Is the King of Beers turning its back on its frosty brew? In an interesting development on Tuesday, Anheuser Busch (NYSE:BUD) announced that it would begin distributing Margaritaville Tequila in the state of Massachusetts.
Clearly, this decision won't have a major financial impact on Anheuser whatsoever, given its $40 billion market capitalization and $16 billion in annual revenue. The company also controls about half of the domestic market for beer and is a strong player in many international markets.
However, it's no secret that consumers are increasingly developing a taste for higher-end spirits and wine, to the detriment of beer. Worse yet, imported beer is growing faster than domestic brands such as Budweiser, Molson Coors' (NYSE:TAP) Coors brand, or SABMiller's Miller and related brand names. In its most recent annual report, Anheuser CEO August Busch conceded that the beer industry is shifting because of "changes in demographics, shifts in consumer preferences, [and] rising competition from other forms of alcohol," and that beer is growing slower than the overall alcohol industry.
So, does the company plan to move aggressively into tequila, much as high-end spirit firm Brown-Forman (NYSE:BF-B) did last fall by acquiring Mexican tequila maker Casa Herradura? Well, not exactly -- Casa Herradura and Diageo's (NYSE:DEO) Jose Cuervo brand can rest easy. While Anheuser does plan to "look at the total beverage landscape" to grow its business, it plans on remaining firmly committed to its mature, but highly profitable, flagship domestic beer business.
Growth will stem from expansion and acquisitions related to international brew, with a recent agreement to become the exclusive U.S. importer for InBev's portfolio of import brands, including the highly popular Belgian beer Stella Artois. Man, I'm getting thirsty. It must be happy hour somewhere.
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Anheuser-Busch is a recommendation of Motley Fool Inside Value. Diageo is a recommendation of Motley Fool Income Investor. Whatever your taste preference, The Motley Fool has brewed up an investing service to quench your stock thirst.
Fool contributor Ryan Fuhrmann is long shares of Diageo, but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool's disclosure policy still denies that it ever drank Zima.
