Fifteen Eighty Four

Or is it A Case of Global Beer?

So InBev, the giant Belgian brewing conglomerate, is buying Anheuser Busch. What does that mean for both companies? It can be hard to fathom for the average beer drinker, since many of the brews we enjoy come from companies larger than we ever imagined. Meanwhile, as Brookston Beer Bulletin points out, this makes Sam Adams the largest American-owned brewer! Teresa da Silva Lopes sounds off on what this means, why, historically, breweries have moved in this direction.

“Like World Series baseball, for too long Budweiser thought being big in America made it a global brand. It now gets to compete in the ‘world cup’ of beers and not just the World Series.”

Teresa da Silva Lopes

THE recent acquisition of AB by Inbev is the most recent tsunami in the waves of global merger and acquisitions that have been shaping the brewing industry in the twenty first century. The internationalisation of leading brands such as Stella Artois, Brahma, Heineken, Carlsberg, Miller and Bass previously domestic or regional but not global, has transformed brewing into a highly competitive and concentrated industry, where to succeed you need to compete on a global stage. Budweiser, historically the world’s leading beer brand in value terms, has had its position threatened in recent years mainly because it remains so concentrated in the US market. Its internationalisation only started in the late 1990s, and despite being sold in a more than 60 markets, more than 80 percent of its sales are in the US market.

Inbev will bring a great deal to Budweiser. The brand will finally take its place in a global portfolio, part of a true multinational that is particularly strong in South America and Europe, with wide experience in managing successful global brands, and with strong focus on its core business – brewing. Coordinated marketing with other brands of the group is likely to result in cost reductions which will increase firm competitiveness and may possibly bring benefits to consumers. Inbev will very likely sell Anheuser-Busch’s non core businesses – theme parks and manufacturing and recycling of aluminium cans – quickly to focus, as Inbev does so well, on its strengths in brewing and, most of all, marketing. The brand will remain part of a family controlled group, but will be managed by professionals with high levels of knowledge about the marketing of global brands and with strong distribution channels in all parts of the world. Historical research on the world’s leading alcoholic beverages firms shows that founding families seem to be better at creating enduring brands but professional managers seem to be better at making them global. The newly formed Anheuser-Busch Inbev will show this process at work.

The recent growth of alcohol consumption in emerging markets (Brazil, Russia, India, and China), where tastes and habits of alcoholic consumption are still being formed and growth potential is strong, make it important to sell global brands. Budweiser will benefit from such a transformation from Inbev’s investment in horizontal marketing strategies to create brand awareness worldwide.

In traditional markets such as the United States and Europe, where consumption is stagnant, firms will have to invest in vertical marketing to change the image of beer. So, even though the US market will possibly experience an increase of brand variety after this acquisition, these brands will be essentially targeted to different niches from those of brands such as Budweiser and Michelob. The main strategies of firms such as the newly formed Anheuser-Busch Inbev will very likely involve the rejuvenation of existing brands through for example the creation of line extensions to target premium segments.

Beer or Wine?

The Answer is YES.

But more beer.