To understand the challenge facing Michael Doukeris, who was named Anheuser-Busch InBev’s Zone President North America/President and CEO of Anheuser-Busch take a look at the above picture from an 1860’s edition of Gulliver’s Travels. Doukeris succeeds Joao Castro Neves, “who decided to step down and pursue other career opportunities.”
All those little people have succeeded in tying down a giant. Just like craft beer and distilled spirits have succeeded in costing Big Beer millions of barrels of beer year-after-year for nearly 20 years.
Add to that the financial industry culture that InBev brought to A-B when it captured the great American brewer nearly a decade ago. InBev promptly dumped A-B’s theme park division, slashed the number of Clydesdale hitches, sold off the unit that produced a lot of Budweiser-themed merchandise, began charging communities that wanted the Clydesdales in holiday parades, and finally, moved the company’s marketing unit to New York City to tap into the talent in and around the Big Apple. (Apparently, the talent in St. Louis that had grown A-B to be the world’s largest brewer weren’t as competent as those in New York City with no record.)
To be clear, had InBev done those things in the 1970s, they wouldn’t have made a difference. But this is the 21st Century, not the end of the 20th, and the culture of America has changed. It’s that shift in American culture that explains the rise of craft beer and Donald Trump.
And just a couple of years ago, to feed the dream of the Brazilian investment bankers who control ABI to own the first global beer company, the company agreed to surrender its interest in importing Corona Modelo and other Modelo beers, to Constellation Brands. In return, ABI got SABMiller outside the U.S. CBrands is doing just fine, while A-B is sinking.
Having seen American jobs disappear as large companies moved production offshore, it’s little surprise that Americans have embraced craft beer, small wineries, micro distillers, etc. The loss of those factory jobs affected the people most likely to buy Big Beer’s mainstream products.
Just one example: Bud Light, A-B’s biggest U.S. brand, has seen volume fall 15.1% to 33.8 million barrels in 2016 from 39.8 million in 2010. At the same time, Bud Light’s market share has plunged to 15.8% from 19%.
We have no doubt that Doukeris is a competent, talented executive, and we wish him well. “Michel has extensive experience delivering results for our business worldwide, including helping to grow Budweiser globally and launching The High End business strategy, which now represents $5 billion of sales,” said Carlos Brito, ABI’s ceo, in announcing the appointment.
The biggest problem A-B faces is two-fold: the rise of craft beer and the mainstreaming of distilled spirits.
From Repeal of Prohibition until the mid-1980s, distilled spirits was haunted by a rum-runner reputation dating back to the 1920s, when high speed launches would pick up product at Hiram Walker’s Hiramville, Ont., plant and Joseph E. Seagram’s Canadian facilities, and deliver them to mobsters in the U.S. Martin Bart, at the time the top sales executive for Joseph E. Seagram & Sons in the mid-1980s, told me that’s why Seagram’s and other liquor companies didn’t advertise on TV.
But in the early 1990s, Seagram decided to advertise on TV, and today, with some exceptions, spirits is able to buy TV advertising just as easily as beer.
About the same time ABI decided to slash the number of Budweiser Clydesdale hitches and sell off Sea World and Busch Gardens, the Distilled Spirits Council funded the restoration of George Washington’s Distillery. America had adopted the Clydesdales as a national symbol, but with fewer Clydesdale on the trail, DISCUS’s Mount Vernon project effectively replaced it.
InBev bought A-B just as social media was taking off. Marketers were convinced social media would replace mainstream media and get equal results. So A-B, like most major corporations, poured billions into social media. There’s one problem with that strategy: social media simply doesn’t have the reach of mainstream media.
Meanwhile, craft beer was rising. T. Rowe Price, the Baltimore investment manager whose company lives on today, warned that “change is the investor’s only certainty.” From Prohibition to the turn of the century, A-B (and less effectively Miller Brewing Co. and Coors Brewing Co.) had dominated the U.S. beer business.
A-B did so most effectively, jumping into TV advertising when the industry was young and cheap. It also rode the post-World War II belief in big organizations, becoming a truly national brewer with 12 strategically located breweries around the country, many co-located with a Sea World or Busch Gardens park at which A-B would provide free beer to guests.
Big Beer’s troubles eventually will end. The problem is, they probably won’t end in the next 10 years. While aging entrepreneurs are in many cases perfectly happy to sell out to A-B, Molson Coors, Heineken, etc., the simple fact is that big companies need big brands, and while collectively craft brewers represent a big brand, simply lumping them together into a unit like The High End doesn’t make them a big brand compared to Bud Light or Budweiser.
Meanwhile, we don’t think Doukeris has a clue what to do. That’s not intended as a put down, but rather a recognition that he has been dealing with ABI’s global issues, not those specific to the U.S. We have no doubt he will go on a major cross-country tour, talking with distributors and major retailers.
The other reason we don’t think he has a clue what to do is that he’s not an American. If your editor was assigned to turn around a major business in Brazil, he would have trouble because he doesn’t understand Brazilian culture. The same thing applies when it’s a Brazilian assigned to turn around a major American business.
When InBev acquired A-B nearly a decade ago, we noted the company’s growth was attributed to acquisitions, not to growth of existing business units. That remains true today. A-B has effectively run out of major brewers to acquire, and acquisition of craft brewers simply won’t offset the decline in its big beers.
Now, it has to produce results as a brewer in a mature market. Can Doukeris deliver? We’ll see.