Anheuser-Busch InBev

History

Interbrew was a large Belgium-based brewing company which owned many

internationally known beers, as well as some smaller local beers.
AmBev is a Brazilian beverages company formed by a merger in 1999
between the Brahma and Antarctica breweries. It has a dominant position in South
America and the Caribbean.
In 2004 Interbrew merged with Brazilian brewer AmBev to form InBev, which
is the now largest brewer in the world by volume, with a 13% global market share (as
of 2004)
InBev was the second largest brewery company in the world. While its core
business is beer, the company also had a strong presence in the soft drink market in
Latin America. It employed about 86,000 people and was headquartered in Leuven,
Belgium.
On June 12, 2008, Brazilian-Belgian brewing company InBev announced that
it had made a US$ 46 billion dollar offer for the Anheuser-Busch which if it was
accepted would join two of the world's four largest brewing companies (based on
revenue) and create a company brewing three of the highest grossing beers in the
world, namely Bud Light, Budweiser, and Skol.
Anheuser-Busch is the largest brewing company in the United States in
volume with a 49.2% share of beer sales. It was the world's largest brewing company
based on revenue, but third in brewing volume, before the proposed merger with
InBev announced 13 July 2008. The division operates 12 breweries in the United
States and 17 others overseas.
On July 13, 2008, Anheuser-Busch and InBev said they had agreed to a
deal, for InBev to purchase the American icon at $70 per share, creating a new
company to be named Anheuser-Busch InBev.

Company Profile

Anheuser-Busch InBev is the leading global brewer and one of the world’s top
five consumer products companies. For 2009, Anheuser-Busch InBev generated
revenues of 36.8 billion USD. With a dream to become The Best Beer Company in a
Better World, the company has a strong, balanced portfolio. With four of the top ten
selling beers in the world, Anheuser-Busch InBev holds the No. 1 or No. 2 position in
19 key markets. It has a key presence in both developed and developing markets.
Headquartered in Leuven, Belgium, Anheuser-Busch InBev leverages the
collective strength of approximately 116,000 people based in operations in 23
countries across the world. The company works through six operational Zones; North
America, Latin America North, Latin America South, Western Europe, Central &
Eastern Europe, and Asia Pacific, allowing their consumers around the world to enjoy
their beers.
With operations and license agreements around the globe, Anheuser-Busch
InBev is a truly global brewer.
 A true consumer-centric, sales driven company, Anheuser-Busch InBev
manages a portfolio of well over 200 brands; Budweiser, Stella Artois and Beck’s,
fast growing multi-country brands like Leffe and Hoegaarden, and strong "local
jewels" such as Bud Light, Skol, Brahma, Quilmes, Michelob, Harbin, Sedrin,
Klinskoye, Sibirskaya Korona, Chernigivske, and Jupiler, among others.
In addition, the company owns a 50 percent equity interest in the operating
subsidiary of Grupo Modelo, Mexico's leading brewer and owner of the global Corona
brand.

Acquisitions / Divestitures / Joint Ventures

Following the Anheuser-Busch acquisition and the resulting increased

leverage, the combined company performed a series of asset disposals as part of a
new disposal program. Pursuant to the disposal program AB InBev divested during
2009 its 27% stake in Tsingtao (China), Oriental Brewery (Korea), four metal
beverage can lid manufacturing plants from the US metal packaging subsidiary,
Busch Entertainment Corporation, the Central European Operations, the Tennent’s
Lager brand and associated trading assets in Scotland, Northern Ireland and the
Republic of Ireland and the Labatt USA distribution rights.

Products

AB InBev has a focus brands strategy (focus brands are those in which most
marketing money is invested, and to which greatest proportion of share of mind is
dedicated). The company prioritizes a small group of the 200+ brands with greater
growth potential within each relevant consumer segment. The focus brands account
for two-thirds of total sales volume, and is divided into three groups:

 3 global brands: built on values an experiences which appeal to consumers

across borders
 Budweiser, Becks, Stella Artois

 Multi-national brands: connect with consumers across continents

 Hoegaarden, Leffe, Brahma

 ‘Local jewels’: the backbone of the company; capture the local needs of
consumers
  United States: Bud Light, Bud Light Lime, Budweiser Select, Michelob
Ultra, Michelob Original Lager, Busch, Busch Light, Natural Light,
Rolling Rock, Bass, Boddingtons
 Germany: Franziskaner, Löwenbräu, Hasseröder, Diebels, Haake-
Beck, Spaten, Gilde
 Argentina: Andes, Iguana, Norte, Patagonia, Quilmes Cristal, Quilmes
Bock
 China: Sedrin, Red Rock, Double Deer, Jinling, KK, Baisha,
Jinlongquan, Harbin

About their New Identity

The new Anheuser-Busch InBev identity reflects the vision of their new
organization, with their guiding principles at the very heart of its conception. It is
designed to represent drive, authenticity and friendship.
It is also meant as a source of pride, which aims to motivate and inspire
employees, engage with partners, and demonstrate their ambition to become The
Best Beer Company in a Better World.
Reflecting the rich heritage of both companies, the eagle represents strength,
agility and focus, while at the same time looking forward and upwards to reflect their
collective vision, drive and energy.
The combination of rich golden colours captures what they know and do best:
their expertise and heritage in brewing great beer, which is so often a part of
enjoyable moments shared by friends.
In summary, the new identity is meant as a beacon of a bright, vibrant future
for employees, customers, consumers and the communities where we work and live.

Dream-People-Culture
Their Dream

Their shared dream energizes everyone to work in the same direction: to be

the Best Beer Company in a Better World. The three long-term objectives of their
business are:
• To deliver volume growth ahead of industry growth.
• To grow revenue ahead of volumes.
• To maintain strong financial discipline and ensure that costs remain below
inflation.

All are necessary conditions if they are to fulfil their long-term goal of becoming
the Best Beer Company in the industry measured by profitability. Becoming the best
is their commitment and an on-going challenge. They constantly aim to raise the bar
in order to build a company that will generate growth and sustainable results for the
long-term.

People make the difference

Being the Best means having the best people. Talented people who are
engaged and thriving in their culture represent their most important, and indeed only
sustainable competitive advantage.
Their culture, their passion

Ownership is an important part of who they are and how they behave. It
begins with a mindset of everyone who works there – their people really own this
company and treat it as if it were their own. Anheuser-Busch InBev’s culture defines
them as a company, unites them wherever they do business, and is the one thing
their competitors can never copy. Above all, they are truly consumer-centric, sales
driven company, and everything they do is geared towards their mission of creating
enduring bonds with consumers through brands and experiences that bring people
together.

Corporate Governance

Executive Salaries are aligned to “mid-market levels”, meaning that for the
appropriate market and for a similar job, 50% of the companies will pay more, and
50% of the companies will pay less. Annual incentives are also offered and are
designed to motivate executives to hit short and long-term performance targets.
Many are based on performance metrics such as cash flow, market share and
EBITDA. The final amount paid is directly linked to the achievement of these targets-
if there is no result, there is no bonus. This was proven to be true in 2008 when the
company missed their targets and the CEO and the members of the Board were not
given bonuses. It also demonstrates AB InBev’s determination to completely align
incentives with shareholder’s interest.

Brewing a Better World

AB InBev strives to be the Best Beer Company in a Better World. After the
combination of Anheuser-Busch and InBev, the company took the opportunity to take
corporate social responsibility to a new level. To initiate the effort, AB InBev created
the “Beer & Better World Taskforce,” a team dedicated to implementing an
aggressive three-year Better World plan. The taskforce is guided by the newly
established “Better World Council,” comprised of senior company leaders and two
Board of Directors members. The Better World plan is three-pronged:

 Responsible Drinking – promote responsible drinking and discourage alcohol

abuse, including drunk driving and underage drinking, through focused
consumer campaigns. Programs include: Drunk Driving Prevention,
Underage-Drinking Prevention, and Responsible Drinking Prevention

 Environment – being as efficient as possible in use of natural resources, such

as the water used to brew beer; recycling byproducts and waste; and taking
on the shared challenges of the future, such as climate change, by reducing
the carbon footprint

 Community – takes many forms, from employees volunteering their time for a
community beautification project, to a donation of canned water in times of
disaster, to charitable donations
Macroeconomic Analysis

The recession officially ended in June 2009. GDP has slowly rebounded while
unemployment has stayed over 9%. Slow growth is expected in 2011. Due to AB
InBev being a defensive stock, it does relatively well in economic downturns. There is
still economic uncertainty but the FED is engaging in a second stimulus which should
boost the economy further. Sales in beer related products usually enjoy high sales
increases when the economy is booming.
AB InBev’s products are not a necessity so consumers must therefore use
their discretionary income to purchase them. As the economy has rebounded,
personal consumption expenditures have jumped back as well. Fairly stable growth is
expected. Although consumers are still deleveraging, we can see that spending has
increased since the recession low. As the economy keeps improving, consumers
usually switch to higher quality/price beer. This usually translates into higher profits,
as the brewers can obtain higher margins. Fortunately, AB InBev offers both low
price and high price beers.
An important thing to be wary about is how AB InBev is vulnerable to
commodity prices. As they are needed for the production of beer, AB InBev has no
option and must obtain commodities disregarding price. Being such a big company,
AB InBev usuallyengages in hedging activities to minimize the risk of volatile
commodity prices.

Industry Analysis

Competitors

Carlsberg Breweries A/S

The fourth largest beer company in the world. They have over 500 brands and
sell their beers in Asia and Europe. Carlsberg also makes and sells Coca-Cola in
Denmark and Finland. Brands differ significantly in price, volume, and target
audience, but the strongest market share is held in Northern Europe. Some of its
brands include Baltika, Carlsberg and Tuborg are three of the top six brands in
Europe. Baltika is ranked as the number one European brand.

Heineken N.V.
Operating in over 70 countries, Heineken produces 170 international brands of
beer. In addition to beer, they also market and sell wine, sodas and other soft drinks.
Their two principle international brands are Heineken and Amstel, but the company
has over 200 international premium, local, and regional brands, including Tecate,
Dos Equis, and Cruzcampo.

SABMiller PLC
SABMiller markets and produces over 200 brands of beer worldwide and sells
in over 70 countries. SABMiller is the second largest producer of beer in the U.S.,
behind AB InBev, holding 30% of the market share. International brands include
Pilsner Urquell, Miller Genuine Draft, and Peroni Nastro Azzurro.

Industry Overview
 The alcoholic beverage industry is a mature and defensive industry.
Historically, alcoholic beverages have been defined as staple goods, and although
their consumption does not greatly decrease with a struggling economy, they do
extremely well when the economy is booming, and consumers have higher levels of
discretionary income. The industry suffered its worst year in nearly 20 years in 2009.
However, beer sales have continued to moderate through 2010. Price increases are
expected, as a method of covering increasing commodity costs, packaging expenses
and freight charges. Also, while beer sales typically claim the largest percentage
(85%) of the alcoholic beverages industry, they lost market share to wine and spirits
in 2009.

Governmental Regulation

Governments have always strictly regulated the sales of alcoholic beverages.

In nearly every country in the world, when the government starts struggling to pay
debts, there is a noticeably larger tax placed on beer, wine and spirits. Such is the
case in most countries currently struggling to come out of the recession.

Industry Consolidation: Lack of Organic Growth

The beer industry has been experiencing significant consolidation since 2004,
creating several global brewing powerhouses. Most recently notable were the 2008
acquisition of Anheuser-Busch by InBev and the merger of Molson Coors Brewing
Co. with SAB Miller. One characteristic of an industry that is entering the
consolidation phase is that it is difficult to find opportunities for organic growth;
however, the acquisition of Anheuser-Busch by a European company will allow for
greater international growth and market penetration.

Growth Opportunities: Emerging Markets

China, Eastern Europe, Mexico and Latin America offer great growth
prospects for beer companies. China surpassed the US as the largest global
consumer of beers in 2003, and has continued to grow. AB In-Bev holds stake in
several of China’s breweries. In Eastern Europe, the Czech Republic has the highest
per capita alcohol consumption in the world. Also, Russian demand for beer has also
been increasing due to government promotion and attempts to lower the vodka-
intake. However, this region was hit hard by the global economic crisis, and
governments are using taxes on alcoholic beverages to cover budget deficits. Finally,
Mexico and Latin America could prove very promising as well, as beer sales have
been on the rise. In this region, however, a weak economy is a mildly inhibiting
factor, yet it shows potential to be an excellent market in the long term, as there
appears to be an increasing level of prosperity. Also, it is important to note that there
has been an industry shift in countries such as Argentina and Chile, who have
historically been wine-drinking countries. These countries have seen recent market
share turnover from wine to the beer industry. AB InBev holds 50% equity ownership
of Grupo Modelo, a Mexican brewing company, which has had very successful last
few years of sales, and thus AB InBev stands to profit from this. AB InBev also holds
strong market share in Brazil.
Industry Trends

Beer growth has slowed since the 1990’s with the exception of the low-carb
and low calorie drinks, due to the increased health consciousness of consumers.
Last year, four out of the top 5 selling domestic beers are light-beers and in 2009,
Bud Light became the world’s top-selling beer, surpassing Budweiser. Beer
companies are hurriedly jumping on this bandwagon. MillerCoors released MGD 64
as their low-calorie product, and Molson Coors of Canada launched Molson
Canadian 67, along similar product lines. What has AB InBev done to profit on this
trend? Early this year, they launched their new product, Select 55, with only 55
calories and 1.9 grams of carbohydrates.
Another trend is the growing popularity of craft beers. Craft beers are defined
as beers produced in microbreweries and which are made with 100% malted barley.
These have risen in popularity against global, mass produced lagers such as
Budweiser and Bud Light. To use this trend to their advantage, AB InBev launched
Bud Light Golden Wheat, which is a premium light unfiltered wheat beer that targets
the tastes of the craft beer drinkers.
Although the beer industry has seen stagnant growth the last two years, high
levels of industry consolidation, an increasing market share of wine and spirits, and a
growing popularity of craft beers, AB InBev is in a good position to tackle these
trends. International growth is more feasible now with the merger of the two
companies, allowing for more growth globally. AB InBev continues to have a
presence in emerging markets such as China and Mexico, which should prove very
profitable in the long run. Also, new product releases are helping AB InBev ride the
popularity of light drinks and craft beers.

Mission and Strategy

Winning with Consumers via their Winning Brand Portfolio

Consumers come first at Anheuser-Busch InBev. They promise is to create

enduring bonds with consumers so that they enjoy their brands time and again. One
way they will realize this is through their superior brand portfolio. With well over 200
brands, they are prioritizing a small group of focus brands – the brands they believe
will most effectively build deep connections with consumers.

Winning at the Point of Connection

This is the moment when consumers ultimately choose to purchase or

consume their brands. By utilizing capabilities in sales, merchandising and
distribution they will win over the consumer at the point of connection. This entails
building sales and merchandising capabilities, achieving preferred supplier
partnerships with customers, and consistently building the equity of their brands.

World-class efficiency

World-class efficiency drives every part of their business, wherever they do

business, and whatever the wider economic circumstances. They are focusing on a
range of initiatives including their Voyager Plant Optimization program, which is
bringing about a real step-change in brewery performance. It also entails raising the
status of their procurement processes to maximize purchasing power, helping them
gain the best results when they are purchasing a range of goods and services. They
are also optimizing their network of breweries and sharing best practices, to leverage
their learning and drive continuous improvements.
Zero-Based Budgeting is a crucial element of World-class efficiency, and one
of the tools which helps them prioritize and control costs. It has been implemented in
all Zones and has reached a high level of maturity in most. The concept is simple;
implementing it is much more difficult, but for Anheuser-Busch InBev employees,
Zero-Based Budgeting has become a way of life.

Targeted external growth

The goal of targeted external growth is to strengthen their positions in

developed markets, and continue to maximize opportunities in high-growth markets.
Their recent acquisitions are very much in line with this strategy, for example, the
acquisition of Fujian Sedrin in China and Lakeport in Canada.

Critical enablers

Enabled by Innovation

Underpinning these four pillars is innovation. They seek to combine

technological know-how, with unparalleled market understanding, to develop a
healthy innovation pipeline. A good example of their innovation delivering exciting
choices for consumers is PerfectDraft®: a system which combines a high-quality
appliance and consumer-preferred beer brands in light metal kegs, delivering the
great taste and experience of draught beer in the comfort of one's own home.

Enabled by People/Culture

At Anheuser-Busch InBev, their people lead the way, representing their most
important competitive advantage. Great people are behind everything they do, and
they believe great people build great companies. Their culture is one of ownership,
disciplined execution and focus on results. They believe their people will make better
decisions if they think and act like owners, and their teams are focused on the basis
of stretched but achievable targets. Their target setting and cascading system
together with their compensation model are also built on the principles of ownership.

Enabled by Financial Discipline

Financial discipline underpins the SuperVoyager strategy, ensuring that they

have the right metrics, with the right focus on tracking performance, whilst effectively
managing the use of resources such as invested capital and capital structure.

Cost-Connect-Win

They strategy is made operational day by day through the simple cost-
connect-win model: they aim is to capture non-working money from within their
overall cost envelope, and convert it into working money, directly supporting their
brands and sales and marketing capabilities.
 • The cost element challenges them to continuously reduce their cost-base,
enabling them to stay ahead of the game in a highly competitive marketplace.
• By making savings, they can invest more in connecting with consumers,
turning non working euros into working euros. The key is disciplined
investment to help them make lasting.
• Winning for them is about achieving sustainable, profitable, growth. They are
looking to achieve long-term growth, but not just volume growth regardless of
the margin, it has to be sustainable and profitable.
• People are at the centre of this virtuous circle, because they are their long-
term competitive advantage, making things happen.
• They want to create a winning combination – a dynamic and disciplined
company that is wholly focused on the consumer, and at the same time a
highly profitable company, that really will be ‘the best’.

Brand Strategy

At Anheuser-Busch InBev, their brands are the foundation of the company, the
cornerstone of their relationships with consumers, and the key to their long-term
success.

Brand Promotion

 2010 FIFA World CupTM Sponsorship: AB InBev extended local

sponsorship rights to the 2010 World Cup. Budweiser was made the “official
beer” of the event and several of the AB InBev local brands were made
“official beers” in their markets. Budweiser was the #1 sold beverage in FIFA
World Cup stadiums, outpacing soft drinks, sport drinks and bottled water
combined.
 Stella Artois “Le Bar Guide” iPhoneTM App: Stella Artois is the first beer
brand to launch an iPhone app to help consumers locate bars that serve the
beverage of their choice.
 Olympic Games: Anheuser-Busch has been an Olympic sponsor since 1984;
that’s two decades and 13 Olympic Games and Olympic Winter Games. The
sponsorship has been extended through 2012. Anheuser-Busch backs its U.S.
Olympic Team sponsorship with significant media buys on NBC and affiliated
networks during the Olympic Games, as well as select athlete and National
Governing Body sponsorships, retail point-of-sale and promotional items in
stores across the U.S.
 Budweiser Concentration Week: A marketing campaign from September
27th to October 3rd which implemented extensive strategic sampling in order
to reach new United States customers. The campaign was kicked off with a
Budweiser National Happy Hour during which Budweiser staff and affiliates
 jumped into the market place to pass out samples to a half million consumers.
This was the largest selling promotion in Anheuser-Busch's history and one of
the company's most successful campaigns.

Focus Brands

They know focus works. This is why they have rigorously reinforced their focus
brands strategy. Focus brands are those in which they invest most of their marketing
money, and to which they dedicate the greatest proportion of their share of mind.
With a portfolio of well over 200 brands, they are prioritizing a small group with
greater growth potential within each relevant consumer segment. These focus
brands, include their three global brands, key multi-country brands, and ‘local jewels’.

Values Based Brands

All of their brands must have clearly defined and consistently communicated
values, making them ‘Values Based Brands’. The process of defining these values is
a key discipline for all marketing activities in their business and is proving particularly
powerful in renovating and innovating their premium brands around the real and
changing habits and preferences of consumers.

Points of Connection

Anheuser-Busch InBev is and always will be a truly consumer-centric, sales-

driven organization. Their number one priority is their relationship with their
customers and their consumers. With their customers, they focus on the 'point of
connection' as the moment of choice for consumers - the moment when customers
promote, and consumers decide to purchase or consume one of their beers.

A disciplined approach to sales execution

Anheuser-Busch InBev is a sales driven organization, and they are continually

working towards best in class distribution. They must outpace and out-execute thier
competitors with a sense of urgency to win with consumers at the point of
connection.
Their World Class Commercial Program (WCCP) is an integrated Sales and
Marketing Excellence Program. It is designed primarily to help all their sales teams to
implement the right processes in eight core categories to help drive volume, market
share and EBITDA. WCCP is not just about selling; it is about selling in the right way
with the right processes.
The program is also the best practice training and sharing platform designed
to establish a cycle of continuous improvement across all markets. At the heart of its
growth is point of connection research followed by analysis, followed by action.
As part of WCCP they also aim to continuously improve the quality of their
marketing capabilities and processes, by ensuring they are understood and
consistently followed.

Making the difference through Cost-Connect-Win

 In 2006 Anheuser-Busch InBev's sales capabilities were clearly boosted by the
cost-connect-win model. The cost element challenges them to continuously reduce
their cost-base, enabling them to stay ahead of the game in a highly competitive
marketplace. As cost reduction programs capture non-working money from other
areas of the business, they can invest more in connecting with consumers, turning
non-working money into working money. The key is disciplined investment behind
their brands, sales, and marketing capabilities to help them create sustainable
revenue growth. Winning for them is about achieving long-term, profitable, growth;
but not just volume growth regardless of the margin.