China Esquire

Yes, its the weekend and here is my favorite article of the week. A Modern Lei Feng, who is also a lawyer but blogs about other things, had a post about InBev’s bid for Anheuser-Busch. A European beer maker trying to take over an American one? How much could that possibly effect China or have to do with? Plenty it seems:

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.

An article from Beverage World, which is referenced to above, says this about the numbers:

InBev was incorporated in 2004 by Interbrew and PAB. Now it is holding 14 percent of the global beer market, with more than 200 beer brands.
Latest financial report of InBev indicates that the group recorded total sales of EUR 13.308 billion in 2006, with its sales in China rising 7.7 percent. The group has 33 beer brewhouses in eight provinces of China, with total output of more than 4 million tons each year. It has become the third largest beer brewer in China after Qingdao and China Resources.

By taking over Anheuser-Busch, Inbev will control completely the 100-year-old Harbin Beer and 27 percent stakes in Qingdao Beer.

Anheuser-Busch purchased Harbin Beer in June 2004 after buying 29.4 percent stakes in the Chinese company from SabMiller, the world second largest beer company, taking the whole industry by surprise.

In April 2005, Anheuser-Busch bought 27 president stakes in Qingdao Beer through a private share placement, having become the second largest shareholder of Qingdao Beer after the State Owned Asset Management Committee of Qingdao.

Interesting indeed. I wouldn’t naturally think of the Chinese beer market as being a target, though it makes perfect sense: over 1 billion people and both businessmen/young people hitting the bars. Anyways, I just thought it was interesting to see how China comes to play, and the growing Chinese market, in the attempted acquisition of two MNC’s that seem to have little to do with China. I’m not a drinker, but I can still appreciate China business and globalization… even if it comes with a beer.

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