What’s left of Anheuser-Busch?
... very little, it seems. Exactly three years after Anheuser-Busch was taken over by InBev, the local St Louis newspaper, St Louis Post, on 26 November 2011 ran a story on the new culture at Anheuser-Busch’s headquarters in St Louis, which highlights the profound changes.
Most obvious to bystanders are the changes in numbers and in corporate dress code. Fewer people report to work each day at the St. Louis brewery and adjacent office building. And they wear jeans to work now.
The takeover of Anheuser-Busch coincided with the U.S. economy falling into a steep recession. Thousands of Anheuser-Busch workers nationwide lost their jobs. The company did not provide exact numbers, the newspaper said. But in St Louis alone, the number of Anheuser-Busch workers fell 15 percent from 2007 to 2009, according to city government records.
Today, the U.S. subsidiary of AB-InBev employs about 14,000 people nationwide, about 4,000 in the St Louis region, down from 6,000 in 2007, according to the company.
"Some things are clear: Anheuser-Busch is a diminished but still huge, powerful presence. The worst of the cost-cutting appears over. The brewery and some executive functions have remained in St Louis. But the corporate culture of the old Anheuser-Busch – tradition-bound, perfectionist, focused more on dominating the beer market than making money – has given way to an aggressive austerity," the paper said.
Early on, Carlos Brito, CEO of AB-InBev, announced plans to slash USD 1.5 billion at just Anheuser-Busch over three years. That was raised to USD 2.25 billion throughout the newly combined company. InBev also brought zero-based budgeting to Anheuser-Busch – costs are never assumed, but rather justified every year.
According to the St Louis newspaper, the cost-cutters found a cosy environment at Anheuser-Busch, which by all accounts had grown fat.
But InBev did not just cut. It changed the way Anheuser-Busch operates and, to some degree, thinks.
"Talk of ‘a culture of excellence’ filled hallways. Workers were closely evaluated. Managers looked not just to sell more beer but to make more money. Pressure to perform, which seemed to wane under Anheuser-Busch Chief Executive August Busch IV’s brief leadership, was ramped up," the St Louis Post noted.
The cost-savings plan connected to the integration ends this year.
AB-InBev noted in its third-quarter earnings report (published in November 2011) that it had saved USD 195 million in "integration synergies" in the first nine months of 2011, with USD 75 million more needed before the end of the year to reach its companywide three-year goal.
The extensive cost-cutting has squeezed more profits out of Anheuser-Busch, but the lingering question is whether AB-InBev cannot just cut costs but boost sales.
This has long been a knock against AB-InBev, which has grown through steady acquisitions.
In the U.S. market – Anheuser-Busch InBev’s largest – the company is selling less beer and losing market share. Its shipments dropped to 119 million hl in 2010 from 125 million hl in 2008, according to estimates by Beer Insights. Its market share stood at 47.9 percent at the end of 2010.
Still, earnings and profit margins have risen steadily with regular beer price increases.
Industry watchers say this cannot continue forever.
Bump Williams, a long-time industry analyst and AB-InBev investor, was quoted as saying that he was alarmed by the company’s lack of concern about the drop in beer volumes. "They have yet to demonstrate to anyone that they know how to build brands," he reportedly said.
