Brito’s ‘TNT’ Successor at AB InBev Looks Beyond Beer for Growth
(Bloomberg) -- When Carlos Brito used to stride onto the stage at the gathering of Anheuser-Busch InBev NV’s top 100 leaders each spring, he’d bring the crowd to its feet with AC/DC’s “Back in Black” blaring from the speakers.
In a choice fit for disruptive times, Michel Doukeris, who succeeded Brito as chief executive officer of the world’s largest brewer on July 1, has opted for the Australian rockers’ “TNT” as his anthem.
Not that Doukeris, a 25-year company veteran, intends to light a fuse under the house that Brito built. Nor would investors want him to -- the Budweiser maker rebounded from the depths of the pandemic with a 14% jump in profit last quarter, double the rate analysts expected. Yet to fuel growth, the new CEO will have to be more innovative with the company’s existing brands than his predecessor, who assembled the brewing giant from buying up major rivals.
Investor Tom Russo, whose firm, Gardner, Russo & Quinn, has a roughly $300 million stake in the brewer, said his first question for Doukeris would be: “Are you prepared to invest deeply enough to deliver innovations, and core brand extensions, that have the potential to grow AB InBev’s long-term value?”
Brito built the behemoth that makes about a third of the world’s beer, including Corona and Stella Artois, through almost $200 billion of takeovers. In the process, he stripped out billions in costs from what were often bloated family businesses. The purchase of SABMiller for more than $100 billion in 2016, however, left the company deeply in debt and highly exposed to a beverage category that’s losing out to spirits and wine in developed countries. The shares are down about 40% since the deal closed.
AB InBev’s scale and zealous efficiency allowed it to prosper as a mass-market brewer for most of Brito’s 15 years at the helm, weathering threats such as the rise of craft ales. But Doukeris, who previously led the North America region, also sees opportunities elsewhere, namely in the hard seltzers and Cutwater canned cocktails that have been flying off the shelves in the U.S.
“I feel a special responsibility to continue to lead and catalyze the beer industry globally, but it feels special as well to take advantage and compound our growth in what I call the beyond-beer space,” the 48-year-old said in an interview. “We really need to smartly allocate our capital to where the biggest opportunities for growth are.”
Balancing efforts to revive the company’s largest labels, such as Bud Light, with fostering growth in e-commerce or the canned wine and energy drink brands is paramount.
A “big revolution” is afoot in the alcohol industry, with more than 60% of growth being driven outside of beer, Doukeris said. Mining insights from AB InBev’s data analytics tools and delivery apps will also guide the company’s investments into new labels or future delivery ventures, he said.
Russo said a sound start would come from marketing more products to women, which the beer industry has historically been slow to include in campaigns, and doubling down on technology investments such as the company’s BeerHawk.co.uk and Ze Delivery.
It may also be an opportune time for AB InBev to set out new ambitions as it emerges from 18 months of pandemic-related disruptions. The brewer, along with Heineken NV, Molson Coors and Carlsberg A/S, bore the brunt of a coronavirus outbreak that not only crushed sales to bars and nightclubs but also spawned a cocktails-at-home trend that buoyed distillers Diageo Plc and Pernod Ricard SA.
Brito’s main focus in the early months of the pandemic was to shore up liquidity by closing a deal to sell AB InBev’s Australian operations after earlier leading an initial public offering of its Asia Pacific division and then shedding a minority stake in its U.S. canning plants.
Doukeris’s beyond-beer strategy builds on his predecessor’s initiatives to diversify, while keeping its brewing operations fresh, as with the rollout of the popular low-calorie Michelob Ultra lager. But it’s also a departure from the company’s earlier formula for success -- buying laggard competitors and aggressively trimming the flab.
Guided by his billionaire mentor, Jorge Paulo Lemann, Brito helped shape AB InBev’s distinctive ethos -- one that rewards and promotes young talent early and pressures employees to “dream big” as they chase growth. The brewer also creates a sense of ownership by structuring incentive plans that sometimes don’t vest for as long as 10 years, and fosters competition by offering target-based bonuses to individuals at every level, from packaging plants to the executive floor.
Lemann’s drive and vision are what prompted Brito to turn down $100,000 job offers from Citibank and McKinsey in the late 80s to join his mentor’s boutique investment bank in Brazil on an annual salary of $20,000. Brito’s father told him at the time that he didn’t know where he’d gone wrong in raising him. Three months later, Lemann acquired the Brazilian brewer Brahma, and set Brito on a course that would upend the alcohol industry.
With the scope for more consolidation limited, Doukeris’s ability to understand what’s needed to drive demand makes him the right person for the job, said Brito, 61, in an interview.
“He’s even more consumer-centric than I am, and because he led our business in China, he’s even more connected to technology than I am,” the former CEO said. Most important of all, Doukeris is “an embodiment of our culture.”
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