Showing posts with label beer. Show all posts
Showing posts with label beer. Show all posts

Wednesday, June 18, 2008

InBev, in Bid for Bud, Courts Community






It really ought to be called “uncommon sense”. While it may seem that InBev are doing what any company pursuing an unsolicited takeover bid should do by prosecuting a charm offensive with stockholders, the community, and government, you may be surprised how few companies get it right. The sale of the largest US brewer and its iconic Budweiser brand to Brazilian controlled, Brussels based InBev is not sitting well with US lawmakers or many in St. Louis. However, the proposed $65/share offer, that could result in a $57 billion total takeover bid with assumption of debt, should be sitting well with shareholders who have seen little positive share movement in recent years as Bud’s share and historic pricing control over the US market have been eroded by the massive expansion of small micro-breweries, rising imports, and the search by many beer drinkers of the elusive “anti-Bud”.

It would of course be crazy for law makers and community leaders to comment favorably on the proposed transaction. Nobody likes change and a change that sees the country’s leading brewery, and its leading brand, Budweiser, sold to the Brazilians, is not going to be popular. InBev gets this. This is not the first time the company has faced local hostility during its massive expansion and they have learned much over the years. In addition to a charm blitz aimed at wooing the St. Louis media, community opinion leaders, and Missouri’s Congressional delegation, InBev has set up a website to promote the acquisition by providing reassuring facts and grist for the media mill. This is a very smart move and, again, while it will strike most people as common sense, it is not something done with the regularity necessary to make it “common”.
If anyone hadn’t previously noticed the global shift in economic power that is taking place and gaining momentum during the first decade of the 21st Century, this should do it for you. Anheuser-Busch is not a company in trouble. It is not a company without global reach. It is however a tasty target in the on-going consolidation of global brewing that has seen US number two, Miller, become part of South African Breweries to make the world’s current largest brewer, and the nation’s third largest brewer, Coors, merge with Molson of Canada in 2004 to become the world’s fifth largest beer company. Indeed, that consolidation, and the subsequent merger of SABMiller and Molson Coors operations in the US and Puerto Rico just over six months ago, helped make the InBev takeover bid possible by putting further competitive pressure on Anheuser-Busch.
So, when the 'Show-Me State' gets all worked up about Anheuser-Busch being sold to foreigners, they may care to note that there aren’t really any US owned mega-brewers left but Anheuser-Busch. And even if the company somehow survives the InBev takeover bid, its Missouri roots will likely be diluted by the merger of Anheuser-Busch with Grupo Modelo of Mexico (maker of Corona), in which Anheuser –Busch already has a 50% stake. While this strategy is being discussed a means to make a hostile takeover by InBev unpalatable, there is substantial speculation that InBev may like to swallow the Corona maker in the deal anyway. While InBev chief Carlos Brito seems opposed to further upping the deal, it seems unlikely that he would really balk at the opportunity.
The bottom line is that InBev is doing all the right things and making all the right noises. While politicians can volubly declare their opposition to the deal, the fact is that there’s really not much they can do about it as there are no substantial regulatory hurdles to such an acquisition. If Anheuser-Busch shareholders like the offer, that should pretty much be that. The Busch family controls less than 5% of the stock while Warren Buffett’s Berkshire Hathaway Inc., owns over 5% of shares and stands to make some USD $600 million on a three year investment in the company. The largest single shareholder, Barclay's PLC, with over 6% interest in the company, is unlikely to oppose a tidy profit.
“That Buffett is a clever chap. I haven’t been in beer shares for some time. With the economy on the way down, your booze portfolio should be in hard liquor. Beer may be relatively more affordable, but ‘liquor is quicker’ as they say. I can’t see Anheuser-Busch staving this bid off. A Grupo Modelo merger may put InBev off temporarily if they only have Board approval for a purchase in the $50 billion range, but Anheuser-Busch has not grown as aggressively as it should have internationally and this is the price it pays”, said the Bloated Plutocrat. The Bleeding Heart is still so angry with your Genteel Moderator over last week’s Big Oil vs Big Government post that he would not file written remarks. When I did speak with him over the phone, he insisted that “this is all because of NAFTA”. When I explained that the proposed InBev deal had nothing to do with NAFTA, he became very distraught and screamed that I didn’t understand international trade and that this was all just another unwanted side-effect of a free-trade policy. This is of course partly true. But if Anheuser-Busch were buying Tsing-Tao, I somehow doubt the Bleeding Heart would be railing against free trade…
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Thursday, April 24, 2008

The Cows are Drunk and My Beer Tastes like Cow Patty…it Must be Earth Day!


It has come to the attention of Your Genteel Moderator that some of his refined readers believe he has been unkind in consistently taking companies to task for greenwashing, i.e. spinning their actions or processes as environmentally friendly when there is at least some evidence to the contrary. Having reviewed past Blogposts, there has certainly been a good deal to say about corporate greenwashing, and little have I focused on those actions by companies that do indeed act in ways that represent real, meaningful and effective commitment to the environment. It is therefore with great pleasure that I stitch together this post which covers two of my favourite things: Vermont and Beer.

Looks like those Down East Yankees at the Long Trail Brewing Company have got the green coming and going. The privately held Long Trail Brewery of Bridgewater VT doesn’t release detailed financials but with nearly 90,000 barrels of installed capacity, they stand solidly in the upper ranks of America’s independent craft brewers, have grown solidly and steadily since their 1989 debut, and were just this month ranked (by sales) 22 out of 1,406 small, independent craft breweries across the country. With 19 years of successive growth, expansion plans telegraphed by permits the company has obtained, and continuing rumors of some kind of Anheuser-Busch link-up afoot, we can safely say that this is a business-savvy and successful company, if perhaps another Ben & Jerry’s corporate sell-out in the making.

So when a company like Long Trail (the largest to yet do so) signs on to Central Vermont Public Services “Cow Power” program and begins utilizing electricity generated by the same cows that it flogs the hops and malt leftovers from beer production to as feed, we really are moving into an area of seemingly solid green economics and science. Because not only does electricity generation from the methane released from cow manure represent use of a “green” fuel, it also helps diminish a significant source of so-called greenhouse gas. According to an Earthsave report (ah, those wonderful environmental campaigners unhindered by inconveniences like the truth), animal agriculture is the single largest source of human activity related methane gas emissions. The EPA suggests that it is the third largest such source, following landfills and natural gas systems. In any event, according to multiple sources animal agriculture is a major source of methane, a leading “greenhouse gas”, so diminishing the emission of methane by using cow manure as fuel to generate electricity must be beneficial (even if it simply replaces methane with CO2). Finally, there is a substantial benefit simply from consuming the manure as fuel. You can only spread so much muck on your fields and maintenance of manure slurry is a major environmental issue, and cost, for dairy farmers, so much so that foreign dairy farmers are moving to the US to benefit from less severe environmental regulations, among other things.

Long Trail Principal Andy Pherson must presume that demonstrably and seriously going green will in fact attract more customers and sell more beer. Coming from a small, independent, Vermont craft brewery, this has the intuitive ring of truth to it. Long Trail’s portfolio of ales are not trading on a price proposition. Building increased energy expenditures into the premium charged for their beer, or at least mentally (let’s not toss around any GAP contravention allegations) writing some portion of those costs off to marketing expenditures makes good sense for a company that has long cultivated an independent, eco-friendly image. And there’s the rub for most larger companies. When the Long Trail Brewery of Bridgewater VT does something green like contract for premium electricity (it will allegedly raise the electricity costs by some $ 10,000 per annum), it sounds credible, whether the company has a track record of environmental commitment (and Long Trail does), or not. When Shell puts a number of earthy-crunchy scientists on its TV ads saying how much the company cares about the environment, well, I think they are contributing more methane gas to the environment.

The difference between greenwashing and actually generating positive investor or consumer reaction to meaningful green action seems directly related to the company’s “methane meter” reading. The credibility of the green activity has to be solid. Virgin Airways flying from Amsterdam to London on 20% babassu nut bio-fuel ( see March 5 blog entry) may well advance the development of aviation bio-fuels, but it doesn’t make Virgin “green” and it has the wafting scent of another palm oil environmental disaster in the making. When a company has a comprehensive program in place aimed at diminishing its environmental impact, and the doing so costs them money, it becomes credible and tangible.

The Bloated Plutocrat was not interested. “Beer? I don’t drink beer and unless Vermont miraculously develops a credible wine industry anytime soon, I’m not very interested in the state either. There was that charming Bing Crosby movie of course, but the skiing is much better in the Rockies in any event. As for CVPS creating electricity from cow manure, well Bully for them!” The Bleeding Heart on the other hand hasn’t been so pleased since the civil union legislation went through in Vermont. “ This is exactly what we mean when we talk about “the green economy”! This is the type of change that Senator Obama is talking about – changing the way we do business, changing the way we live, and changing our purchasing behavior. I do hope that I can find Long Trail beers in Fairfield County.”

Your Genteel Moderator must admit to bias in this matter. Having spent a good deal of time in Vermont, where our family has had roots since the middle of the 19th century, and being somewhat fond of Long Trail’s IPA, rather than question the real impact of manure driven electrical generation, I will focus on further study of the company’s portfolio and remind my respected readers to be careful of the carousing beer fed cows (let us hope that Central Vermont Kobe beef is not next on the menu) in the greater Bridgewater area…
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