InBev courts King of Beers

InBevs proposed acquisition of Anheuser-Busch could bring the good times grinding to a halt for Budweiser marketers. As guardians of the worlds biggest lager brand, Bud executives have confidently strode the globe, assured in the belief that they have reached the top of their profession.

f1_120x120InBev’s proposed acquisition of Anheuser-Busch could bring the good times grinding to a halt for Budweiser marketers. As guardians of the world’s biggest lager brand, Bud executives have confidently strode the globe, assured in the belief that they have reached the top of their profession.

But, at the stroke of a pen, the big-budget, money-swilling marketing pizazz of the King of beers could be brought down to earth with a bump by the parsimonious Brazilian bankers who control InBev.

InBev’s $46bn (£24bn) bid, announced last week, is likely to be opposed by Anheuser-Busch’s management under chief executive and family scion August Busch IV. But many observers believe the $65 (£33) a share offer will be too tempting for shareholders to reject, even in the face of popular, trade union and political opposition in the US.

The deal would give InBev, already the world’s biggest brewer, control of over a quarter of global beer sales. But whether InBev would be well placed to build the Budweiser brand around the world is open to question.

First, it would have to overcome a marked difference in marketing cultures between the two companies. “InBev marketers have to go through relentless cost-cutting and justification of everything they spend. By contrast, Budweiser marketers are very bullish and even quite arrogant. They say, ‘We are the King of beers. We can do what we like’”, says one source.

Meanwhile, some have wondered about InBev’s true intentions in bidding for Anheuser-Busch. One theory suggests that InBev is looking to get hold of the US brewer’s distribution system so it can build its four global brands – Beck’s, Stella Artois, Brahma and Leffe – into North America. Under that scenario, Bud would be downgraded.

But according to InBev’s Brazilian chief executive, Carlos Brito, his company intends to turn up the heat on Budweiser should its audacious bid succeed. “Budweiser would be a flagship brand. It’s a brand known by a lot of consumers around the world. They look for international, premium brands,” Brito said last week.

Bud Light and Budweiser are the world’s two biggest selling beers, mainly by dint of their stranglehold on the US beer market, where Anheuser-Busch has a 48% market share. Some 85% of A-B’s business is in the US.

But, although Bud dominates the US – the world’s second biggest beer market after China – A-B has failed to exploit this colossal scale to create a truly global brand for Budweiser on a par with other US giants such as Coca-Cola, McDonald’s and Disney.

Brito believes InBev can succeed in building Bud as a global brand where Anheuser-Busch has failed. A-B has used classic US strong-arm marketing tactics to boost Budweiser’s international presence, especially in the UK, its biggest European market. With a heavy advertising spend (somewhat curtailed of late), scatter-gun sponsorship and an aggressive approach to distribution, Budweiser has become the UK’s top-selling bottled lager since launching here in 1984. It introduced the long-necked bottle in the early Nineties after failing to score a hit with its draft and tinned versions.

A-B only has breweries in a dozen or so markets and is far from a global brand. Some believe that uncoupling Bud’s overseas strategy from direct control by A-B’s St Louis, Missouri headquarters could be just what is needed for the brand to go truly worldwide. But Bud is described as “cold and aloof” by beer writer Pete Brown. “The ubiquity of it makes it seem like a default brand you choose if you can’t think of anything else. It is 5% ABV, but most people think of it as a standard lager,” he adds.

Another source suggests: “If any lager brand can go global, it is probably Bud. But it needs to tap into the pleasant side of the US. It has tended to be a bit George W Bush, while it needs to be more Barack Obama.”

He adds that A-B has tended to think that successful strategies in the US can simply be rolled out to other markets without paying too much attention to local differences. This is short-sighted, he says, especially given that Budweiser has a light, crisp taste that to many drinkers can seem like soda pop.

There are also concerns that the cost-conscious InBev could shy away from the huge spend needed to boost Bud’s premium positioning in markets around the world. In truth, few lagers have achieved the status of global brands; perhaps only Heineken and, to a lesser extent, Carlsberg.

Creating a global brand is crucial to InBev’s strategy. Yes, it wants to be number one in the US, hence its bid for A-B, which would also help it to make further in-roads into China through A-B’s stake in Tsingtao Brewery. But InBev is devoid of a global brand to rival Heineken. It has tried turning its Brazilian lager Brahma into a worldwide hit, with limited success. It needs a flagship lager.

Bud, though, is held back in many markets by its image of Eighties, good-times Americana, unsuited these days to a world where many view the US with suspicion.

Observers believe that A-B’s experience in the UK is indicative of the problems it has faced in globalising the brand. “It has a higher share of mind than it has share of throat,” says Futurebrand strategy director Adrian Goldthorpe. “Bud does great marketing communications, but when you get to the fixture, it is just too bland. We’ve fallen out of love with the US, compared with 15 years ago when it appeared fun and exciting. Bud is just stars and stripes in a bottle.”
He speculates that InBev may position Bud in its portfolio as a standard lager alongside its premium offerings, adding that InBev lacks a standard, swilling lager with global potential.

Without doubt, InBev ownership would represent a significant cultural shift for Anheuser-Busch marketers. InBev operates a system called Zero-Based Budgeting. This contrasts with the usual approach where brand marketers are given a budget and told to plan media buying accordingly – or to reduce the budget by a certain percentage.

InBev’s ZBB system operates in the opposite way. Marketers have a budget of zero, but request funds for specific activities and are given bonuses according to their success.

This approach is acknowledged to be responsible for driving out excess costs in InBev’s operations, but some wonder whether it leads to long-term brand health. Sceptics point to Stella Artois – which has performed poorly in its core UK market under InBev’s ownership – as evidence of InBev’s failings in building brands. The company has been accused of selling Stella cheap through supermarkets, while trading off its premium status as “reassuringly expensive”. UK sales have slumped under InBev’s ownership. Yet, as one source says: “They have learned the lessons of Stella. They won’t repeat those mistakes.”

Formed in 2004 from the merger of Brazil’s AmBev and Belgium’s Interbrew, InBev is controlled by managers from the Brazilian side of the business. But these executives are not the Latin party-goers of their national stereotype: they are unemotional when it comes to brands and are said to be fixated with cost-cutting.

Should the deal go through, it will be a truly historic moment for marketing. That the top US beer brand is acquired by a Brazilian-controlled company indicates that the era of US-brand domination could be drawing to a close. Brazil, Russia, China, India and other emerging nations will become the major brand owners of the future.

Perhaps freed from its American roots, Bud can prosper around the globe. Much depends on whether InBev has learned from the Stella Artois experience. Simply pruning costs and selling products at a discount is no way to build brands.

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