After years and years of chasing, buying, and stripping companies, InBev announced, prior to the release of their latest earnings report, that the company has sold their Australian business to the Japanese brewer, Asahi, for $11.3 billion. ABI said they sold that business to reduce their massive debt, which was brought on by the recent SABMiller acquisition. Selling this piece of InBev’s Asian business is considered their plan “B.” InBev had originally attempted a public offering of their Asian business, but reneged as it seemed ABI could not get the valuation they desired. According to the pundits, this sale and reduction in debt puts ABI in a position to acquire more acquisitions in a faster growing market. If that is the case, how do the U.S. AB distributors feel?
The recently released second quarter results for ABI reflect higher revenue and earnings driven by their global market, led by Brazil and other countries. Once again, though ABI’s global results look good, their U.S. results are not good. ABI’s market share in the U.S. dropped .55%, in addition to a.1% loss in the first quarter. ABI blamed these results on raising prices, needed as a result of increased costs. ABI also announced that Michelob Ultra is 10% of their U.S. business, and still growing.
Are the pundits correct in saying that ABI’s business model is simply to buy and gut companies, but not sell them? This seems to hold true concerning ABI’s goal to reduce their $104 billion-dollar debt. Yet, why are they are selling their highly profitable and mature Australian business, something ABI never does, only to reduce debt, then return to the same debt-laden situation?
While it is hard not to admire what ABI has accomplished globally, the question is, can their business model continue to work while losing substantial market share in the U.S.? And, at the same time, SABMiller’s debt seems to have changed ABI’s operating strategy.
There is no reason that logically indicates any short-term changes for ABI. In fact, there may be a sense of urgency in their offices to get something done, and done quickly. Whatever happens, the industry and the world will soon know.
I never think about the future – it comes soon enough.