This article first appeared in the St. Louis Beacon: July 13, 2008 - There was one strategy, and perhaps only one strategy, that could have kept St. Louis’ Anheuser-Busch King of the Brewing Mountain, immune from its now seemingly inevitable and imminent takeover by InBev of Belgium.
And that one thing, believes William Finnie, is the company having been more aggressive – and much sooner – in the international marketplace.
“For decades Anheuser-Busch has been one of the best managed companies in America, one of the best places to work,” says Finnie, long an A-B executive and now a professor at Washington University. “The basic problem is that they were not sufficiently aggressive in international growth. They refused to pay the high price ratios.”
And there well might have been sound reason for A-B pulling up short of trying “to take over the world,” as Finnie phrases it.
“It’s an incredible, hands-on, competent management team,” he says of A-B, “ but I don’t think they felt they could manage a global enterprise.”
The Anheuser-Busch mindset, Finnie says, was, “How can we develop enough marketing strategies and have all of the relationships necessary so that we feel comfortable that we can grow? We can’t make the aggressive changes; we’d love to, but we can’t.”
Had A-B taken a longer world view, he says, “It would have a 2-1 share over the rest. That is the lesson for every other large company.”
Eighty percent of InvBev’s market, Finnie says, is in emerging economies, Korea, the Ukraine, etc. Ironically, “Everything InBev has done are things that A-B could have.”
The apparently near deal at $50 billion and $70 per share to stockholders is playing out as Finnie predicted in a June 18 story on The Beacon. “I was darn lucky. I had no inside information. I was very lucky. There was posturing on both sides.”
What happens after a sale?
Consequences of the sale for St. Louis and the region are monumental.
There will be “a psychological blow to the region because this is the one company in the region that blue collar and white collar workers most care about. There will be a lot of very good white collars jobs cut at A-B … a billion in annual cuts. That is 10,000 jobs at $100,000 a year.”
Finnie foresees early retirement packages for white-collar workers on the horizon as well as the reduction by InBev of “a lot of administrative jobs.”
“My old corporate planning department basically could be eliminated. They could eliminate 80 percent of secretaries. They will keep the people who send out the invoices and the people who collect the invoices. They can’t do too much in terms of blue collar jobs and unions.
“They will be wise in maintaining the sacred liquid.”
Workers not receiving generous severance packages could be particularly hard-pressed, he says.“Having those jobs lost in this type of recession, it will be difficult for those people to find comparable jobs somewhere else.”
Possible positive
There exists, though says Finnie on a more hopeful note, the possibility that InBev and A-B and St. Louis all could come out smiling.
That is “if St. Louis business and political leaders get together and really make an offer to move the InBev world headquarters to St. Louis. And there is a compelling argument. But it will require transformative changes so that St. Louis is more attractive to business of all sides of the region. It is going to be tough, but it’s consistent with InBev’s culture and history.” (Read more from Finnie in an article he wrote for the Post-Dispatch .)
The Pain of change
Each company, emphasizes Finnie, has distinctive and complementary gifts.
“If you have the InBev people and the A-B people working together in St. Louis … with the world-class cost-cutting of InBev and the world-class marketing of A-B, it could take profit share to the mid 50s. ... Lower costs, plus world-class marketing, is a great formula for taking over the rest of the world. It could create an upside scenario for InBev shareholders, get rid of the bad PR of a foreign company buying an icon of blue-collar America.
“But major change does not come until the pain of change is less than the pain of NOT changing. The psychological and economic threat to A-B makes the pain of not changing large. We have the best political leadership in the region in the past 50 years. Done right, InBev and the St. Louis region can look back on a tragedy averted and the foundation for unimagined success.”
A-B tactical errors
In addition to not expanding broader globally, A-B has made other tactical errors, Finnie says.
“One thing they did really badly was during the ‘Kill Miller’ (1977-87) was that they destroyed the Michelob brand. It was the ultimate premium beer in the mid '70s." Finnie stresses that InBev “would be very wise” to maintain A-B’s marketing acumen.
A-B marketing genius
“They have had the best advertising in the country for any industry. Both the genius of A-B and its horrible challenge is that their key beer drinker is 21 to 40, and they have to focus on the 21 to 27 group. You have to continually reinvent yourself to be relevant and highly relevant to a new generation of people It’s an incredibly hard challenge.
“I’m a Clydesdale (click here to see the original Clydesdale commercial, and on the other highlighted words to see some of those.) , so what the hell are frogs and ants ? It’s incredible that August Busch III could listen to the Fourth, hear ‘Wassup ?’ and see frogs and ants and say, ‘OK, I don’t understand it, but go for it.’ That is a strength, that incredible marketing.”
Media critique
Because of his credentials, Finnie has been in regular demand from local and national media. He’s in position to assess the overall news coverage of the international beer battle.
“I have been very impressed with the professionalism and competence of people I’ve talked to. And their ability to talk at 4 o’clock and have a coherent piece on the news an hour later.”
The national press has done a competent job, he says, with notable exceptions.
“The Wall Street Journal and New York Times, boy, they have had a lot of interesting stuff. They know how to get the facts. But the Times and Wall Street Journal have savaged (and demeaned) August Busch IV. They think August Busch IV is lucky sperm. They don’t get him credit for what they’ve done.”
What about InBev?
The question that most haunts those loyal to A-B and with local and regional ties and interests is what kind of St. Louis citizen InBev is likely to be.
“They are going to support a lot of things that A-B has supported in the past … charitable and philanthropic,” Finnie speculates. (But if sales lag) “they will cut back at the margins. If they are borrowing $40 or $44 billion from 10 banks around the world, they are very much cost-conscious. If sales and costs don’t reach their projections, they will go back and look at where can they cut.”
There remains a chance, however slim, that the deal still could stall or go sour. “Two days ago my own thought process was that there’s a 5 percent chance that (No. 2 stockholder) Warren Buffett will say ‘I support A-B management even if InBev offers $70 (per share). I’ll vote for Anheuser– Busch.’ There’s no reason for him to do it. But there’s always a 5 percent chance. But (probably) not in today’s environment.
“There are 10 world class banks involved. There’s always a 2 percent chance of something else being a killer. Somebody saying ‘We’re NOT going to make August Busch IV CEO.’ Ego could get in the way.”
Finnie jests that, if nothing else comes of his being on the money so far, at least his two children might be impressed.
“In this case, everybody has played the game. They have played the public game, hostile and aggressive. And they have played the game behind the scenes.
“It was good poker. If InBev blinks, then (A-B) management gets to keep independent and if A-B blinks ….
“I think we’ll have a deal Monday.”
Bill Finnie worked at A-B for 26 years. Today he is a business strategy consultant and an adjunct professor at the Olin Business School at Washington University.
Paul Povse is a free-lance writer and former journalist with The State Journal-Register, Springfield, Ill., who teaches journalism at Southern Illinois University-Carbondale.