Drinking buddies

InBev of Belgium, the world's second-largest brewer, will announce its second quarter results on Thursday. Following positive second quarter earnings from competitor Carlsberg of Denmark, InBev is likely to follow suit.

In July, and after a bitter takeover battle, InBev announced it was acquiring Anheuser-Busch for 70 dollars per share, pending regulatory approval. Once combined, InBev would become the world's largest brewer, with over one quarter of the global market. This would effectively push SABMiller, the current leader, to number two.

In 2007, the firm realised 14.4 billion euros. Its geographically diversified portfolio of brands, in both developed and developing countries, has buttressed its success. New middle classes with a taste for beer around the world have compensated for sluggish growth and jaded drinkers in traditional markets. It has a portfolio of 200 local brands, including Stella Artois, Becks, Leffe, Hoegaarden, Bass and Brahma. The acquisition of Anheuser-Busch adds Budweiser and Michelob to that list.

Apart from paying down the debt it took on to bid for Anheuser-Busch, the biggest long-term risk to the tie-up is the potential clash of cultures. InBev is headquartered in Belgium, and already accustomed to big international mergers following its creation from the merger between Interbrew of Belgium and AmBev of Brazil. Anheuser-Busch, on the other hand, is deeply rooted in a United States, with generations of family control.

For brewing as a whole, the merger is a sign of more to come -- which still makes sense, in a market where economies of scale are easier to achieve than organic growth in the search for profits. Having lost its premier position as world's largest, SABMiller might consider tie-ups with other North American brewers such as Molson Coors, which is vulnerable after recent losses, and with whom it already operates joint ventures. Smaller firms such as UK drinks maker Diageo, meanwhile, might consider acquisitions, lest they be bought up themselves.