They wear jeans to work now. It no longer feels odd. They walk by flower beds that might not be tended as obsessively as in years past. Certainly fewer of them report to work each day at the St. Louis brewery and adjacent office building.
Once the global headquarters of Anheuser-Busch, today it’s the North American headquarters of Anheuser-Busch InBev.
They still make big decisions in St. Louis, but now executives in New York City sometimes sign off on them too.
This month marked the three-year anniversary since InBev took control of Anheuser-Busch in a $52-billion deal that rocked St. Louis, spreading justified fear of job losses and the anxiety that comes with losing control of a business widely considered a cultural institution.
Some things are clear: Anheuser-Busch is a diminished but still huge, powerful presence. The worst of the cost-cutting appears over. The brewery and some executive functions have remained in St. Louis. But the corporate culture of the old Anheuser-Busch — tradition-bound, perfectionist, focused more on dominating the beer market than making money — has given way to an aggressive austerity.
The extensive cost-cutting has squeezed more profits out of Anheuser-Busch, but questions remain over whether the company’s new bosses can grow brands and sell more beer.
And St. Louis is no longer the center of the company universe. Anheuser-Busch is now the U.S. subsidiary of Anheuser-Busch InBev.
The changes were wrenching.
Early on, Carlos Brito, chief executive of Anheuser-Busch InBev, announced plans to slash $1.5 billion at just Anheuser-Busch over three years. That was upped to $2.25 billion throughout the newly combined company. InBev also brought zero-based budgeting to Anheuser-Busch — costs are never assumed, but rather justified every year.
InBev’s brass “are not known for their gentle demeanor,” said veteran industry-watcher Tom Pirko of Bevmark Consulting.
The cost-cutters found a target-rich environment at Anheuser-Busch, which by all accounts had grown fat. Even before InBev arrived, Anheuser-Busch sensed its heady days were over.
The U.S. beer market for big brands such as Budweiser and Bud Light was stagnant. The company’s stock price had stalled. So the brewer developed its own plan, code-named Blue Ocean, to slash $1 billion.
Dave Peacock, a longtime Anheuser-Busch executive who is now president of Anheuser-Busch, the subsidiary, recalled urging Brito to move fast. Integration would be painful, and he wanted to spare workers the anguish of uncertainty. “I told him to just rip the Band-Aid off,” Peacock said.
They did. And it hurt. Just as the U.S. economy fell into a steep recession, thousands of Anheuser-Busch workers nationwide lost their jobs. The company did not provide exact numbers. But in St. Louis alone, the number of Anheuser-Busch workers fell 15% from 2007 to 2009, according to city government records.
Today, the subsidiary employs about 14,000 people nationwide, about 4,000 in the St. Louis region, down from 6,000 in 2007, according to the company.
But the devastating cost-savings plan connected to integration ends this year. Anheuser-Busch InBev noted this month in an earnings report that it had saved $195 million in “integration synergies” in the first nine months of 2011, with $75 million more needed before year’s end to reach its companywide three-year goal.
InBev did not just cut. It changed the way Anheuser-Busch operates and, to some degree, thinks.
Talk of “a culture of excellence” filled hallways. Workers were closely evaluated. Managers looked not just to sell more beer but to make more money. Pressure to perform, which seemed to wane under Anheuser-Busch Chief Executive August Busch IV’s brief leadership, was ramped up.
“It had coasted for a long time,” Pirko said. The changes bordered on “a revolution.”
The business model developed in St. Louis was replaced by a model shipped in from Sao Paulo, Brazil, home to AmBev, the InBev subsidiary that owns the Brazilian market. It has 70% market share there. By comparison, Anheuser-Busch has almost 48% of the U.S. market.
The way Anheuser-Busch operates today is almost entirely InBev.
“There were two preexisting cultures and ultimately one prevailed,” said David Wolfe, a marketing executive who left Anheuser-Busch after 19 years in 2010.
The lingering question is whether Anheuser-Busch InBev cannot just cut costs but boost sales. This has long been a knock against InBev, which has grown through steady acquisition.
Anheuser-Busch InBev’s stock price skyrocketed after the Anheuser-Busch deal. But the price flattened in the last year. Speculation has bubbled that the company might buy SABMiller, the world’s second-largest brewer behind Anheuser-Busch InBev, which would launch a whole new search for “synergies.”
But in the U.S. market — Anheuser-Busch InBev’s largest — the company is selling less beer and losing market share. Yet earnings and profit margins have risen steadily with regular beer price increases.
Industry watchers say this cannot continue forever.
“I think if there’s a question that I’d like to see answered, it is: Can this company really grow?” Pirko said. “And if so, how fast?”
Bump Williams, a longtime industry analyst and Anheuser-Busch InBev investor, said he was alarmed by Anheuser-Busch InBev’s lack of concern about the drop in beer volumes. “They have yet to demonstrate to anyone that they know how to build brands,” he said.
Frankel writes for the St. Louis Post-Dispatch/McClatchy.