Buying Budweiser

A confession – while I love beer, I have not purchased much product from Anheuser-Busch during my lifetime as I’m a microbrew kind of bear. CNNMoney has the following story:

Anheuser-Busch has entered preliminary merger talks with Mexican brewery Grupo Modelo, according to a report from the Wall Street Journal Thursday. A merger between the two companies could help the American brewing company hold off Belgian beer maker InBev’s $46.3 billion unsolicited takeover bid that was announced Wednesday.

Evan Newmark discussed certain aspects of the InBev offer as advice to the two Presidential candidates:

InBev offers Anheuser Busch shareholders a lot of money and its employees a new-and-improved management team … The company is hungry and driven. It is run by a Stanford-educated Brazilian Carlos Brito and dominated by a gung-ho, military-style culture. It’s a thoroughly global company with a HQ in Belgium, operations in 130 countries and 200 brands. And it’s a tight ship focused on cost-cutting and profits. Just like any company – American, Belgian or Brazilian should be.

Newmark’s post comes complete with Senator Obama holding a small glass of beer. Not to dust off the old elitist nonsense, but maybe he should be holding up a pint of beer. But let me turn the microphone over to Kevin Drum:

In any case, his main point is that “it would be politically untenable for Obama to welcome a takeover,” so John McCain should take the bait and position himself as a champion of free trade, even if it does mean letting a Belgian company run by a Brazilian dude take control of good ‘ol American Budweiser. After all, who better to take a stand on this than a guy who dumped his first wife 30 years ago in order to marry a wealthy heiress who now owns one of the largest Anheuser Busch distributors in the country? On second thought, somebody may need to call rewrite on this script. It’s not really working, is it? FWIW, my prediction is that, contra Newmark, Obama can stay neutral on this with no problem. It’s not a trade deal, it won’t send jobs overseas, and it’s not a tax scam. It’s just an acquisition of a beer company. Nothing in Obama’s record, or the record of his economic advisors, suggests to me that he’ll try to demagogue this.

Whether InBev or Grupo Modelo owns the facilities that brew Budweiser doesn’t seem to have much to do with the free trade issue. Hey – I’m all in favor of free trade for beer given I’m a consumer. Now if I were a Budweiser employee, I just might be concerned about having new management in the mood to slash costs.

If we are not familiar with what beers Grupo Modelo sells, check this out. Grupo Modelo appears to be doing quite well as its operating margin has been around 28% for the past three years. Then again – Corona Extra, Modelo Especial, and Corona Light rank among the top six imported brands along with Heineken, Tecate, and Guinness.

You might be wondering whether the folks that produce Tecate also produce other beers and it does seem that FEMSA also produces Dos Equis, Indio, Bohemia, and Kaiser. The Canadian beer Labatts is produced by InBev, while Molson Coors Brewing produce popular Canadian and U.S. beers. On top of that – these beer distributors often sign distribution agreements with each other. So should we be worried about another beer merger? Maybe not – as they are a lot of really good microbrews not owned by the big boys. In fact, I wish I were in San Francisco right now as I’d could be visiting this one this evening if I were.