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"A word, Mr. Chairman?" Advice to Carlos Brito

3/16/2014

 
For the few who may not be familiar with his name, Carlos Brito is the big cheese at Anheuser-Busch Inbev, the world's largest brewer. Brazilian by birth with a Stanford graduate degree, he's a finance guy who ran Belgium's Inbev, the brewer of Stella Artois, before the A-B takeover.
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Carlos Brito, CEO, Anheuser-Busch Inbev
A legendary business leader

Brito is legendary for leading extremely profitable operations, and so has been a Wall Street favorite. He acquires companies and runs them much more efficiently than the previous owners. To grow, he acquires other breweries, or simply expands brands into new geography. He has no corporate jet, no private office, no high-roller hotel suites on the road. All of those, and a good deal more, had long been part of the Anheuser-Busch culture.  
Shareholders, of course, love it when these luxuries are eliminated because they're the ones paying the bill. And when the boss can find far greater operational efficiencies year after year, as Brito has been doing since the takeover, investors cheer all the more.
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But in any company, efficiencies, expense-cutting, acquisitions and geographic expansion go only so far. If the underlying business isn't robust, trouble lurks ahead. If the underlying business is actually shrinking, that trouble arrives sooner rather than later. 

A-B's underlying business challenge

The share declines for A-B's biggest brands (some dating back well before Brito's arrival) continue pretty much unabated. The lost volume is staggering, and almost certainly exceeds any pre-takeover projections. Well over two million barrels on just Budweiser and Bud Light lost since 2008. And a number of high-profile new product launches, including Budweiser Black Crown, Bud Light Platinum, and most recently, Lime-a-Rita, are tanking. You can be the most cost-conscious and efficiency-minded businessman out there, but if top-line revenue is trending the wrong way like this, you will not be a hero in the long run. 

One analyst recently expressed his view as to Brito's immediate challenge. It's a double-whammy, quoting Beer Marketers Insights: "To stabilize market share, A-B not only has to grab 'disproportionate share' of high-end growth, but 'work to stem the recent declines in the premium light category.'"

Simply put, A-B has to sell more beer. A lot more beer. (Hard to believe analysts get the big bucks for reaching conclusions this obvious, eh?) Selling more beer means A-B's marketing has to become dramatically more effective. And fast.

I really hope I'm wrong, but without a fundamental change in Brito's philosophy, I am pessimistic about the prospects for pulling this off. 

A philosophy problem

In a presentation to Stanford's business-school students, Brito emphasized his key point: "People are the only sustainable advantage a company can have over competition." He went on to make this remarkable statement: "(We) tend to get distracted that what counts is really the brands, the factories, the warehouses, the trucks, the access to market, and forget the people component.” 

While few would argue against people being key to making a company great, there's a very troubling assumption in that second statement. 

Brito is not the first finance guy to equate brands with other company assets like trucks and warehouses, and fail to appreciate the profound difference. In the world of finance, everything can be measured, and reduced to a straightforward cost-return equation. But unlike inanimate vehicles and buildings, brands are living assets. As proof of this distinction, brands do not appear on the finance guy's holiest of documents, the balance sheet. They share this distinction with the company's other living assets, its people. 
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Brands live in the mind of the consumer. Their health depends on relevant, exciting, strategically sound ideas reaching that consumer. And with a reasonably steady supply of these good ideas, I would go so far as to disagree that people are a company's only sustainable advantage. The best brands are, too.

My advice

Treasure those brands, Mr. Brito. Every bit as much as you treasure your star-performer people. Perhaps more. They alone can drive the U.S. revenue growth you need. And with good stewardship, the brands will outlive us all.

Understand the brands in great detail. Not in binders full of facts, but in your heart. Study their histories, their idiosyncracies. Know the exact character of their bond with customers. Know particularly why so many people remain so loyal to them. And above all, find new ideas consistent with the brand that can strengthen that bond, and expand it to new customers. In the process, do not fall for the marketing mysticism that promises brand popularity through flashy ads. Those ads do not sell beer. Fire the charlatans who tell you otherwise. 

The power of the brands lies in the business they can produce now, and long into the future. 

Sustain that advantage, Carlos.


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    The Author

    Dan Fox is a real beer guy.

    For more than half his 30-year career at ad agency, Foote, Cone & Belding, he ran the Coors Brewing account. Leading a group of dozens of advertising professionals, Dan also personally wrote the Pete Coors "Somewhere near Golden, Colorado" commercials, designed the Coors NASCAR graphics, authored sales-convention speeches, and most important of all, formulated marketing strategy for virtually every Coors brand, including Coors Light, Keystone, Killian's Irish Red and more. His proudest achievement? "Our team had every Coors brand growing at once."

    Over his advertising career, Dan was personally involved in the analysis, planning and creation of thousands of ads for a variety of products and services. By way of this blog, he freely shares his expertise about what works, and what doesn't, when it comes to selling beer.

    If you're in the beer-marketing business--or just interested in the subject--you may want to read what "HeyBeerDan" has to say.

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