Hostile takeovers – the flavour of the month

Constellation Brands, the world’s largest wine company, reaffirmed its hostile bid to buy Canadian rival Vincor International for about USD 900 million. Vincor International is one of the world’s top ten wine companies by revenue with wineries in British Columbia, Ontario, Quebec, New Brunswick, California, Washington State, Western Australia and New Zealand. Vincor is also one of the largest wine importers, marketers and distributors in the United Kingdom.

Pass the smelling salts, please

What do you make of that: First Anheuser-Busch used its pricing power to engage its rivals in a price war which must have cost them an arm and a leg. Then the brewer latched onto lowbrow humour that is best left unmentioned. Ok, if you must, here’s an example. A recent ad for its Bud Extra with caffeine, ginseng and guarana reads: “You can go home early when you’re married. Go longer with Bud Extra. The beer … that will unshackle the ball and chain from your evening. So go ahead, linger.” Your reaction? A loud yawn? Interestingly, though, Anheuser-Busch next turned around and bewailed the low image of beer in the eyes of the public. That begs the question: Who is responsible for that? The best is yet to come: Anheuser-Busch has since been calling on its competitors for a generous support of its plan to do some generic beer advertising that will raise the image of beer. You have to give it to Anheuser-Busch, few could have pulled that one off.

Fortune Brands quarterly profit falls 59 percent

In November, Fortune Brands Inc., whose products range from Jim Beam Bourbon to Titleist golf balls, said third quarterly profit fell 59 percent from a year earlier, when it recorded a tax credit, as it expensed some of its acquisition costs. According to media reports, profit fell to USD 92.2 million from USD 226.8 million a year earlier.

Doom, gloom and disaster

At the end of October, Anheuser-Busch had to admit to a greater than expected drop in quarterly profit as price cuts on key brands hurt the company’s bottom line. Even more embarrassingly, the brewer also warned that its full-year-profit would fall 10 percent to 11 percent below last year’s figures and its shares slid 2.4 percent to their lowest in more than three years. The company reported a third-quarter profit of USD 518 million. This compares with earnings of USD 684 million in the same quarter last year.

A marriage is made in heaven

… but its problems are usually homemade. When Molson and Coors announced their plans to merge last year, the response from investors and the international media was a loud yawn. With combined beer sales of 51 million barrels, the new entity became the world’s fifth-largest brewing company by volume, with combined sales of USD 6 billion (and a long way behind InBev, SABMiller, Anheuser-Busch and Heineken in both volumes and market capitalisation). The transaction brought together Coors, which is the number three brewer in the United States with a market share of 11 percent and the number two brewer in Britain with a market share of 21 percent, with Molson, Canada’s leading brewer with a 43 percent market share and the third-largest brewer in Brazil. ....

The cuddle factor

What is it that persuades advertisers and marketers that grown-up consumers of beverage alcohol products will make brands with animals and infantile logos their tipple of choice?

Best practices

In September, Anheuser-Busch agreed to pay USD 120 million (EUR 101 million) to settle lawsuits brought by the family of former Major League Baseball star Roger Maris. The brewer said in a filing with the U.S. Securities and Exchange Commission that it would take a pre-tax charge of USD 105 million in the third quarter. The Maris family, which operates Maris Distributing Co. in Florida, had been asking for up to USD 5 billion from the top U.S. brewer, which the Maris family claimed had made false statements about the family’s beer distributorship. Anheuser-Busch had said that the distributor was not meeting standards and was re-labelling and repackaging old beer. ...

Brands reborn

What did you do with a tired brand? You axed it. These days, with some luck, you can turn it into a retro brand. This seems to have happened to Pabst Blue Ribbon. The brand, which once was the pride of blue collar workers, has languished for years on the shelves until it was "discovered" by young hipsters in Portland, Oregon, and its popularity began to spread out. Without initial prompting, Pabst Blue Ribbon became the symbol of authenticity and cool. It has been enjoying double-digit growth every year since 2003. ..

Reason for optimism

Leading Mexican brewer Modelo has revised its 2005 forecasts for growth in domestic and foreign markets upwards, following first-quarter sales volumes far outstripping its targeted expansions this year of a 5 percent annual increase in exports and a 3 percent rise in domestic sales. In the first quarter, shipments abroad soared 23.6 percent. Apparently, Modelo, which is half owned by U.S.-based Anheuser Busch, has no short-term plans to raise export prices after bumping up domestic prices in late February this year. Modelo last raised export prices in January 2004. ..

SABMiller makes one of beer’s biggest buys

As was to be expected, SABMiller came first in the race to acquire South America’s number 2 brewer Bavaria for USD 7.8 billion including debt and interests in subsidiaries. The deal makes SABMiller the world’s second-biggest brewer behind InBev. SABMiller said it was buying a 71.8 percent stake in Bavaria from the Santo Domingo family by issuing 225 million shares worth about USD 3.46 billion. This will give the family a 15.1 percent stake in the combined group and make the Santo Domingos SABMiller’s second biggest shareholder, behind Altria (formerly Philip Morris), which holds 25 percent after selling Miller to South African Breweries in 2002. ...