Buysiders.com » costcutting

Carlos Brito at the WSJ

IP — Tue, 13 Jul 2010 19:49:22 +0000

The WSJ had an interview in late June with Carlos Brito about his plans for Anheuser-Busch Inbev. The video (embedded inside) is focused on the corporate culture aspect, and it’s always refreshing to watch. That said, we wonder if the video registers for foreign investors as much as it registers for investors who have been exposed for so many years to the effects that Brahma’s/ AmBev’s/ InBev’s and now ABI’s culture really has over time.

Here’s the video (it seems a little slower to load than average, though):

Brazilian capitalism in the US

IP — Tue, 11 May 2010 15:24:11 +0000

Brazilian business magazine Exame has translated the story they ran a few months ago on AB-Inbev, about the culture “massacre” imposed by the newcomers. It reminded us that many years ago, when the brazilians were set to take over key management positions at Interbrew, we had an edge over foreign investors (and took advantage of it) because we knew how relentless these guys could be in terms of operational efficiency – especially when well aligned. They did an incredible job at InBev, which makes it surprising to us that Anheuser-Busch investors and employees (and suppliers, much to their loss) were, well, so surprised with the changes they’ve made and are making.

Foreign investors are starting to catch on. At the latest Value Investing Congress – West, one presenter had AB-Inbev as his long case and said: “Amazing how unfamiliar the market is with the management story behind AB-InBev; like Rose Blumkin at Nebraska Furniture Mart.”

This is another example of looking at companies “globally”. From just this angle, that of the “local” investor: How could an US investor really understand Anheuser-Busch’s competitive environment if he ignored that such a revolution was going on in Europe? It was “common sense” in the US that Anheuser-Busch was “very efficient”, yet a closer look at what the InBev people understood as “efficient” would have made them reconsider. And the inverse is also true: how can a brazilian investor really understand a local company’s challenges if he ignores what’s going on in the world, best practices, trends and so on?

The payoff has always been clear to us, even before the authorization for local funds to invest abroad up to a certain percentage of the portfolio.

OTHER LINKS:

Luiz Fernando Edmond goes public, sort of – St. Louis Journal – April 28th, 2010

St. Louis Journal profiles Edmond and other key managers – April 24th, 2009

AB Inbev a love-hate case in Belgium

IP — Tue, 23 Feb 2010 23:03:21 +0000

Mostly hate, actually, judging by recent troubles in Belgium and this article at Valor (in Portuguese – links in English inside). And there’s the “socialism vs. capitalism” conflict in Europe again. If it weren’t for the image deterioration risk – and it seems that they’re handling it by going as far as they can, but no further – the union representative’s words would be music to shareholders’ ears.

Background: after the AmBev – Interbrew merger, the brazilian team’s cost-cutting efforts have surpassed European standards by far and that is rattling many cages. A strike has occurred, disrupting Stella Artois production, and competitors have jumped to the opportunity of reminding people that they’re “still Belgian”, in what must be ironic for the InBev guys. And now the management team has come to be a synonym for corporate greed. Wow.

But the usefulness of the Valor story for us is to highlight the huge gap between the unions’ speech and the interest of shareholders. Some of the quotes would read quite amusingly in the social and historical arena, if they didn’t lead to image problems that might eventually affect sales. That said, it’s crystal clear that the cost-cutting and cultural change efforts in course, if handled well, are in the best interest of shareholders in the long run.

We’ve tried to get an article in English that would translate the weirdness of the unions’ quotes and couldn’t capture them all in a single article, but here’s one from a pro-union site that has an infamous quote: “AB InBev are just thinking of their bottom line for shareholders, regardless of the social cost. There is no reason at all to fire people.”

Amazingly, the article describes the kidnapping of 10 senior managers at the plant as if it was the most normal event ever… “Social cost” indeed!