7/25/2008 6:59:00 PM
Sports and beer have a strong bond
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By Jordan Kobritz
Courier Columnist
An American sports icon changed hands last week, and it wasn't the widely anticipated sale of the Chicago Cubs.
Anheuser-Busch's consent to be bought out by Belgium-based brewer InBev for $52 billion sent shock and fear through the sporting world, in spite of the fact the merger had been rumored in financial markets for a year and a half. The angst in sports boardrooms is understandable. It's not an exaggeration to suggest that A-B, headquartered in St. Louis, has had a greater impact on sports and sports marketing than any other U.S. company.
Among the major beneficiaries of A-B's marketing budget are the Olympics, Major League Baseball, the NFL and NASCAR. But those properties represent a small fraction of the many tentacles the beer giant has in the sports world. A-B's commitment to sports marketing benefits such diverse sports as golf, horse racing, volleyball, fishing, rodeo, tennis, boat racing and lacrosse. Company expenditures range from stadium naming rights and TV advertising, to league and event title sponsorships. And Busch
products are available for purchase at virtually every sporting event where adult beverages are consumed.
A-B, best known for its signature brands, Budweiser and Bud Light, spent an estimated $218 million last year on sports advertising and sponsorship in this country and another $300 million around the world, according to Michael McCarthy of USA TODAY. After the merger announcement, the question on everyone's mind was, will that level of expenditure continue?
InBev CEO Carlos Brito tried to assuage any fears by saying his company has "no plans to trim advertising" in the U.S. But actions speak louder than words and InBev, maker of Beck's and Bass in addition to more than 50 lesser brands, has a reputation for acquiring companies and then cutting costs in an effort to increase profitability. Will that formula apply to InBev's latest acquisition? And if cuts are made, will they be in sports marketing? Only time will tell.
In the short term, no changes in the way A-B markets its products are expected. The merger, which will create the largest brewer and the third largest consumer products company in the world, won't be completed until at least the end of the year. And even then, A-B is locked into long-term contracts with a number of teams and other properties, including recently executed deals with the Chicago Cubs, new stadia for the Yankees and Mets, the new Giants-Jets Stadium, and the National Hockey League.
It's unlikely that InBev will suddenly appear on the scene and demand a re-write of existing agreements. The most likely scenario suggests a scaling back of marketing efforts in this country over time, with a greater focus on making Bud and Bud Light as recognizable world-wide - especially in Europe, Asia and Latin America - as they are in this country. But InBev's post-acquisition history gives credence to the prediction by Tom Pirko of Bevmark, a beverage-consulting firm, that the new company's sports spending will be trimmed by a third or more.
Anheuser-Busch InBev will have combined sales in excess of $36 billion. That figure is 40% larger than its largest competitor, SABMiller - marketers of the Miller, Molson and Coors brands - with more than double the profits, according to the N. Y. Times. Beer sales in the U.S. have been flat for the last five years and the new company sees an opportunity to increase market share and profits by promoting their respective products in different parts of the world.
But the motivation behind the merger may not be limited to market share. With a potential increase in the capital gains tax, depending on the outcome of the November elections, the Busch family, which remains a major shareholder in the company, along with other corporate board members, saw an opportunity to save millions of dollars in taxes. The merger's benefit to shareholders is less clear. In the short term, InBev warned of lower dividends and no increase in earnings per share.
Still, the biggest impact of the merger may be in the sports world. And if the new company does cut sponsorship spending, how will sports properties make up the shortfall? Will the $8 stadium beer be as distant a memory as $2 per gallon gas?
(Jordan Kobritz is a former attorney, CPA, and Minor League Baseball team owner. He is an Assistant Professor of Sport Management at Eastern New Mexico University, teaches the Business of Sports at the University of Wyoming, and is a contributing author to the Business of Sports Network. Jordan can be reached at jkobritz@mindspring.com.)
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Posted: Tuesday, September 09, 2008
Article comment by:
Kim Lea, Wishaven Animal Rehabilitation
As a vegan individual, I hope that Inbev will cease sponsoring "sporting" events that claim to entertain, but cause immense suffering to thousands of voiceless animal victims. So what do ya say, Inbev? Can I enjoy my Beck's again?
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