Anheuser Busch Market Strategy

BSAD 525 – Company Report

Company Analysis

April 24, 2008

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Written by: Steve Escobar, Gevorg Khachatryan, and Josh Richard

I. Executive Summary

Anheuser-Busch (ABI or “the Company”) has been the market leader in United States for

half a century now, but there are still a lot of challenges lying ahead both in terms of further

growth and keeping the leading positions. The most important issues facing Anheuser-Busch

are:

Severe competition in U.S. market, which puts enormous price pressure on the

Company

Globalization: imports to U.S. and exports from U.S. wash away the distinct

features of different national and geographic markets

Changes in ethnic composition of U.S. population

Changes in customer preferences

Market stagnation

Our internal and external analysis revealed opportunities and strength for the future

growth of the Company. We recognized a lot of success of previous and current strategies

employed by the management of the Company, but together with that we have some

recommendations to accelerate its growth, secure its revenues and diversify its activities. The

basic strength of the company and its core competency - beer production, remains unshaken

and must be exploited further. But ABI has underperforming segments and markets and

needs to align the volume of capital expenditures and profit abilities of each segment.

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The Company has yet to fully exploit the potential of foreign markets. ABI’s

International Beer segment did an excellent job with its investments and acquisitions in

Mexico and China. The Company should focus on beverages and continue to invest more in

foreign markets and import beer, those categories proved to be several times more profitable

than the U.S. beer segment.

The Company should also seek opportunities for further diversification in order to find

profitable investment opportunities and to diversify the sources of cash flow.

Further funds for its growth can be acquired by increasing the proportion of more

profitable operations, spinning off the segments that perform significantly lower than the

company average and even issue new stock (of course, if ABI is able to reach a good

underwriting deal).

II. Issues and Outlook

ABI is the only major American beer company to be majority owned and operated in

the United States. In 2007, 93% of the Company’s net sales were generated in United States

and domestic beer contributed 75% to net sales. Beer itself contributed over 94% of the

Company’s revenue. This testifies to the fact that the company is heavily concentrated on

U.S. market and beer is by far the main product of the Company. In contrast SABMiller is

not concentrating on one single market but has interest centers all over the world and is also

one of the largest bottlers of Coca-Cola products in the world. Heineken also has very diverse

geographical presence around the world. Of course, Anheuser-Busch can be criticized for

lack of diversification, but at the same time the Company managed to keep the lion’s share of

U.S. beer market, the second largest beer market of the world (approximately 48.5% for

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http://en.wikipedia.org/wiki/Coca-Cola


2007, about 2.5 times its closest domestic competitor). Thus far the strategy of “one product

and one market” has worked well for the Company. For example, last year ABI didn’t

increase its sales in U.S. as fast as did Coors, but it did manage to grow domestic sales by 2%

whereas the similar result for SABMiller’s U.S. operations was negative 0.5%.

ABI became the U.S. beer market leader in 1957. Since then ABI held its position of

market leader every year. In the 1990’s the Company’s market share grew steadily, it peaked

in 2003. By the end of 2007 it lost its market share by 1.3 percentage points compared to its

peak year of 2003, but the Company has improved its market share compared to 2006. So

the Company has stabilized its market share above 48% for the last 8 years. You can see the

market share numbers of the Company since 1991 in Chart № 1.

The response of ABI to globalization processes was the establishing of Anheuser-Busch

International, Inc. (BARI) in 1981. But the first significant foreign investment was the

investment in Grupo Modelo (Corona beer) in Mexico in 1993. Currently Budweiser is

brewed locally in 12 countries and Anheuser-Busch International sells beer to 80 countries.

The response of ABI to growing competition was aggressive pricing policies and

marketing campaign.

The response to changes in ethnic composition of U.S. population is ABI’s investment in

Grupo Modelo the № 1 selling beer in Mexico and one of the leading brands consumed by

Latino population in U.S. The Company also introduced Bud Light Chelada which is

flavored especially for Latino customers and has bilingual packaging. ABI also appealed to

the Latin segment by the means of advertising: they used famous comedian Carlos Mencia

in Bud Light ads.

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The overall success of ABI was the result of following factors:

Quality and taste

Large assortment of products and brands

Cost leadership

Distribution network

Effective marketing and advertising

Successful foreign investments

Issues concerning market and economy

The shift of power from manufacturers and distributors to retailers

The degree of buyer power is high due to the continuous consolidation of retailers

seeking to improve profitability. This phenomenon could result in reduced profitability for

the beer industry a whole.

Recession

With the economy going through what many call a recession there is less disposable

income in the population which may directly affect the beer industry as a whole.

Oil Prices

The continuous rise of oil prices is a significant threat to the cost of operations for

ABI. It is important to keep an eye on this trend and engage in actions that search for new

cheaper alternatives to counteract the impact on cost. The Company currently uses a

combination of natural gas, fuel oil, and coal as its primary fuel materials in order to ensure

an adequate supply of fuel and electricity are available at the present time. However future

availability or market prices are unpredictable. (Refer to table 1)

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Table 1.

Stagnant Growth of Market Share

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In the past years one of the main weaknesses of ABI has been the stagnant growth of

their market share in the beer industry. Even thought ABI is the company with the largest

market share it is important to address the issue due to a threat of possible growth of the

competition.

Miller & Coors Joint Venture

The proposed joint venture between SABMiller Plc and Molson Coors Brewing U.S.

operations will create a more competitive and viable competitor in the American beer

business. This deal will provide the competition with more resources to compete with

significant funds for the market place investment.

Craft beers

Further indication of the forward thinking at Anheuser-Busch can be seen in their

particular interest in craft breweries. Talking with breweries across the US they tried to

successfully integrate breweries that “…with proven regional traction, well-identified and

respected brands, strong growth potential, and the demonstrated ability to appeal to cross-

over drinkers.” (Beerscribe 2005) “Anheuser-Busch is beginning to position itself to

capitalize on opportunities for future growth by expanding into new categories and seeking to

meet consumers where they are going, instead of following where they have been.”

(BeerAdvocate 2006)

Environmental movement

Anheuser-Busch’s environmental contributions include their awareness and

conservation of energy. ABI also has partnerships with companies such as the Quail

Unlimited in “leading the charge to restore and enhance habitat for wild quail and all upland

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wildlife.” Not only does Anheuser-Busch publish an annual report detailing environmental

goals from lessening injury rate to conserving water and energy, it also has a completely

dedicated website (www.ABenvironment.com) to answer questions and highlight its

achievements. Anheuser-Busch is consistently surpassing government standards and raising

the bar for the industry. Its environmental program received an “A” on its environmental

program by Shopping for a Better World.

Marketing and Consumer Preferences Issues

On the marketing and consumer preference side the Company has to address the

following issues and trends in the U.S. market:

Premiumization

Drinkers today don’t mind paying a bit more for a beer that has certain branded

attributes. Many of these are status symbols that will bring the drinker into a “members

only” status amongst regular beer drinkers.

Fragmentation

The market and more specifically consumers want a beer that is personalized and

customizable to their preferences.

Occasionization

Occasionization now divides a beer drinker’s taste amongst different situational factors

such as time and place, seasonality, and situational circumstances.

Feminization

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http://www.ABenvironment.com/


The concept that the female segment of the ground is under marketed meaning that

Anheuser-Busch has to find the right mix of marketing signals specifically designed for

female segment.

III. External Environment Analysis

Strengths

Brand Name

AB’s consumer recognition of and loyalty to all of its brand names and trademarks

are extremely important to long-term success of its principal business segments. The

company has made significant marketing investments to build Budweiser brand recognition

inside and outside the United States.

Market Leader

In the United States beer represents 57 percent of alcohol servings and AB has 48.4

percent of the beer market. This gives ABI very big leverage for negotiating with wholesalers

and retailers.

The Company managed to keep the biggest share of U.S. beer market, the second largest

beer market of the world (approximately 48.5% for 2007, about 2.5 times its closest domestic

competitor). ABI became the U.S. beer market leader in 1957 and since then ABI has hold its

position of market leader every year. In 90-s the Company’s market share grew steadily and

the Company has stabilized its market share above 48% for the last 8 years. Below you can

see the market share numbers of the Company since 1991.

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10

Year Market Share

1991 43.9%

1994 44.3%

1995 44.1%

1996 45.2%

1997 45.5%

1998 46.2%

1999 47.3%

2000 48.3%

2001 48.8%

2002 49.2%

2003 50.0%

2004 49.6%

2005 48.8%

2006 48.2%

2007 48.5%


Effective Marketing Campaigns

The Company is famous for its effective advertising strategy which includes various

channels to appeal to consumers: sports, entertainment, TV commercials etc. The Company

has even been criticized for being overly aggressive in its marketing. There have been

accusations that their advertising appeals to minors. Of course, this is a stigma labeled to any

successful company in the alcohol or tobacco industry, but to be completely honest, we have

to confess that, for example, among all leading beer companies Anheuser-Busch’s corporate

web-site is the only one that does not require age verification for entry. But in contrast this

aggressiveness is one of the success factors of ABI.

Investment in Foreign Industries

ABI operates overseas breweries in China and the United Kingdom making selected

investments in leading brewers in key international beer growth markets. AB also has

license agreements to brew, sell and distribute ABI’s flagship brand under the Bud trademark

in Russia, Central America, and Canada. ABI implemented a distribution partnership with

Grupo Modelo, Mexico’s leading brewer, as well as acquiring 50 percent of equity stake and

in India Anheuser-Busch is in formal negotiations with Crown Breweries near the central city

of Hyderabad.

Weaknesses

Slow growth in U.S. beer market

The U.S. beer market is a classic example of a saturated and mature market. Although

physical volume of beer sales grows annually on a slow rate the per capita consumption rate

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has peaked in 80-s and 90-s and is declining now. The answer to that issue can be further

participation in non-beer alcohol segments (the Company already has a few product lines,

most successful among them Bacardi), capturing larger market share in craft beer segment.

Exploiting opportunities in non-alcohol beverages market: Anheuser-Busch is poised to

capture market share with other products such as its energy drinks via 180 and Monster, as

well as its bottled water via Borba and its exclusive right to distribute Icelandic Glacial in the

US with a 20% stake in the company.

Chart №2. Percentage change of dollar sales in U.S. supermarkets in 2006 vs. 2005

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Opportunities

Foreign Markets

China is the world’s largest and fastest growing beer market and accounts for 45

percent for the growth in global volume. Even though AB already owns 9 breweries and is in

a joint venture with two local name brands in China it is important to keep expanding in

order to establish the brand and acquire the maximum market capacity.

Russia is the world’s fifth largest market and there is an opportunity to implement the

strategy used in China.

In India Anheuser-Busch is in formal negotiations with Crown Breweries near the

central city of Hyderabad and is also speaking with Aurangabad Breweries in Maharashtra,

Arlem Breweries in Goa and Mohan Meakin Ltd.'s brewing operations, according to sources

cited by the Economic Times. Even though the consumption per capita in India is

significantly less compared to the United States or other countries ,the volume growth in the

mature U.S. market is flat, while the Indian beer market is growing at an estimated 7 percent

to 10 percent annually, according to Mark Swartzberg, a beverage industry analyst with

Stifel, Nicolaus & Co. in New York.

Beyond Beer

At this time the growth rate of alcohol is greater than the growth rate of beer and as a

result of this it is imperative for ABI to increase their participation in the alcohol category.

The company is currently testing a distilled spirit that can be served as a layered shot. The

goal is to enhance the understanding of the distribution of a liquor product as well as

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reaching contemporary adult consumers. Another high margin beverage segment that ABI

needs to attain is energy drinks, water, and vitamin water. By moving into these markets the

company will be one step closer to their goal of becoming the pre-eminent global beverage

company.

Expand the Theme Park Operations

Bush Entertainment Corp. has been successful branch of ABI in the United States.

Considering the booming economies of other countries such as China, India, and the

European Union it is important to recognize the opportunity to invest in these markets not

only with beverages but also with theme parks. By entering the market at this early stage it

will be possible to establish in the area as the ultimate entertainment attraction and by doing

so AB can take advantage of the almost untapped market.

Explore new distribution alternatives

With oil prices on the rise and consequently higher costs there is an opportunity of

acquiring a competitive advantage finding new distribution channels. Currently ABI has

invested in railroads which could be an excellent alternative of distributions compared to

only using trucks.

Threats

Miller & Coors Joint Venture

Most likely one of the most troublesome issues facing Anheuser-Busch would be Miller

Coors delving into a joint venture. In mid 2008 MillerCoors should be under final review

from the United States for a green light in antitrust laws. This new joint-venture will affect

Anheuser-Busch primarily in the combining distribution of the two products. Obviously the

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joint-venture will enjoy economies of scale, but not to the extent that Anheuser-Busch has;

the only foreseeable threat to Anheuser-Busch would be distribution of the craft and specialty

beers from the two companies can now be easily distributed throughout the country.

Changes in Consumer Taste

Premiumization

There is a trend, certainly in the USA to “trade up” for things once coined as

commodities. This is most evident in the beer category; with the introduction of Heineken

Premium Light, introduced in 2006, it self-proclaimed itself as creating a new “luxury light”

segment. This trend has obviously caught on and is getting everyone on board. Drinkers

today don’t mind paying a bit more for a beer that has certain branded attributes. Many of

these are status symbols that will bring the drinker into a “members only” status amongst

regular beer drinkers. Anheuser-Busch has responded with products such as Bud Select,

Michelob Ultra line, and on the import side Becks Premium Light.

Fragmentation

In 1997 supermarkets sold a total of 672 different beer or flavored malt beverage brands,

contrast that with in 2007 they sold 1,125, an 82% increase. This is compelling evidence that

the market and more specifically consumers want a beer that is personalized and

customizable to their preferences. Anheuser-Busch has attacked this with a two-prong

strategy. On the one hand it has its marketing department advertise explicit differences

between their products and the competition. Marketing in this manner allows for the

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consumer to see how their products align with their style. The other front Anheuser-Busch

has launched is with its innovation and product development. This is apparent with its push

for crafted and imported beers that come to consumers with very distinctive positions.

Occasionization

In line with fragmentation, occasionization now divides a beer drinker’s taste amongst

different situational factors such as time and place, seasonality, and situational

circumstances. Anheuser-Busch has responded by placing its products in distinct situational

lights that will place the product in the correct light for the average drinker. They are also

trying distributing certain types of beer at certain points in the year to try and tie seasonality

with that certain product. For instance, Beach Bum Blonde is released in the summer months

to correlate it with the summer atmosphere.

Feminization

Although this phenomenon is not new to the society and market, there are still grounds

to believe that female segment of the ground is under marketed. What this means is that

Anheuser-Busch has to find the right mix of marketing signals specifically designed for

female segment. Obviously the same channels that drive men to buy beer will not work for

women. The release of Michelob Ultra proved to address this issue becoming very popular

among women. Another response from Anheuser-Busch was Peels line of fruit-flavored malt

beverages. The latter response wasn’t campaigned so successfully and has been discontinued

since.

New Competitors from Foreign Markets

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New foreign beers have entered the US market in the past years saturating the

industry even more. In order to fight this threat ABI obtained various licensing agreements

for distribution European and Chinese beers in the US market.

Economic recession and commodity prices

Another enormous, sometimes seemingly insurmountable, issue facing Anheuser-

Busch is the combination of rising commodity costs and slowing consumer spending.

Combine rising transportation costs, a worldwide shortage of hops, and a slowing in the US

economy it will make for a very troubled beer market. With the rise in gas prices, smaller

brewers are feeling the effects of getting their product out to the nation much less the world.

Add to that a rise in prices of hops due to climate conditions worldwide, and you will find

small brewers taper off. Although this issue can be beneficial for ABI in competition with

local breweries, the offsets can be much bigger in terms of declining nationwide sales

volumes and profit margins. The most effective answer to this scenario is cost leadership

because the lower-end market is the largest segment. Anheuser-Busch has reported to the

Consumer Analyst Group of New York (CAGNY) that its sales for its lower-tiered beer such

as Natural Light and Busch have been accelerating. Due to the fact that Anheuser-Busch has

such a diversified portfolio it stands to reason that it will not be as affected by the rising costs

and tightening of the consumer wallet as smaller companies will.

Risks associated with international operations

Anheuser-Bush has significant international operations including equity investments

in China, Mexico and the United Kingdom. Therefore these operations are subject to the

inherited risks of international business such as:

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Political and economic changes

Changes in the relations between the United States and foreign countries

Actions of foreign or United States governmental authority affecting trade and

foreign investment

Regulations on repatriation of funds;

Foreign currency exchange restrictions;

Interpretation and application of local laws and regulations;

Enforceability of intellectual property and contract rights;

Local labor conditions and regulations.

i. Porter’s Five Forces

Threat of New Entrants

Barriers to Entry-Economies of Scale

Over the years ABI has expanded its operations to an optimal level attaining a high

level of economies of scale, protecting the high profit levels of the firm and inhibiting

competitors from entering the market. These economies of scales permitted AB to enjoy a

low production cost compared to the industry. This advantage allowed the company to

reduce the price of its products and successfully obtain market share from its competitors.

Capital requirements

In order to compete in these industry there are two main channels to enter. The first

channel is through a large brewery in which case the capital requirements are considerably

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high. However, new trends of competition, which are small breweries, have taken the market

by surprise specially because there is no need for a large capital investment. ABI took action

to neutralize this trend and acquired several small breweries.

Differentiation

Brand name is very important in the beer industry since it is a signal of quality and

taste. ABI spends a large amount of capital on promoting their brand names as well as

differentiating themselves from the competition.

Switching Costs

Switching costs for consumers in the industry are non existent, therefore it is

important to establish customer loyalty and differentiation in order to maintain market share.

Bargaining Power of Suppliers

ABI's main inputs are commodities; ABI purchases commodities through following

channels:

Direct purchases from farmers through its Agricultural Division - Busch Agricultural

Resources, LLC.

Commodity exchanges

The Company also has its own farms, milling and storage facilities, and processing

plants

Both raw materials and energy supplies are acquired from diverse sources and so

there is no significant supplier power or threat of consolidation of suppliers.

Bargaining Power of Buyers

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This issue is present in virtually all industries dealing with consumer products. Craig

Purser, president of the National Beer Wholesaler’s Association says he has concerns for the

long-term in shifting power to retailers. Such as Wal-Mart, Costco, Albertson’s, Safeway,

Kroger, etc. He firmly believes that this shift will be prevalent in determining who gets shelf

space. “At Anheuser-Busch, we work to understand our retailers’ business issues, their

business needs and objectives, and how the beer category fits into the retailers’ overall

strategy across the entire store. We then develop recommended strategies and tactics to help

our retailers meet their business objectives, their consumers and drive sales and profitability

for the beer category.” says Joe Patti the vice president of retail planning. His position, and

moreover his department was more or less created in anticipation of this shift in retailer

power. It is obvious by his objectives that they intend to form a deep personal relationship

with their retailers to better enable both parties to gain from their relationship.

Threat of Substitute Products

Because Beer is a generally inexpensive commodity the threat of substitute products

is low. The substitute products would consist of alcohol, such as rum and vodka, or “light”

alcohol drinks such as Smirnoff Ice. Costumers usually have a high degree of consumer

loyalty towards their brand in this industry and especially in the type of drink they consume

(beer, alcohol, and “light” alcohol).

Intensity of Rivalry among Competitors

Because of the large amount of competitors the beer market has become saturated. ABI

currently possesses the largest market share but still drives costs higher due to the high cost

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marketing campaigns, capital investments, and innovation that has to take place in order to

keep the market share.

IV. Internal Analysis

Internal Strengths

It’s really hard to consider the Company in isolation to tell its internal strengths and

weaknesses because, after all, almost every factor inside the Company is connected to the

outside world. So, taking the responsibility of classifying factors into internal and external

types, here are most of the ABI’s internal strengths and weaknesses.

ABI has vertically integrated structure:

a. Packaging division: Metal Container Corporation (MCC) which manufactures

beverage cans at eight plants and beverage can lids at three plants for sale to

ABI and U.S. soft drink producers.

b. Anheuser-Busch Recycling Corporation, which buys and sells used aluminum

beverage containers and recycles aluminum and plastic containers.

c. Precision Printing and Packaging, Inc., which manufactures pressure sensitive,

metalized, plastic and paper labels.

d. Eagle Packaging, Inc., which manufactures crown and closure liner materials

for ABI.

e. Busch Agricultural Resources, LLC, (“BARL”) owned and operated by ABI,

operates rice milling facilities, eight grain elevators in the western and

Midwestern States, barley seed processing plants and a barley research

facility. BARL also owns and operates malt plants in United States. Through

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other entities owned by BARL, ABI operates land application farms in

Jacksonville, Florida and Fort Collins, Colorado; hop farms in Bonners Ferry,

Idaho and Huell, Germany; and a barley purchasing office in Winnipeg,

Canada.

f. Another wholly-owned subsidiary, Wholesaler Equity Development

Corporation, shares equity positions with qualified partners in independent

beer wholesalerships and is currently invested in 5 wholesalerships. Even

though it only sells 6% of the Company’s beer. The growth of that division

could provide more stability, independence, direct access and control over the

distribution of the Company’s products.

The Company’s financial condition is good. The current and acid test ratios are high,

debt volume and interest payments are low and better than its closest rivals in U.S.

market.

Asset utilization of the Company is much better than its main competitors.

Employee relations of the Company are good. Within the United States most of the

employees are members of a labor Union called “the Teamsters”, approximately 7800

of the employees outside U.S. are members of workers organizations that are not

subject to collective bargaining agreements.

The administrative and distribution costs in relation to sales are lower than those of

SABMiller and Coors Companies.

13 production facilities in U.S. are located in an optimal way to reduce transportation

and distribution costs.

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The Company management: the President and CEO of Anheuser-Busch is August A.

Busch IV, so even though ABI is publicly traded, the Company is run like a private,

in terms of care and diligence of the management.

Internal Weaknesses

The performance of different divisions of the Company varies significantly. For

example profit margin of the international beer segment is 65.38%, whereas the same

ratio for the packaging division is 4.14%.

Large capital expenditures on underperforming segments: the Company's capital

expenditures on U.S. beer segment is almost ten times higher than on the international

beer segment. At the same time, U.S. beer segment's income exceeds the

International segment's income only 2.4 times. This means the Company funds U.S.

beer operations on the expense of opportunities in more profitable foreign markets.

Company’s product prices (especially retail) are affected by energy costs; the

Company uses natural gas, fuel oil and coal as primary fuel materials and the increase

in costs cant be compensated completely by increasing the price of beer.

Inability to improve production costs: during the past four years, costs of goods sold

of ABI increased faster than the sales volume growth.

Big debt to equity ratio: Currently debt/to equity ratio is 2.9 and the Company will be

unable to get more funds through debt financing on advantageous terms.

Internal Threats

The Company doesn't have significant internal threats:

Employee relationship is considered to be good

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Does not operate any hazardous or environmentally dangerous facility

Not bound by any contractual liability that can potentially cause losses for the

Company

Company has more than enough cash flows to cover the service of the debt

Internal Opportunities

The Company can spin off the segments that are underperforming and invest them to

the more profitable segments. Specifically the Company may choose to spin off the

Packaging segment or some of its theme parks.

The Company can improve its CGS/Sales ratio by changing its price war with rivals

towards the strategy of differentiation. We don't recommend increasing prices in

lower-end categories such as Bush or Natural Light, but ABI could definitely use the

differentiation approach in middle and high-end price categories.

The Company can change its capital distribution between its segments: more capital

to International Beer market and new products, less expenditures on underperforming

divisions.

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i. Analysis of financial performance of the Company.

Table 2. Financial ratios of three leaders U.S. beer market

ABI

2007

SABMiller

2007

Coors

2007

ABI

2006

SABMiller

2006

Coors

2006

ABI

2005

SABMiller

2005

Coors

2005

Profitability Ratios

Return on Total

Assets 12.33% 6.55% 3.69% 12.00% 6.17% 3.11% 10.54% 8.83% 1.90%

Return on Equity 67.12% 13.07% 17.98% 49.89% 12.83% 11.39% 47.40% 17.53% 4.21%

Gross Margin

Percentage 35.05% 16.26% 40.18% 35.32% 16.82% 40.44% 36.11% 13.56% 39.95%

Gross Margin

Percentage

(Operating

Income/Revenues) 17.34% 10.11% 20.76% 17.30% 10.94% 9.94% 16.53% 10.42% 4.07%

Liquidity Ratios

Current Ratio 87.87% 58.98% 102.38% 81.00% 58.15% 81.01% 88.70% 82.85% 65.65%

Acid Test Ratio 34.35% 37.71% 71.92% 41.82% 34.88% 56.15% 45.75% 45.58% 38.86%

Leverage Ratios

Debt to Equity 2.90 0.50 0.32 1.94 0.58 0.37 2.17 0.43 0.47

Times interest

earned 5.97 3.89 5.09 6.02 6.04 4.06 5.47 4.18 3.22

Resource

Management

Ratios

Age of Inventory

(Days) 24.73 21.72 36.42 24.96 25.17 33.5 24.87 20.75 34.7

Age of accounts 17.61 28.33 44.72 16.72 29.21 51.7 16.54 21.73 54.9

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Receivable (Days)

Age of accounts

Payable (Days) 49.34 64.27 37.52 51.23 69.2 44 47.49* 41

Growth Measures

∆ Sales 6.10% 21.64% 5.90% 4.53% 18.65% 6.10% 0.68% 13.51% 27.89%

∆ Net Income 7.60% 12.49% 37.00% 12.65% -3.18% 195.99%*

-

17.90% 76.90% -22.96%

∆ Earnings per

Share 10.20% 4.99% 31.70% 13.45% -13.94% 246.47%*

-

15.16% 71.89% -99.44%

∆ Total Assets 4.75% 5.98% 15.92% -1.07% 71.13% -1.66% 2.36% 6.74% 153.34%

∆ Cost of Goods

Sold 6.60% 22.47% 6.37% 5.82% 22.97% 5.20% 6.65% 11.04% 6.42%

As you can see the return on assets and equity are much higher than its main competitors.

That's not only because of good performance, it is also because the Company has historically

relied less on equity financing (this can also be a result of Busch family's policy to keep their

dominant position in the management of the Company).

Debt to equity: the company uses debt leverage very well: yes, D/E ratio is higher than

its competitors, but the interest coverage is lower. This means first, the company has

sufficient cash flows and income, second the Company managed to get debt financing on

better terms.

Growth in sales and net income is lower than its main rivals, but the return on assets is

much higher. So the relatively faster growth of the competitors’ sales is because these

companies have unutilized potential, whereas the asset utilization of ABI is much better.

ABI’s costs of goods sold were growing faster than volume of sales during last three

years. In contrast, Coors and SABMiller managed to grow their sales faster than their CGS.

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One of the reasons why ABI fell behind in this issue is the aggressive pricing policy of the

Company in U.S. beer market.

V. Development of Strategic Alternatives and Options

The current strategy of the Company is concentrated on U.S. beer market. 93% of sales of

the Company were generated in U.S. in 2007 and beer itself contributed 94% of the sales. In

addition, the current strategy involves penetrating the American beer market as much as

possible. They dominated both in diverse products and in geography. The current strategy

of the Company could be described as “one product – beer and one market U.S.” ABI is very

unique because other big companies like SABMiller and Heineken are very diverse

geographically and don’t have any main centers of activities. By the mid-90’s top

management at ABI realized that being a global player was essential for future growth. They

first sought to capitalize on this global market by attaining a 30% stake in Grupo Modelo,

which is the #1 Mexican beer company. This move played extremely well in venturing out

into the global market without overexposing themselves to a high level of risk and moving

into the Latino segment. Secondly, they ventured into the Chinese market by direct and

indirect investments in Harbin and Tsingtao. With these first moves, ABI now has advanced

itself into selling products in 80 countries with breweries in 12 countries. ABI is currently

investing in new markets and trying to grow its global presence, all the while the American

beer market remains their core and they are avidly protecting it. Since ABI offers products

ranging from premium lagers to lower-tiered discounts brand it pursues both cost-leadership

and differentiation strategies.

27


The company is vertically integrated both forwardly and backwardly. We can see this

with packaging operations. Horizontally, they are diversified with their Busch Entertainment

Corporation.

Anheuser-Busch’s competitive advantage over its rivals is mainly attributed to its

size. With market share looming around the 50% mark every year it is highly unlikely that

another competitor is to show up competing head to head with Anheuser-Busch. With this

unrivaled distribution infrastructure it is easy to see that Anheuser-Busch enjoys many cost

advantages. It is able to bring a premium brand to further cities in the nation, and worldwide,

at a lower cost than its rivals, and that by definition is a competitive advantage. That being

said, the two biggest, long time rivals of Anheuser-Busch; Coors, and Miller, are also

susceptible to Anheuser-Busch’s size, particularly in distribution. That is why we see them

trying to team up in that respect; so that they too may enjoy the fruits of such a network. The

amount of synergy involved in the company is another competitive advantage over its rivals.

Breaking the company into functions and operations can be done by competitors; but when

all the elements are put together it forms an organization that the whole is truly greater than

the sum of its parts. Obviously one of its most intrinsic advantages is brand recognition.

This is truly a competitive advantage for the basis of this advantage lay in historical

precedent. Anheuser-Busch, after prohibition ended, made a historical journey on 34 th street

in New York City to deliver the first case of post prohibition Budweiser to New York Mayor

Al Smith. You cannot simply re-create that moment. It is forever forged into the pages of

history for all to know. Anheuser-Busch also has such a diversified company that it can

spear head a project with many of its expertise and with such large capital expenditures that

28


new competitors would face almost insurmountable capital costs in addition to acquiring high

fixed costs. The beer industry is one of lumpy assets, in that if you want to supply just 5%

more beer to the market and your facilities are at 100% operation you cannot simply incur

small marginal costs. You must expand facilities at a high cost and at once to increase

capacity so that you can serve that extra 5%. As you can imagine this is quite costly to a

newcomer. To boot Anheuser-Busch has a extensively effective first-mover advantage in

many instances. One of its most notable first move advantages is in international markets.

Successfully moving and acquiring Grupo Modelo in Mexico and acquiring Harbin and a

vested interest in Tsingtao in China; Anheuser-Busch is now with a strong presence in both

countries as its leader in the beer industry.

Anheuser-Busch has a number of different management systems in place. One of the

systems they promote heavily is their environmental management system. It “provides

specific guidance for how the environment must be factored into business decisions and

mandates special consideration of environmental issues in conjunction with other business

issues when any of the company’s facilities or business units plans capital projects or

changes in processes.” Another one of Anheuser-Busch’s systems is risk management. They

use instruments such as forward exchange contracts, futures contracts and others to minimize

risk associated with the business. Anheuser-Busch has consistently hedged their risk using

their system of risk management tools and continues to improve upon using risk management

as a major tool in their development. Anheuser-Busch also uses management systems for

financial reports, control over financial reporting, and assessment of effectiveness of internal

control over financial reporting. These may sound redundant, but each has its own function.

29


VI.

Proposal of Growth Strategies

In the following section we will present 3 strategies focused on the development of

activities with the intention to provide the company with significant growth. These strategies

will present different directions ABI can take to foment growth, depicting financial evidence

as well as data on future trends that might lead to higher than normal profits for the

Company.

Strategy 1

In 2007 four segments of the Company had the following shares in gross sales of the

Company:

U.S. BeerInternational

BeerPackaging Entertainment

70.74% 6.42% 15.39% 7.44%

According to this strategy by 2018 ABI should have the following structure of revenues:

U.S. Beer and

beverages*

International

Beer and

beverages

RailroadsEntertai

nment

55% 30% 10% 5%

* U.S. segment will include wholesale distribution business and pub chain

This strategy calls for ABI to stop being “a one product and one market” Company. This

strategy suggests stopping price war tactics employed by the Company even if it will lead to

30


losing a few percentage points of U.S. market share. The reasons why we recommend in this

strategy to stop clawing for every inch of the U.S. market is are the following.

1. U.S. beer market profitability is multiple times lower than International beer segment

2. U.S. beer market is highly saturated.

More than 100 companies in 2007 (379 brewing establishments in 2002 according to

U.S. census bureau) are operating in the US beer industry.

3. Usage rate of current customers can’t be increased

Decennial consumption rate per capita has been slowing down and stopped during

the last decade.

4. Total industry sales are increasing very slowly and market shares of competitors are

relatively stable

Physical volume of sales in U.S. grew slowly during last three years: 2% in 2007,

1.2% in 2006, 1.8% in 2005.

5. Marketing efforts are limited by federal and state laws and regulations.

Segmental Profitability (Net Income/Net Sales)

U.S. Beer

International

Beer Packaging Entertainment

2007 14.27% 65.38% 4.14% 12.80%

2006 14.78% 63.41% 3.51% 12.24%

2005 14.72% 59.14% 3.68% 11.77%

2004 17.89% 59.92% 4.46% 10.83%

31


2003 14.88% 50.34% 4.60% 10.92%

Segmental Profitability Chart (Net Income/Net Sales)

As you can see, from the segmental information, the worst performing segment is the

Packaging segment. It includes Metal Container Corporation (MCC), Precision Printing and

Packaging (PPPI), Longhorn Glass Corporation (LGC), and Anheuser-Busch Recycling

Corp. Of course, their operations are very important for ABI and even if you assume that

Packaging operations are cutting inter-company sale prices still the majority of the sales of

the Packaging operations are to external buyers. So even if we consider the case when the

packaging operations would not be a part of the Budweiser group they would still be

32


underperforming with the numbers that they have now. The same time the Company can do

very well without having their own packaging operations: for the most part it uses bottles

made by external suppliers and it does not affect its price effectiveness.

In this optional strategy we recommend ABI to spin off its packaging operations. By

2007 the book value of the packaging operations total assets was 772 million dollars. So in

optimistic case the market value of the Packaging Operations could be around 300 mln.

Another segment that gets too much funding despite its relatively poor performance is

U.S. beer segment. As you can see, its profitability is slowly declining too. Yet ABI’s capital

expenditures on U.S. beer segment in each of the last three years were more than two times

the size of the capital expenditures for rest of the Company. The Company should cut

significantly its capital expenditures on U.S. beer segment, this strategy does not call for

acquittal from U.S. beer market, we are recommending that ABI freeze capital expenditures

on U.S. beer production facilities and fund only the very emergent needs. We believe the

Company could cut more than 50% of its U.S. capital expenditures and if that may eventually

affect its production capabilities they could recover the potential decrease in U.S. beer sales

by increase in operations from other segments were the funds would be directed.

Approximately $ 1 billion, raise by spinning off Packaging, cutting capital expenditures

in U.S. beer and new stock issues, are recommended to invest in following directions:

Direct investments in Russia, Central Europe, India and South America (priority

Russia and India)

Invest in craft beer segment and develop a pub chain

33


Investments in development, production and/or distribution of non-carbonated soft

drinks and water

Investments in railroad business

Investments in wholesale distribution

1. Direct investments in Russia, Central Europe, India and South America

(priority Russia and India)

Developing markets of Central Europe, Asia and Latin America have much stronger

growth potential in beer sales because of following basic factors:

Market saturation levels are lower and/or geographically uneven

The relatively low level of current GNP per capita and the fast rate of its growth

makes it possible to increase the consumption of beer per person

Significant changes in culture in countries like China and India contribute to increase

in consumption of alcohol beverages

Statistics show that Asia and Central Europe are not only the fastest growing markets, but

also the most profitable. In 2007 international beer contributed 7% of the company revenues

and 26% of net income, whereas domestic beer contributed 75% of the revenue and only

64% of net income. It means the profitability of international operations is more than 3 times

higher than the domestic beer.

Growth opportunities are much higher overseas: in 2007 SABMiller company reported 36%

sales growth in India, 30% in China and 24% in Russia (this may sales growth due to new

34


acquisitions and investments, but still the numbers are astonishing). The physical volume of

sales growth of international beer of ABI was 5.8% (and 10% increase in dollar amount)

which is almost three times higher than the domestic rate.

The Company is very passive in Latin American (excluding Mexico) and Russian markets

(ABI’s interest in Russian market is represented by distribution agreement with Heineken).

The Company should make direct investments in Russian market; add volume of investments

in Latin America and India.

2. Further investment in craft beer segment and develop a pub chain

The fastest growing segment of U.S. beer market is craft beer, 12% growth in 2007. It is

important for the company to keep strong participation in that segment. The Company

already has craft beer brands (domestic and imports), ABI also has an initiative that allows

company employees to come up with their own tastes and flavors and then those products are

tested in local markets. Craft beer is mostly brewed in microbreweries or right in the pubs.

Craft beer is more profitable: in 2007 craft beer segment’s volume share in U.S. was 3.6%

but the dollar share was 5.4%. There are 375 microbreweries, 967 brewpubs in the U.S. and

from the point of view of developing new products and getting bigger share of craft beer

market we would suggest ABI to open a pub chain. There is already a large tendency of

consolidation of small pubs into pub chains in United Kingdom. ABI can open a “beer

Starbucks” (of course with a different name, maybe “BrewWeiser”, “ClubWeiser” or

“BeerWeiser”): a chain of brewpubs that offers craft beer that is brewed right in the pub, plus

all brands of ABI and maybe even competitors’ brands and different features of a sport bar,

or night club. ABI could develop this network by acquiring existing popular pubs, selling

35


the franchise and building new pubs. The success of this enterprise could be backed by ABI

beers and expertise in brewing and ABI’s expertise in entertainment business.

3. Investments in development, production and/or distribution of non-

carbonated soft drinks and water

Another path of new product development will be entering soft drinks market, sport

drinks and water in particular. During last 50 years soft drinks consumption has increased

more than 5 times in U.S. But the market for the carbonated soft drinks is mostly stagnant in

U.S. In contrast, the consumption of sport drinks and water is growing by double digits. In

2007 Coca-Cola Company reported 3% sales growth of Coke brand, whereas sales of non

carbonated soft drinks were up by 12% (most successful among them Powerade and Dasani

brands). The most successful recent example is Glaceau Company with its Vitamin Water

and SmartWater brands acquired by Coca-Cola in 2007. Growing health awareness and

lifestyle changes will continue to support growth for sport drinks and water.

ABI can be successful in this category because the Company is involved in similar

production process and they have the huge advantage of using the existing distribution

network. The Company can come up with its own new drink or import a brand from overseas

that is not present or is very little known in U.S. market.

4. Investments in railroad business

The Company owns a subsidiary called Manufacturer’s Railway Co, which is mainly

used to support production needs. Taking into consideration rising oil prices and out of

control commodity market system needs for effective transportation means will grow

radically in U.S. economy and the preference of automotive transportation in U.S. will

36


inevitably change towards railroads. The Company can grow its railroad business in

following ways:

Physical expansion of Manufacturer’s Railway Co by acquiring more fixed assets and

infrastructure and adding number of employees

Investments in stocks of large U.S. railroad companies

Joint ventures with existing large U.S. railroad companies

5. Investments in wholesale distribution

The Company’s wholly-owned subsidiary, Wholesaler Equity Development Corporation,

shares equity positions with qualified partners in independent beer wholesalerships and is

currently invested in 5 wholesalerships. Even though it only sells 6% of the Company’s

beer, the growth of that division could provide more stability, independence, direct access

and control over the distribution of the Company’s products.

Funding of the strategy

As we have already mentioned, the vast majority of the funds needed for this strategy

would come from selling the packaging segment and cutting the capital expenditures on U.S.

beer segment. The Company could also raise more funds through new issues of stocks. ABI’s

equity financing share is much smaller than it’s competitors and that is why it seems like

ABI’s debt is too big because of its debt/equity ratio. But at the same time it is clear that the

debt burden is relatively the same or even less when you look at the interest coverage ratio.

Also we compared the equity/Total assets ratio of the 3 U.S. beer market leaders. Table 3

37


below shows that Anheuser-Busch has historically overly relied on debt financing. That’s

why we recommend at this stage, given that we are proposing expansion plans for the

Company to rely on new stocks issue.

Table 3.

Equity/Assets

2007 2006 2005

Budweiser 0.18 0.24 0.22

Coors 0.53 0.50 0.45

SABMiller 0.52 0.50 0.56

Another source of funding will be dividend cuts for the next 2-3 years. The Company

has paid more than $900 million in dividends which means 56% retention rate. We

recommend increasing retention rate to 75% for two years, which will provide another $800

million for the investments in abovementioned activities.

So, according to this plan the Company will be able to invest more than $2 billion

within next 2-3 years to the segments other than U.S. beer without increasing the level of

debt.

Strategy 2

Invest heavily in Entertainment Industry

38


As we know, the United States beer industry is mature and heavily saturated. Growth

potential inside the states is very low. Anheuser-Busch would be hard pressed to find

anymore domestic growth with beer. As a growth strategy, Anheuser-Busch has played a

part in the entertainment industry for some time now first with their Busch Gardens and more

recently with their acquisition of Sea World. Not only are these parks immensely popular,

they also have huge growth potential. According to the Themed Entertainment Association

(TEA) and the Economics’ Research Associates’ (ERA) attraction attendance report,

attendance grew 2.6% in parks, and a 3% growth in water parks in 2007. Worldwide,

currently, Anheuser-Busch has Busch Gardens in 4 spots within the top 20 theme parks in

North America, with a combined attendance over 17.6 million. In addition, they have two

water parks in the top 15 spots with a combined attendance of 1.4 million. What’s more is

that SeaWorld Orlando is ranked 12th in worldwide theme parks with annual attendance of

5.8 million. They are only beat out in many categories by the giants at Disney, whose main

core competency is entertainment. With all of this, it is easy to see why Anheuser-Busch

should pursue a growth strategy in entertainment. Additionally, the report notes that

domestic growth can be attributed to a combination of good weather, more international

tourism, and a marketing campaign known as Howl-O-Scream. Busch Gardens Europe,

located in Williamsburg, VA, posted an amazing 12.5% growth in 2007, the only double-

digit growth among any of the parks. This was attributed to marketing efforts and added

attractions. Adding in the fact that pretax profit was up 13% to 233 million, you can see just

how valuable this asset can be for Anheuser-Busch. Even still what makes this an attractive

venture is that Anheuser-Busch has positioned its parks to not compete head on with the

39


giant Disney; rather its parks are aimed more towards animals and wildlife than magic and

fairytales. This strategy of differentiation has put it in a niche market so that it can easily be

seen as a completely different experience than Disney.

Currently efforts are underway to expand on its differentiation strategy by promoting

a sense of wildlife conservation through their Conservation Fund. “Since its founding in

2003, the fund has donated over 2.2 million to 175 projects in 40 countries.” In addition to

the projects already underway we believe that a viable growth option for Anheuser-Busch

would be to aggressively invest in their experienced, highly profitable entertainment section

via Worlds of Discovery (which is the new name of Busch Entertainment Corporation). The

pricing structure is already being repackaged as to add to the bottom line and expansions into

Dubai are in the works to put into place a 4 park attraction. The parks would initially cost

upwards of 5 billion, but Anheuser-Busch has made a deal with Nakheel, an arm of the Dubai

government, to finance the parks, paying the licensing and investment fees. Investments like

this, worldwide, would establish Anheuser-Busch as a leader in entertainment, ultimately

leading to growth. In addition, similar investments would reduce the overall risk associated

with expanding worldwide since Anheuser-Busch isn’t financing the entire project.

Additional financing for the projects would be done by raising equity via issuing more shares

of stock. We do understand that this would, at first, drop the stock price but we do believe

that the ROI would be quite high given the positive NPV of the project. We believe that this

expansion would achieve a positive NPV through Anheuser-Busch’s extensive expertise in

entertainment given their excellent growth and profit record for nearly 20 years. We believe

40


also that our economies of scope and scale would aid us in this expansion throughout the

world.

Strategy 3- Final Recommendation

Concentrate in core business- Beverages

The main goal of this strategy is to obtain significant growth of operations as well as revenue

in the global market. Due to the US operation’s lack of sufficient growth as well as

considerably less profitability compared to international operations (Refer to Table 4) it is

essential to become a main player in the global market. Considering that ABI currently has

investments in different countries, it is imperative to focus the attention, while maintaining

market share in the US, in Russia, India, and China which is the largest and fastest growing

market in the world. ABI has started establishing in China by buying 27 percent share in

China Brewer Tsingtao, owning a brewery in Wuhan, selling Budweiser through a strong

network of more than 200 independent wholesalers, and acquiring Harbin which is one of the

leading brewers in China. It is necessary to expand its operations and become market leaders

in this country which has accounted for 45 percent of the growth on global beer volume.

Table 4 US Beer

International

Beer Packaging Entertainment

Corporate

and

Eliminations Consolidated

Income Statement

Information

Gross sales $14,158.70 1,351.70 2,632.80 1,272.70 -427.2 $18,988.70

Net sales - intersegment $3.20 0.6 931.9 — -935.7 $ —

41


Net sales - external $12,106.10 1,097.50 1,700.90 1,272.70 508.5 $16,685.70

Depreciation and

amortization $749.00 49.8 68.9 103 25.5 $996.20

Income before income

taxes $2,784.00 93.3 175.8 262.7 -893.1 $2,422.70

Equity income, net of tax $2.30 660.1 — — — $662.40

Net income $1,728.40 717.9 109 162.9 -602.9 $2,115.30

Balance Sheet

Information

Total assets $8,142.00 5,880.80 772.6 1,548.30 811.3 $17,155.00

Equity method

investments $93.90 3,925.60 — — — $4,019.50

Goodwill $21.20 1,343.30 21.9 288.3 — $1,674.70

Foreign-located fixed

assets $4.50 544.4 — — — $548.90

Capital expenditures $554.40 59.2 72.4 169.4 14.6 $870.00

In India Anheuser-Busch is in formal negotiations with Crown Breweries near the

central city of Hyderabad and is also speaking with Aurangabad Breweries in Maharashtra,

Arlem Breweries in Goa and Mohan Meakin Ltd.'s brewing operations, according to sources

cited by the Economic Times. St. Even though the consumption per capita in India is

significantly less, compared to the United States or other countries ,the volume growth in the

mature U.S. market is flat, while the Indian beer market is growing at an estimated 7 percent

to 10 percent annually, according to Mark Swartzberg, a beverage industry analyst with

Stifel, Nicolaus & Co. in New York.

42


ABI also has license agreements to brew, sell and distribute AB’s flagship brand

under the Bud trademark in Russia

To be successful in this goal ABI should not only reduce domestic capital expenditures

by 50% but also concentrate on the company’s core business which is beverages, especially

beer.(Refer to Table 2) In order to do this AB has to sell of these assets that do not support

the core business. The assets are those under Bush Entertainment Corporation, which

include all the Bush Garden theme parks as well as Sea World.

ABI’s priority is investing in its core business, which is beverages, to enhance profit

growth. This includes increasing capital expenditures in existing international operations as

well as acquisitions and investments to enhance the company’s long–term earnings growth.

Currently the company’s primary source of liquidity is cash provided by operations.

Principal uses of cash are capital expenditures, business investments, and dividend and share

repurchases. Cash generated by each of the company’s business segments is projected to

exceed funding requirements for that segment’s anticipated capital expenditures. However,

in order to pursue a strategy of this magnitude the beer business segment does not have the

capabilities to generate the required funds and also the company has a debt to equity of 2.9,

far greater than to those of SABMiller and Coors (please refer to Table 1). Therefore by

selling off Bush Entertainment Corporation’s assets and issuing stock AB we will gain a

large amount of capital that can be further used in a true growth strategy. Our proceeds from

the divestiture of Busch Entertainment Corporation should be used to lower the debt/equity

ratio if, current market conditions support a lower fixed interest for our debt. Otherwise we

should directly invest the proceeds into our global growth strategy via direct investments into

43


China, Russia, India, etc. By having all business segments support its core competencies AB

will gain a better focus of its goals as well as obtain greater synergy. At the same time while

this growth strategy is in process AB can also focus in the development of other beverages

with higher growth rates in the US such as alcohol, energy drinks, and vitamin water. When

these other business segments are established in the US market then they will be ready to

start taking over the global market as the beer segment did.

Funding of Strategy

We believe that the proceeds from selling the Busch Entertainment Corporation will

amount to approximately $400 million. This can break down into our estimated net worth

and goodwill we have in our entertainment division. Concurrently, we will bring to market

about $200 million in new shares of stock. We believe this is quite conceivable considering

our current position in the market. Additionally, we believe cuts in domestic capital

expenditures are needed to re-invest the funds in a higher growth margin market, such as the

international one we have proposed; bringing capital expenditures down 50%, saving about

$200 million. Cuts in dividends are appropriate. Due to the fact that we are pursuing a more

aggressive growth strategy we believe our shareholders will understand a decrease in

dividends given their higher return in stock price in a few years. Estimates of the funds

gained from this would be about $300 million, or about 30% decrease in dividends. On top

of that we will invest our retained earnings annually to accompany this $1.1 billion in gained

revenues. Roughly, we approximate that we will invest about $1.5 billion in a span of two

years and this will be divided as follows: 50% investment in China, 30% investment in

Russia, and 20% investment in India.

44


The financial result in following this strategy is that overall the company’s net income grew

20.22% assuming the profitability of international beer segment is the same; compare this to

the current growth of 2006 to 2007 of 7.6%.

Current Net Income/Equity Ratio

of International Beer Segment 18.28%

Projected Net Income Increase

(mln. dollars) 274.3

Increase in total net income

as a result of implementing new strategy 20.22%

VII. Conclusion

In conclusion the strategies and recommendations brought forth in this paper come from

the rational of increasing the operational margin and revenue. The history of recent years has

shown that there is huge potential in developing markets both in terms of quantitative growth

and profitability. ABI has not concentrated enough on those markets. Up to this day only

6.42 percent of the company’s total revenue comes from the international beer segment. This

issue needs to be addressed, not only in the form of investing more funds from continuing

operations in the international market but also by spinning off the entertainment segment, and

cutting excessive capital expenditures on the U.S. beer division. It is imperative to act on

these recommendations with a sense of urgency in order fully capture the growth potential

45


the international market offers. With the passage of time these markets will become more

mature, consequently ABI will have to increase its investment accordingly in order to attain a

significant market share.

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Gilpin, Ann. "Stock Picks for Alcohol." Yahoo! Finance. 28 Mar. 2008. 2 Apr. 2008

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Anheuser Busch Market Strategy