Earlier this week, as InBev SA put the final touches on an unsolicited bid everyone knew was coming, Anheuser-Busch Cos. announced a
distribution deal in Vietnam. Taken in isolation it's a reasonable move to increase A-B's presence in a fast-growing market. But it's also emblematic of a cautious approach to global expansion that may well result in the sale of the company.
In a story in Thursday's Deal (subscription required), Renee Cordes points out two recent cross-border bidding opportunities A-B passed up, both of which could have served as poison pills: a play for Scottish & Newcastle plc and
a potential stake in Carlsberg A/S.
This story has been developing for some time, though. In a decade of global beer consolidation, A-B has simply not been as aggressive as InBev or SAB Miller NV. Yes, it has a good presence in China; it owns Harbin, has a 27% stake in Tsingtao and is a big sponsor of the Beijing Olympics. It's in Mexico with a half-share of Grupo Modelo SAB de CV, brewer of Corona.
But it's still overly concentrated in the slower-growing U.S. market, which is what leaves it vulnerable to a bid from a global operator like InBev. According to the 2007 A-B annual report, if you count sales by brands where it has an equity stake, 35% of A-B's sales by volume come from outside the U.S. If you don't count the equity stake production, the proportion falls to 15%.
Procter & Gamble Co., as a comparison, gets only about 40% of its sales from inside the U.S., according to a recent company presentation. It gets 32% from other developed markets and 28% from those fast-growing developing markets.
In an earlier post I referred to this caution about global expansion as Budweiser Syndrome. It's quite understandable, and it's by no means limited to beer companies. Cross-border deals are, after all, even riskier than domestic ones, and they're often kind of a pain in the neck. But in a great many industries these days, if you don't go cross- border, you will sooner or later be hearing from somebody who did. -
Kenneth Klee
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