A (Former) Insider’s Report on Anheuser-Busch InBev

I got an email the other day from a person who used to work at A-B InBev, who wrote to share some thoughts about what it was like to be on the inside during the turmoil of the past few months.

He was kind enough to allow me to share his comments with you, although I’m posting his comments anonymously in order to protect his identity. (I hasten to add that I have confirmed he is who he told me he is.) I’ve deleted some of the text for the same reason. His observations are fascinating and thoughtful.

. . . .I don’t think any of the messages on the blogs fully convey the train wreck that this InBev deal appears to be. The company was fat with management, but thin on technical people — and the company has a lot of highly automated systems. The tech people that understand these are leaving.

For example, there is only one man who knows how the entire domestic system’s order write system works (written in Fortran years ago — not a common language nowadays), and he just took the early retirement package. I think they realize the peril and are bringing him back for 3-5 hours of consulting a week, but the whole thing is on thin ice . . . . The news that the contractors are getting 10% cuts hit the contractors this morning, and they’re mad as hornets. It’s approaching the level of mass revolt.

The place has always been somewhat dysfunctional (at least as long as I’ve been there), but I think most large organizations are. . . . But the Busch culture has been really odd, because the dysfunction has heretofore always been gilt (masked) with gold. My own feeling regarding that is that the Busch family has always had a sort of inferiority complex associated with the working-class nature of the drink: I suspect there was always some back-of-hand chatter at the coming-out balls in early 20th century St. Louis. So those old Germans ran roughshod over all that with money. Lots of it.

In any case, the gold is gone now, and the dysfunction is now out in the open. I was in a meeting . . . with several members of good, competent mid-to-upper management types, and the tone was astonishingly similar to the tone you see in one of those old war movies, where grim GIs sit in a bunker under heavy fire and make quiet, wry jokes about the hopeless situation and the incompetence of the top brass. No one was angry, just jaded and tired. These guys are trying to do their jobs and make this work, but it’s almost like they’ve been ordered to charge into withering fire — they’re not sure it’ll do any good, or if they’ll survive the task.

One of the problems ABInBev will face is that they are following a script that will probably not work well in the environment AB built. . . . .[S]upposedly that script is a book that Brito thinks is the bible of business called “Double Your Profits: In Six Months or Less”. It sounds to me a lot like something you’d see hawked on an infomercial, but I know someone that’s ordered and read the book, and supposedly you can go through it with a pencil and check off the steps Brito’s taking, item by item . . . .

Supposedly, one of the tenets in this book is that you cut until someone screams loud enough, and when they do, you put that part back.

Problem is, these aren’t things you turn off and on at will — even if you have lots of money to do so (and I’m not sure InBev does). For example, the warehouse picking system is a complex program which only two men really understand. And one of those men is now working elsewhere. There is no way to train someone on this stuff in short order, and there will likely be no successful way to beg people back: no one I know yet is either leaving for money or would return for it. . . .

He’s spot-on about the “inferiority complex”: In the 19th century and into the 20th century, the rich-and-powerful of St. Louis society looked down on many of the German immigrants who’d done well, and being a brewer didn’t help. St. Louis elites held people like the Busch family at arm’s length

And to his comment about that, I would add this: When I started researching my book, I figured out right away that American beermakers, and especially the Busch family, had reason to be paranoid and suspicious of “outsiders.” Beermakers in particular faced real hostility from prohibitionists. The more well-known the brewer, the greater the venom. And of course because of their German heritage, many of them were accused of disloyalty and treason during World War I. (Never mind that they were American citizens…)

Again, that was especially true for the Busch family, which has been denounced by name not once, but twice, on the floor of Congress.

Also, his comment about the clash-of-cultures is dead-on. David Kesmodel predicted as much in a piece in the Wall Street Journal last summer. But anyone who knows the history of A-B would have predicted it: A-B’s philosophy has always been “spend money to make money and make friends.”

Or, as industry analyst Harry Schuhmacher calls it, A-B’s “all in” approach: At a meeting for sales reps or distributors, it wasn’t enough to have one shrimp platter; there would be fifteen shrimp platters. InBev under Carlos Brito operates from a completely different philosophy: Return maximum value to shareholders and do so by slicing costs to the bone. Those two approaches to business are at opposite ends of the spectrum, so, well, it was easy to see this trainwreck coming.

My thanks to my (anonymous) correspondent. MUCH appreciated!

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