InBev goes from upstart to global beer behemoth

InBev keeps a low profile despite having the largest market share of any brewer.

St. Louis Post-Dispatch

ST. LOUIS — Nearly two decades ago, Jose Dedeurwaerder, chief executive of a small Belgian brewer called Artois Piedboeuf Interbrew, made a brash prediction: Interbrew would become one of the few truly global brewers in the 1990s.

“That is a tall order,” opined The Wall Street Journal in 1990, noting the company depended on the small, stagnant Belgian market.

Consider the order fulfilled.

Interbrew’s descendent, InBev, is the world’s biggest and arguably most aggressive brewer. It has patched together an empire stretching from Russia to Brazil and Canada, with 200 brands and ever-growing ambitions.

In 2006, InBev sold one of every eight beers in the world; its 12.4 percent global market share outranked SABMiller of London, St. Louis-based Anheuser-Busch Cos. and Dutch brewer Heineken, according to Euromonitor International.

Now, the company is reportedly interested in laying out a huge takeover bid for Anheuser-Busch.

InBev’s emergence as a global player able to dictate its own terms is a case study in aggressive management. InBev has turned the tables on the global beer industry, and shaken up St. Louis in the process.

The company that now calls itself InBev traces its roots back 6 1/2 centuries, to a Belgian brewery in 1366. Its move to the peak of the brewing industry took just a fraction of that time.

In 1988, Belgium’s Artois and Piedboeuf breweries announced a merger to form Europe’s No. 3 beer company. It was a defensive move to compete with bigger rivals such as Heineken and Carlsberg.

The maneuver was rocky. The next year, the company — which had changed its name to Interbrew — announced it was cutting its breweries from eight to two and planned to cut 1,000 employees by 1996. A strike shut down production at each of its breweries and disrupted communications at headquarters.

Meanwhile, Interbrew executives faced a defining question at the dawn of the 1990s: buy, or be bought? They chose the former.

Interbrew eyed partners in the United States, where the company’s presence was slim; the national import manager for Stella Artois once complained to the Orange County Register that few drinkers knew about the beer, or even knew Belgium was a European country.

In 1989, the company tried to acquire Stroh Brewery Co., then the No. 3 U.S. brewer, but the deal fell through when Adolph Coors Co. bought the assets instead.

Between 1990 and 1994, Interbrew made runs at small breweries, buying up stakes in Belgium, Hungary, Romania and Croatia.

But InBev put all its chips on the table in 1995 when the company completed a $2 billion takeover of John Labatt Ltd., Canada’s No. 2 brewer.

With one massive deal — the beer industry’s largest ever at the time — Interbrew joined the big leagues, becoming the world’s third-largest brewer.

But Interbrew didn’t slow down. Three months after the setback in South America, the company said it was pursuing a possible acquisition of South African Breweries. The deal didn’t happen, but the message was clear: an opportunistic Interbrew was on the prowl.

In late 2000, Interbrew went public, reaping $2.5 billion in Belgium’s biggest initial public offering to that point. It instantly put its newfound money to use in deals big and small.

In its 30th acquisition in a decade, Interbrew slammed $1.58 billion on the table to buy the brewer that made Beck’s, a famous German export beer.

But it was the merger of Interbrew and AmBev of Brazil in 2004 that finally allowed the company to vault over the industry’s other giants. Overnight, the deal made the newly chartered “InBev” about one-quarter larger than Anheuser-Busch and 43 percent bigger than SABMiller. It became twice as big as archrival Heineken.

InBev’s management style does not always sit well with employees. In the last three years, InBev has been hit with strikes and labor protests in Belgium and Newfoundland over issues such as layoffs and the presence of outside security companies.

InBev’s ambition to build a global business through buying sprees “has driven them to be one of the consolidators in the business,” said analyst Marc Leemans with Bank Degroof in Brussels. Other brewers have been forced to react to the rise of global behemoths like InBev and SABMiller.

But even as InBev amassed breweries and brands at a breakneck pace, it managed to keep its corporate profile largely under wraps for drinkers at the corner pub. It prefers to use takeovers to weave a network of local brands and marketers such as motorcycle-riding Brazilian beer salesmen.

“They know all these local markets very, very well,” said Wim Hoste, an analyst with KBC Securities. “They know the brands in the various markets.”

One InBev beer in Argentina is literally wrapped in the country’s flag: Its label bears Argentina’s blue and white colors.

If brands are “winning in a market and consumers like them, why on Earth would we change that?” asked InBev spokeswoman Marianne Amssoms. The goal, she said, is to find “the right balance between global and local.”

Interbrew’s tag line in the early part of this decade — “The World’s Local Brewer” — summed up its effort to play up its on-the-ground connections.