June 16, 2008
America’s Beer in Foreign Situation
By Tom Ryan
The $46 billion unsolicited bid by Belgian’s InBev for Anheuser-Busch has stirred up grave concerns over lost jobs and the loss of a national icon for corporate America. But from a branding perspective, many are wondering how the “America’s King of Beers” would fair under foreign ownership.
Long wrapped around patriotism, Budweiser uses red, white and blue as its colors. It’s often employed soldiers, Clydesdale horses, and stock cars in its advertising. One past slogan announced: “American owned. Brewed here. Born here.” And although competitor Miller was also sold to a foreign company, Budweiser’s positioning is seen by many as too Americana.
One particularly notable ad was the Super Bowl spot that ran after Sept. 11, 2001, that showed its famous Clydesdale horses bowing in tribute to the victims of the attack.
“I was sitting around a room when that advertisement ran with a bunch of rednecks … guys who love football … and they were sitting there with tears running down their faces because their beer understood how they felt,” Ted Parrack, chief strategic officer of Colangel marketing agency, told Reuters. “That’s gone if that becomes an international company.”
But other beer industry observers believe Budweiser’s loyal fans won’t create a huge backlash.
“There’s no real reason for InBev to take away from the tradition Anheuser-Busch has built,” said Austin Wilson, publisher of Draft magazine. “The Anheuser-Busch brand is just so strong in this country. I’d be surprised if it was even possible to detract from that brand.”
Politicians and union organizers are clearly concerned about InBev’s reputation for cost cutting. But InBev has already made several concessions to create a friendlier deal. These include a proposal to keep St. Louis as the new company’s headquarters, maintaining Anheuser-Busch’s existing breweries, retaining the Anheuser-Busch name in some way and making Budweiser its flagship brand. InBev also said that it plans “to expand Budweiser even further, through our extensive distribution network.”
If the deal happens, InBev, which owns Stella Artois, Beck’s and Bass, would become the world’s largest brewer, and benefit from significant economies of scale.
Without overwhelming political or consumer protests, many expect the deal will go through. Anheuser-Busch’s stock has been stagnant for years. While politically entrenched, the Busch family holds only a small stake in the company.
But former Anheuser-Busch marketing executive Bill Finnie told NPR that it will not be easy to make the combination work.
“Done wrong, it’s going to be a disaster for InBev, for Anheuser-Busch and its people,” says Mr. Finnie. “Done right, it could be a huge win for all three.”
Discussion Questions: What do think of the InBev/Anheuser-Busch deal? Is foreign ownership a bad idea for Anheuser-Busch and the Budweiser brand?
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I’m rather surprised by the amount of negative reaction this is generating; sure, one would expect fallout in St. Louis–especially coming only a few short years after loss of May Company, AG Edwards, etc–but the reaction here on RW seems no different than on the Post-Dispatch site. And I’m not sure whether this is because it’s seen as a foreign takeover of a distinctly “American” brand–the one with the Czech name and the Scottish horse mascot(s)–or because it’s a foreign takeover, or even because it’s just (yet) another takeover, period. But of course talk is cheap, and many will get over it…after they’ve had a few beers.
Budweiser is a branding juggernaut built on sports marketing and nationalism and tradition. I don’t think I’d shock anyone by claiming the brand is not built on producing the world’s finest-tasting brews; it’s, well…it’s the Budweiser of beer, so to speak.
Cutting the AB sports marketing budget is dangerous. A national icon like Budweiser has to remain iconic through any kind of transition like this; it can’t take a hiatus from the national consciousness.
InBev stock is down about 1/3 since October. It’s unlikely that economies of scale can be improved significantly for Anheuser-Busch. They already have about half the American market, and the major costs are advertising and physical distribution. Yes, InBev could cut the ad spending, but that isn’t an economy of scale, since Anheuser-Busch could do exactly the same thing by itself.
As for the “American” marketing angle, beer consumption is notoriously sensitive to price, so “loyalty” is questionable. Furthermore, InBev could thwart the “American” issue by listing its stock in the USA, and changing its name to We Love America Worldwide Beer Company, Inc. InBev isn’t an inspiring name anyway.
For me, this deal has a “wrong” feeling about it, I think because it’s another piece of fallout from the poor economy.
Budweiser is an American icon and A-B’s corporate culture has propagated a mostly healthy “good times” ethos that is reinforced by vigorous spending on advertising and event sponsorships.
So it doesn’t feel quite right that the company becomes subject to an unsolicited takeover bid largely because the U.S. dollar has slipped relative to the Euro. It would feel worse if InBev were to squeeze profits out of the deal by trimming back on marketing and sponsorship spending.
To me foreign ownership is less of an issue than the face that someone, anyone else will own Anheuser-Busch. When a company comes in, there are inevitable changes. Those marketing, community, employee, supplier strategies have created the image and success the brands have today. If the company is being purchased because it is profitable/successful/positioned well or has strong brand image, changing what the company has done is likely to have a negative impact. There are many examples of this.
While Bud will no longer be able to say American owned, they can still say American born and American made. Keeping the image involves more than just keeping the Clydsedales in the commercials. Any company taking over the brands needs to be cognizant of how the brands have been created and maintained. Otherwise they are taking over a successful brand and are likely to be surprised when it is no longer successful.
I live and work in St. Louis so to me, Anheuser-Busch means even so much more than just beer. In this city, Anheuser-Busch is as much a part of the community and landscape as the Arch.
But with even all the emotion set aside, I think there will be another important ingredient missing if Belgium’s InBev takes over. It’s one of the main ingredients that makes Budweiser the “brand” that it is; simply put it’s Sports! InBev has already said it will cut by a half billion dollars the sports sponsorships. I could write several paragraphs on that one topic alone, but does anyone believe that the brand will remain as strong long term without the sponsorship of sports events? By the way, I have tickets for tomorrow’s Cardinals game at Busch Stadium; or would that be InBev Stadium?
Is InBev wiser than Budweiser? If so, Anheuser Busch will still remain a kingly stable of fine beers while ruled from within the Kingdom of Belgium but St. Louis’ pride will wilt in the hot, humid summer sun for which St. Louis is also famous, or infamous.
If not, AB will trump InBev by acquiring a full acquisition of its Mexican partner, stay independent and continue to be a cardinal contributor to the Pride of St. Louis and a proud companion to its fine baseball team.
Knee jerk reaction: Yes, it’s bad.
Somewhat more reasoned reaction; Yes, it’s bad.
Some products and brands do become icons associated with their country of origin. That doesn’t necessarily mean they have to stay that way to remain viable brands–but moving ownership out of the country of origin in a visible way (and everything anyone cares about is highly visible these days) does change things.
Having Budweiser under foreign ownership is quite likely one of those cases. Example: No one in Australia gave a tinker’s darn when Foster’s was exported and brewed internationally. Try doing that with Victoria Bitter (VB) and someone will have your head on a boomerang. Same thing with Guinness.
It works in the auto industry as well. I doubt many Jaguar owners know or care where the marque is owned these days (India)–but would Porsche ever survive severed ties with Germany? I don’t think so.
The point isn’t what InBev would do to MISmanage Bud–they would most likely do the right thing and largely leave it alone. The damage will come from what they will be unable to KEEP in the brand persona. Certain elements of the brand that are freely ascribed by loyalists today will slip away. And there is nothing InBev could do about it.
The beer industry has been changing for years. First there was global consolidation and second, the explosion of micro-brewers.
Anheuser-Bush is typical of many American companies. America is a big and highly competitive market. These companies focus all their efforts within the market. Then one day they wake up with a foreign firm buying them. Prior foreign buying up of American companies included the Japanese buying technology, Arabs buying real estate and Europeans buying retail. Most sold out at a loss.
This time the world has changed. We are still early in the globalization of consumer products, but there is no stopping this trend. Losing Anheuser-Bush hurts some American pride, but we will see more of this in the next few years. The trend can be expected to continue until the dollar increases in value.
Most acquisitions present integration and scale benefits without much change to branding. Becoming more of a player across beverage alcohol could make AB’s already strong distribution network even stronger.
Globally, InBev has left their best brands alone and they recognize that beer is such a local business. However, there are few brands as American as Budweiser. Rarely would we be so wary of an acquisition on a marketing message. Should the deal go through, InBev will need to be very inventive on how to credibly morph the Budweiser message.
I believe it is capitalism that makes America work. Bud is a huge American icon, InBev must know that and any deal put forth should be structured around keeping Bud the king of beers. Don’t forget, AB also owns some profitable amusement properties and other consumable brands that hold considerable market share. This deal should be about the business and not about altering Bud’s position in the category. I agree. Done correctly, this will be a winning strategy for all involved.
I have not seen many of these acquisitions fare well. One that comes to mind is Brach’s Candy. Jacob Suchard ran it into the ground. What Anheuser-Busch does not need it another layer of management. Given their size they have been pretty adept at adjusting to market conditions and growing their brands. The complexity of InBev controlling AB will inevitably lead to more brands added to the mix and cannibalization of the existing brands. I cannot see any benefit to AB stockholders in the long term.
Get used to it. The Bush economy has devalued the dollar to the point where American icons are ripe for buy-out from foreign interests flush with elevated euros, or yen, or yuan. We’re going to have to have a national discussion about what we think our currency should do, and whether we want to keep our top domestic companies.
I agree that it’s a bad idea.
On an emotional level and business level, I really hate to see an American icon sold out to a foreign interest.
Might as well sell off Coca Cola, PepsiCo and the NFL while we’re at it.
Setting all the kumbaya global marketplace stuff aside, I really think we need a resurgence of good ol’ American imperialism.
What do I think about another foreign company coming to the states and trying to gobble up an American institution? Not such a good thing! AB, as it’s been said, is woven into the fabric of Americana. They are not just another brewer–they “are” American Beer. The same would go for any other commodity out there that has been developed, nurtured, maintained and produced here in the good ol’ USA. People take pride in what he have here and I don’t think they’ll take too kindly to this acquisition.
With all of the emotions now aside, this is a business deal. But some of the same factors will cross-over and influence how well this deal will turn out. Sales could very easily drop if the American people who are buying an American beer find out that it is no longer made by an American (controlled) company…better be ready with plan B. InBev has said that they will also severely cut back on their sports endorsements/sponsorships (another bad idea). I’d call that “strike 2”–better make that Plan C.
I would think that “if” InBev could find a way to leave AB’s image; i.e. American beer and sports, and infuse money into manufacturing process, marketing and distribution efforts, that maybe they could make this work, but they are better known for their cost-cutting than their spending.
I would say leave this one alone and go chase after Heineken.
There are times when selling out is the right thing to do, but AB is a strong company. It’s a marketing powerhouse and a category leader. They are NOT a family business looking for a way out, they are NOT in need of rescuing, and they are NOT at risk of ‘missing the boat’ by staying independent.
The buyout offer should be taken as nothing more than a wake up call for management. They need to become their own version of InBev, not part of InBev. They’re big enough and strong enough. Isn’t that the American way?
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I’m rather surprised by the amount of negative reaction this is generating; sure, one would expect fallout in St. Louis–especially coming only a few short years after loss of May Company, AG Edwards, etc–but the reaction here on RW seems no different than on the Post-Dispatch site. And I’m not sure whether this is because it’s seen as a foreign takeover of a distinctly “American” brand–the one with the Czech name and the Scottish horse mascot(s)–or because it’s a foreign takeover, or even because it’s just (yet) another takeover, period. But of course talk is cheap, and many will get over it…after they’ve had a few beers.
Budweiser is a branding juggernaut built on sports marketing and nationalism and tradition. I don’t think I’d shock anyone by claiming the brand is not built on producing the world’s finest-tasting brews; it’s, well…it’s the Budweiser of beer, so to speak.
Cutting the AB sports marketing budget is dangerous. A national icon like Budweiser has to remain iconic through any kind of transition like this; it can’t take a hiatus from the national consciousness.
InBev stock is down about 1/3 since October. It’s unlikely that economies of scale can be improved significantly for Anheuser-Busch. They already have about half the American market, and the major costs are advertising and physical distribution. Yes, InBev could cut the ad spending, but that isn’t an economy of scale, since Anheuser-Busch could do exactly the same thing by itself.
As for the “American” marketing angle, beer consumption is notoriously sensitive to price, so “loyalty” is questionable. Furthermore, InBev could thwart the “American” issue by listing its stock in the USA, and changing its name to We Love America Worldwide Beer Company, Inc. InBev isn’t an inspiring name anyway.
For me, this deal has a “wrong” feeling about it, I think because it’s another piece of fallout from the poor economy.
Budweiser is an American icon and A-B’s corporate culture has propagated a mostly healthy “good times” ethos that is reinforced by vigorous spending on advertising and event sponsorships.
So it doesn’t feel quite right that the company becomes subject to an unsolicited takeover bid largely because the U.S. dollar has slipped relative to the Euro. It would feel worse if InBev were to squeeze profits out of the deal by trimming back on marketing and sponsorship spending.
To me foreign ownership is less of an issue than the face that someone, anyone else will own Anheuser-Busch. When a company comes in, there are inevitable changes. Those marketing, community, employee, supplier strategies have created the image and success the brands have today. If the company is being purchased because it is profitable/successful/positioned well or has strong brand image, changing what the company has done is likely to have a negative impact. There are many examples of this.
While Bud will no longer be able to say American owned, they can still say American born and American made. Keeping the image involves more than just keeping the Clydsedales in the commercials. Any company taking over the brands needs to be cognizant of how the brands have been created and maintained. Otherwise they are taking over a successful brand and are likely to be surprised when it is no longer successful.
I live and work in St. Louis so to me, Anheuser-Busch means even so much more than just beer. In this city, Anheuser-Busch is as much a part of the community and landscape as the Arch.
But with even all the emotion set aside, I think there will be another important ingredient missing if Belgium’s InBev takes over. It’s one of the main ingredients that makes Budweiser the “brand” that it is; simply put it’s Sports! InBev has already said it will cut by a half billion dollars the sports sponsorships. I could write several paragraphs on that one topic alone, but does anyone believe that the brand will remain as strong long term without the sponsorship of sports events? By the way, I have tickets for tomorrow’s Cardinals game at Busch Stadium; or would that be InBev Stadium?
Is InBev wiser than Budweiser? If so, Anheuser Busch will still remain a kingly stable of fine beers while ruled from within the Kingdom of Belgium but St. Louis’ pride will wilt in the hot, humid summer sun for which St. Louis is also famous, or infamous.
If not, AB will trump InBev by acquiring a full acquisition of its Mexican partner, stay independent and continue to be a cardinal contributor to the Pride of St. Louis and a proud companion to its fine baseball team.
Knee jerk reaction: Yes, it’s bad.
Somewhat more reasoned reaction; Yes, it’s bad.
Some products and brands do become icons associated with their country of origin. That doesn’t necessarily mean they have to stay that way to remain viable brands–but moving ownership out of the country of origin in a visible way (and everything anyone cares about is highly visible these days) does change things.
Having Budweiser under foreign ownership is quite likely one of those cases. Example: No one in Australia gave a tinker’s darn when Foster’s was exported and brewed internationally. Try doing that with Victoria Bitter (VB) and someone will have your head on a boomerang. Same thing with Guinness.
It works in the auto industry as well. I doubt many Jaguar owners know or care where the marque is owned these days (India)–but would Porsche ever survive severed ties with Germany? I don’t think so.
The point isn’t what InBev would do to MISmanage Bud–they would most likely do the right thing and largely leave it alone. The damage will come from what they will be unable to KEEP in the brand persona. Certain elements of the brand that are freely ascribed by loyalists today will slip away. And there is nothing InBev could do about it.
The beer industry has been changing for years. First there was global consolidation and second, the explosion of micro-brewers.
Anheuser-Bush is typical of many American companies. America is a big and highly competitive market. These companies focus all their efforts within the market. Then one day they wake up with a foreign firm buying them. Prior foreign buying up of American companies included the Japanese buying technology, Arabs buying real estate and Europeans buying retail. Most sold out at a loss.
This time the world has changed. We are still early in the globalization of consumer products, but there is no stopping this trend. Losing Anheuser-Bush hurts some American pride, but we will see more of this in the next few years. The trend can be expected to continue until the dollar increases in value.
Most acquisitions present integration and scale benefits without much change to branding. Becoming more of a player across beverage alcohol could make AB’s already strong distribution network even stronger.
Globally, InBev has left their best brands alone and they recognize that beer is such a local business. However, there are few brands as American as Budweiser. Rarely would we be so wary of an acquisition on a marketing message. Should the deal go through, InBev will need to be very inventive on how to credibly morph the Budweiser message.
I believe it is capitalism that makes America work. Bud is a huge American icon, InBev must know that and any deal put forth should be structured around keeping Bud the king of beers. Don’t forget, AB also owns some profitable amusement properties and other consumable brands that hold considerable market share. This deal should be about the business and not about altering Bud’s position in the category. I agree. Done correctly, this will be a winning strategy for all involved.
I have not seen many of these acquisitions fare well. One that comes to mind is Brach’s Candy. Jacob Suchard ran it into the ground. What Anheuser-Busch does not need it another layer of management. Given their size they have been pretty adept at adjusting to market conditions and growing their brands. The complexity of InBev controlling AB will inevitably lead to more brands added to the mix and cannibalization of the existing brands. I cannot see any benefit to AB stockholders in the long term.
Get used to it. The Bush economy has devalued the dollar to the point where American icons are ripe for buy-out from foreign interests flush with elevated euros, or yen, or yuan. We’re going to have to have a national discussion about what we think our currency should do, and whether we want to keep our top domestic companies.
I agree that it’s a bad idea.
On an emotional level and business level, I really hate to see an American icon sold out to a foreign interest.
Might as well sell off Coca Cola, PepsiCo and the NFL while we’re at it.
Setting all the kumbaya global marketplace stuff aside, I really think we need a resurgence of good ol’ American imperialism.
What do I think about another foreign company coming to the states and trying to gobble up an American institution? Not such a good thing! AB, as it’s been said, is woven into the fabric of Americana. They are not just another brewer–they “are” American Beer. The same would go for any other commodity out there that has been developed, nurtured, maintained and produced here in the good ol’ USA. People take pride in what he have here and I don’t think they’ll take too kindly to this acquisition.
With all of the emotions now aside, this is a business deal. But some of the same factors will cross-over and influence how well this deal will turn out. Sales could very easily drop if the American people who are buying an American beer find out that it is no longer made by an American (controlled) company…better be ready with plan B. InBev has said that they will also severely cut back on their sports endorsements/sponsorships (another bad idea). I’d call that “strike 2”–better make that Plan C.
I would think that “if” InBev could find a way to leave AB’s image; i.e. American beer and sports, and infuse money into manufacturing process, marketing and distribution efforts, that maybe they could make this work, but they are better known for their cost-cutting than their spending.
I would say leave this one alone and go chase after Heineken.
There are times when selling out is the right thing to do, but AB is a strong company. It’s a marketing powerhouse and a category leader. They are NOT a family business looking for a way out, they are NOT in need of rescuing, and they are NOT at risk of ‘missing the boat’ by staying independent.
The buyout offer should be taken as nothing more than a wake up call for management. They need to become their own version of InBev, not part of InBev. They’re big enough and strong enough. Isn’t that the American way?