AB InBev's strategic capabilities and market position during economic recession

AB InBEV is the world's largest maker of alcoholic beverages and they have other interests (such as bottling for other beverage makers) which increases their overall revenues. Because the company has a business plan which includes operational efficiency, a strong financial matrix, well-trained and knowledgeable employees and a customer-first focus, they have been able to maintain and even gain market share during difficult economic times. With unique strategic capabilities that have positioned AB InBEV as the leader, it is possible to see the company be an even larger part of the beverage industry in years to come.

The latest quarterly report for AB InBEV (3rd quarter 2010) shows that the company continues to see a rise in revenues across the board[footnoteRef:1]. Although some high end products (mainly high-dollar spirits and specialty beers) have taken a hit in the market[footnoteRef:2], AB InBEV has been mostly insulated from this outcome because of their focus on world beer markets[footnoteRef:3]. A recent study showed that beer is able to deal with market fluctuations more easily than other spirits because of processing time[footnoteRef:4]. Because a new batch of beer can be brewed and fermented within a relatively short period of time, the manufacturers of these spirits are not as susceptible to global economic struggles. With the economic downturn, individuals have been spending more money on low-end beer products which has caused AB InBEV to focus a greater amount of their resources on those products[footnoteRef:5]. Since one of the greatest threats to AB InBEV's strategy is the popularity of microbrews, they have made a concerted effort to enter that market and put their weight behind new products that will breed customer loyalty[footnoteRef:6]. [1: AB InBEV, "Anheuser Busch InBEV Reports Third Quarter and Nine Months 2010 Results," Anheuser Busch (November 3, 2010), Accessed February 20, 2011 from http://www.ab-inbev.com/press_releases/20101103_1_e.pdf] [2: Euromonitor International, "Alcoholic Drinks Overview: A Tentative Recovery and the Great Divide," Euromonitor International December, (2010).] [3: Janine MacShane, Alison Sampson and Roberto Restrepo, "AB InBEV," Trinity University. Accessed February 20, 2011 from http://www.trinity.edu/smf/inc/reports/fl2010/bud.pdf] [4: Euromonitor International, "Growth Opportunities for Beer Suppliers," Euromonitor International January, (2011).] [5: AB InBEV, "Dream & Deliver: Annual Report 2009," Anheuser Busch (2009), Accessed February 20, 2011 from http://www.ab-inbev.com/pdf/AB_InBev_AR09.pdf] [6: Janine MacShane, Alison Sampson and Roberto Restrepo, "AB InBEV," Trinity University. Accessed February 20, 2011 from http://www.trinity.edu/smf/inc/reports/fl2010/bud.pdf]

AB InBEV has the strategic capability to both create popular new products and market share at the same time. Because it uses known local brands, the company does not have to worry that it will not be able to enter new markets. The process is to acquire locally known companies (such as Anheuser Busch[footnoteRef:7]) to help it secure markets that otherwise would not have been available. The Anheuser Busch name was valuable in the United States because it was a known, consistent maker of pilsners and lagers. By purchasing this company InBEV was able to instantly raise its credibility in the U.S. And other American markets familiar with the name of Anheuser Busch[footnoteRef:8]. The brand name that they received is also inimitable. No other company has the presence that Anheuser Busch has accomplished in the United States because they have the iconic Clydsdales and its trademark market slogans (e.g. "King of Beers"). With these advantages, AB InBEV was created to increase the strategic capabilities of the overall brand[footnoteRef:9]. [7: Fredrix, Emily, "Anheuser-Busch InBEV: World Cup Success Helps Bud," AP News, July 21, 2010.] [8: Jeffrey Precourt, "How Anheuser Busch used Emotion to Reach Beer Drinkers," Warc Exclusive September, (2010).] [9: AB InBEV, "Interbrew and AmBEV Establish InterbrewAmBev: The World's Premier Brewer," Anheuser Busch (2004), Accessed February 20, 2011 from http://www.ab-inbev.com/pdf/EN_InterbrewAmBev.pdf]

Following is a strengths, weaknesses, opportunities and threats (SWOT)[footnoteRef:10] analysis of AB InBEV. Although the company is strong in many sectors, there is much room for improvement due to a large amount of market share that continues to be exploited by other spirit manufacturers. By utilizing annual and financial reports[footnoteRef:11], a SWOT analysis allows the individual investor to ensure a solid investment opportunity. It also helps the company itself establish the areas where it could use some improvement[footnoteRef:12]. [10: Lynn F. Kime and Winifred W. McGee, "SWOT Analysis a Tool for Making Better Business Decisions," United States Department of Agriculture August, (2008).] [11: Mind Tools, "SWOT Analysis Worksheet," Mind Tools, Accessed February 22, 2011 http://www.mindtools.com/pages/article/worksheets/SWOTAnalysisWorksheet.pd f] [12: Lynn F. Kime and Winifred W. McGee, "SWOT Analysis a Tool for Making Better Business Decisions," United States Department of Agriculture August, (2008).]

Strengths

AB InBEV is a strong company with by far the largest market share in the alcoholic beverages business. Currently, the company enjoys a 20.4% overall market share in the spirits industry with higher numbers for some regions and drink types[footnoteRef:13]. ABInBEV controls most of the worlds beer market with 4 of the top ten selling worldwide brands[footnoteRef:14]. With the acquisition of Anheuser Busch, the company gained a strong foothold in the American market and has significantly increased revenue in North America. However, being a global company which has strong sales of one type of product is not enough to maintain the strength and market share that AB InBEV enjoys. The company also has a very diverse group of products and uses its bottling capabilities to assist other companies[footnoteRef:15]. All of these aspects of the business that AB InBEV has created make it the strongest purveyor of alcoholic spirits in the world. [13: AB InBEV, "Unaudited Interim Financial Report," Anheuser Busch (June 30, 2010), Accessed February 20, 2011 from http://www.ab-nbev.com/pdf/100812_HY_Report_EN.pdf] [14: Janine MacShane, Alison Sampson and Roberto Restrepo, "AB InBEV," Trinity University. Accessed February 20, 2011 from http://www.trinity.edu/smf/inc/reports/fl2010/bud.pdf] [15: Jeffrey Precourt, "How Anheuser Busch used Emotion to Reach Beer Drinkers," Warc Exclusive September, (2010).]

First, a company has to concern itself with personal market share and devise ways that it can increase its ability to acquire new share. AB InBEV has a sound business plan that has allowed the company to gain in markets that were previously owned by other companies[footnoteRef:16]. The North American market was largely unavailable because customers bought products with which they were familiar[footnoteRef:17]. This meant that InBEV was priced out. However, one of the hallmarks of the company has been its willingness to acquire other spirit makers when it was given the opportunity[footnoteRef:18]. Thus the acquisition of Anheuser Busch was just a continuation of a business model that had already been well established with past acquisitions. [16: AB InBEV, "Guide to Our Business," Anheuser Busch (2009), Accessed February 20, 2011 from http://www.ab-inbev.com/pdf/AB_InBev_AR09_GuideToBusiness.pdf] [17: Ibid.] [18: Janine MacShane, Alison Sampson and Roberto Restrepo, "AB InBEV," Trinity University. Accessed February 20, 2011 from http://www.trinity.edu/smf/inc/reports/fl2010/bud.pdf]

Another company strength is diversity of products. AB InBEV currently has "well over 200 brands"[footnoteRef:19] that it manages. The brands range from the most exclusive liqueurs to the non-alcoholic offerings in both beer and sparkling varieties. Because of this diversity and a global stance, AB InBEV is able to cater to markets from around the world. [19: Ibid.]

AB InBEV has also taken the opportunity to help other manufacturers which do not have bottling facilities that can service certain areas[footnoteRef:20]. Soft drink manufacturers are able to reach more remote areas because AB InBEV allows them to use bottling facilities that AB InBEV owns. Although AB InBEV is not directly invested in soft drink sales, they are able to gain a small amount of market share in that industry via their bottling capabilities. [20: Ibid.]

Since AB InBEV is the largest spirit manufacturer in the world, has diverse products sold in every region of the globe, and they have bottling facilities that assist other beverage manufacturers, they are strongly positioned to maintain their leadership stance.

Weaknesses

The fact that AB InBEV is a strong company does not negate the fact that there are some weaknesses which the company must constantly address. Any large, global business has to maintain its market share through superior products and advertising. The public is fickle and can turn to a new favorite quickly, so a company such as AB InBEV cannot remain stagnant. Recently the company has had some difficulties with their image due to faulty advertising campaigns and a flirtation with getting rid of an American brand icon. The company is also in a lot of different markets which makes them susceptible to incursion from local companies and specialty brands.

Advertising can be difficult to quantify. Even though global companies utilize local advertising agencies to market their products, they can sometimes make decisions that mar their public perception[footnoteRef:21]. Anheuser Busch has gained its advantage in the American beer industry because it has recognizable products that are consistent, it has a name that is easy to recognize, and it owns advertising properties which make it very recognizable even among non-beer drinkers. When InBEV merged with Anheuser Busch they wanted to make the company more profitable and one of the ways they saw that they could accomplish this was through selling their Clydesdales[footnoteRef:22]. Unfortunately, for them there was such a loud outcry from the American public that AB InBEV quickly realized its folly. The company reinstated the horses because they added to the salability of the product. The company realized that the horses boosted sales because they were an icon of the Anheuser Busch name. [21: Jeffrey Precourt, "How Anheuser Busch used Emotion to Reach Beer Drinkers," Warc Exclusive September, (2010).] [22: Ibid.]

Another advertising campaign was equally disastrous. AB InBEV realized that alcohol related traffic accidents were a cause of much concern, so they began an ad campaign which asked beer drinkers to act responsibly[footnoteRef:23]. Unfortunately, much of the public saw the advertisements as hypocritical. There was also an issue with the content of the advertisements. AB InBEV asked people to "act responsibly" but did not mention that they shared any culpability in the actions of drinkers[footnoteRef:24]. This stance hurt their market share in America until the advertisements were pulled. [23: Tucker, John H., "Researcher: InBEV Pushes Anti-Booze Program that's Destined to Fail," The Riverfront Times, December 15, 2010.] [24: Ibid.]

Finally, the company is well-established around the world and they are a prized purveyor in almost every market. However, sometimes having a well-known brand name can be a detriment. Local names have been becoming more popular around the world, and people have been more likely to spend a little bit more for an original local brew than for a known international one[footnoteRef:25]. AB InBEV has been trying to combat this by producing beers that are more diverse in flavor and consistency, and they have also tried to partner with local beer manufacturers to improve their beers. However, this effort has not proven to be entirely successful. [25: Euromonitor International, "Growth Opportunities for Beer Suppliers," Euromonitor International January, (2011).]

Threats

AB InBEV faces many of the same issues that all large companies must deal with, and they have issues that plague them specifically. Because of the shifting and changing world climate, droughts in some regions and severe floods in others are becoming the yearly normal. Both extremes can be dangerous to the supply of fresh water, and AB InBEV is especially susceptible to water shortages. A continued slow global economy is also a danger that all companies face. However, a company with a significant global stance could be even more prone to lose money. Also, purveyors of alcoholic beverages often have a bad reputation with the community. AB InBEV could easily see revenues drop due to government regulation and public opinion make it more difficult to conduct its business.

Drought is a constant threat around the world, but it has become worse recently[footnoteRef:34]. Because of this actuality AB InBEV needs to further its efforts to streamline the company's use of water and grain resources. The steps that they are taking now will help in the short-term, but they can continue to create more efficient ways to bottle spirits[footnoteRef:35]. This will give them a decided advantage over the competition. [34: Rob Brown, "Water Crisis," Grocer, September 25, 2010] [35: Ibid.]

Another threat that most companies, both local and global, is facing is that the world economy is not growing. However, there are sectors, in which AB InBEV has a small amount of market share (17%)[footnoteRef:36] in which the economy is growing. Asia and some African nations have not been hit by the downturn as much as the West. The opportunity for growth in these regions is significant. However, in this area, brand recognition and national loyalty are extreme[footnoteRef:37]. Therefore, the company has to make sure that it approaches this area carefully in branding and advertising. [36: Janine MacShane, Alison Sampson and Roberto Restrepo, "AB InBEV," Trinity University. Accessed February 20, 2011 from http://www.trinity.edu/smf/inc/reports/fl2010/bud.pdf] [37: Ibid.]

Finally, makers of spirits can develop a bad reputation because of the products that they sell[footnoteRef:38]. Through protests, forcing television advertisers to drop ads, and via government intervention, anti-alcohol lobbies sometimes make it difficult to conduct business. Only by being responsive to the threats can AB InBEV hope to maintain the market share that they have gained in these regions. Through campaigns aimed at responsibility, the company can possibly quell any protests. [38: Jeffrey Precourt, "How Anheuser Busch used Emotion to Reach Beer Drinkers," Warc Exclusive September, (2010).]

Conclusion

AB InBEV is the strongest, and most recognized, seller of alcoholic spirits in the world[footnoteRef:39]. Through a program of fiscal conservancy, customer responsiveness, employee training and green initiatives they have positioned themselves as a company that can weather any financial storm. The company relies on worldwide brand recognition and the consistent quality of its products. Through marketing campaigns that also retain icons of the industry, they have continued to enforce the recognition and leadership that their subsidiaries are famous for. [39: Janine MacShane, Alison Sampson and Roberto Restrepo, "AB InBEV," Trinity University. Accessed February 20, 2011 from http://www.trinity.edu/smf/inc/reports/fl2010/bud.pdf]

Maintaining this enormous market share (at 20.4% share they have twice the sales of any alcoholic beverage company in the world[footnoteRef:40]) is a challenge that the company seems fit to manage. Actually, they seem poised to gain market share in regions that have been largely local in the past such as Asia[footnoteRef:41]. With sustainable goals and a business plan that includes incorporating winning companies within its umbrella of subsidiaries, it seems that AB InBEV will be able to maintain its leadership of the world alcoholic beverage market for the foreseeable future. [40: Ibid.] [41: AB InBEV, "Dream & Deliver: Annual Report 2009," Anheuser Busch (2009), Accessed February 20, 2011 from http://www.ab-inbev.com/pdf/AB_InBev_AR09.pdf]