This Bud's for InBev? (And Why the Focus May Be China)

Ahh, I always love when I have a good reason to talk about alcohol, namely beer, on this blog!

There is a lot of talk about the potential takeover of Anheuser-Busch by InBev, the world's biggest brewer. InBev, which earned over 14.4 billion euros last year, controls the European and South American markets with a combination of its major brands and its local products. Despite InBev's power in these markets and its size, the company's US market penetration has really only taken place over the past few years with its brands like Stella Artois and Beck gaining in popularity. These merger/takeover talks have been around for over a year, but it now looks like things are getting serious and a deal could be forthcoming soon, if A-B is willing to give up its independence.

This is where US media usually ends it analysis of the proposed agreement. In my opinion, the reality, which is rarely touched on, is that while control of the Budweiser name and US market domination are nice, InBev's focus on A-B has to do more with China.

InBev currently has 33 breweries in 8 provinces in China and their brands include Zhujiang (Guangzhou/Guangdong), Baisha (Changsha/Hunan), Jinling (Nanjing), and Sedrin. Sedrin has been expanding its advertising campaign over the past few months and set to make a go of it around the country while Zhujiang is dominant in Guangdong. However, that pales in comparison with A-B's control of Harbin Beer and an equity interest in Qingdao, the number 2 and 5 beers in China and both establishing international presences. Further, A-B's Budweiser brand is one of the top placed foreign brands in China. InBev is currently the 3rd biggest brewer in China behind Qingdao and China Resources, taking over A-B would lead them to controlling the China market through A-B's Chinese brands and its shares in Qingdao.

It's going to be an interesting fight during the latter parts of this year and next in the beer industry. In Beijing, the fight between Yanjing and Qingdao is going to get a little more crowded as Snow and Budweiser/Harbin are both opening up major breweries close to the city. Further expansion of the Harbin label is expected in the Shanghai area as well.

While it may be hard for those in St. Louis to accept A-B's loss of independence, the beer game is a global one and A-B's China possessions make it a major player and a coveted entity.

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