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Musing: So does it matter if A-B gets taken over?

It’s still Monday in Tok, Alaska.

I’m not sure why I feel obliged to voice an opinion on the very good chance Inbev will successfully take control of Anheuser-Busch. Back when I was writing a monthly editorial for RBPMail it would have been a must, but now there are how many thousand beer blogs? Even though my reading time is pretty limited I’ve seen enough to know opinions abound. So I’ll keep it short.

Pete Brown makes it easier to be brief with a fine post about what Interbrew was and what Inbev is. A few years ago I wrote in a business story that small brewers could learn several lessons from Interbrew. That was before Interbrew was rolled into Inbev and Inbev jacked with Hoegaarden so capriciously, but Pete’s got a nice summary.

I understand his feelings about Anheuser-Busch — if you still need an excuse to read Three Sheets to the Wind use this as one to buy the book — although I don’t altogether agree. I know too many people who work at A-B who are just as passionate about beer as those Pete worked with at Interbrew.

OK, Shock Top Belgian White seems like a beer that came out of the marketing department. But in the last few years individual A-B breweries released regional beers that began as suggestions from employees. Michelob, just-another-adjunct beer, became Michelob, all-malt beer. Maybe things change in this beer world turned upside down, but A-B did announce its plans to spin off Michelob as a separate entity, and that one of its first acts would be to release Michelob Dunkel Weisse nationally. So what? Well, the dunkelweizen that was produced in Fort Collins for sale only in Colorado and only on draft was a fine beer.

All that is progress, and seems unlikely to continue if Inbev is in charge. Remember Inbev decided to shut down the Rolling Rock brewery before it then sold the brand to A-B. Apparently Rolling Rock simply could have disappeared when the brewery doors closed. This was an operation that produced more beer than any craft brewing company other than Boston Beer and Sierra Nevada.

Interbrew calling itself the “world’s local brewer” always seemed more like marketing than fact, but for the words seem worth reconsidering since we are at the beginning of our Year of Drinking Local. A week and some on Southeast Alaskan coast has vividly reminded me that the best local beers aren’t just local, but reflect the place where they are brewed. And when they do are special enough you want to seek them out far from their home. But that’s a discussion for the next post.

Back to Inbev and A-B. I wouldn’t argue either really cares about local or about place, and that’s why I can’t get fired up either way about this business deal.

But practically speaking I think there’s a better chance an independent Anheuser-Busch would brew beers we’d drink at the neighbor’s cookout than an A-B operating under orders from somewhere else.

Further reading

This possible deal touches every country where consumers drink beer. Read Martyn Cornell’s post, InBev versus Bud: Am I Bovvered?, for a sense of perspective.

11 Responses to Musing: So does it matter if A-B gets taken over?

  1. Zythophile June 17, 2008 at 3:04 am #

    I changed the name of the post to reflect better its more UK-centric viewpoint … it’s now “London’s biggest brewer threatened with takeover”. The link should still work though …

  2. SteveH June 17, 2008 at 4:59 am #

    A question I posed at RealBeer, and I’d like to hear your opinion as well; what becomes of the shares A-B holds in some of the smaller breweries, such as Red Hook? And what of the distribution deals?

    Many have speculated that InBev would honor all contracts, but your Rolling Rock example is poignant.

  3. Pivní Filosof June 17, 2008 at 5:21 am #

    What I find funny is that, according to what I’ve read on the press, InBev has promised A-B to tout Budweiser in the European market, pretty hard due to all the trade mark battles with Budvar. Unless InBev knows something we don’t.
    If the Staropramen case is anything to go by. I don’t think a takeover will be good for A-B or their cunsumers. InBev’s business trategy is to make beer the cheapest possible way. Its Brazilian head honcho is a fan of fierce cost reduction (read corner cutting) and any underperforming unit (as seen by InBev) will have to close down, at most, the brand will remain if convenient.
    Not to mention that InBev will use A-B massive distribution netowork and market muscle to forcefeed either Stella or Brahma Chopp to the American market

  4. Jeff Alworth June 17, 2008 at 8:08 am #

    Stan, I think you focus too narrowly on the interests of the corporate behemoths–about whose welfare we should rightly care little. I’m not nearly as concerned with what faux craft InBud releases as compared to A-B’s faux craft. What I am concerned about is real craft’s access to barley and hops and, critically, distribution in local markets. I’m concerned what a company that owns half the world’s production means to inefficient but lovely regional breweries across the planet. When I was in Panama a few years back, I enjoyed Soberana and Panama beer. Can they compete against InBev-backed Budweiser onslaught?

    Fortunately, it looks like A-B is fighting back. Since $40 billion of InBev’s offer is borrowed, A-B’s purchase of Modelo will make it too big for InBev’s creditors to swallow. I hate to support Bud on this one, but I think it’s best that InBev stays out.

  5. Jeff Alworth June 17, 2008 at 8:09 am #

    Sorry, a quarter of the world’s production (and half of America’s).

  6. Stan Hieronymus June 17, 2008 at 10:04 pm #

    Jeff – This is a conversation I was pretty much ducking, but . . .

    Since you brought it up, don’t you think that it is the companies selling beer based upon price – and efficiency throughout their system – should be more afraid than small brewers who have proved masters of brewing and selling inefficient beers?

  7. Stan Hieronymus June 17, 2008 at 10:15 pm #

    Steve H – Good question. I’m not aware of deals where Inbev has been a partial owner, as A-B is in Widmer-Redhook, Goose Island, etc. Would they want to change that, going for full ownership or striking some other deal?

    At this point just speculation.

  8. Jeff Alworth June 18, 2008 at 2:26 pm #

    Don’t you think that it is the companies selling beer based upon price – and efficiency throughout their system – should be more afraid than small brewers who have proved masters of brewing and selling inefficient beers?

    Absolutely. And apparently SABMiller had been really courting InBev and were enraged when they turned to Bud. The institutional advantage Bud already enjoys had eroded other companies over the past generation. Now, with macros flatlining and imports and craft showing the only growth, the pressures are greater.

    But that’s only one of several reasons why I’m hoping this won’t go through.

  9. Swordboarder June 19, 2008 at 11:16 am #

    Jeff,
    There’s no way that InBev and SABMiller are going to merge. InBev in the last year has moved all of it beer into AB distributorships. It’s very expensive and not something they’re going to do more than once. The buyout will happen, or a merge will happen somewhere down the road.

    I fear for the major micros under AB’s wing. The AB distributors will do whatever AB tells them to do, and the same will be true for InBev. I fear the growth of Red Hook, Widmer and Goose under AB may come to a close when InBev buys them out. How big does a brand need to be for ImBev to want to keep it?

  10. SteveH June 20, 2008 at 5:07 am #

    “I fear the growth of Red Hook, Widmer and Goose under AB may come to a close when InBev buys them out. How big does a brand need to be for ImBev to want to keep it?”

    If nothing else, these 3 establishments were thriving before their distribution deals with A-B, I’d like to think that they’d survive if ties to InBud were cut. Maybe they can band together themselves to build a micro-distribution group?

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