A-B to Import InBev Brands

Inks licensing deal for Stella Artois, Beck’s and others.

Anheuser-Busch has reached a deal with InBev to import Stella Artois, Beck’s, Bass and other import brands, according to press reports and Brew sources.

A-B has coveted the brands as part of its “funnel strategy” of delivering high-margin brands to its restricted distributor network. Indeed, the two came close to a deal this past summer but it fell through.

Meanwhile, the Buffalo office of InBev will continue to handle Labatt and Brahma, according to Beer Business Daily (subscription required).

Now comes the tough part for A-B: Bringing the brands into its network. Beer Marketer’s Insights (subscription required) -- which broke the story -- says that could prove challenging.

Transition headaches? You bet. If some Miller/Coors distribs in strong franchise states unwilling to sell declining lower-priced Rolling Rock, hard to imagine greater willingness to sell hot Stella or other higher priced Euro brands. … Multiples likely to be higher as will gross profits per case.

In a report, Morgan Stanley analyst William Pecoriello says the deal should help investor sentiment about A-B. But he also sees hurdles:

Other than impacting reported volume growth we don't envision having to change our EPS estimates for A-B as a result of today's announcement. One issue for the A-B network will be transferring the brands into A-B wholesalers as the acquisition prices and willingness of the Miller/Coors wholesalers to sell these brands could prove challenging. (note even transferring recently acquired Rolling Rock into the A-B network has been challenging).

Rumors about an InBev-A-B deal have circulated for years, so distributors weren’t shocked that one finally came to pass.

“It hurts,” says one large distributor who stands to lose the brands. Stella Artois, in particular, “is big for us.” The distributor added that a possible counter is boosting support for Peroni Nastro Azzurro brand, an Italian beer owned by SABMiller plc that’s positioned at the high end of the import segment.

BMI says the big prize is fast-growing Stella Artois, which could hit 500,000 barrels this year compared to 300,000 in 2005. The largest brand is Beck’s, with 700,000 barrels. Bass accounted for 437,000 barrels in 2005 and has been in decline.

Ironically, the transaction comes weeks after InBev told its employees to ignore rumors of a deal.

And, as BMI notes, the announcement comes on the last day of August Busch III’s tenure as chairman of the board.

Previous Brew Blog coverage of the A-B/InBev talks can be seen here, here, here, here and here.

Brew Magazine explored the issue of the acceleration of brand ownership and licensing changes -- and its implications for wholesalers -- in August. Read it here.

Update: The A-B press release can be seen here.