With annual profits of $7.2 billion there is little doubt that Anheuser-Busch InBev (NYSE: BUD) is after another company. This article tries to analyze the next probable targets. Each year the target companies need to get bigger or they won’t move the profit needle enough to surpass Coca-Cola, (NYSE: KO).
Today: The king of beers. Tomorrow: The king of beverages
Anheuser-Busch InBev sells almost as much as Heineken (world’s third largest brewer) and SABMiller (world’s second largest brewer) combined. If you want to compare their profits then you need to combine Diageo with SABMiller.
Are they going to buy another beer company?
Anheuser-Busch InBev is now still $8.2 billion away from Coca-Cola in sales. Even if they buy the cheapest beverage company in the world which is currently Monster Beverage Corporation (NASDAQ: MNST) they still will need to increase their sales by $6.1 billion. In profits they are now only $1.8 billion behind Coca-Cola. You cannot make that kind of cash with only one company unless you buy Heineken Holding (Amsterdan: HEIA) for $18.6 billion which could set off a lot of monopoly alarms in Europe. Buying three or less companies for less than $12 billion each could be smoother.
(Numbers in billions ordered by Market Value)
| Company | Profits | Market Value |
| Asahi Group Holdings | 0.7 | 11.1 |
| Coca-Cola HBC | 0.3 | 10.2 |
| Beam | 0.4 | 10.1 |
| Coca-Cola Entrerprises | 0.7 | 10.1 |
| Anadolu Efes | 0.3 | 9.0 |
| Dr Pepper Snapple Group | 0.6 | 9.0 |
| Molson Coors Brewing | 0.4 | 8.8 |
| Constellation Brands | 0.4 | 8.4 |
| Green Mountain Coffee | 0.4 | 8.1 |
| Monster Beverage | 0.3 | 8.0 |
| Lhou Laojiao | 0.5 | 6.6 |
As you can see, some of the companies from the list are Coca-Colas which are likely to be acquired by Femsa (NYSE: FMX) (world’s second largest Coca-Cola bottler) or by The Coca-Cola Company itself. Buying another beer company for less than $16 billion could also work. The options are limited and Femsa could block a merger between Heineken and Anheuser-Busch InBev.
(Numbers in billions ordered by Market Value)
| Company | Profits | Market Value |
| Carlsberg | 1.0 | 15.8 |
| Kirin Holdings | 0.6 | 15.2 |
| Thai Beverage | 0.9 | 12.3 |
| Asahi Group Holdings | 0.7 | 11.1 |
| Anadolu Efes | 0.3 | 9.0 |
| Molson Coors Brewing | 0.4 | 8.8 |
Molson Coors and SABMiller already have a joint-venture started in 2007 called MillerCoors. If Anheuser-Busch InBev buys Molson Coors then they could sell Coors to SABMiller in exchange for the right but not the obligation to buy them within eight years if certain financial targets are met.
Margins are low in Japan. Buying Thai Beverage and Asahi Group Holdings at the same time with the help of another big company would create an Asian powerhouse which could grow in the near future at a much faster rate than each company on its own and would eventually bid for Kirin Holdings or Anadolu Efes leaving Asia (Excluding China) without beverage companies.
There is a collision course between beer, liquor and soft drink companies. They all use a truck to deliver their products to convenient stores. There is no point in sending a beer truck at 6 am to a 7 Eleven and then a soft drink truck at 6:10 am and then a vodka truck at 6:20 am every day.
Suntory which in 2009 tried to merge with Kirin without success is actually the sole bottler of Pepsi in Japan. If you sell tequila at a restaurant then you also sell beer. The savings from buying a company like Beam are not as attractive as a beer company but some of the brands could be sold to other big players in the industry. Femsa would love to pay billions for Sauza because they are already selling it in their over 11.000 convenience stores in Mexico and other countries.
Femsa would become a vertically integrated tequila manufacturer selling directly to the consumer in the largest tequila market worldwide. (Mexico) Brown-Forman also has a very popular brand of Tequila called Herradura which could be worth billions to Femsa.
They cannot just buy the entire company for $14.7 billion and then unload all the brands they are not currently selling in Mexico. A bigger company like Anheuser-Busch InBev needs to buy the company first and then sell them the tequila for a few billion more and keep or sell the rest of the brands.
If Anheuser-Busch InBev partners with Femsa to acquire another Coca-Cola bottler then they could secure a long term distribution deal for their beers in many countries where their brands have a small market share. In other words, together they could make more money than The Coca-Cola Company and Pepsi combined. InBev could become the first megacorporation in the world if they are smart enough to partner with Femsa.
Anheuser-Busch could easily buy Dr. Pepper Snaple Group and make sure their beverages are distributed worldwide at convenience stores everywhere. Few companies in the world have a distribution network for beverages and snack foods as large as Femsa. They have thousands of stores now and they open a new one somewhere in the world every 8 hours.
It appears sooner or later both CEOs will get in the same room to discuss how many billions does Anheuser-Busch InBev needs to lend to Femsa to expand its large distribution network faster and wider. 7-Eleven of Japan already surpassed McDonald’s in 2007 with 46,000 outlets. After all, you cannot order beer or Coca-Cola on Amazon or Ebay.
Anheuser-Busch InBev is big in Mexico
Corona is a very popular brand of Mexican beer sold worldwide and Grupo Modelo is one the leading companies in the world according to Forbes but not for long because Anheuser-Busch InBev bought them recently and is waiting for approval by the United States of America. You can read a more about Grupo Modelo and other leading companies from Mexico in another one of my syndicated articles here.
Conclusion
Anheuser-Busch InBev could buy a liquor company with Tequila brands that Femsa is already selling in Mexico and other countries where Tequila is a popular choice and sell them for a very nice and quick profit. The rest of the brands could be sold to other companies or they can keep them. If they get shares for their Tequila brands then they will become shareholders in Heineken because Femsa is already the second largest shareholder of Heineken with a 20%