When a brewing company is regarded as “the supreme acquirer”, by the world known evaluations’ firm Goldman Sachs, then I believe it worths taking a look of the company’s particular characteristics and philosophy, especially since the Financial Times had a two part article for them just recently.
AB InBev is a reference company, not only for the brewing industry but also for worldwide entrepreneurship. Begging from a local Brazilian brewery back in 1989 under the name Brahma, in about 25 years they managed to become the number 1 brewing company in the world, by reaching 21.1% of the global beer market share.
And just to put you in the “game”, since it is not mandatory for a consumer to know the owner company of his or her favourite beer label, AB InBev is the owner-company behind legendary labels of worldwide circulation such as Stella Artois, Budweiser, Corona, Beck’s, Leffe and Hoegaarden.
But let’s start from the beginning of the company’s history to examine its worth mentioning track of development. As we said above, it all started in 1989 in Brazil. There, three partners, Jorge Paulo Lemann, Marcel Telles and Carlos Alberto Sicupira, decided to take over the control of a local Brazilian brewery called Brahma, even though they lacked any specialised knowledge over the industry.
And it comes as a normal question to examine, what was the reason that justifies such an investment in an industry they knew little about? Well, the reason is shockingly simple yet indicative of their philosophy: Because back in 1989, when they looked to see who were the richest citizens of their neighbouring South American countries the found out that they were all brewers! Therefore, this entrepreneurship trio made its goal to become exactly that: the richest Brazilian citizens. And as it seems, Jorge Paulo Lemann is indeed the richest Brazilian, thanks to his 12.5% share of company stocks.
The Brazilian Brahma, under the guidance of the entrepreneurship trio evolved steadily and methodically through bold acquisitions and mergers into a leader, with a market worth that reaches today €170 billions and a capitalisation of again €172 billions (yes you just read correctly!).
In the begging, the company developed into a regional power under the name AmBev. Then the milestone year of 2004, the company joined forces with the Belgian brewer Interbrew (Stella Artois, Beck’s, etc.) and together created InBev. Four years later came the new milestone deal in the company’s history with the American Anheuser-Busch (Budweiser) worth €52 billion, which shaped the company in today’s colossus of AB InBev.
But no one can built such an enterprise, without having a deeply rooted philosophy and at the same time generate critics both inside and outside the company. Because outsiders see a company that pushes its working force to operate on the maximum of its potential.
Although this may seem harsh, (and also have true grounds) that the company demands a lot and does not tolerate failure to achieve targets, it is at the same time the core philosophy of all its members, beginning from the leadership itself. Carlos Brito (Chief Executive AB InBev) states clearly: “My life is the company and the family”.
By having this philosophy, the company builds upon ambitious and talented professionals of the young generation who themselves perceive the company as “their own child”, with an open way for creativity and not as another bold title to add to their resumes. The thing that quite resembles to having a brainwash for outsiders, is for the young executives of the company the feeling of responsibility and commitment towards the common goal. This is the way we can probably explain that in 2014 alone, the company received around 100.000 applications for only 147 graduate posts. It is more than crucial for a company, to be able to choose the best out of such a huge pool of aspiring candidates.
The mentality of the company to “dream big”, is definitely an element that attracts new applicants. But it is not the only one. The possibility of professional development within such a company, where the managers are not locked inside far corner offices but are situated in centered open-space desks and promote their executives to quiz them, are also elements that drive applicants’ interest like a magnet. Additionally, the rewarding of all those employees that achieve the company’s hard-to-get goals, in contrast to those who fail to do so.
And because “beer isn’t magic; beer is process” according to Mr. Vicente Falconi, a Brazilian management consultant who still advices the group from the Brahma era, the operational management of the company cannot pass unnoticed. Because in what other way would a company achieve operating under the impressive 32.5% of profit margin! (yes, you read once again correctly! 32.5% of profit margin!)
A basic tool for the achievement of such a percentage is the “zero-based budgeting”, which means that company expenditures are reset to zero each year and re-planned to match each year’s true needs. This strict financial control is translated and implemented vertically within the company, with all its executives using the same normal level of services and company benefits (such as flight seats) and avoiding over expenditures of prestige services and comfort.
Furthermore, who could overlook the importance of regular internal inquiries concerning the satisfactory achievement of also regularly set benchmarks? When the size of a company is that big, there is no other way to maintain a positive track course without the implementation of high standards.
A clear example of AB InBev management’s mentality were the actions that followed the deal with Anheuser-Busch (Budweiser). Just 24 hours after the deal, Carlos Brito (Chief Executive AB InBev), visited the headquarters of the legendary american brewer in Saint Louis, Missouri and immediately made sure that everyone was aware who was the new boss and with which mentality the company wished to move forward. They “shook the tree of comfort” of all Anheuser-Busch executives and did not hesitate to let go of all those who had no motive (either due to their age or due to high position) as well as those who could not keep up with this new approach.
“Beer is not magic but a process”
Budweiser, might be the leader in the American market, but its track over the last years has been downward. So the new management showed upfront how it perceives “dream big”. It reexamined its sales and marketing policies of the label and did not hesitate to invest further in relocating executives and in new initiatives. This way it managed to get placed in the epicentre (NY) of the trendsetting scheme in consumption and to fill in the market gap with the launch of the new Signature Draught beer for all the bars, reaching out to the audience of youngsters and hips who oppose famous brands and mainstream trends.
Initiatives, mentality, ambitious executives, benchmarks and sky high goals, are therefore the elements that someone has to manage correctly if he desires to create and boost an entrepreneurship vision. AB InBev is for these reasons, an example company and more specifically in the brewing industry that we are so interested in.
Maybe the hope to actually see a dynamic brewery in Greece, setting new benchmarks and adopting such core philosophies seems a bit far fetched due to the economic crisis, but hope lasts and especially all of us here in BeerBartender.gr we shall continue to seek and to highlight everyone and everything that moves to this direction.
This post is also available in: Greek
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