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ANALYSIS: Anheuser-Busch and InBev bunk up

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The announcement late last night that Anheuser-Busch is to be InBev's exclusive distributor in the US looks like a great deal for the Europe-based brewer.

If there is one territory that A-B has got well and truly covered, then it's its home market in the US. As one analyst told just-drinks today (1 December): "From InBev's point of view, the agreement's fantastic. You've got to remember that A-B is going to give you pretty much nationwide distribution very fast."

InBev's presence in the country prior to this has not been what the company would want it to be. Another analyst describes InBev as having "an under-scaled business unit with long-standing execution issues" in the US. While InBev has focused most of its efforts on building its Stella Artois and Beck's brands, in the country's north-eastern cities, the company has not had the distribution muscle to build them nationwide.

For A-B, the benefit is the addition of some potentially iconic import brands into a portfolio where imports are sorely missed. "It strikes me that (the deal) is very much appeasing the Bud wholesalers - they want import brands and they're missing out on the party," an analyst said today. "They just don't have import brands in the Bud portfolio."

So, everyone's a winner, then? That's certainly possible, but then, with the financial implications not being released, it's difficult to be certain?

"It's hard to see what InBev gets out of it if there's any way a transfer of margin to Bud [A-B]," warned one analyst. "InBev says that this won't lead to them seeing their profitability going backwards at all, which means that whatever margin is being transferred to Bud [A-B] as an import margin is offset by the cost savings in Labatt and the incremental sales that they expect to make from pushing it out through the broader distribution system."

With these figures still shrouded in mystery, the only certainty seems to be that from a volume growth point of view, everyone will be happy. As such, there's nothing to suggest that this won't be the start of a budding relationship. The question, then, is is there more to come from these two?

"They're not at each other's throats (in the global beer markets) as much as A-B and SABMiller are," one analyst highlighted. "Once InBev did the AmBev deal, they've been reasonably remote from competing with A-B on a market-to-market basis.

"It's a reasonably comfortable fit, and over the longer term, these are the two businesses that fit together incredibly well. If you look at the ability of these two to join together, it's not something that is completely impossible or would be blocked by regulatory issues."


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