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Anheuser-Busch InBev NV (ADR) (BUD), Fomento Economico Mexicano SAB (ADR) (FMX): Three Beer Makers You Shouldn’t Miss This Summer

The beverage industry is expected to reach a market value of $1,347 billion by 2017, with a compounded annual growth rate of 4.6%. The global demand of beverage products is rising, and the beverage companies are using various strategies like acquisition, packaging innovation, expansion, etc. for long-term growth. I have discussed three such beverage companies that are working on the above stated strategies in order to maximize growth.

Acquisition and innovation will strengthen the position in market

Anheuser-Busch InBev NV (ADR) (NYSE:BUD)

Anheuser-Busch InBev NV (ADR) (NYSE:BUD) received U.S. court permission in April, 2013 to take over a 50% stake in Grupo Modelo SAB de CV (USA) (OTCMKTS:GPMCF) — one of its competitors, for $20.1 billion. Grupo Modelo SAB de CV (USA) (OTCMKTS:GPMCF) is a Mexico-based brewer that produces Corona and Pacifico beers. Under the terms of the merger, Anheuser-Busch InBev will sell Modelo’s U.S. business and the Modelo brewing facility in Mexico to Constellation Brands, a wine and liquor producer, in order to preserve competition in the American beer market. This will give Constellation exclusive rights to sell Modelo products in the U.S., for which it will pay $4.75 billion to Anheuser-Busch InBev NV (ADR) (NYSE:BUD) .

This acquisition will help Anheuser-Busch InBev NV (ADR) (NYSE:BUD)  expand in fast-growing emerging markets, as high rates of unemployment and slower economic growth restricted its sales in Europe and North America. This deal will give the company an opportunity to export Corona beer outside the U.S. and Mexico. The Modelo acquisition will deliver cost and revenue benefits of $1 billion annually.

Product innovation played a key role for Anheuser-Busch InBev NV (ADR) (NYSE:BUD), resulting in revenue growth of 7.2% in 2012. Platinum and Lime-A-Rita were the top two new beer products launched last year, as well as Straw-Ber-Rita launched this year. It is now focusing towards packaging innovation. The company is trying to attract consumers in Brazil with one-litre and 300-ml (about 10 oz.) returnable brand bottles, including Brahma and Skol. Returnable bottles appeal to the consumers as a value, against the standard 600-ml can.

The company also recently came up with a bowtie-shaped “Budweiser can” to attract young adults. Due to the can’s slimmer middle and sleek design, it holds 11.3 ounces of beer against the traditional 12-ounce can of Budweiser. More than 10 million bowtie cans were produced for an initial run in March 2013 for the spring introduction. The company started the sale of its bowtie-shaped Budweiser can from May 6, 2013.
Such innovative strategies will help in contributing revenue growth of 11.3% in 2013, in comparison to the 7.2% of 2012.

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