Liquor Biz

AB-InBev marks 10 years since shocking move – August 2018

By Paul F. Vang (this article first appeared in the Montana Tavern Times – August 2018 – reprinted with his permission)

This past month marked the 10th Anniversary of Anheuser-Busch, America’s biggest beer company, getting taken over by a Belgian beer company, InBev, to form Anheuser-Busch InBev, the world’s biggest brewing company.

In retrospective, stltoday.com, the online service of the St. Louis Post-Dispatch noted the day, July 10, 2008, when the news rocked the brewing industry, not to mention the city of St. Louis.

In the report, Tom Pirko, of the California consulting firm, Bevmark, recalls that the old Anheuser-Busch company was ripe for a takeover. He described the A-B management of the time as “dinosaurs waiting for the asteroids to hit and wipe them out.”

In the immediate aftermath of the takeover, jobs were lost and key functions moved out of St. Louis. The city of St. Louis took a huge blow to civic pride, losing Anheuser-Busch to a Belgian company.

AB InBev, as a global brewer, had done well for its investors, with per-share profits up 37 percent, even with declining sales of Budweiser and Bud Light in North America, AB InBev’s largest market.

If that seems strange, to be increasing profits in spite of declining sales of their leading brands, Eric Shepard, editor of Beer Marketer’s Insights, commented in the article that it wasn’t a sustainable business model.

“You can’t lose barrels forever and make more money. That math doesn’t continue to work.”

The corporate formula that does seem to work is to make big acquisitions every few years, such as Mexico’s Grupo Modelo in 2013, and London-based SABMiller in 2016. In addition, the company has brought up a number of U.S. craft beer companies, such as Chicago’s Goose Island.

Analysts speculate that AB InBev’s next big buy will be outside beer, perhaps a big soft drinks company such as Coca-Cola, though, company executives insist that their focus is beer.

Beer operations that might make sense might be beer businesses operated by French wine company Castel, or Diageo’s Guinness.

In any event, the report concludes that if North American sales continue to slip, AB InBev will find “something somewhere” to buy.

They didn’t build the world’s largest brewer by being satisfied with the status quo.”

Beer Sales Falling Flat

This report isn’t exactly related to the previous segment on AB InBev, but it’s along a similar theme.

As reported by Beer Business Daily, after a relatively strong winter and spring, beer sales, as measured by volume, started declining, as tracked by Nielsen. We usually think people drink more beer in summer, but that doesn’t seem to be happening.

First off, premium light beers are mostly in decline. The segment as a whole was down 4.3 percent, with Coors Light down 6.7 percent and Bud Light down 4.8 percent. Miller Lite held to a growth curve, but at a bare 0.5 percent.

Import beers were down overall, though Constellation Brands’, Corona and Modelo were up 8.6 percent and 10.4 percent. Heineken and Dos Equis were both down in the 5 percent range.

Even the craft segment was down 3.2 percent in volume and off a bit in market share. Among the top craft brands, Sierra Nevada was down 41 percent, and Sam Adams, Leinenkugel, New Belgium, and Shock Top brands were down double digits.

There’s a related story, this from foodandwine.com, with the headline, “People Aren’t super Excited About Beer Right Now.”

This report notes that the whole beer category seems to have stalled out in both the suds produced by Big Beer and the craft segment, which saw increased retail sales of just 1.7 percent. On the other hand, there are a lot of players in the craft segment and some brewers have vigorous growth in sales, even while some of the biggest craft brewers were down.

These trends are reinforced by changes in the alcohol market. In 2002, beer accounted for 54 percent of alcohol sales and wine made up 37 percent. Last year, beer had dropped to 46 percent, while spirits had modest growth to fill the gap.