USA: Anheuser-Busch rules out acquisitions moves and pledges to grow in China, Mexico and US market
Anheuser-Busch, on November 29 distanced itself from the consolidation sweeping the global beer industry by ruling out making acquisitions "for scale" and pledging to grow in China, Mexico and its core US market, according to the Financial Times.
The disclosure is in contrast to the strategies of rivals SABMiller and Belgium's InBev, which have grown rapidly by making large acquisitions and using economies of scale to cut costs. It comes amid concern from analysts that Anheuser is too reliant on the US beer market at a time when beer is losing share of drinkers' wallets to wine and spirits and as US brewers have suffered from a fierce price war.
Anheuser chief financial officer, Randy Baker told investors that while the brewer was interested in mergers and acquisitions, "to do a deal that would give us a couple of years of earnings improvement but would not grow long-term shareholder value is not in our interest".
Mr. Baker said: "There are not huge economies of scale on a global basis but there are important economies of scale on a local basis. Rightly, we have been conservative in our evaluation of opportunities because we don't need an acquisition simply to gain scale."
The brewer this year prompted a price war in the region by introducing steep discounts in a bid to narrow a price gap between its Budweiser brand and cheaper beers such as SABMiller's MillerLite and products from third-ranked Molson Coors.
The move caused alarm in the industry as it cut wholesaler profits by up to 20 per cent and lowered the overall price of beer to levels that are damaging "brand equity", industry experts say. It also forced Anheuser to report two consecutive quarters of lower than expected earnings.
Mr Baker said: "Although 2005 has been difficult and disappointing, Anheuser has now achieved its top objective of restoring volume and market share momentum."
He said he did not anticipate any further price cuts. Anheuser had started to raise prices again in some regions ahead of a broader effort to raise prices early next year.Net income at Anheuser's international operations had grown by 22 per cent this year, making up 28 per cent of overall consolidated earnings growth. . Anheuser expected cost savings of $100m next year, the highest annual savings for five years, as the company implemented a flexible packaging system.
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