BUD Preview: One More for the Road

Anheuser-Busch (BUD - commentary - Cramer's Take) is expected to report EPS of 93 cents vs. a year-ago number of 87 cents. Sales are expected to grow by 4.2%, to $4.71 billion.

By now, everybody knows that InBev will pay Anheuser-Busch $70 per share in cash, which is about 12.2 times enterprise value-to-EBITDA, or 3.2 times 2007 net sales. This also includes the Modelo and Tsingtao ownership.

Big U.S. consumer staples companies are at the point where most unit growth comes from international operations. Household products have had the easiest time going overseas for growth, assuming that they were not dumb enough to go too heavily into Europe. New household and cosmetic products travel well.

Tobacco and beverage companies had a tough road to follow, but Coca-Cola (KO - commentary - Cramer's Take) and Altria (MO - commentary - Cramer's Take) were able to trade on American culture and invest and market well and make huge inroads in growing areas.

The worst-situated were the food companies, which had to take on established taste and cultural habits of foreign populations. A few have made progress by changing foreign habits such as General Mills (GIS - commentary - Cramer's Take) with its Cereal Partners Worldwide joint venture with Nestle. And Kellogg (K - commentary - Cramer's Take) has pushed cereal too.

At this point, with lifestyles changing, the need for one-handed food items probably makes some U.S. food items more marketable in developing countries, especially when McDonald's (MCD - commentary - Cramer's Take) and Yum! Brands (YUM - commentary - Cramer's Take) have been trailblazers.

Anheuser-Busch's efforts to grow abroad and keep its growth rate going have been next to nil, as the company mostly only invested in established brewers. Back when the company had vanquished most of its U.S. competition and had a 40%-plus share of the U.S. market, the writing was on the wall for saturation. It may have been a cultural myopia (or laziness?) on the part of the Busch family that kept the company's operations (for the most part) in the U.S. For Wall Street, the company always pushed for higher returns on equity (ROEs), gaining about 0.5% of market share per year here. And Wall Street, which so many times looks at internal rates of return rather that a net present value of future returns, was happy.

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At the time of publication, Thomas had no positions in the stocks mentioned.