What made In-Bev decide to buy Anheuser-Busch?

Anheuser-Busch InBev: A Mega Merger in Brewing Industry

Anheuser-Busch was acquired by In-Bev for $52 billion in cash in 2008 in order to form the new firm Anheuser-Busch InBev. Three worldwide brewing companies—Interbrew from Belgium, AmBev from Brazil, and Anheuser-Busch from the United States—were successively merged to create AB-in Bev. The top brewing company, SABMiller, which is based in London, was followed by In-Bev. The combined board offered Anheuser-Busch two seats (AB InBev).

The Goal: Increasing Sales and Profits

The major goal of the acquisition was to raise annual total sales. If the acquisition goes through, sales of more than $36.4 billion are predicted to be generated. This purchase needed to outperform the top brewer at the time. Increasing its sales means an increase in its profits. If the profits exceed the revenue generated before the acquisition, then it is a worth deal (Alfred and Warner). This could make it easier to reach more customers of the world at much ease e.g. in Africa and Asian markets. Apparently, a company endowed with significant financial resources usually stands a high chance of exploring its potentials and realizing maturity sooner.

Expanding Market Share and Localization

Moreover, considering the fact that, Anheuser-Busch was leading in the United States, could make it easier to increase and defend its market share, and the growth rate in the market share would exceed the 1.4% rate. You realize that mature company’s brands are usually for both levels of consumers because the prices will always be remain constant, therefore to ensure that it take care of the low-income customer, it was cheaper to buy AB which was already meeting the needs of low-income consumers rather than introducing production of a new product.

Also, the need to localize their products whereby, with the fact that AB was a local company and using AB to sell the new products could be easily accepted. Sometimes it is normally hard for a foreign investor to sell their product in the country since the local people will always prefer to buy from the local company. Therefore the products of the new corporation are localized. Considering that 90% of In-Bev revenue was from the American market, they opted to have a local brand that would be produced by the New York-based subsidiary company. This could, in turn, reduce the cost of exportation from Belgium to America (David and Kesmodel).

Cutting Costs and Maintaining Sales Volume

To help cut some of its costs. The AB-InBev company has managed to lower its costs and grabbed gross margins currently flowing to distributors. Selling through distributors means that the price has to be marked up. In America alone, Anheuser has 13 distributors. It is cut costing to sell through dealers than directly to consumers. Currently, it has matured and the sales volume does not significantly increase or decrease. The marketing and corporate social responsibility activities undertaken are just meant to maintain the sales volume.

In Conclusion

In conclusion, the buying of Anheuser-Busch by InBev has led to increased sales which have made the new company AB-InBev a leading brewing company in the world. The buying was propelled by the need to increase and defend the market share, to help cut on cost such as exportation, the need to localize the products.

Work cited

AB InBev, “ Anheuser-Busch InBev”. Code of Business Conduct, 2011, Retrieved on: From, http://www.ab-inbev.com/pdf/ABInBev_CodeOfBusinessConduct_2011.pdf, Accessed on 21 Jan, 2017.

Alfred G. Warner, “the Evolution of the American Brewing Industry”2004

David, Kesmodel., “A-B InBev Explores Consolidating Distribution Network” Wall Street Journal, 2006