Magazine article Marketing

Mark Ritson on Branding: InBev May Create Bud Brand Crisis

Magazine article Marketing

Mark Ritson on Branding: InBev May Create Bud Brand Crisis

Article excerpt

Last Wednesday, US brewer Anheuser-Busch finally acknowledged that it had received a bid of dollars 47.5bn (pounds 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 dollars 65 a share from it, or believing that Anheuser-Busch has a strategy that will see the current pre-offer share price of about dollars 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 dollars 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. …

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