Newspaper article St Louis Post-Dispatch (MO)

10 Years after Deal, A-B InBev Struggles to Grow in U.S

Newspaper article St Louis Post-Dispatch (MO)

10 Years after Deal, A-B InBev Struggles to Grow in U.S

Article excerpt

St. Louis got the shocking news on a Sunday in July 10 years ago: The brewery was being sold.

Anheuser-Busch's board had fought the overtures from Belgium-based InBev for weeks before accepting a sweetened offer worth $52 billion. Much of what would happen later, after the deal closed in November, was predictable: Jobs lost, key functions moved out of St. Louis, civic feathers ruffled.

A decade later, the merger announced in July 2008 also looks inevitable. Big beer companies had extended their dominance in the U.S. market about as far as possible, and growth was slowing. The path to further profits lay in international consolidation, something A-B had been slow to embrace.

The global Anheuser-Busch InBev has delivered solid financial returns, with per-share profit up 37 percent since 2009. It's hard to imagine the old A-B doing as well, especially with domestic sales of Bud Light and Budweiser steadily declining.

Tom Pirko, managing director of California consulting firm Bevmark, says the merged company has done "a marvelous job" of cutting costs and building brands -- including Budweiser, which is gaining market share in countries outside the U.S.

The old Anheuser-Busch management, by contrast, "were dinosaurs waiting for the asteroids to hit and wipe them out," Pirko says.

If that sounds harsh, remember that the industry was changing in 2008. Miller and Coors, the No. 2 and No. 3 U.S. brewers, put their operations into a joint venture that closed two weeks before the announcement of the A-B deal.

North America remains A-B InBev's biggest market, accounting for 23 percent of beer sales and 31 percent of operating profit, but it has multiple challenges.

The U.S. market has shrunk, with wine and spirits gaining "share of throat" at beer's expense. Craft brewers also have stolen sales from the big brands.

"Anheuser-Busch InBev has lost a lot of volume but has made a lot more money" in the past decade, says Eric Shepard, executive editor of industry publication Beer Marketer's Insights. …

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