Coke… & Beer

As I go back to our records, we intended to buy Anheuser-Busch (BUD) in July 21st 2006, at $ 46.81. We did not do so and we expect the situation to get much different now, if InBev’s bid will be accepted. InBev stock is traded at approx $41 now, so we might have a second chance.
The merger will open chances for the future of both businesses, creating a huge synergy (for example through A-B’s 24% market share on China market).
InBev will make a good buy, considered the strength of EU-market, compared to US-market. However the cultural differences will make the deal difficult and can be seen as a risk factor – family traditions, US-habits, Icon status of Budweiser, employees who do not accept cost cuttings.
Whatever the price of a beer will be in the following years – considered higher price of fuel, transportation, shipping costs, electricity, water - it will be still affordable, compared to the other alcoholic drinks.
So, we maybe concentrate on Coke and beer?

Summary from:
BRUSSELS, July 8 (From: Reuters)
As per: http://www.guardian.co.uk/business/feedarticle/7637222

InBev:
- Cost Cutting: to squeeze out up to $1.4 billion of costs if it succeeds in taking over U.S. peer Anheuser-Busch.
- Budgeting: "Zero-based budgeting" is central to InBev's business model (= to justify all spending, rather than just changes in their budgets)
- Regions: Brazil, North America, Western Europe, Eastern Europe, Asia
- Employees: the tightest of budget controls: mobile phones taken back and returned only to employees who justified a need for one; new pens given out only in return for used ones; and an elevator at the global headquarters closed for several months.
- CEO Carlos Brito: plans to cut costs by 10-15 percent in year one, 5-10 percent in the second year and enough to offset inflation in the third. In the first year in key home market western Europe, InBev laid out restrictions on 15 areas from travel to utilities that reaped 118 million euros ($186.3 million) of savings.
- Offer: $46.3 billion takeover offer
- Vision: boosting revenues by making Anheuser's Budweiser a flagship global brand beside its stable of Beck's, Stella Artois and Brahma - by adding Anheuser's near 50 percent share of the profitable U.S. market to InBev's global empire.
- More savings: downgrading Anheuser's corporate HQ to a North American head office, shifting Budweiser production in Britain to InBev plants, rationalising Chinese operations and boosting U.S. sales of AmBev brands and Bud volumes in Canada
- Marketing: $100 million cost of sponsoring soccer's World Cup tournament – it is in South Africa in 2010 (where Budweiser is not present).
- Distributors: to lean on them to consolidate and become more efficient.
- Bid: potential risk for the take-over to become hostile (massive culture clash & ZBB cost philosophy is difficult to implement without willingness from the workforce)

A-B’s future after take-over:
- Cost cutting: $1 billion of cost cuts, principally the result of reducing the workforce by between 10 and 15 percent by 2010 and speeding up price hikes.
- Core competence: Anheuser's packaging business and SeaWorld and Busch Gardens theme parks would also almost certainly go.
- Image of US Icon: all Anheuser's U.S. breweries will be kept open (said InBev), but it could be eyeing more job cuts than Anheuser now plans.
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Trevor Stirling, analyst at Sanford Bernstein, believes such changes could yield $380 million in annual synergies.