Budweiser’s Internal Constraints

Budweiser is produced by Anheuser-Busch Companies (Anheuser-Busch), one of the worlds largest brewers best known for its Budweiser and Bud Light brands. The group is a leading brewer and operates 12 breweries in the United States (Company Website, 2007). As a company, Anheuser-Buschs internal constraints are as follows 1. High dependence on domestic beer division Although the company operates done four business segments including domestic beer, international beer, packaging and entertainment it is still dependant on the domestic beer segment for majority of its revenue.During the fiscal year finishing 2006, company generated approximately 74. 8% of its total revenue from the domestic beer segment. In contrast the other three segments accounted for only 25. 2 % of the total revenue during the identical period. Strong dependence on a particular segment increases the business risk of the company thereby putting it in a competitive single out (Anheuser-Busch yearly Report, 2006). Thi s is why Anheuser-Busch is currently battling for a presence in China, the worlds largest beer market, as state owned breweries seek foreign help with privatization.In 2004, Anheuser-Busch outbid Miller for the Harbin Brewing Group of China (Modern Brewery Age, Weekly News Edition, June 14, 2004). This year, Anheuser-Busch may acquire Scottish & Newcastles 37. 5% stake in India-based United Breweries. 2. ) Poor liquidness position Anheuser-Busch has substantial outstanding long-term debt. As of December 2006, the company had long term debt of approximately $7,653. 5 million. The companys debt equity ratio is 2. 2 generation which is quite high as compared to industry average of 1. 3 propagation.The companys interest coverage ratio is 6. 2 as compared to industry average of 10. 1 times (Anheuser-Busch Annual Report, 2006). This ratio clearly signifies that the liquidity position of the company is bad and this would hamper companys credibility in the market and would be effortful for them to raise money from the market for their expansion plans. 3. ) High dependence on wholesalers Anheuser-Busch sells substantially all of its beer to independent wholesalers for distribution to retailers and ultimately consumers.During 2006, approximately 94% of the beer exchange by the company, reached retail channels through more than 600 independent wholesalers (Anheuser-Busch Annual Report, 2006). In 2007, Anheuser-Busch was appointed as the United States importer for a number of the premium European brands of InBev (International Herald Tribune, 4 February 2008). Many of the wholesalers of these brands have not traditionally been wholesalers for Anheuser-Busch. As independent companies, wholesalers make their own business decisions that may not always order themselves with the companys interests.Dependence of the company on the wholesalers may affect the bargaining power of the company in the market, thus affecting its financial performance. Works Cited Anheuser-Busch. About the Company. Anheuser-Busch Website. 7 Feb. 2007. http//www. anheuser-busch. com/Company. html. Anheuser-Busch. Anheuser-Busch Annual Report, 2006. 7 Feb. 2007. http//www. anheuser-busch. com/Stock/2006AR_Anheuser_Busch. pdf. International Herald Tribune. InBev Linked with Mergers, 4 February 2008. Modern Brewery Age, Weekly News Edition. Anheuser is Victor in Harbin Bidding War, 14 June 2004.