Anheuser-Busch InBev (ABI) recently announced a search to replace CEO Carlos Brito, a move that comes at a time of uncertainty for one of the world’s largest companies. Under Brito’s leadership since 2008, the conglomerate turned inward to create a culture widely considered to be insular, if not outright nepotistic. Former employees who spoke to Good Beer Hunting express doubt much will change for the company, which is riddled with debt and faces an undetermined path toward greater solvency.
After an era of deal-making, cost-cutting, and brewery acquisitions, it’s fitting that Brito will be a part of the search for his replacement, and will remain in his role until the chosen candidate takes over. Brito began his career at Ambev, a Latin American regional brewer that expanded—after buying Anheuser-Busch and SABMiller—into the world’s largest beer company. Surrounded by other Brazillian executives, he maintained a power structure that benefited those closest to him.
The Financial Times broke the news on Sept. 7, citing three sources who say ABI is considering only one internal candidate, Michel Doukeris, who is the head of Anheusur-Busch’s North America business. Whoever takes over isn’t expected to become the next CEO until 2021, when Brito will transition to a role on the company’s board and maintain influence over aspects of operations. In interviews with GBH, former employees said Doukeris was also presumed to be the likely choice—an executive “cut from the same cloth [as Brito],” as one former ABI employee put it.
Whether Doukeris or another candidate is selected, Brito’s replacement will likely have hard work ahead: ABI’s balance sheets have been bogged down by debt and obligations from years of acquisitions and expansion. According to the company’s 2020 half-year report released at the end of June, it drew $76 million in profits in the first half of the year, down from $4.7 billion in the first six months of 2019. Some of that is explained by a $2.5 billion write-down because of "risk of impairment" from its business in Africa, as well as lingering debt from its $106 billion acquisition of SABMiller in 2016.
This moment represents a changing of the guard that will signal ABI’s next priorities, as the industry watches to see whether business strategy or culture will change.
While those in and around the beer world could interpret news of a search for a new CEO as evidence ABI is desperate to change course, any shift in priorities is likely to be gradual. One former ABI employee tells GBH the move is likely meant to placate anxious shareholders worried about the company’s declining profits. The company’s stock price had tumbled from an October 2016 high of $128 per share to $52 per share as of Sept. 25.
By floating news of the transition, ABI shows it isn’t sticking its head in the sand. But it’s also not proof the company is preparing for a massive shakeup, something it’s avoided in the past. With Brito’s transition to the board, this former employee says, “there’s always going to be Brito DNA in ABI as long as Brito is alive.” The search, though, indicates Brito’s strengths—no-nonsense deal-making and cost-cutting—have run their course. (ABI declined to make Brito available for an interview for this article.) Brito oversaw ABI’s acquisition of 12 American craft breweries (four of which were reported to cost $200 million in total), the merger with SABMiller, and the 2019 sale of its Australian unit of Carlton & United Breweries to Japan's Asahi Group Holdings for $11.3 billion.
As financial services firm Jefferies reported in early September: “[Doukeris’] background is in sales/marketing, as opposed to finance/M&A [… this] points to the shift from a deal-making background to one more growth-orientated as ABI moves towards a phase that is less M&A dependent.”
Brito emphasized lean operations, insisting on zero-based budgeting, in which departments build budgets from the bottom up every year to justify every expense. Another former ABI employee says the multinational cut all “unnecessary” expenses, including office snacks and cost-of-living raises. This—and layoffs—began in 2008 when InBev bought Anheuser-Busch, but it was “death by a thousand paper cuts” afterward, they say, and the nickel-and-diming of travel expenses got worse around 2015. “For a while you had to book whatever flight or hotel was the cheapest, no matter if the flight had a six-hour layover or the hotel was 45 minutes away from your conference,” the former employee says. “I will never forget [Craft Brewers Conference] in Portland [in 2015] when I stayed at a hotel 45 minutes away from the city center because it was the cheapest option. Uber wasn't permitted at the time so I wasted hours looking for and riding in taxis.”
Now that ABI has wrung out possible efficiencies from acquired breweries, the company has less need for Brito’s proficiency in those areas. With a desire to pay down some of those billions in debt, the company likely isn’t eyeing acquisitions or deals at the same pace it was earlier this decade—though the financial toll to global beverage companies from COVID-19 could create a few “too good to pass up” opportunities.
ABI has a reputation for favoring its Brazilian executives at the expense of other employees who aren’t considered members of its inner circle. Brazilian investment firm 3G Capital has owned a significant stake in Ambev since 1989, which went on to buy Anheuser-Busch and eventually become AB InBev. It’s also known to be an insular company that moves executives around within its portfolio companies. (3G also has a significant stake in Kraft Heinz, whose current CEO is the former chief marketing officer at ABI.)
Former ABI employees describe Brazilian executives within the company as sharing a corporate culture that rewards loyalty and promotes those who fit their mold. The company promoted Fernando Tennenbaum from CFO of its Brazilian unit, Ambev SA, to its corporate CFO position in April of this year, keeping with this philosophy and further strengthening suspicions that Brito’s replacement will come from within.
Jefferies’ report notes that while ABI’s new management will likely “represent continuity rather than major change,” it also shares that there’s an increased emphasis on gender diversity within the company. (It cites the number of women on ABI’s board increasing from two to five in 2019.) But two former ABI employees say the global and U.S.-based leadership teams remain stubbornly male, with just one woman on each team.
Overall, none of the former employees who spoke to GBH expect Brito to help choose a replacement that would significantly alter the company’s culture.
This is key, because it points toward the path the company will take in the coming years, if not decades. ABI has already tried to reduce its debt through cost-cutting, a tool that seems to have reached its limits. Its global and U.S. leadership is, many say, culturally homogenous, led by loyal Brazilians and American white men. The company overall is treading water at best, both financially and in terms of innovation. Just when the moment seems primed for a shakeup—and when craft beer sectors in the U.S. and around the world are exploring ways to cater to societal and business changes—ABI is likely instead to keep culture and strategy constant.
Brito has high expectations for “structure-following,” one former employee said, “and the corporate culture followed suit: absolutely no nonsense, not a lot of emphasis on engagement, camaraderie, or fun. [… Brito is] easy enough to work for if you fit the culture mold.”
This is why it’s hard to decipher if following the same path Brito has forged would benefit ABI, or whether continuing to promote leaders from within “the culture mold” would only lead to stagnation.
One aspect of the ABI corporate culture that could serve the company well in the future, a former employee says, is the way its leaders view gaps in their business as “pure opportunity.” This employee offers Goose Island IPA as an example: Prior to 2013, ABI saw it had no leading IPA in its portfolio. Rather than ceding the segment and building in other areas, it identified an IPA within its portfolio to scale into a national brand.
“I was always afraid to raise my hand and say there was a gap in my business because Americans look at it as a failure,” this former employee says. “But the Brazilian mentality doesn’t see it that way.”
This worked for a time. Goose Island IPA was indicative of a pattern the company has followed with other brand portfolios: Scale up a brand, send it national, and then replace it with something else when its shine dulls in a few years. Goose Island IPA, for example, was on a tear in the middle part of this decade. It grew sales in grocery, convenience, and other stores, as tracked by marketing firm IRI, from $23 million in 2016 to $51.5 million in 2018. Then it fell significantly, and is on pace to do less than $40 million in chain retail sales this year. It’s been lapped by brands like Sierra Nevada’s Hazy Little Thing, which is on track to break $83 million in sales this year.
Churn seems to characterize the company’s approach to innovation, which this former employee says Brito set at “a high bar.” Brito pushed for accelerated approaches to new beers and products, urging his teams to produce a wide range of potential new beers from which testing could winnow down the field.
That fast pace can come at the price of long-term thinking. At ZX Ventures, ABI’s “global incubator,” former employees say the focus on quarterly profits and short-term wins impeded true long-term innovation. “Everybody is working for their employee review and promotions, not five years out,” one former employee told GBH of ZX in 2018. But if ABI can get its aligned wholesalers on board—and let its acquired breweries think outside the box, another former employee says—it could theoretically score future hits with new products. They say centralizing the brewing of core brands like Goose IPA at ABI’s largest brewing facilities frees up individual breweries to continue with the small-batch, taproom-focused beers that could yield the next big hit. Scaling up the beers that consumers actually respond to—rather than pushing market research-driven products like Mixxtails, which fizzled—will be key to the company’s success in the U.S., they say.
Yet, ABI has owned craft breweries for a decade now, and has yet to capitalize in a massive way on their brewing experiments. Goose Island IPA grew nationally, then cooled, only to be replaced by a push for Elysian Brewing Company’s Space Dust IPA. But neither is a headline-grabbing, share-of-market monster like hard seltzer.
ABI has struggled to innovate internally through ZX Ventures, and also hasn’t mined an industry-changing hit from its acquisitions. It will have to chart a path forward that creates long-term loyalty for its products, not just a boom-and-bust cycle of products like Mixxtails and -Ritas.
“That’s got to be the next phase for AB InBev is to take their brands and figure out how to connect with people again,” this former employee says. Market researchers agree, noting that it’s time for the company to “shift focus to more internal growth after years of acquisition-led expansion.”
From there, the former employee says, the task will be to use what works here in the U.S. to inform strategies in other countries, and vice versa. ABI’s strength is its global infrastructure, where ideas can flow both ways: What’s working in one geography can be scaled up, and insights gained at a global level can flow down to individual breweries. For example, because ABI has a brewery in Wuhan, China, where the COVID-19 virus originated, Brito told Bloomberg the company was able to observe and adapt to pandemic conditions early on to keep its employees safe and respond to changing patterns of consumer demand. But that’s all contingent on the right leadership. While those close to the company are not expecting a drastic shakeup in corporate culture, they do expect a refocusing on growth rather than acquisition.
Growth can be difficult to come by within companies and institutions that prize continuity and reward adherence to the status quo. But then again, this is a company whose executives are said to see every gap as a future opportunity.
Words by Kate Bernot