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The $52 B InBev-Anheuser-Busch Deal To Shake Up India's Beer Duopoly

14 April, 2016

 

 

InBev, the world’s largest beer maker by volume, has to acquire US-based Anheuser-Busch in a deal worth $52 billion. What are the implications of the deal for the Indian market? Both the firms are small players in the 158-million cases Indian beer market but this deal could mean some heady competition in the domestic brewery business.

The Indian beer market currently resembles a duopoly in classical economics sense with UB Group (Kingfisher) and SAB Miller (Foster’s) controlling more than 80 percent of the business, but the global deal which would create the world’s largest brewery by far could potentially see a third big player emerging in India.

Although InBev has been focusing on emerging markets, it had only a marginal presence in the country till last year. InBev, which had struck a joint venture with franchisee king Ravi Jaipuria, had taken over operations of Bangalore-based brewery H Dasappa & Sons for rolling out beer brands Tennents and Lowenbrau and is also reportedly planning to bring in another brand, Beck’s thereafter.

InBev is in the process of reviving Dasappa’s existing unit which used to be a contract production site for Shaw Wallace Breweries. The firm has also been negotiating with actor Danny Denzongpa’s Yuksom Breweries in Orissa besides Som Breweries in Madhya Pradesh and Kool Breweries in Haryana.

While InBev was working through its strategy in India, Anheuser-Busch was cementing its own position. Last month it acquired the 50 percent stake held by its Indian JV partner Crown International in Crown Beers India. Besides getting full control over the JV firm, it also got a 500,000-hectolitre brewery located in Hyderabad. One of its flagship brands, Budweiser, which was launched in 2007, has a strong brand recall in the country. Anheuser is aiming to sell more than a million cases this year in India, largely backed by Budweiser. Besides Budweiser, Anheuser-Busch brews and distributes Armstrong, a premium strong beer developed specifically for the Indian market.

With the corporate marriage of InBev and Anheuser-Busch, the global giant will have a strong brewery presence in South India and may eventually look at acquiring units in other regions, specially West and North. Secondly, the combined entity would also have better distribution presence which could further spoil the party for Kingfisher.

 

The Deal

InBev has been pursuing Anheuser for sometime now and it finally clinched it after raising its previous(June 11, 2008) offer price of $65 per share to $70 per share in cash. Anheuser had earlier dismissed the bid as ‘financially inadequate’. The takeover battle took a hostile turn with both firms looking at legal action against each other. However, many US shareholders in Anheuser, including Warren Buffett, were backing the deal.

The new company, to be called Anheuser-Busch InBev, would have net sales of about $36 billion with a bouquet of 300 brands, including Anheuser’s Budweiser and Bud Light besides InBev’s Stella Artois and Beck’s. The deal marks the creation of not just the largest brewer. It is also the birth of a firm which would be one of the top five consumer goods groups in the world.

InBev has been focused on emerging markets since its creation four years back with the combination of Belgian group Interbrew and Brazilian brewer Ambev. With the Anheuser deal it will have an equally strong presence in the developed markets.

After a wave of global consolidation in the brewery business, Britain-based SABMiller and Dutch group Heineken have emerged as the leading international brewers along with InBev and Anheuser-Busch.

 


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The $52 B InBev-Anheuser-Busch Deal To Shake Up India's Beer Duopoly

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