ABInBev has been famous for gaining new market share through mergers and acquisition as seen in the figure.
(History of ABInBev, u.d.) (ABInBev - Wikipedia, u.d.)This initiative is a fairly easy and straightforward process to gain new market share. As seen ABInBev are very skilled in this process, which is also one of their core business strategies, making them able to do these process fast and swiftly. The 2012 acquisition of Grupo Modelo showed exactly this strategy being put into practice when results for 2012-2013 revealed a growth of 11%. This growth showed a jump of 10% from the 2011-2012 results. ABInBev managed to sustain a gap, of more than 10%, to the global growth market through this acquisition.
11101,3 19841,7
12812,3 12128,1
5167,5 9577,5
2676,2 2721,4
2702,1 1672,9
44,2 915,8
85,6 6207,8
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
2010 2015
Anheuser-Busch InBev NV: Alcoholic Drinks Volume Share by Region 2010/2015
Latin America North America Asia Pacific Western Europe
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Through time ABInBev’s market share have been slowly declining in their key markets. As seen earlier this have been a challenge, but however, it can also be used as an initiative to regain market share through adapted diversified product portfolios and their massive presence as the largest beer company in the world.
Focus on especially millennials naturally leads to a larger product portfolio due to their demand for specialty crafted beer. This new trend is serving both as a challenge and initiative for ABInBev, either through internal growth or external growth. External growth is seemingly the best for ABInBev, through acquisitions. An example of this is recently seen in the takeover of Camden Town Brewery, a famous microbrewery located in Camden London. This brewery served many millennials from all over London on their associated brewery bars.
The acquisition of this brewery immediately penetrated a small but hip portion of the millennials, letting ABInBev tap into this speciality industry with only a few complications.
Figure 10 - M&A tree of ABInBev; Sources from ABInBev and Wikipedia
The global presence of ABInBev is focused in some key markets resulting in a lack of presence in areas such as Middle East, Africa, and Asia. These markets are emerging and prove a stronger growth than where ABInBev already operates. (Beer in South Africa - MarketLine, April, 2015) Focussing on these markets can create an even larger growth for ABInBev than what solely stems from the capturing of the market share.
The original company stems from Den Hoorn brewery which was established in 1366, renamed in 1717 to Artois, the company known today as Stella Artois. InterBrew was formed in 1988 when Stella Artois and Piedboef, another Belgium-based brewery, merged, initiating the M&A history of a world renowned
multinational brewing company. Labatt, a Canadian company, was acquired in 1995, expanding their portfolio of brands to North America and therefore moved to the global scene. In 1999 when Brahma and Companhia Antarctica Paulista merged AmBev was formed. InterBrew Merged with AmBev in 2004, forming InBev. A brewery with operations in more than 30 countries and sales in more than 130, with a market capitalization of
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€30 billion. InBev gained at this point in time the status as the world’s largest brewery. In 2008 InBev merged with Anheuser-Busch, a company also formed through several mergers, bringing together two of the world’s largest breweries in the world. (Creating the global leader in beer , 2008) A deal costing InBev $54 billion USD.
5.5 3G Capital “Dream Big.”
An introduction to ABInBev without introducing 3G Capital is no introduction at all. 3G Capital, a Brazilian private equity firm, has been behind some of the biggest and most successful mergers in history. Led by Jorge Paulo Lemann the company has teamed up with Berkshire Hathaway, and bought Heinz & Kraft in the past as well as other major mergers. In 2010 3G capital bought Burger King in a leveraged buyout.
Lemann describes the corporate philosophy at 3G Capital like this: “You’re running, you’re always close to a limit, you’re working very hard and being evaluated all the time.” (3g Capital , u.d.)
ABInBev was created by 3G Capital back in 2008, and Jorge Paolo Lemann is the controlling shareholders is the majority shareholder in ABInBev. These are the people that pushed for the takeover of SABMiller as well.
Through an intense drive, a ruthless focus on costs and acquisitions Lemann has worked his way. He is now the richest person in Brazil and the 19th richest person in the world with an estimated net worth around 30.3 billion USD. (Jorge Paulo Lemann, u.d.) It is good to know that the takeover of ABInBev was a hostile takeover. A 54-billion-dollar deal made the company 3G Capital then cuts costs harder than anyone else. The CEO of Anheuser now is a Lemann protégé. Brito actually brought “zero-based budgeting” to the company. Here every item in the budget has to be accounted for every year, with the goal to remove it. They have been a profit machine for ABInBev, and this is a part of “ The 3G Way” That stands for extreme transparency, merit-based pay; austere budgeting(Pretend company money is your own money) promoting young talent, and keeping it competitive.
Brito (current CEO is a good example of how 3G promotes talent.) he first met Lemann when he had gotten into Stanford. Immediately after graduation, he started working for 3G partner Marcel Telles at Brahma, the first brewer they had bought. From there he went to Ambew to InBev to Anheuser-Busch InBev now serving as CEO.
3G Capital is also seen as a very attractive owner by the investors. A partner 3G named Carlos Sicupira, his favorite expression is: “Costs are like fingers you constantly have to cut them off.” In the Kraft acquisition, they axed the free cheese sticks for employees; Budweiser employees did not longer get free beer. They are every investor dream, and being famous for operating companies in the food and beverage industry.
Big Dream), Lemann’s partner Sicupira has a favorite phrase: “Costs are like fingernails: You have to cut them constantly.”
The formula has done wonders for the profitability of Anheuser-Busch InBev, the company created by Anheuser’s 2008 merger with InBev; its stock price has increased about 150 percent in the past five years. Burger King is already valued at more than twice the
$3.3 billion the three musketeers bought it for in 2010.
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Burger King had languished for eight years under the ownership of the private equity firms Goldman Sachs Capital Partners, TPG Capital, and Bain Capital. In two years under Hees the company more than doubled its margins, as measured by Ebitda.