Whether in the U.S. or halfway around the globe, the rivalry between beer's top dog, Anheuser-Busch (NYSE: BUD), and No. 2, SABMiller, is building to a fever pitch, as aggressive marketing, lawsuits, and takeover battles add froth to this normally staid industry.
No longer an afterthought in Altria Group's (NYSE: MO) portfolio, the former Miller Beer (now SABMiller) has regrouped and appears ready for action. Miller Lite's recent market-share gains are driving the turnaround, prompting counteroffensives from Anheuser-Busch that mock Lite's low-carb claims and challenge beer drinkers to choose on taste. Miller followed with the President of Beers campaign, provoking a hostile response from the king that landed both parties in court, still arguing. And back and forth we go.
Yet while the companies bicker publicly over the saturated U.S. market, and distant third Coors (NYSE: RKY) goes European, beer's real story is playing itself out in the world's largest market -- China. The fight for China's fourth-largest beer maker, Harbin Brewery, ended this week, as Anheuser-Busch's $720 million offer was accepted over SABMiller's $550 million hostile bid -- hostile because it was clear from the beginning that Harbin's management wanted Anheuser-Busch as a suitor, which in hindsight is easy to understand.
The two beer makers tried to woo the Chinese company's shareholders with very different approaches. Miller's strategy bordered on arrogant, as the company made clear its intention to merge Harbin with another of its Chinese interests. Not surprisingly, Harbin's management was less than thrilled with this idea, forcing SABMiller to accompany the hostile bid with assurances that Harbin's brands and employees would be protected.
Contrast SABMiller's action with that taken by Anheuser-Busch. Rather than launch an immediate counteroffer for Harbin, the company played politics first by donating $8 million to the city of Harbin, establishing a fund to promote economic development. Then the company outbid its rival, offering HK$5.58 per share ($0.72) for the outstanding shares -- roughly 35 times earnings -- with assurances that Harbin would remain independent.
Everywhere in the world business is about relationships, but particularly in Asia. China's beer market is ripe for takeovers, but still largely controlled by the state. Humility and respect are in order if foreign companies wish to be successful in this land, something Anheuser-Busch apparently understands. We'll see if its South African colleagues learn this lesson.
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Fool contributor
Chris Mallon
is excited to see the Budweiser lizards back in action and owns shares of Anheuser-Busch and Altria through his private investment partnership.
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