Budweiser focus of InBev's plans

Deeper cost-cutting will follow brewer's merger with Busch

July 15, 2008|By Jeremiah McWilliams and Tim Logan | Jeremiah McWilliams and Tim Logan,St. Louis Post-Dispatch

ST. LOUIS, Mo. - Expect "Blue Ocean" to get deeper and Budweiser's reach to get wider.

In a conference call yesterday, executives from InBev laid out their plans to expand cost-cutting at Anheuser-Busch Cos. and to build the world's dominant brewer around its new flagship brand, Budweiser.

InBev chief executive Carlos Brito told analysts hours after the announcement of a $52 billion deal to buy the St. Louis brewer that the merged company, to be known as Anheuser-Busch InBev, will be the leading provider of beer in the world's five biggest beer markets and the third-largest consumer products company in the world. It will be 62 percent larger in terms of revenue than its next-largest brewing rival, SABMiller.

Brito said Budweiser has unlocked potential in countries where the beer is not widely available because Anheuser-Busch's globe-spanning advertising of the World Cup and Olympics has made drinkers aware of the brand.

Changes will begin with a deeper cost-cutting plan than the one Anheuser-Busch unveiled last month, when it was trying to fend off InBev's advances.

That plan, known as Blue Ocean, called for cutting $1 billion in expenses over two years. It will be expanded to a $1.5 billion effort over three years, which means the buyouts planned for up to 1,300 salaried employees are likely to continue.

The approximately $500 million increase in cost-cutting will include about $360 million from greater leverage with suppliers, more aggressive production efficiencies and "elimination of corporate overlapping functions," which probably will lead to job losses at Anheuser-Busch's corporate headquarters in St. Louis.

Brito said he has no plans to cut Anheuser-Busch's marketing spending.

"One of the things we like about Anheuser-Busch is its marketing expertise," he said.

The deal will open up new markets for Budweiser, which InBev will push in 19 countries, including Brazil and Ukraine, where the Belgian brewer is strong but Anheuser-Busch is not.

InBev takes the same "no-compromise" position toward quality that Anheuser-Busch does, Brito said.

"Consumers can be assured that we will continue what makes Bud the great American lager," he said.

That push will begin in St. Louis, which will remain the company's North American headquarters, said Brito, who pledged to maintain the company's heritage.

In a brief statement at the start of the call, Anheuser chief executive August Busch IV stressed that the deal was "friendly" and the best move for his company's shareholders.

Busch will not have an executive role with the new company but will take a seat on InBev's board, as will one other current or former member of Anheuser-Busch's board.

Brito said he hopes to close the deal by the end of the year.

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