Reference no: EM133155911
AB InBev, Beer Globally, and Creating Value
The company AB InBev may not sound familiar to everyone, but spelled out, its name likely becomes clearer to most people, especially the beer-loving population of the world. Anheuser-Busch InBev originates from the Den Hoorn brewery in Leuven, Belgium, which dates back to 1366, and the pioneering spirit of the Anheuser & Co. brewery, with origins in St. Louis, Missouri, since 1852. Today, AB InBev is the leading global brewer and one of the world's top consumer products companies.
AB InBev has operations in 25 countries, sales in more than 100 countries, revenue of $44 billion, 155,000 employees, and 7 of the top 10 most valuable beer brands. These seven brands are: Budweiser, Bud Light, Stella Artois, Skol, Corona, Brahma, and Modelo Especial. Budweiser, Corona, and Stella Artois are marketed as "global brands," while Beck's, Leffe, and Hoegaarden are considered "international brands" in AB InBev's brand portfolio. The company also has 15 "local champions," which represent leadership in their respective local markets. These local brands include Jupiler (the most popular beer in Belgium), Quilmes (an original Argentinean lager since 1890), and Harbin (from the oldest brewery in North China). In total, AB InBev's portfolio consists of more than 200 brands.
With so many brands and strong coverage internationally of these different brands, strategically AB InBev is a unique and highly organized global company. Carlos Brito (CEO) and Olivier Goudet (chairman of the board) have stated that the company's ambition is to build a great, enduring company for the next 100 years. The core management team consists of the CEO, nine Executive Board members, and six zone presidents. The six zone presidents are responsible for the following sales areas: Latin America South, Latin America North, Asia Pacific, North America, Mexico, and Europe.
Using this management structure, AB InBev has built leading positions in the important beer profit markets of the world through a combination of organic growth and selected, value-enhancing acquisitions. The company follows a focus brands strategy in which the majority of the resources are devoted to those brands that have the greatest long-term growth potential. Investment behind the brands is fueled by a disciplined approach to cost management and efficiency. AB InBev has a strong track record of industry-leading margins and cash flow generation. In 2015, this led to growth of 12.6 percent of the company's three global brands (Budweiser, Corona, and Stella Artois), for example, and strong earnings in North America and most of Latin America.
The foundation for AB InBev's global strategy is the company's "Dream-People-Culture" approach. The goal is that despite having operations in many countries around the world, with different national cultures, AB InBev operates as one company, with one dream and one culture uniting them. There is also a focus on having the right people in the right place at the right time. This culture is built on ownership, informality, candor, transparency, and meritocracy.
Strategically, AB InBev has 10 principles driving everything it does. At the core, AB InBev is focused on a shared dream that energizes everyone to work in the same direction to be the best beer company in the world, bring people together, and make the world a better place. Additional principles cover people strengths, the quality of teams, striving for increased satisfaction, consumer focus, ownership, common sense and simplicity, cost management, leadership, and hard work and responsibility.
Sources: D. Leonard, "Can Craft Beer Survive AB InBev?" Bloomberg Business, June 25, 2015; V. Wong, "Why AB InBev and Big Brewers Are Betting on Hard Cider," Bloomberg Business, May 13, 2013; J. Colley, "The Big Beer Merger Won't Bring Down the Price of a Pint," Newsweek, October 18, 2015; C. Purdy, "There's a Less Obvious Reason Why AB InBev Is Buying Up Craft Breweries," Quartz, December 23, 2015; AB InBev Annual Report 2015, annualreport.ab-inbev.com.
Please answers the following question:
- What strategy was AB InBev pursuing when it was creating value in the beer industry globally? What strategy paradigm was used regarding profitability?