Inbev, known for its low cost and no nonsense business operations, will be selling a majority of its stake in Tsingtao Brewery to Asahi Breweries. Currently the Tsingtao brand is the number two beer producer in China, while Asahi Breweries tackles the Japanese marketplace.
A bridge loan sale
Inbev found itself in over its head with its purchase of Anheuser-Busch for some $52 billion. Originally, the full amount was to be financed with both private equity and bond sales, but finding lenders in a credit crunch has proved to be a difficult task for Inbev, whose products rely on strong consumer spending. Inbev will retain a 7% stake after selling 20% to Asahi.
Sizing up then sizing down
CEO Carlos Brito purchased Anheuser in whole, but has since mentioned five parts of the combined company that may be liquidated in an attempt to erase $14 billion in debt that the company borrowed to complete the acquisition. His strategy has remained the same: sell off foreign holdings in an attempt to raise capital and bring popular American brews to developing nations. After purchasing Anheuser-Busch, the company inherited many businesses that do not fit with its main brewery businesses, including Sea World and Busch Gardens Theme Park.
Political options limited
As ABInbev is now the third largest producer of beer in China, with more than 20 local brands and brews, Chinese regulators were unwilling to allow the company to chase bigger holdings in the Tsingtao brand. Selling off the brand was a simple decision which would allow the company to focus on organic growth with its regional brands, rather than fight fierce Chinese regulations. The company will fare better in bringing Budweiser to China, rather than market brands it doesn’t completely own. Budweiser’s success in the United States should be easily replicated in China, where there are very few large brands, but rather much smaller and often independent brands.