Jul 282015
 

World cup beerSchlitz had a market share of about 40% in the 1980s when Stroh took over the brand in my market. I was definitely aware of the quality problems Schlitz was having on a national basis.  In spite of those concerns, I felt that at worst Schlitz could maintain a 20% market share.

Schlitz had been either the number one or number two bestselling brand for decades, so it seemed only natural to assume that the beer would maintain a reasonable share in the marketplace. When Stroh bought the company, however, support behind Schlitz was eliminated. The rest is history.

July 14th of this year marketed the seventh anniversary of InBev’s acquisition of AB, which many in the industry believe marked a shift in the beer business.  Prior to InBev, the industry’s priority was on market share.  Now it is ROI and the bottom line.

In these seven years, AB has gone from 107 million bbls. to 96 million bbls. in sales.  They have lost over 10 million bbls. in volume.  Overall market share has dropped to 44.7% and these trends are continuing in 2015, as the June Nielsen show AB is down -3.1%.

During this seven year period, InBev directly made over $2.5 billion in cuts and eliminated over 2,300 jobs.  While making these changes their stock went from $70 per share to $129 per share.  No doubt the impact of InBev’s actions has produced outstanding financial results for the company and investors.

What about the AB distributors?  How have they done?  Despite the fact that many AB distributors have lost market share, the same group has increased revenues and profits.  All of this is due to InBev and the expansion of crafts and opening their operations to distribute many of new beers.  For both the AB wholesalers and the craft breweries the timing on this availability could not have come at a more fortuitous period.

InBev did not follow the footsteps of either Stroh, when they purchased Schlitz, or Alan Bond when he acquired G. Heileman Brewing.  Both companies were heavily laden with debt, and as time passed, both collapsed under that weight of their financial woes.  Brands of both companies, while still around today, are mostly bolt-ons for wholesalers with very small volume.

What is interesting is that in one way InBev’s acquisition parallels both Schlitz and Heileman, in that AB’s volume is dropping, and has since been dropping since InBev acquired the brand. Similarly Schlitz’s and Heileman’s volume dropped when they were acquired by Stroh and Alan Bond, respectively.  This, however, is where the similarities end. InBev is a company whose focus is on the bottom line and ROI; it has accomplished what it set out to do, increase the bottom line.  In fact, it was able to continue to acquire additional companies, including Modelo.

The next seven years will be very interesting to see how ABI performs.  In 2022, what will ABI’s market share look like?  Who will they purchase during these years?  Will their stock continue to perform as well as it has since the acquisition? Sooner or later you have to sell something.

Prior to InBev’s take over, AB dominated the market for decades, but when InBev came in, the industry leader looked at the status quo, and it sucked!

 

 Posted by at 6:00 am

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