Asia strategy

Budweiser APAC IPO hints at new strategy for multinationals

Multinational corporations have been scaling back in the Asia-Pacific region by selling or shutting down their operations. AB InBev hopes to show there is a lighter way of reducing exposure while maintaining some of the potential upside.

For many executives of multinational corporations with a presence in our region there's probably never been a busier time than the last 24 months.

From McDonald’s and Sony to Marks & Spencer and Metro AG, MNCs have been rethinking their Asia-Pacific strategies due to a changing global business landscape, tougher regulations and the ongoing trade spat between China and the US.

Many of these MNCs have either fully or partially disposed their Asian business, sought local partners and joint ventures, or simply shut down their operations in the region.

The latest to join this list is Belgian brewing giant Anheuser-Busch InBev, which is set to make its stock market debut in Hong Kong should it price this week an up to HK$76.4 billion ($9.8 billion) initial public offering for its Asian business, Budweiser Brewing APAC.

It is likely to be the largest-ever food and beverage company IPO that the world has so far seen.

By taking the IPO route, AB InBev has embarked on an Asian path no other MNC has pursued in recent years. But if the post-IPO performance of Budweiser APAC stays solid, it could set a precedent for other MNCs reviewing their Asian strategies.

Specifically, AB InBev’s alternative approach could be followed by MNCs looking to fine-tune their Asian operations or slightly reduce their exposures to the region, instead of exiting fully. After all, AB InBev will still retain a majority shareholding in the business once it sells a roughly 15% stake to public investors through the IPO.

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According to sources familiar with the company, AB InBev’s decision was driven primarily by a diverging operational environment between its Asian operations and those in the rest of the world.

AB InBev, which owns more than 50 beer brands including Budweiser, Stella Artois, Hoegaarden and Corona, is looking to build an independent platform to facilitate mergers and acquisitions for its Asian business, senior company executives have said during the IPO process.

Acquiring new beer brands in Asia would allow AB InBev to tap into the affordable segment of the value chain, which is proven to be more popular than premium brands in some of its Asian markets, such as India and Vietnam.

At the same time, the company hopes its strength in super-premium beer categories will allow it to capitalise on Asian markets that are experiencing a shift in consumer preference towards higher priced beers.

China is one of these markets having seen rapid disposable income growth and urbanisation over the past few years. AB InBev, which currently owns the affordable Harbin brand in China, is looking to move up the value chain by expanding the market share of its premium brands.

As such, AB InBev is following a dual-track strategy in Asia by adopting different approaches across different markets with different levels of maturity. This is unlike its European operations where the focus is largely on premium markets.

Executing such a plan of action should be easier after the listing of Budweiser APAC in Hong Kong as it will enable AB InBev to create an independent entity, both financially and legally, as well as one with its own shareholding structure and decision-making abilities.

To be sure, an IPO may not be a good option for MNCs who want to drastically change their Asian businesses or those that want to monetise the bulk of their assets here. However, for MNCs looking to facilitate unique, localised strategies, AB InBev's way may well be the way to go.

Budweiser APAC is slated to make its debut on the Hong Kong Stock Exchange on July 19. The company has offered 1.63 billion shares at HK$40 to HK$47 each. 

JP Morgan and Morgan Stanley are joint sponsors of the IPO. Bank of America Merrill Lynch and Deutsche Bank are joint global coordinators, while BNP Paribas, CICC, Citigroup and HSBC are joint bookrunners.

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