Shares in Anheuser-Busch, the world’s biggest beer company thanks to a 49% share of the US market, plunged 4% overnight after the traditional earnings power house put out a profit warning as more and more Americans switch to wine or spirits. Check out how Forbes covered the story here.
The St Louis-based juggernaut actually suffered a 2.7% decline in revenue in the previous period and is battling the same stagnant growth as other brewers in first world countries. However, Anheuser-Busch is also under pressure from SAB-Miller, the number two US brewer which was created when South African Breweries bought 64% of the the Philip Morris beer division for US$5.6 billion in 2002 and the recent merger between Coors and Molson, the Canadian beer operation formerly owned by Foster’s.
Watching Anheuser-Busch does bring back memories of a famous John Elliott story from the time when Foster’s was the world’s fourth biggest brewer and a genuine threat. A long-time Elliott watcher takes up the tale:
The way I was told, Elliott was escorted from the Anheuser-Busch building by two security guards under orders of the old man Anheuser. Elliott went to see the boss to talk about a proposal to brew Foster’s in the US for him and by the end had made a threat to take Anheuser on. I can’t recall whether it was a threat to take ’em over or to build a Holmes a Court-style stake of influence, but it ended with Elliott being escorted to the front pavement by security. It was a story which had a currency around the time that Elliott was spending a lot of time with Freddie Heineken, so at the time he was moving in pretty substantial but tough circles.
Hindsight is a wonderful thing but as Foster’s tries to gobble up Southcorp to become the world’s biggest premium wine company, it would be interesting to know what would have happened had it continued to do deals in the global beer market. The exits from the UK and Canada now leave Foster’s barely in the world’s top 15 brewers. While the early Australian wine plays were all good moves, the $3 billion-plus move on Beringer now looks excessive and the jury certainly remains out on Foster’s.
Maybe John Elliott’s vision to Fosterise the world should have continued as the terms of the recent Coors-Molson merger certainly suggest that Foster’s sold its Canadian operations too cheaply for $1 billion in 1998. Similarly, the UK Courage business has flourished since Foster’s sold it to Scottish & Newcastle.