{"id":258,"date":"2015-11-28T18:41:36","date_gmt":"2015-11-28T23:41:36","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/ab-inbev-getting-high-on-growth\/"},"modified":"2015-11-29T15:07:51","modified_gmt":"2015-11-29T20:07:51","slug":"ab-inbev-getting-high-on-growth","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/ab-inbev-getting-high-on-growth\/","title":{"rendered":"AB InBev: Getting High on Growth"},"content":{"rendered":"

Consumer goods is a very tough business. I have battle scars from spending 5 years in the industry.\u00a0Are we putting the consumer first? How do we drive growth and profitability\u00a0simultaneously? Can we leverage scale to think global and act local? <\/em>These are some key questions all companies in this industry continuously grapple with. One company that\u2019s consistently found answers to these questions is Anheuser-Busch InBev SA\/NV (AB InBev for short).\u00a0A look at the stock price (NYSE: BUD) shows how consistently and rapidly AB InBev\u00a0has been able to increase shareholder value. [1]<\/a><\/p>\n

\"Untitled\"<\/a><\/p>\n

So how has this Belgium-based brewer taken over the world of beer?\u00a0The answer lies in the strong link between the business model and the operating model, which enables repeatability. Let\u2019s look at some some key elements that shed light on how this linkage works, and gives AB InBev a sustainable, competitive advantage.<\/p>\n

Go big, or go home:\u00a0<\/strong><\/em>The AB InBev business model is geared towards driving big global brands with long-term growth potential. What this translates to is channeling capital, labor and production capability to brands like Corona and Budweiser, which are sold in multiple countries, and enable economies of scale. The big decisions on these brands are made at a global, centralized level, and permeate the entire company. While there is localization as needed, the clear company priority is on centrally managing these big brands, and designing an operating model that executes on global business strategies. Business history is full of examples that show how hard it can be to pull off a global strategy across markets. But when it’s carefully planned and measured as in the case of AB InBev, it can lead to unparalleled scale and growth. [2]<\/a><\/p>\n

A winning culture:\u00a0<\/strong><\/em>AB InBev has successfully driven the message of one global company built on collaboration and leading from the frontlines. Energizing employees behind the ‘dream’ of being the \u201cBest Beer Company Bringing People Together for a Better World\u201d<\/em>, the operating model allows for quick decision making, flattened hierarchy, a feedback loop, and focus on winning in the marketplace. The 10 non-negotiable principles that make up the company\u2019s \u201cDream-People-Culture\u201d platform are not just words on a paper, but a true guide for employees from the C-suite, down to each engineer at the plants [3]<\/a>. This is critical for a giant like AB InBev with operations around the world. Unless everyone is part of the same team, has a \u2018desire to dream\u2019, and acts as the business owner, no global strategy can be executed successfully. And as former P&G CEO A.G. Lafley says, execution is the only strategy that consumers see <\/em>[4]<\/a><\/p>\n

https:\/\/www.youtube.com\/watch?v=WQ4HDRuoedg<\/a><\/p>\n

Focus on the bottomline:\u00a0<\/strong><\/em>The AB InBev business model of growing via M&A deals works well, because with each merger, there’s been relentless focus on optimizing the operating model to increase margins. This focus on deliberate cost management is enabled via unique operating interventions like WCCP (world-class customer processes), ZBB (zero-based budget process) and VPO (Voyager Plant Optimization). In a nutshell, these interventions focus the entire supply chain on key metrics to achieve ruthless efficiency and maximum output [5]<\/a> [6]<\/a><\/p>\n

Putting it all together: Repeatability
\n<\/strong>The key features mentioned above converge to allow for a key source of competitive advantage for AB InBev \u2013 Repeatability. By creating an architecture within which the business model and operating model are in sync with each other, AB InBev is able to apply this architecture to new markets, contexts, and mergers with continued success. This has enabled\u00a0sustainable value creation and earnings growth, rooted in solid business fundamentals. [6]<\/a>\u00a0[7]<\/a><\/p>\n

\"\"<\/p>\n

Looking Ahead: Brew. Drink. Merge. Repeat?
\n<\/strong>The froth is yet to settle on the recent $100 Billion merger with SAB Miller, which has shaken up the beer industry. With this new entity responsible for brewing almost a third of the world\u2019s beer, it’ll be interesting to see how synergistic this marriage is, as AB InBev is\u00a0likely to\u00a0reapply its business model to the SAB Miller brands. As outlined earlier, the biggest driver of AB InBev\u2019s business success has been the repeatability of its centralized operating model that focuses on big global brands. This is fundamentally at odds with SAB Miller\u2019s preference for a decentralized focus on managing local brands. The proven benefits of AB InBev\u2019s business and operating model are apparent, with its profit margins at 39.4% in 2014, compared to SAB Miller at 29.5%. [2]<\/a>.\u00a0It would take a brave soul\u00a0to bet against AB InBev repeating this success yet again. Cheers to that!<\/p>\n

 <\/p>\n

Sources:<\/strong><\/p>\n

[1] https:\/\/www.google.com\/finance?q=NYSE:BUD<\/a><\/p>\n

[2] http:\/\/uk.reuters.com\/article\/2015\/10\/06\/us-sabmiller-abinbev-culture-idUKKCN0RZ1UL20151006<\/a><\/p>\n

[3] http:\/\/www.ab-inbev.com\/about\/dream-people-culture.html<\/a><\/p>\n

[4]\u00a0http:\/\/www.forbes.com\/sites\/danschawbel\/2013\/02\/05\/a-g-lafley-develop-a-strategy-to-win-at-business\/<\/a><\/span><\/p>\n

[5]\u00a0http:\/\/www.bain.com\/publications\/articles\/the-strategic-principles-of-repeatability.aspx<\/a><\/p>\n

[6] http:\/\/www.bain.com\/Images\/BAIN_BRIEF_Winning_operating_models.pdf<\/a><\/p>\n

[7] https:\/\/hbr.org\/2012\/04\/the-beliefs-that-built-a-globa<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The world\u2019s largest brewer has been able to drive sustainable growth throughout its merger-filled history. 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