Friday, June 29, 2012
The conglomerate that brews Budweiser (is it right to even call it beer?) has sucked down the rest of Grupo Modelo, makers of that fine flavored water commonly known as Corona.
Grupo Modelo also makes Modelo beer, which is quite tasty and makes an excellent chaser for a pitcher of margaritas. Paired with guacamole and chips, Negro Modelo is the beer that made Mexico famous.
AB InBev will pay over $21 billion American for the Mexican brand, to make for a more international selection of beverages, to add to the likes of Stella Artois and Bud. And of course they'll take on a debt load of $14 billion to fund the purchase, with an expectation of turning enough profit to cover the cost.
That's code for firing people left and right, to squeeze more work out of each employee so that fewer employees are needed. They can merge sales forces, accounting departments, marketing, etc. and cut down on salary expenses.
For those who get synergized, well, I guess AB InBev figures you can go cry in your beer. Make it a Busch. It's cheaper.
Grupo Modelo is growing, which made it a tasty target for acquisition. For some reason, and it's probably clever advertising, Corona beer is wildly popular. It's the segment of the beer market that isn't declining, in spite of difficult economic times.
As the money rolls in and the synergies get realized, AB InBev can then move along and buy up another brewer, and then another, until the only beer you can buy is made by them.
Unless, of course, the Feds take note and slap AB InBev for trying to create a monopoly. No one likes a lack of competition, unless it's in the health care insurance industry. That's because monopolies drive up prices as they're the only game in town.
For now, AB InBev can dream big beer dreams and set their sights on swallowing their competition. At some point, they will reach a limit, whether it be financial or legal.
And at some point, too many people will be out of work and sales will drop off as drinkers make the hard choice between paying the mortgage or buying a six-pack.