Last Summer, InBev bought Budweiser in a $52 billion dollar takeover to globalize Budweiser and Bud Light, while expanding distribution in the U.S. of its premium beers, most notably Stella and Beck’s.
The question is will this deal go ‘Stella’ or ‘Brahma’? Stella Artois was famously refashioned from a blue collar Belgian beer into a premium brand in Britain and the United States. But Brahma has never really caught on, despite years of attempting to export Brazil’s most famous beer. Can Budweiser be another Stella Artois around the world? Can Stella be another Bud in the U.S.? Perhaps, but is that the right strategy for 2009? InBev might be better served by focusing on a domestic policy for its brands. Let me explain.
I looked into BrandAsset Valuator, the largest database of consumer perceptions in the world. Stella is a strengthening brand with U.S. Consumers. Between 2006-2008, Stella’s pricing power improved by 7%, while its relevance (appropriate for me) and liking grew by 14% and 19% respectively. Beck’s is another story. It’s pricing power and loyalty are flat and it’s differentiation has declined by 10%. And while beer is supposed to be recession-proof, I’m not so sure that premium beer is. Consumers are trading down, not up. If InBev diverts its efforts away from the U.S., to the global expansion of Bud and Bud Light, its premiums may face a hard year in the U.S. Market.
Secondly, I’m concerned that as InBev focuses on integrating operations and distribution systems in 2009, they won’t focus as much attention as they should on the brands that will do well in the downturn - Bud and Bud Light. Fewer marketing dollars will have to be spread across a bigger portfolio, and the stated benefits of combining the companies probably won’t be realized until 2010. Look for more layoffs on top of the ones announced, which will add further consumer apathy towards the company and its key brands.
If I were InBev, I would be very worried about Coors and SAB/Miller. Miller in particular will be in a great position next year, since they have pretty much completed the integration with SAB. Miller is doing very well with consumers. It’s preference is up by 10% and it’s emotional commitment is up by 19% over the past three years. And with commodities prices on the decline, Miller may choose to launch a price war, which it may well win given where InBev’s focus will be next year. It looks like what happened with the banks and the mortgage lenders all over again: a company overextends itself and pays too much for a company right when a perfect storm hits.
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