Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



A-B InBev Steps Up Asian Beer Market Battle

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Despite warnings from a number of large consumer-goods companies, including European heavyweight Unilever, emerging market demand for some goods still looks strong. In any case, good enough for Anheuser-Busch InBev (NYSE: BUD  ) to get back into with its recent repurchase of South Korea's Oriental Brewery. Key rival Heineken (NASDAQOTH: HEINY  ) has also been working on increasing its presence in Asia, one of the fastest-growing beer markets, having purchased Asia Pacific Breweries in 2012. What does Anheuser-Busch InBev's pending acquisition mean for the industry?

Buyback brewing
It seems as if all the major brewers are trying to cash in on the Asian beer market. This is not surprising, considering its formidable growth over the last few years. Asia's $258 million beer market is reportedly growing around twice as fast as the rest of the world and so far shows no signs of slowing down.

The continent overtook Europe and the Americas in total amount consumed as early as 2007, although consumption per capita has not yet caught up. Interestingly, beer consumption seems to be correlated with growing prosperity in Asia. People drink more beer when things are going well economically, while consumption of spirits seems to continue no matter what the economic backdrop is.

So, it comes as no big surprise that the world's largest brewer wants a piece of the action. Investors have been wondering for some time now what the company had planned for its cash pile, a question which now seems to be partly answered. In 2009, in an effort to pay off debt and boost the company's financial position, it sold Oriental Brewery to private equity firm KKR, but is now intent on repurchasing the company to increase its competitive edge in Asia.

The deal is currently worth around $5.8 billion, which is around three times what the company originally sold Oriental Brewery to KKR for. However, under KKR's leadership, Oriental Brewery has become South Korea's largest beer brewer and has more than doubled its earnings. Clearly, A-B InBev sees lucrative opportunities for growth.

Market consolidation: Heineken and SABMiller
Anheuser-Busch InBev is not the only company looking to expand its footprint in Asia. As mentioned above, in 2012 Heineken completed the acquisition of the remaining part of Asia Pacific Breweries it did not yet own. The Asian brewer has some very strong brands in the region, especially Tiger, which saw brand volume skyrocket 32% during 2012, driven largely by very solid demand in Vietnam and China. China volume grew by some 27%, with Tiger and Heineken as the top sellers.

The global beer market is becoming consolidated to such a degree that some analysts believe the big fish may start merging at some point. For years, commentators have speculated on the possibility of a merger between the world's No. 1 and No. 2 brewers, Anheuser-Busch InBev and SABMiller (NASDAQOTH: SBMRY  ) . The reacquisition of Oriental Brewery has once again started the discussion of its feasibility.

A merger with SABMiller would supply Anheuser-Busch InBev with access to Africa, one of the fastest-growing markets in the world. SABMiller has an extensive portfolio of local beers in the area, which are generally the preferred drinks in Africa. The deal would certainly be a massively expensive one, but according to some, A-B InBev can throw up to $100 billion at the merger. Yet money might not be the problem. Rather, such a venture would almost certainly run into antitrust issues, as one corporation would account for some 46% of the global beer industry.

The bottom line
The battling for the burgeoning Asian beer market is heating up. The world's No. 1 beer brewer, Anheuser-Busch InBev, announced it will be buying back South Korea's Oriental Brewery, after having previously sold it to KKR. The move will presumably bolster the brewer's position in the region, which accounts for much of the industry's growth. It remains to be seen how much the new acquisition will contribute to bottom-line growth, but a strong presence in Asia should provide some upside for A-B InBev shares.

More upside for your portfolio
It's no secret that investors tend to be impatient with the market, but the best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report, "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2806173, ~/Articles/ArticleHandler.aspx, 9/2/2015 9:17:44 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Daniel James

I'm primarily a value and fixed-income investor with a background in cultural anthropology. As a writer for the Fool, I focus mainly on the consumer goods sector, also dabbling in technology occaisionally. When not pouring over the world's stock markets, I like to read, travel and make music.

Today's Market

updated 12 hours ago Sponsored by:
DOW 16,058.35 -469.68 0.00%
S&P 500 1,913.85 -58.33 0.00%
NASD 4,636.11 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/1/2015 4:01 PM
BUD $106.07 Down -2.84 +0.00%
Anheuser-Busch InB… CAPS Rating: ****
HEINY $38.83 Down -0.76 +0.00%
Heineken N.V. (ADR… CAPS Rating: ****
SBMRY $45.39 Down -1.47 +0.00%