InBev and Bud . . . In Bed?

24 May 2008 at 5:36 pm 3 comments

| Randy Westgren |

Recent news about the impending bid by InBev for Anheuser-Busch was interesting subtext for my current study tour on EU agri-food supply chains. We normally schedule a stop at InBev when we spend our first week based in Leuven, Belgium, which is InBev’s HQ. This year, they told us a visit was impossible. I had assumed that it was due to shake-ups in the management following a weak first quarter, but I guess there was more in the air!

You will note that A-B shares rose on the news. The strategic fit is stunning. InBev is strong in its traditional markets (Belgium and Germany from the Interbrew parent; Brazil from the Ambev parent) as is A-B, who also has an equity strategic alliance with Tsingtao in China. Not much overlap geographically and lots of opportunities for building on existing distribution alliances. A merged firm gets serious presence in mature markets as well as the growing ones.

The other thing that the market will react to is the InBev style. They drive growth with a limited number of global brands; they pare local brands over time. And they are relentless cost-cutters. Look at the top management team for a “Belgian” brewer. It has only taken a few years for the “tradition-oriented” Belgians to be succeeded by aggressive Brazilians. (I know this smacks of ethnic profiling, but ask around. . . .) The corporate culture of InBev is palpable.

Entry filed under: Corporate Governance, Food and Agriculture, Former Guest Bloggers. Tags: .

From Rumination to Rumelt via Dobzhansky Do What Consultants Say, Not What Other Firms Do

3 Comments Add your own

  • 1. Peter Klein  |  26 May 2008 at 12:06 am

    Back in my days as a government bureaucrat I worked on a case involving the proposed acquisition of a small Denver-based wireless carrier, Voicestream, by Germany’s Deutsche Telekom. There were concerns that a foreign firm, at the time part-owned by the German government, controlling US communications assets would pose a threat to US national security. (There is an agency, the Committee on Foreign Investment in the United States or CFIUS, tasked specifically with overseeing these kinds of transactions.) I argued that the acquisition was likely to be harmless, in this sense, and the deal did ultimately go through, leading to the creation of T-Mobile USA. (The fact that I personally played such an important role in the establishment of the nation’s fourth-largest carrier never seems to impress the guy in the T-Mobile store when I’m trying to get free stuff.)

    Anyway, if it’s this hard for a foreign firm to buy a small US wireless carrier, how can one possibly get our largest brewery? I”m certain that those opposed to the transaction, especially here in Missouri, will point out the grave threat to our national security from allowing people with funny accents to control the nation’s beer supply. I mean, just imagine what Gen. Jack D. Ripper would say!

  • 2. Andre Sammartino  |  23 June 2008 at 10:04 pm

    Two recent articles in Wall Street Journal on this have highlighted some of Randy’s points:

    “At InBev, a work atmosphere reminiscent of an athletic locker room is a key ingredient in a culture that also includes ferocious cost cutting and lucrative incentive-based compensation programs.”

    CEO:””At Ambev, we had this culture that . . . has never changed,” he said. At Interbrew, “they grew by acquiring existing businesses, and they didn’t have a culture of [their] own.” He said Interbrew was ripe for AmBev’s embrace and ready to accept a new way of doing things.”

    “InBev “used to be totally Belgian, then it was Belgian-Brazilian, and now it’s Brazilian-Belgian,” says Economy Minister Vincent Van Quickenborne. “We’re a very open economy. We don’t have this sense of economic patriotism like the French.””

    “”The Brazilians certainly aren’t apologetic for having high standards. In the Stanford talk, Mr. Brito said that in a corporation, “great people attract more great people. That’s obvious. But the opposite is even more dangerous. Mediocre people attract more of the same.””

    Above quotes all from:
    Moffett, M. “At InBev, a Gung-Ho Culture Rules” WSJ, 28 May 2008, B1

    And this quote which might peeve more than a few in the HRM world: “Mr. Brito told the Stanford audience that out of InBev’s 85,000 employees, only 200 to 250 “are really the ones who make a difference.” He said InBev is unapologetic about giving special treatment to the difference makers.”

    From Moffett, M. “InBev’s Chief Built Competitive Culture”, WSJ, 13 June 2008, B6

    The Brazilians getting this takeover accepted and ringing such changes inside an old US behemoth like Anheuser-Busch would certainly be an exciting example for all us IB teachers… and, dare I say it, perhaps a faint glimmer of hope for the ailing US car manufacturers and airlines…

  • 3. Andre Sammartino  |  3 May 2009 at 9:25 pm

    More on the impact of InBev at Anheuser-Bsuch can be seen in another recent WSJ article:

    “The new owner has cut jobs, revamped the compensation system and dropped perks that had made Anheuser-Busch workers the envy of others in St. Louis. Managers accustomed to flying first class or on company planes now fly coach. Freebies like tickets to St. Louis Cardinals games are suddenly scarce.”

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