ABI Buys 10 Barrel

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This caught me by surprise. Anheuser-Busch InBev announced today that it is buying 10 Barrel Brewing, the award-winning brewpub located in Bend, Oregon. 10 Barrel is the brewery that Tonya Cornett, formerly of Bend Brewing, moved to a couple of years ago.

From the press release:

“For the past eight years, we’ve been brewing beer, drinking beer and having fun doing it.” said co-founder Jeremy Cox, who will continue to lead 10 Barrel along with his partners, co-founder and brother Chris Cox, and Garrett Wales. “We are excited to stay focused on brewing cool beers, get our beers in more hands, and make the most of the operational and distribution expertise of Anheuser-Busch,” said Cox.

10 Barrel expects to sell approximately 40,000 barrels of beer in 2014. Apocalypse IPA, the brewer’s most popular beer, accounts for nearly half of the company’s total volume.

“10 Barrel, its brewers, and their high-quality beers are an exciting addition to our high-end portfolio,” said Andy Goeler, CEO, Craft, Anheuser-Busch. “The brewery is a major contender in the Northwest, an area with a large number of craft breweries. We see tremendous value in the brewery’s unique offerings and differentiated style, which 10 Barrel fans know and love.”

In addition to the Bend brewery, the acquisition will include the company’s existing brewpubs in Bend and Boise, Idaho; and a Portland brewpub scheduled to open in early 2015.

The deal should close by the end of the year, though the terms or price have not been disclosed.

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The founders of 10 Barrel also posted a short video explaining their decision and, perhaps more importantly, asking people to give them the benefit of the doubt before rushing to judgment and “let the beer do the talking.”

Anheuser-Busch To Buy Blue Point Brewing

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Anheuser-Busch announced today that they would be acquiring Long Island craft brewery Blue Point Brewing for an unspecified amount. The deal is expected to close in the next quarter, and like its other recent acquisitions, the brewery will remain at its original location in Patchogue, New York.

From the press release

Anheuser-Busch today announced it has agreed to purchase Blue Point Brewing Co., one of the nation’s top craft brewers with more than 40 beers and sales concentrated along the East Coast, in a move that will bring additional resources to Blue Point’s operations, allowing it to meet growing consumer demand for its award‑winning brands. Terms of the agreement were not disclosed.

Blue Point, known for its creativity, was founded by Mark Burford and Peter Cotter 15 years ago in Patchogue, N.Y., where the brewery will continue to operate. Anheuser-Busch also plans to invest in the brewery to grow its operational capabilities and enhance the consumer experience over the next few years.

“We are deeply grateful to our family of loyal employees and customers. Our success was made possible by the hard work of good people and good beer in Patchogue,” said Peter Cotter, who will continue to be instrumental in the success of the brands along with co-founder Mark Burford. “Together, our talented brewing team and Anheuser-Busch will have the resources to create new and exciting beers and share our portfolio with even more beer lovers,” said Mark Burford.

In 2013, Blue Point sold approximately 60,000 barrels, with 50 percent of the volume from its flagship brand, Toasted Lager. It also sells Hoptical Illusion, Blueberry Ale and seasonal brands among others.

“As we welcome Blue Point into the Anheuser-Busch family of brands, we look forward to working with Mark and Peter to accelerate the growth of the Blue Point portfolio and expand to new markets, while preserving the heritage and innovation of the brands,” said Luiz Edmond, CEO of Anheuser-Busch. “With Anheuser-Busch’s strong beer credentials, we share a commitment to offering high-quality beers that excite consumers. Blue Point brands have a strong following and even more potential.”

The St. Louis Post-Dispatch also some additional information on the deal and its background.

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And in case you’re unfamiliar with Blue Point, here’s an overview, also from the press release.

Blue Point Brewing Company is Long Island’s oldest and most award-winning brewery. Founded in 1998 by Mark Burford and Pete Cotter, Blue Point Brewery is headquartered in Patchogue, New York, and is currently the 34th largest craft brewery in the U.S. Blue Point Brewing Company is independently owned and operated and its beers are available in 15 states of distribution including New York, New Jersey, Massachusetts, Connecticut, Pennsylvania, Rhode Island, New Hampshire, Vermont, Maryland, Delaware, Virginia, North Carolina, Georgia, Florida, and Michigan. Blue Point’s portfolio of more than 40 craft beers includes Hoptical Illusion, ESB, RastafaRye Ale, Sour Cherry Imperial Stout, Toxic Sludge, White IPA, No Apologies Double IPA, and its flagship Toasted Lager, which won the World Beer Cup in 2006.

ABI To Buy Back Korea’s OB

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In a strange turn of events, Anheuser-Busch InBev (ABI) has agreed to buy back the South Korean Oriental Brewery (OB) for $5.8 billion, about three times the $1.8 billion that they sold it for in 2008. OB is South Korea’s largest brewery with approximately 60% of the market.

From the press release:

KKR and Affinity Equity Partners (“Affinity”) today announced that an agreement has been entered into whereby AB InBev will reacquire Oriental Brewery (“OB”), the leading brewer in South Korea, from KKR and Affinity for 5.8 billion USD.

This agreement returns OB to the AB InBev portfolio, after AB InBev sold the company in July 2009, following the combination of InBev and Anheuser-Busch, in support of the company’s deleveraging target. AB InBev will reacquire OB earlier than July 2014, as it was originally entitled to under the 2009 transaction.

Since KKR and Affinity entered into partnership with OB in 2009, OB has grown to become the largest brewer in South Korea, driven by strong growth of the Cass brand. OB and AB InBev also remained long-term partners through OB’s exclusive license to distribute select AB InBev brands in South Korea such as Budweiser, Corona and Hoegaarden.

Carlos Brito, Chief Executive Officer of AB InBev, said, “We are excited to invest in South Korea and to be working with the Oriental Brewery team again. OB will strengthen our position in the fast-growing Asia Pacific region and will become a significant contributor to our Asia Pacific Zone.

Bloomberg Businessweek also has more on the story.

Reuters Hinting At Possible ABI/SABMiller Merger

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Rumors and discussions of a possible merger between Anheuser-Busch InBev and SABMiller are nothing new, it’s been talked about by the business press off and on for a number of years now. But it had been quiet lately, most likely because of the deal by ABI to buy Grupo Modelo. But yesterday Reuters fanned the flames of merger once again, in a piece of speculation: Bets on for mega brewer merger as virgin ground shrinks.

With the acknowledged bullet points that “Asia main area with assets left to buy,” and that the ABI and SABMiller would combine the “growth markets” of Africa and Latin America,” they put the price for ABI to buy SABMiller at at least $100 billion. According to Reuters:

Now, with AB InBev planning to return to a comfortable pre-deal debt-to-EBITDA ratio of below two next year, industry experts are betting on a combination of its Budweiser and Stella Artois brands with SABMiller’s Peroni and Grolsch. Some expect a deal within a year.

“It’s more a question of when, not if,” said a banker who has worked on drinks deals. Others, also speaking on condition of anonymity, cited AB InBev’s record as a serial acquirer and the need for a target to match or surpass its $52 billion purchase of Anheuser Busch in 2008.

Asia, they claim, is the next frontier, though many of the bigger breweries are state-owned (which means expensive). Interestingly, while they admit that SABMiller would also be expensive the Reuters’ business analysts believe “a tie-up would be straightforward with antitrust issues relatively easy to fix and immediate benefits of scale.” Other analysts, however, do see potential problems with the merger from “regulators is in the United States and China” because of the market overlap in those countries.

Price, not surprisingly, is the elephant in the room, and the estimated $100 billion ticket price would make such a deal the “fifth-largest corporate acquisition ever.” Reuters places the current value of SABMiller at $84.5 billion and believes it’s in ABI’s best interest “to move fast before SABMiller gets more expensive.” But would SABMiller be interested in selling? “SABMiller’s two top shareholders — cigarette maker Altria Group and the Santo Domingo family of Colombia, which own 27 percent and 14 percent, respectively — ‘may think this is as good as it gets,’ said another banker.” So that suggests that the people behind the curtain might be amiable to the buyout. A couple of years ago, writing about this very possibility of a merger, I recalled that when the AB/InBev merger went down, someone joked that eventually there would be just one international beer company and it would just be called “Beer.” I remember laughing at the time, but truth really is stranger than fiction. So who knows? It should be an interesting year.

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ABI Beer Brands …

plus …

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SABMiller Beer Brands …

Equals = ?

Learn How Budweiser Drives Results From Social Media

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AdAge posted an interesting video today, it’s an interview with Anheuser-Busch InBev Vice President Digital Marketing for North America, Lucas Herscovici, where he discusses how ABI “measures its results in social media. It was taped prior to his presentation at the Ad Age Digital Conference, which took place yesterday in San Francisco.

Modelo Agrees To Reduce Its Tied House Monopoly In Mexico

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I know governments have become increasingly beholden to business interests in my lifetime, but the idealist in me is unable to just be okay with that. It’s certainly true here in the U.S., where politicians are bought and sold, and the interests of ordinary folks rarely count for much in political decisions. And that’s unlikely to change while corporations are essentially immortals with all of the rights of people and none of the consequences or responsibilities, and whose profits have been declared free speech that can be used to influence our politics. Apparently Mexico’s government is similarly business-oriented. According to a story in today’s Wall Street Journal, “Mexico’s top brewer said Thursday it reached an agreement with the country’s anti-trust authority to limit its sales exclusivity contracts with corner stores, bars and restaurants, allowing more room for craft brewers and other players in a lucrative market split by Anheuser-Busch InBev’s Grupo Modelo unit and Heineken N.V.’s Cerveceria Cuauhtemoc Moctezuma.”

In a world where people mattered, a government would tell companies what the rules are and expect them to follow them. Negotiations would be, and frankly should be, unnecessary. But that’s not the way the world works anymore, if indeed it ever did.

More from the Journal piece:

Modelo said in a statement it would cap such agreements to no more than 25% of its points of sale, with the aim of reducing that number to 20% by 2018. The brewer said it would also allow craft brewers to sell their beers in bars and restaurants where Modelo has locked in exclusive pouring terms.

The Mexican beer market, the world’s fifth-biggest according to Euromonitor, is a virtual duopoly, with Modelo brands like Corona claiming around 58% of the 67 million hectoliters of brew sold in Mexico each year, while Cerveceria Cuauhtemoc brands like Tecate account for 41%.

Around half of the beer sold in Mexico each year is channeled through small convenience stores, many of which agree to sell only one of the two brewers’ brands in exchange for branded awnings, signs or refrigerators, as well as discounts on beer purchases, credit and even assistance with local permits.

The country is Heineken’s largest market, accounting for about 16% of sales, while it represents around 13% of AB InBev’s pro forma sales, according to Credit Suisse.

Nice that Modelo will “ALLOW craft brewers to sell their beers in bars and restaurants.” How magnanimous. While the Wall Street Journal, itself as pro-business as they come, ignored the reasons for Modelo’s change of heart, Beer Business Daily reveals why they’ve agreed to soften their monopoly. It’s because the Mexican Federal Competition Commission ruled, 4-1, “that future exclusive contracts that Cuauhtemoc and Grupo Modelo have with retailers be limited in nature.” If they don’t, they could be fined up to 8% of their total income. According to Harry, currently the two biggest Mexican brewery’s “exclusive contracts with retailers account for about 85% of total volume.”

More from Beer Biz Daily:

The CFC ruled that craft brewers (such as Cerveceria Minerva and Primus) that manufacture beer in Mexico (under 100m hectos a year) should have unfettered access to restaurants, bars, and cantinas, and that big brewers’ exclusive contracts with accounts should not exceed 25% of the total outlets they do business with, which is reduced to 20% over five years. Current contracts are allowed to continue in effect without change until they expire.

I find it odd that Heineken apparently responded with a press release saying “that it will abide by the new rules and ‘standardise and simplify some of our future contracts with customers.'” How nice that they let us know they’ve agreed to follow the law. That’s what drives me crazy about the large multinational corporations with economies bigger than many nations. But at least it’s some good news for Mexico’s smaller breweries and their burgeoning craft beer scene.

Class Action Suit Alleges ABI Watering Down Bud & Michelob

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Just when you think things can’t get any stranger, beer drinkers in three states — California, Pennsylvania and New Jersey — have filed a class action suit against Anheuser-Busch InBev. The L.A. Times is reporting in Beer drinkers accuse Anheuser-Busch of watering down brews, that the lawsuit alleges the following:

Ten Anheuser-Busch products were named in the lawsuits: Budweiser, Michelob, Michelob Ultra, Bud Ice, Bud Light Platinum, Hurricane High Gravity Lager, King Cobra, Busch Ice, Natural Ice and Bud Light Lime.

Former employees at the company’s 13 breweries — including some in high-level positions — are cooperating with the plaintiffs, said San Rafael, Calif., lawyer Josh Boxer, the lead attorney in the case.

“Our information comes from former employees at Anheuser-Busch, who have informed us that as a matter of corporate practice, all of their products [mentioned in the lawsuit] are watered down,” Boxer said, according to the Associated Press. “It’s a simple cost-saving measure, and it’s very significant.”

The excess water is added just before bottling and cuts the stated alcohol content by 3% to 8%, he said.

ABI, naturally, is calling the lawsuit “groundless,” but it will be interesting to see how it all plays out.

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Cartoon by Tony Husband.

UPDATE: NBC News is also now reporting this story, in Budweiser waters down its beer, lawsuit alleges. Apparently, Bloomberg broke the story earlier today, and also the AP, the BBC and Business Day have all weighed in.

UPDATE 2: I’ve seen a lot of commentary on this story in the interwebs suggesting that since there appears to be no test results from the Plaintiffs in this case that perhaps they are simply confusing high-gravity brewing with actively lowering the final alcohol percentage, which is a reasonable assumption. But there may be another possibility. Thanks to Stan at Appellation Beer for pointing out a post from last October by Gary Spedding at his Alcohol Beverage Testing News. I’ve known Gary for a number of years. He runs a lab in Kentucky called Brewing and Distilling Analytical Services, LLC and also most years presents an orientation exercise for GABF judges the day before we start each year. It’s sort of a continuing education component of the judging experience. His presentations are always interesting and informative and, needless to say, Spedding’s expertise is unassailable.

Last October, he posted Gaining its airs and losing its graces — a Tale of Two Buds, which he wrote in response to a popular article last fall from Bloomberg Business Week entitled The Plot to Destroy America’s Beer. In addressing the suggestion in the article that Budweiser beer had changed after InBev took control of Anheuser-Busch, noted the following experiences he’d had with the beer in recent months.

Bud has been our control beer in our laboratory … for calibrating our alcohol instruments Bud goes in after calibration to see hopefully 5.00% abv. pretty much on the nose. Not so recently. Now as low as 4.94% after slipping from 4.98% earlier in the year. Losing it graces by higher airs it may be toppling from its top spot and is no longer our control beer of choice. But it is changing. A tale of two Buds (early and late) would reveal much more. Over the years the international bitterness content has declined from about 12 in the late 90’s to 7-8 today — another parameter to watch.

That original post also included a discussion of increasing oxygen levels, but Spedding had a lengthy discussion with Paul Cobet, who’s the Director of the Technical Center for ABI in St. Louis. The oxygen question is apparently now less of a concern and appears to be instrument-driven, and Gary updated that with a newer post, Regaining its Graces — Driving Oxygen Down — Good for Budweiser. So while the plaintiffs may not have tested the beer — still odd, admittedly — there is apparently some reason to think their case may hold water after all.

Two Beer Companies, 210 Beer Brands

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Today’s infographic is an interesting one, created by NPR. Entitled Two Beer Companies, 210 Brands, it shows all of the beer brands owned by Anheuser-Busch InBev and SABMiller across the globe. Below the map, there’s also a list of brands by country, color-coded by which beer giant owns or controls them. How accurate is it? Hard to say. It doesn’t appear to include line extensions, which would balloon the chart to many times its current size, but glancing at the list for the United states, it looks like it may be missing some, though to be fair I didn’t do a line by line comparison.

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Click here to see the chart full size.

A Bud Is A Bud Is A Bud

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Oh, I hate to pick on the mainstream media as they cover the world of beer, but this is too delicious not to point out. In a story about the proposed buyout of Grupo Modelo by Anheuser-Busch InBev, entitled The Great Beer Monopoly Deal May Be Back On, the Atlantic features the following photo, which I downloaded in case somebody gets wise and replaces it. And a hat tip to Tom Dalldorf for sending me the link. I guess one Bud’s as good as another. Can I assume I don’t have to draw a diagram?

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Megan Fox For Brahma Beer

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Today I saw in the UK Sun that American actor Megan Fox is doing ads for Brahma, the Brazilian Budweiser, an especially accurate association since Brahma is part of Anheuser-Busch InBev. Why do we care? We don’t, but I’m game to look at a couple of ads with Megan Fox in them. Isn’t that why advertisers chose her? Of course, it’s still a tasteless, flavorless beer.

As Mais Gostosas do Carnival (The Hottest Carnival)

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Is it just me, or does that beer have his arm around Fox? Is the beer wearing sunglasses because he doesn’t want to be seen with Megan Fox?

Convidando Megan Fox Pra Uma Brahma (Inviting Megan Fox for a Brahma)

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And here she is going off to have a picnic. According to the Sun, she’s flying down to Rio to do a commercial and pose for some more ads.

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Although humorously enough, a few years ago the hipster appeared more partial to Pabst Blue Ribbon. This was taken by paparazzi in 2009. Ah, sex and beer. What’s not to love. It seems to me, the big brewers follow a variation of the old lawyer’s adage. “When the law is on your side, argue the law. When the facts are on your side, argue the facts. When neither the facts nor the law are on your side, make an ad hominem attack.” In the brewer’s world it’s more along these lines. “When the beer tastes good, promote the beer. When the brewery has personality, promote the brewer. When the beer has neither, promote a celebrity, a cartoon, or both.”

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