Beer Companies a Good Investment Through Thick and Thin

by: David Hunkar

SABMiller PLC (OTCPK:SBMRF), the international beverage company, announced plans to acquire Foster’s Group (OTC:FBRWY) of Australia for A$9.51 billion ($10.06 billion). Foster’s quick rejection of this takeover bid could lead to a battle among the major beer companies. Foster’s rejected the offer saying it “significantly undervalues the company.”

Beer companies are attractive investment options when the economy is in expansion or contraction modes. During times of economic growth, consumption of beer goes up as people tend to drink more. On the other hand, during recessions consumers try to beat stress and suffering by spending on cheap items such as beer.

The graphic below shows the global beer market share in 2010:

[Click to enlarge]

Source: The Wall Street Journal.

Belgium-based Anheuser-Busch InBev NV (NYSE:BUD) is the world’s largest brewer by volume and owns about 200 beer brands including Budweiser, Busch, Michelob, Bud Light, and Natural Light. In February the company announced a deal to acquire 100% equity interest in Liaoning Dalian Daxue Brewery Co., Ltd. of China to expand its market share there. Last year, BUD’s total revenue amounted to about $37.0 billion. While the revenue growth was under 1%, profit margin stood at a healthy 17% range.

SABMiller PLC is the world’s second-largest brewer by volume. It owns a portfolio of over 150 brands, including international beers such as Pilsner Urquell, Peroni Nastro Azzurro and Miller Genuine Draft, according to Wikipedia. SABMiller is also one of the world’s largest Coca-Cola (NYSE:KO) bottlers with operations in 14 markets.

Dutch beer giant Heineken N.V. (HINKY.PK) is the owner of more than 200 international, regional, local and specialty beers and ciders, including Amstel, Birra Moretti, Cruzcampo, Foster’s, Kingfisher, Newcastle Brown Ale, Ochota, Primus, Sagres, Star, Strongbow, Tiger and Zywiec and operates in more than 70 countries. In January, 2010 it acquired the beer operations of Fomento Economico Mexicano, S.A.B. de C.V (NYSE:FMX) of Mexico. Commenting on SABMiller’s takeover bid of Foster’s, Heineken said that it is primarily interested in expansion in emerging markets.

Copenhagen, Denmark-based Carlsberg (OTCPK:CABGY) brews beers under Carlsberg Beer and other local brand names. Carlsberg holds about 40% of the Russian beer market through its ownership of the Baltika Brewery, Russia’s largest beer producer.

China Resources Enterprise (OTCPK:CRHKY) is the subsidiary and the listed company of China Resources Holdings. It is listed on the Hong Kong Stock Exchange and is one of the constituent stocks of the Hang Seng Index. The blue-chip consumer goods conglomerate focuses on the consumer businesses including retail, beer, food and beverage in China. The group is China’s largest beer producer by sales volume and is also the country’s largest supermarket operator.

Disclosure: No positions