Editor's Plate: Look out for Augie Busch IV

March 5, 2007
Don't be surprised if the Eagle again lands in snacks, or some other category that doesn't get poured into a glass.

August Busch IV recently became the fifth generation of his family to run St. Louis-based Anheuser-Busch Cos., the country's largest brewer. And why should real foodies care? Because some day he may be coming at you in your category.

If you were the undisputed king of your hill, with 50 percent market share but in a category growing just 0.2 percent a year, wouldn't you look around for new opportunities? And those opportunities need to be a little further afield than gluten-free beer or flavored malt beverages.

Remember Eagle Snacks? A-B launched them in the early 1990s, a time when a lot of companies were diversifying outside of their traditional categories. It didn't really pan out - remember what happened to Borden? Sara Lee may be one of the last remnants of that era, and it's nearly completed its transformation from a diversified holding company that once sold bras, insecticide and shoe polish. But the idea is not entirely without merit.

On the other hand, look at Pepsico. There probably were a lot of doubters in 1965, when it purchased Frito-Lay. And again when it bought Tropicana. And again when it bought Quaker Foods. But Pepsico now looks like a visionary company that has cornered the market on snacks and drinks, not relegated to the carbonated soft drink category, with many analysts preferring it to the more constrained Coca-Cola Co.

Anheuser-Busch made Busch IV, 42, president and CEO in December. Those titles were vacated when Patrick Stokes, 64, became chairman of the board, replacing August Busch III, 69, who retires but remains a member of the board.

Busch IV has been groomed for the top job since he was old enough to drink, starting at A-B in 1985 as an apprentice brewer and subsequently holding positions in management, brewing, operations and marketing. He had been head of Anheuser-Busch's U.S. beer operations since 2002. His great-great-grandfather Adolphus Busch in 1861 married the daughter of Eberhard Anheuser, who owned a St. Louis brewery, and changed the name to Anheuser-Busch in 1879.

"Here's to beer" was a 2006 A-B ad campaign that celebrated the power of the malt beverage. And a February press release cited an ACNielsen report naming beer the top food and beverage growth category in the world. Nevertheless, A-B has been hit by the revived popularity of spirits, especially among younger drinkers. Since 2000, malt beverages' share of alcohol consumption has dropped from 58 percent to 55 percent. At the same time, spirits' share has climbed from 42 percent to 44.9 percent, according to Beer Marketer's Insights. Busch IV has said that if the trend continues, the company will have to re-evaluate whether to broaden its products beyond beer.

UBS beverage analyst Kaumil Gajrawala issued a report in which he says he expects "A-B will become a more proactive, nimble company" under Busch IV. The report says that "according to industry insiders, Busch IV could be more amenable to bigger, more transformational deals. In our view, A-B will likely engage in additional transactions and possibly even consider a large acquisition in the spirits and wine industry."  Sure, that's diversification of some sort. But don't be surprised if the Eagle again lands in snacks, or some other category that doesn't get poured into a glass.

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