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If Bud Goes Will the Clydesdales Follow?

The King of Beers is apparently subject to the same rules of tribal warfare as other monarchs. InBev, a weirdly named, patched together Belgian/Brazilian beer conglomerate has announced a $46 billion offer to purchase Anheuser-Busch, the parent of Budweiser, Bud Light and, yes, those famous Clydesdales. While it is far from certain at this point what the outcome of this corporate attempted coup may be, it is never too early to begin to assess the consequences of the loss of independence for A-B.

A-B is far and away the largest sports advertiser in North America and perhaps the world. It has used its enormous marketing budget, some $500 million in annual US advertising time, to build and maintain market position for Budweiser and Bud Light. Sports has always been a key factor in that marketing as it is the easiest route to the most significant beer drinking demographic group - young men. In addition, A-B spends $300 million in sports sponsorships annually, money which is very likely to be cut significantly if the deal with InBev is consummated.

InBev has a very different philosophy about marketing, one which should make owners of professional sports franchises and athletic directors of U.S. colleges and universities quickly start campaigns to keep A-B an independent company. InBev's philosophy is to use those dollars to market based on price. It does not believe in spending ad dollars in a way that drowns out your competitor. As a result, it is not a major sports sponsor nor is its advertising budget more than a fraction of that spent by A-B.

In order to protect its Budweiser sponsorship and advertising dollars, every college and university athletic director should march into his or her president's office and ask the president to instruct that all shares of A-B held by the university's endowment be voted against any offer by InBev and not tendered to InBev. These announcements should be coordinated, perhaps by conference, and made public for maximum public relations effect to gain momentum against the sale.

I should point out for the record that I am not an Anheuser-Busch shareholder and have no personal stake in this battle. I don't really care who ultimately owns Budweiser - I don't drink it and don't own it. However, the impact of the sale on the collegiate and professional sports world in this country can't be overestimated. A-B is an irreplaceable part of the American sports scene and a major, major financial force which will be greatly diminished if the sale is consummated. The sale will in all likelihood go down for a price a bit higher than the current offer and InBev will install cost cutting measure more severe than currently contemplated. That will undoubtedly mean significant cuts in both advertising and sponsorship dollars In a weak economy the impact of the loss of those dollars will only be magnified.

Full post as published by Sports Biz on June 14, 2008 (boomark / email).