InBev NV (INBVF:US
), the world's largest brewing company by sales, is buying Anheuser-Busch Companies Inc. (NYSE: BUD
), the brewer that owns the best-selling beer in America. Anheuser-Busch had a 1.8 percent increase in profit in the second quarter of 2008. People are drinking a lot, even though (or because) they are making less money or losing their homes. Most major breweries have a "responsibility'' section on their corporate website. But are breweries ethical? Do they practice what they preach?
Photo: kinkylinkn, Creative Commons, Flickr
InBev shareholders will vote on the company's $52 billion bid on Anheuser-Busch on September 29. InBev has promised to keep open Anheuser-Busch's 12 U.S. breweries and to retain St. Louis as the company's North American headquarters. The company also said that the deal would not affect union jobs. It said in June that it would cut 1,000 jobs to cut costs, according to The Wall Street Journal. The International Brotherhood of Teamsters, a labor union, rallied and negotiated with Anheuser Busch to hold the company to its commitment to keeping jobs.
Anheuser-Busch has made an effort to negotiate with a labor union and it has not erred so far. We will see whether the company will hold to its promises to workers after it completes its sale to InBev.
SABMiller PLC (SBMRY:US
) stirred controversy by making and selling caffeinated alcoholic beverages, which the company advertises to young people. Energy drinks are popular among college students, who rely on caffeine-heavy energy drinks to stay awake while studying. These drinks can lead to serious side effects
such as irregular heartbeat and rapid heart rate, according to nutritionist Thomas Namey
. Caffeinated alcoholic beverages are becoming popular among party youth because alcohol and caffeine seem to compliment each other. You're chilled out and you can stay up for the party all night long, but at what cost?
A clinical study
published in 2006 found that consuming caffeine with alcohol decreases one's perception of intoxication. When drinking caffeinated alcoholic beverages, drinkers are less aware that they are drunk than when they are drinking only alcohol. When they realize that they are drunk, they are in effect more drunk than usual. Thus, reckless behavior such as fights and dangerous driving are more likely to occur than usual.
Miller and Anheuser-Busch have both received criticism for marketing their caffeinated alcoholic drinks to underage drinkers
. The Wall Street Journal
reported that Anheuser-Busch stopped making and selling its caffeinated alcoholic drinks, Bud Extra and Tilt, in cooperation with the attorneys general of 11 states. SABMiller's Sparks drinks are still available in New York City stores, and the company plans to sell Sparks Red, a caffeinated alcoholic beverage with an alcohol content of eight percent, which is higher than that of Sparks, Sparks Light and Sparks Plus. Mississippi Attorney General Jim Hoods disapproved of this move
It is unwise for Miller to market a product against the opinion of judges, especially when rival Anheuser-Busch has complied to the judge's will. It seems like Miller has little concern for the health and safety of young people. One more point to Anheuser-Busch for political correctness.
The Financial Times
reported that Dutch brewer Heineken Holding NV (HKHHF:US
) and British drinks group Diageo PLC (NYSE: DEO
) began to help African farmers grow sorghum, an alternate brewing ingredient to barley, over a year ago. The companies supported this farming initiative to help local economies and increase sources of raw materials for brewing. The sorghum growing business in Africa is now expanding. Heineken brews its Star and Gulder brands beer with sorghum grown by farmers in Nigeria, Ghana, Sierra Leone, Rwanda and Burundi. Diageo brews its Guiness Foreign Extra Stout with sorghum grown by farmers in Nigeria, Ghana and Sierra Leone.
Heineken and Diageo have created a mutually beneficial situation by running a profitable farming scheme that supports developing economies. This is a perfect combination of integrity and competence. Although these farms take a very small part of the production of these beverage companies, the jobs created in Africa means survival and a better life for many who would otherwise starve.
As so-called craft beer - beer brewed with special ingredients targeting a niche market - becomes more popular, more breweries may follow the footsteps of Heineken and Diageo in search of exotic sources of raw materials. As a beer enthusiast, I am eager to see what happens.
Disclosure: I do not own shares in any beverage companies.