Anheuser-Busch sells stake in Chicago beer distributor
It would have been nice if regulators had turned the other way. But no, in early November 2013 AB-InBev announced they will sell their 30 percent stake in City Beverage Illinois, a beer distributor in the Chicago area, to the Hand Family Cos., to comply with new Illinois alcohol regulation.
For years, AB-InBev has held a stake in City Beverage. When in 2010 they wanted to buy the rest of the company, the regulators stepped in. Not only were they rebuffed from hiking their stake, they were actually forced to dispose of it altogether. This is what they have done now.
In order to raise profits in the U.S., AB-InBev have pursued the strategy to increase their ownership of distributors. Though prohibited in principle by the Three-Tier System, about half of all U.S. states allow exceptions. The reason AB-InBev want to move into this business is that alcohol distribution in the U.S. is fairly profitable. Alcohol distribution has already attracted a slew of purely financial investors seeking reliable and good returns. In 2010, the investor Warren Buffett bought two distributors, a move which made several commentators speculate that he was intent on building a U.S.-wide distribution network for alcoholic drinks.
The other stakeholder in City Beverage is the private equity outfit BDT Capital. In a separate deal in November 2013, BDT Capital together with Hand decided to purchase 100 percent of another Chicago beer distributor, River North, from Yusef Jackson, the son of the civil rights leader, the Reverend Jesse Jackson.
Probably thanks to the Reverend’s political clout, August Busch IV himself in 1998 handpicked Yusef Jackson, then 28, to be the majority owner of this lucrative Budweiser distributor, making him one of the youngest such owners in the country, media wrote at the time.
River North is much smaller than City Beverage, but merged they will create the largest beer distributor in the Chicagoland area, selling over 23.5 million cases of beer (about 2 million hl) a year with a turnover of perhaps USD 350 million. The new entity could rank 11th among the major beer distributors in the U.S., according to Brauwelt’s estimates.
Both transactions, terms of which weren’t disclosed, are pending supplier and regulatory approvals and are set to close by the end of the year.
