Crotty,+Bus+Report,+Anheuser-Busch+and+SAB



=Anheuser-Busch's message to US beer drinkers lacks taste=

Business Report, Johannesburg, June 1, 2005

 * By Ann Crotty**

"Why did Anheuser-Busch just pay $700 million [R4.7 billion] to the Chinese for the Harbin Brewery? Anheuser-Busch invested in China so we could generate more profit to bring back to the US.

"Why does Anheuser-Busch own 50 percent of Modelo, the maker of Corona? Anheuser-Busch invested in Mexico so we could generate more profit to bring back to the US."

These are just two of the seven crass and disturbingly xenophobic questions and answers contained in a note that the brewer of Budweiser has circulated to its distributors in the US.

The two questions and answers do, of course, highlight one important fundamental truth about globalisation, which is that large and powerful companies invest in markets across the globe with the sole objective of sucking profits out of those markets.

This certainly doesn't make globalisation a bad thing. If companies did not have the prospect of getting a return on their money, then they would not invest in the first place.

Countries that attract lots of foreign direct investment are those that offer the greatest certainty of enabling companies to "bring profits back home".

Whether or not foreign direct investment from a powerful company, such as Anheuser-Busch, based in the most powerful economy in the world, the US, is attractive for the recipient country depends on what happens between the initial investment and the subsequent outflow of profits.

If the investment helps to develop institutions and infrastructure in the recipient country as well as create employment, then the multiplier impact will presumably be sufficiently attractive to justify the subsequent outflow of funds from this recipient.

For Anheuser-Busch shareholders the really good news is that, because of previous foreign investments that were made, Anheuser-Busch was able to report in its last financial year that its international operations accounted for 25 percent of total profits.

Given the weakness of its domestic market, Anheuser-Busch's international operations are set to become an increasingly important source of profit. So, as far as shareholders go, this means that "foreign is good".

But this is not the message that Anheuser-Busch is trying to sell to US beer drinkers. The brewery is trying to persuade these sensitive souls that "foreign is bad" and to be avoided.

The accompanying crass advertising campaign, aimed at US beer drinkers, says that Miller Beer is owned by South Africans and the message is that it should therefore be boycotted.

This crudeness requires us to assume that one of the most powerful and well-resourced companies in the world does not understand the financial reality behind the ownership of its most threatening competitor.

The reality is that SABMiller's largest shareholder block is US-based; that since SAB purchased Miller in 2002 the dividend flow to US investors has been substantially larger than the profit flow from Miller; and that thanks to new management at Miller, US consumers have a real choice of beers.

So, whatever way you look at it, the US is the main beneficiary of SABMiller's ownership of Miller.

Which brings us to the irony in all of this, which is that South Africans are subsidising this improved position of the US and its beer drinkers.

The massive profit generated from the 98.3 percent monopoly situation enjoyed here has enabled SAB to invest in international assets. And the use of the excellent South African management talent developed by SAB over the years is what has enabled the group to turn these assets into strong profit generators.

In essence, since it transferred its primary listing to London in 1998, SAB has overseen a net outflow of resources - financial and management - from the developing world to the "more developed" world including Russia, eastern Europe, China, India and the US.

If the bulk of SABMiller shareholders were South African, as alleged by Anheuser-Busch, this would be good news for us because the dividend flow would eventually favour this country.

Sadly, because of the costs of accessing the large amounts of capital needed to finance an acquisition-hungry global beer group, this is not the case.

Perhaps therein lies one of the main causes of hostility to globalisation - it is not because US beer drinkers are being tempted by so-called foreign-owned brews but because in a global community it is very difficult to prevent whatever resources are available from draining towards the centres of power and influence.

Of course the challenge for us here in Africa is to ensure that we're not just the passive recipients of foreign direct investment and increased consumer opportunities, but that we are able to secure more long-term benefits of this global trade.

It is because of the enormity of this challenge that Anheuser-Busch's advertising campaign is particularly offensive. It sends the very strong message that the US should be the only beneficiary of globalisation. And indeed, perhaps the next time there are some extremely violent protests at a Group of Eight or World Trade Organisation meeting, the police should check out the advertising executives at Anheuser-Busch.


 * From: http://www.busrep.co.za/index.php?fSectionId=553&fArticleId=2541339