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Case Study

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by

Marcos Perez

on 10 May 2013

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Transcript of Case Study

Suggestions/Comments Social Responsibilities Inbev: SWOT Analysis Social Factors
Cultural- new generation finds substitute for alcohol
Demographic- males between age 45-55 start having liver problems
Religious- Islamic faith spreads
Ethnic- Indians fall in love with Budweiser
Political Factors
Fair trade decisions- Viva la Mexico
Tax programs- Greedy Government
Economic Factors
Availability of credit- Further expansion
Disposable income- Poor economy deters excess drunken fun
Technological Factors
Improve existings beers- scientists make super hops
Improve production- Robots
Improve marketing- Brain chips
Ecological Factors
Pollution
Effects on water and soil- Raw material costs increase Remote Environment InBev’s Offer Anheuser-Busch Case 11
Marcos
James
Kevin
Mike
Jason InBev and Anheuser-Busch Three Circle Analysis Anheuser-Busch: SWOT Analysis Objectives of Presentation Introduction Brewing Industry - Overview of Case
- Short summary of each company
- Discuss effects from merger
- Explanation of:
Mission statements
SWOT analysis for each and new
Porters 5 forces Model
Social Responsibilities
3 Circles
Supply Chain
Enviornment
- Suggestions - June 2008
- Belgian InBev NV posted a bid to Anhueser-Busch to buy shares at $65 a share
- Anhueser-Busch declined bid stating "It undervalued the company, but it would be open to a higher price"
- By Mid-July InBev re-offered a $70 per share bid that was accepted by A-B Mission Statement: Anhueser-Busch New Mission Statement: Anhueser-Busch InBev Brewing is a very straight forward process
Ingredients are a malted (barley, rice, corn or wheat), yeast, hops, and water.
The challenging part is maintaining quality control across large volumes, multiple products, production sites, and costs. United States Characteristics of Beer Brands
Super Premium - (Michelob, Craft Beers)
Premium - (Budweiser)
Core - (Miller High Life)
Value - (Busch) Top 5 Brand in US: Bud Light, Miller Lite, Budweiser, Coors Light, and Corona (import) Brewing Industry Cont. Global Top selling Brands: Snow (China), Bud Light, Budweiser, Skol (Brazil), Corona, Heineken (Netherlands), Brahma (Brazil), Coors Light, Tsingtao (China), and Miller Lite. Largest Markets by Volume:
1# China
2# United States
3# Germany
4# Brazil
5# Russia
6# Japan Brewing Industry Cont. Consolidation of Brewers:
2002 - SAB acquired Miller Brewing Company
2005 - SABMiller acquired Bavaria S.A.
2005 - Coors merged with Molson
2007 - Heineken partnered with Carlsberg
2007 - Heineken acquired Scottish and Newcastle
2007 - SABMiller merged with Molson Coors (US)
2008 - SABMiller acquired Grolshch Craft Beer Growth was 11% for 2010 Anheuser-Busch dates back to 1860 when Eberhard Anheuser bought a struggling St. Louis Brewery
1869 - Anheuser brought along his son-in-law Adolphus Busch
The current CEO is August Busch IV
Fifth generation of the Busch Family
Busch Lager was introduced in 1874
Named after the Bohemian town of Budweis
These lagers would go on to dominant 50% of the market Anheuser-Busch 12 Breweries located in United States
Along with the Breweries, five theme parks are owned by the family (account for 6% of net profit)
Investors
Barclays Global (5-7%)
Berkshire Hathaway (4.9%)
31,000 full-time employees
8,100 represented by Teamsters Union
Very good employee relations Anheuser-Busch Budweiser Family of Beers Anheuser-Busch International Strategy Anheuser-Busch is the 4th largest Brewey
8% of sales are outside of the U.S.
2 elements to expansion
expansion of the name
alliance with out major breweries
Became the first company to enter China
13 breweries in Northeast China
India, Mexico, Canada, and UK
Expansion to Far East and Europe Anheuser-Busch Regarded as one of America's "Most Admired Companies" by 'Fortune' Magazine
Numerous of awards won for the Company
Anheuser-Busch has always been an inovator with the market
Iconic advertising for Budweiser
Cyldesdale horses, frogs, dogs and cathy slogans
Staple for advertising during the Super Bowl Economic - Spreading the name with respect and great integrity. Choosing what is best for the company
Legal - Budweiser uses the best quality ingredients to perfect their product. Along with their production, their responsiblity of their marketing campaign and targets
Ethical - Budweiser has contributed to Disaster Relief, Charitable foundations, volunteer, and support. Donated 72 million cans of drinking water to people affected by natural and other disasters
Discretionary - Committing more than $980m since 1982 in responsibility programs to prevent underage drinking and drunk driving. Company's
Offerings Customers'
Needs Competitors' Offerings A cool refreshing product Innovation Commanding
50% of market A reasonably priced
product Can and Bottle
gimmicks Area brewed product Ties with Premium
Import Beers Brand Recognition Recommendations?
Areas to enforce?
Areas to strengthen
and revise? Interbrew Formed in 1987, two Belgian families merged their private brewing interests
1995 - Acquired John Labatt, largest Canadian brewer
2000 - Acquired Bass and Whitbread, U.K. brewers
Went public in 2000
2003 - Acquired Beck's, Germany
Different strategies than other major brewers
No true 'Global Brand,' many different organizational cultures due to acquisitions AmBev Controlling shareholders: Jorge Paulo Lemann, Marcel Herrmann Telles, and Carlos Alberto Sicupira
Among richest Brazilians, founders of Banco Garantia
Bought breweries all over the world including Uruguay, Ecuador, Paraguay, Argentina
Minimal role in management The Merger - InBev NV Interbrew - 3rd largest brewer in world (primarily Europe and North America, 120 countries total)
AmBev - 5th largest (primarily South America)
Goal - give Interbrew larger foothold in Latin American market, give Ambev better access to Europe, North America Anhueser Busch's Mission Statement broken up into 10 sentences divided into 3 sections, dream, people, and culture.

Dream:
Our shared dream energizes everyone to work in the same direction to be The Best Beer Company in a Better World.

People:
Great people, allowed to grow at the pace of their talent and compensated accordingly, are the most valuable assets of our company.
We must select people who, with the right development, challenges and encouragement, can be better than ourselves. We will be judged by the quality of our teams. Mission Statement: Anhueser-Busch Cont'd Culture:
We are never completely satisfied with our results, which are the fuel of our company. Focus and zero complacency guarantee lasting competitive advantage.
The consumer is the Boss. We connect with our consumers through meaningful brand experiences, balancing heritage and innovation, and always in a responsible way.
We are a company of Owners. Owners take results personally.
Common sense and simplicity are usually better guidelines than unnecessary sophistication and complexity.
We manage our costs tightly to free up resources that will support top-line growth.
Leadership by personal example is the best guide to our culture. We do what we say.
We don’t take shortcuts. Integrity, hard work, quality and consistency are keys to building our company. The new combined Mission statement now includes:

Winning with Consumers through Our Strong Brand Portfolio
Winning at the Point of Connection
World-Class Efficiency
Targeted External Growth June 12, 2008- InBev offers $46.4 Billion for Anheuser-Busch
Potential to create world's largest brewer with net sales of $36 billion Elements of the Proposal Create stronger global company thats more competitive
Budweiser to be distributed globally
St. Louis to become North American headquarters
Anheuser-Busch to be part of the new name
All U.S. breweries to remain open
Continual commitment to communities
Members at high level of management to remain the same
Anheuser-Busch Board members are welcome to join a new combined board Rejection of Offer June 26, 2008- Anheuser-Busch rejects offer
Proposal was greatly undervalued
$65 price per share was unacceptable
Did not meet best interests of the company's share holders AB InBev Supply Chain 2003 - InBev: $12 billion revenue, 14% of market
Ranked 1st or 2nd in 20 key market segments
Main HQ - Leuven, Belgium
Americas HQ - Sao Paulo, Brazil Merger Details InBev issue 140 mil shares in exchange for investment in Tinsel, S.A. (South American company)
Transferred Labatt to AmBev in exchange for about 7.9 bil common and 11.4 bil preferred of new AmBev stock InBev Products More than 200 brands
Divided into three categories:
1) Global Brands (Beck’s, Stella Artois)
2) Multicountry Brands (Brahma, Leffe, Staropramen, Hoegaarden)
3) Local Brands (Keith’s, Labatt Blue, Bohemia, Jupiler)
“predominantly a local brewer with local production based on consumer insights.” -InBev Acceptance of New Offer By mid-July, InBev returned with a raised offer at $70 a share
Offer was increased from $46.4 billion to $52.5 billion InBev Products (Cont.) Seven business zones:
1) N. America (4.8% company’s consolidated volume, 10.7% of sales revenue)
2) Latin America North and South (47.2, 41.0)
3) Western Europe (12.8, 22.5)
4) Central and Eastern Europe (18.4, 16.0)
5) Asia Pacific (14.8, 6.9)
6) Global Export
7) Holding Companies InBev Leadership/Management John Brock became CEO
previously CEO of Interbrew for 6 months
25 years in consumer products prior to Interbrew
Board seats split equally between Interbrew and Ambev
2005 – Carlos Brito, former CEO of AmBev, replaced Brock
InBev Zone President - North America InBev Changes Merger Integration Approach
Modernizing production, streamlining extensive product line
Lowered costs and cut 300 jobs in Western Europe (falling beer consumption)
Attempted to market to younger customers with fruit flavored beers
2006 - "Hoegaarden Controversy" InBev Culture 94,000 employees worldwide -
30 countries (N. / S. America, Europe, and Asia Pacific)
112 plants worldwide
Athletic locker room is a key ingredient in a culture
Ferocious cost cutting, lucrative incentive-based compensation programs
Jorge Paulo Lemann, one of InBev’s chief shareholders Porter's Five Forces 1. Rivalry Among Existing Firms: LOW
Industry Growth - Low
Concentration/Balance of Competitors - Low
Degree of Differentiation - Low
Excess Capacity/Exit Barriers - Low
2. Threat of New Entrants: LOW
Economies of Scale - Low
First Mover Advantage - Low
Distribution Channels - Low
Legal Barriers - Low Budweiser Factory- St. Louis, Missouri Beechwood Distributors Inc.- New Berlin, Wisconsin Woodman's Food Market- Kenosha, Wisconsin Porter's (Cont.) 3. Threat of Substitutes: LOW to MODERATE
Buyer Propensity to Substitute - Low to Moderate
Relative Price of Substitutes - Low to Moderate
Relative Performance of Substitutes - Low
4. Bargaining Power of Buyers: MODERATE to HIGH
Price Sensitivity - Moderate to High
Relative Bargaining Power - Moderate to High Beer lovers, Miller haters, Alcoholics Porter's (Cont.) 5. Bargaining Power of Suppliers: LOW
Bargaining Power - Low Merger (Cont.) Inbev Products Creation of product that has a globilized brand/market
Continuation of their expansion
Focus more on Vertical Integration to lower costs
Disinvestiture of none essential assets of the company
Diversify suppliers and distributors
Full transcript