“There has never been a beer company like AB InBev,” writes Businessweek (Oct. 29-Nov.3, 2012). It was created in 2008 when InBev, the Belgium-based owner of Beck’s and Stella Artois, swallowed Anheuser-Busch(AB), the maker of Budweiser, in a $52 billion hostile takeover. Today, AB InBev is the dominant beer company in the U.S., with 48% of the market. It also controls 69% in Brazil, is the 2nd-largest brewer in Russia and the 3rd-largest in China. The company owns more than 200 different beers around the world.
In a case study in lean management (Ch.16), after taking over Anheuser, AB InBev slashed costs at the combined company by $1.1 billion in a single year. A former AB InBev executive was quoted as saying: “the company saved about $55 million a year substituting cheaper hops in Budweiser and other U.S. beers.” AB InBev also saved money on other materials. It used smaller labels and thinner glass for its bottles. It tried weaker cardboard for its 12-packs and cases. The old Anheuser-Busch insisted on using whole grains of rice in its beer. AB InBev was fine with the broken kind.
AB InBev CEO Carlos Brito was likewise tough when it came to the perks to which Anheuser employees had grown accustomed. He cut the number of BlackBerrys in half. Execs who once traveled in corporate jets now flew commercial. He removed the interior walls at 1 Busch Place in St. Louis and turned the office into an open-plan space. “We always say the leaner the business, the more money we will have at the end of the year to share,” said Brito. “I don’t have a company car. I don’t care. I don’t need the company to give me beer. I can buy my own beer.” He also laid off 1,400 people, about 6% of the U.S. workforce.
Profits are up, but AB InBev is having trouble selling beer. The company’s shipments in the U.S. have declined 8% from 2008 to 2011, and last year Coors Light surpassed Budweiser to become America’s No. 2 beer.
Discussion questions:
1. What are the OM implications of AB InBev’s cuts?
2. What are the main attributes of lean companies discussed in Chapter 16?
3. How do beer drinkers feel about the changes?