InBev: Catalyst For Bud Brand Crisis?

Mark RitsonJune 24, 20083 min

Earlier this month, US brewer Anheuser-Busch finally acknowledged that it had received a bid of $47.5bn (£24.2bn) from InBev to buy the firm. It is a massive potential deal.

InBev, based in Belgium, markets brands including Stella Artois and is the second-biggest brewer on the planet. Anheuser-Busch, based in St Louis, Missouri, is fourth, and famed for producing Budweiser.

In finance circles, the deal is widely seen as a winner. InBev has made a cash offer, which means Anheuser-Busch shareholders have the simple choice of taking $65 a share from it, or believing that Anheuser-Busch has a strategy that will see the current pre-offer share price of about $45 exceed the InBev offer in the near future.

Other analysts are sceptical. Like many major US businesses, Anheuser-Busch has been slow to expand globally and its performance has been flat in the US, where its 49% share of domestic beer sales limits the potential for further growth. The deal is seen as particularly strong because InBev does not have a strong position in the US, while Anheuser-Busch is weak internationally.

However, there are some strong reasons why the deal might not make sense from a branding point of view. One could assume that a firm such as InBev, with 200 brands and a market value of $50bn, would be a proven builder of brands, but the company is only four years old. It was created from an amalgam of deals including the acquisition of Labatts in 1995 and Bass in 2000, and Interbrew’s 2004 merger with Brazil’s AmBev.  Most of InBev’s success, to date, has been derived from successful acquisition and strong cost management. The current questions about Stella Artois, InBev’s leading brand in the UK, suggest that the company may not be the best custodian of Budweiser’s brand equity over the long term. InBev may be an expert in acquiring brands, but its record in building them remains unproven.

Another worrying facet of InBev’s approach is that it will almost certainly be looking to cut costs if the deal goes ahead.

Carlos Brito, InBev’s chief executive, is aggressive in this area; this has been one of the secrets of its success so far. When Boddington’s became part of InBev in 2000, for example, its adspend was gradually cut back and its relationship with Bartle Bogle Hegarty finally succumbed in 2006.

Anheuser-Busch’s brands are unlikely to respond well to this. The US beer market is highly competitive. Most brands have to invest heavily simply to maintain share. Budweiser maintains its brand equity with a $500m annual adspend; any reduction in that figure is likely to see Bud lose share to its major rival, Miller.

Another potential risk is that US consumers will be turned off by a Belgian-owned Budweiser. Last week, Brito was keen to stress that the combined firm’s North American headquarters would be in St Louis and that Bud and Anheuser-Busch’s other brands would continue to be brewed ‘in the same breweries, by the same people, using the same recipes’. Nonetheless, sales of Bud, in particular, could be hit.

Most consumers are unaware of the ownership of brands. Land Rover-drivers are no more likely to think of their car as Indian than a Lamborghini-owner is to realise his car was made by a German firm (Audi). But this deal might be different. Budweiser is so intrinsic to blue-collar US culture that foreign ownership could make the headlines. Everyone from the unions to Barack Obama could be drawn into a public debate.

It is unlikely that any of these brand issues will play a role in the decision to approve or reject the deal. But if it does go ahead, branding will be the central factor in whether the deal ends up proving a success.

30 SECONDS ON … INBEV

– InBev’s roots can be traced back to Den Horen in Leuven, Belgium, where beer production began in 1366.

– It is one of the world’s leading brewers with revenue of EUR14.4bn last year and annual volume sales of 273.9m hectolitres.

– The company holds the lead or number-two position in more than 20 key markets and employs almost 89,000 people worldwide.

– InBev owns more than 200 beer brands including Stella Artois, Brahma, Beck’s, Leffe, Boddingtons, Staropramen and Hoegaarden.

– Its products are sold in more than 130 countries across six operational zones, comprising North America, Western Europe, Central and Eastern Europe, Asia Pacific, Latin America North and Latin America South.

– Skol and Jupiler are top-sellers in Brazil and Belgium, respectively, while its Siberian Crown is a leading brand in Russia. 

The Blake Project Can Help You Grow: The Brand Growth Strategy Workshop

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Growth and Brand Education

FREE Publications And Resources For Marketers

Mark Ritson

One comment

  • Luis

    June 24, 2008 at 10:54 am

    Americans turned off by a Belgian owned Budweiser will turn to Miller? Only if they’re ignorant of the fact that Miller is now owned by a South African company called SAB.

    Also, Inbev selects a subset of their brands to become global brands. Although Stella is one of them, Boddington’s is not. Bud and Bud light certainly will be. Not sure why anyone would expect marketing dollars to be reduced. Inbev creates operational efficiencies so that it can invest those dollars in marketing.

    Also, what we should be concerned about is America’s global brand over seas. Do Americans want to be seen as isolationists that are afraid of foreign capital and afraid of competing in a global market? Not this American.

Comments are closed.

Connect With Us