with Budweiser) noted:
"NO CORN USED. Corn Beer is Nothing better than a Cheap Imitation of Genuine Beer." http://jesskidden.googlepages.com/ABC...

A. A. Busch's opinion of corn as an adjunct was given in the hearings of the Pure Food Commision in the early 1900's-

"Mr. Busch, president of the Anheuser-Busch Brewing Association, states that the beer of this company is made entirely of barley malt, hops and yeast, except that some rice is used in order to make a very pale beer of the Bohemian type. This company has never used any corn or glucose or preservatives or coloring matter. Corn does not make a high grade of beer, because of certain oily substances which it contains. They are partly transformed into fusel oil after fermentation. The quantity of fusel oil is not large enough, in Mr. Busch's judgment, to be injurious to health.

Rice is used not to cheapen beer, but to produce a very pale beer of the Bohemian type. It is twice as expensive as barley malt. Mr. Busch is not opposed to the use of corn, though he uses none himself. He does not think that there can be any good evidence that the use of unmalted grains in brewing is unwholesome."

[Jim Dorsch]

I agree that they should have seen it coming and should have prepared for it. But I still feel some compassion for them; their whole identity is about to be blown to bits.

[MShapiro]

But I still feel some compassion for them; their whole identity is about to be blown to bits.

A.A. Busch III and A.A. Busch the IV own a combined 11.86 million shares of Budweiser (this includes unexercised stock options) per the company’s proxy. At $70 per share their holdings are worth over $830 million (not including other perquisites like a fleet of corporate jets) – please remember this before you start crying in your beer.

[Jim Dorsch]

Oh, I'll get over it quite quickly. When you read stuff like that story in the StL paper, it summons some feelings. It's like a sad movie. A half-hour later you've moved on.

[crewsweeper]

While this merger might have an effect on micro customer growth and increasing distribution points, most likely it'll effect the foreign beer drinkers here the most. Especially if Groupo Modelo doesn't go along with AB on the merger. InBev's strength is its foreign beer network, they're more likely to push those brands through the AB network.

[chimay5]

I think that in the short term, this consolidation opens the door for small, specialty distributors to expand their portfolios. The small importers and craft breweries may not get the coverage of the major distributors, but they certainly will get their fair share of mind from the small companies.

[Jim Dorsch]

I don't think this will affect small brewers. The market has demonstrated a strong pull for craft beer, and wholesalers are still independent businesses that make their own choices. In fact, AB wholesalers have been abandoning exclusivity recently.

Small brewers might be more wary of ever-consolidating wholesalers, combined with the proliferation of franchise laws that grant, by law, exclusive territories for complete brewery product lines to wholesalers, with no competition allowed to other wholesalers in the same area. As they take on more breweries, they may tend to cherry pick their offerings, so that small brewers can't have their complete lines on offer in some areas.

[JessKidden]

Yeah, I think the combining of the US divisions of MolsonCoors and SABMiller (which has quickly been overshadowed by this A-B-InBev deal) will have a bigger effect on the consolidation of US distributorships, especially in light of the fact that most InBev brands are already distributed by the local A-B wholesalers in most markets.

As Boston Beer Company gets larger (considering the opening of their eastern PA. brewery) they'll probably be at a disadvantage when the local Coors and Miller distributors are "encouraged" to merge and "winnow" down their combined inventories.

[Jim Dorsch]

It'll be the marginal players, not BBCo, that get the axe when distributors rationalize their offerings. BBCo produces too many margin dollars and grows too fast to be hurt.

[JessKidden]

Yeah, I'd say the small brewers are more likely to simply be dropped but I think BBC would much rather deal with a distributor where they're the 2nd or 3rd best selling beer, rather than a merged MillerCoors distributor, where Sam Adams might wind up 5 or 6, with corporate pressure from above wanting more emphasis on Blue Moon and Leinenkugel.

Granting that "disadvantage" is different than "hurt" and when the subject of distribution comes up, it's difficult to make generalizations. Seems I read that a majority of BBC distribution is through Miller houses, but in my area it's a Coors linked company and I'm sure it varies greatly from area to area.

[monkeyrotica]

On the question of exclusivity, if you go into any Irish-themed bar in America, they always serve Guinness and Harp. I never see Beamish or any other Irish beer. Is that a function of exclusivity or just that Guinness holds the largest portion of the Irish beer market?

Since Beamish has a new distributor, I've started seeing it in some grocery stores but never on tap.

[Jim Dorsch]

I don't know this for a fact, but I think it's because Guinness is simply the big gorilla in this area.

I had heard that Guinness was somehow involved with the Fado restaurant chain, but don't know if there's substance to this.

Over the years various brands have tried to market an Irish-style stout, but they all seem to give up. Bars buy Guinness even though it costs more. I wonder how AB's Bare Knuckle has fared in this regard.

[JessKidden]

Yeah, I think Guinness and Harp are common simply because they're so big (Diageo is the 8th largest "beer marketer" in the US, based on 2006 figures), not because of any formal "exclusivity" (which would probably be illegal in many states under three tier laws). It's also sort of a "one stop" deal, since a Guinness distributor is also going to carry Harp and, now, Smithwicks (which has replaced Bass as Guinness' "official" Black & Tan partner beer, with Bass now an InBev brand. For many years, Bass was also imported into the US by Guinness.)

Beamish was imported by Scottish & Newcastle until they dropped the brand to concentrate on Newcastle Brown Ale, and it was eventually picked up by the relatively new Carlsberg importing company in the US.

Heineken owns Murphy's and imports it into the US through it's "Star Brands" division, but it's not nearly as common as Heineken and Amstel (which are imported by Heineken USA, another Heineken owned US importer).

Since then, of course, Carlsberg and Heineken have bought Scottish and Newcastle and divided up the company (with Heineken getting the US portion), so one would expect a shuffling around of which company imports those brands in the near future.