USA: Anheuser-Busch’s largest shareholder backed away

Since raising his glass and becoming Anheuser-Busch Cos. Inc.'s largest shareholder last year, Warren Buffett has backed away from his investment a bit, American City Business Journals Inc. said on February 24. The nation's largest brewer has seen its share price continue to slide over the past year, and it appears the Oracle of Omaha -- better known for his interest in Coke than Bud -- is trying to minimize a hangover.

Buffett's holding company, Omaha, Neb.-based Berkshire Hathaway Inc., held about 9.5 million Anheuser-Busch shares at the end of 2004. Berkshire made its big move early last year, apparently taking advantage of the brewer's softening stock price. Buffett increased his stake to 40.5 million shares by March 31, before peaking at 46.5 million shares by June 30, according to filings Berkshire Hathaway made with the Securities and Exchange Commission (SEC).

Anheuser-Busch's share price fell gradually during that period from about $50 a share to about $45 a share. Since mid-2005, it has continued to slip, closing Feb. 22 at $41.70 a share.

Despite his typical long-term investment position, Buffett began to temper his beer binge last summer. Between June 30 and Sept. 30, he sold more than 1.8 million shares. He divested another 856,800 shares during the last quarter of 2005. After soaking up 37 million shares of suds in six months, Buffett dumped nearly 2.7 million shares as Anheuser-Busch's stock price continued to decline.

When Anheuser-Busch first disclosed on April 21, 2005, that Berkshire Hathaway had become a "significant" shareholder, the brewer's stock price enjoyed a spike. Shares jumped $2.94, or 6.52 percent, to close at $48.04 a share with 12.9 million shares changing hands.

Buffett's stock sales haven't generated a clear reverse reaction, but his moves are receiving at least preliminary attention by investors and analysts. Observers will be focused on whether Buffett is simply tweaking his position or beginning a larger sell-off.

"I think it's worth noting, but our initial take is that it's more about fine tuning than about a major change in opinion," said Mark Swartzberg, a beverage industry analyst with Stifel, Nicolaus & Co. in New York. "He's known as a long-term value investor."

Buffett remains Anheuser-Busch's largest shareholder. With nearly 43.9 million shares valued at about $1.8 billion, he owns 5.6 percent of the company. Barclays Global Investors of San Francisco is the second-largest owner with 42.7 million shares, or 5.5 percent, of Anheuser-Busch under its control, according to Anheuser-Busch's preliminary proxy statement filed Feb. 17 with the SEC.

By comparison, Chairman August Busch III and his son, brewery President August Busch IV, control 11.5 million Anheuser-Busch shares, including options, combined. That represents about 1.5 percent of the company. Chief Executive Patrick Stokes controls about 6.3 million shares, or 0.8 percent. All 30 of Anheuser-Busch's directors and executive officers as a group control 29.5 million shares, or 3.8 percent of the company.

Anheuser-Busch has struggled with flat beer sales and increased competition from wine, spirits and rival breweries. Anheuser-Busch's estimated domestic market share for 2005 was 48.7 percent, down from 49.6 percent in 2004, according to its most recent earnings report. Anheuser-Busch's net sales grew less than 1 percent to $15 billion last year from $14.9 billion in 2004. Net income fell nearly 18 percent from $2.2 billion in 2004 to $1.8 billion in 2005.

Over the past two years, Anheuser-Busch's stock price has steadily fallen from about $55 a share to around $41 a share today.

To turn the tide and regain momentum, Anheuser-Busch has introduced and market-tested a variety of new products, including Budweiser Select, Tilt caffeinated malt beverage and Spykes flavored malt beverages. It also has introduced innovative new packaging, including plastic labels for its glass bottles and aluminum beer bottles. During the Super Bowl, the company also used one of its commercial slots to launch a nonbranded campaign called "Here's to Beer" designed to enhance the overall image of the beer industry.

As import and high-end specialty beers remain a bright spot in the industry, Anheuser-Busch announced Feb. 22 a deal that will make it the U.S. importer of the Netherlands-based Grolsch lineup of beer brands. The U.S. import category represents about 12.4 percent of the total U.S. beer market and accounted for about 25.6 million barrels sold last year. The category grew about 7.2 percent in 2005 and has experienced an average annual growth rate of 5 percent over the past five years.

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