23 Nov 2016 Inside the new SAB: How the good times ended for SABMiller
The SA Breweries you knew and loved, which listed on the JSE back in 1897, is no more. After Anheuser-Busch InBev’s $109bn takeover last month, apprehension is stalking the corridors of the SA beer icon. But for new boss Carlos Brito (above), the numbers will trump all.
A month ago Ricardo Tadeu, the tall Brazilian tasked with leading the 125-year-old SA Breweries after its takeover by Anheuser-Busch InBev (AB InBev), stood up in the brewer’s Sandton office to address jittery employees.
As usual, Tadeu was dressed casually in jeans (he almost never wears a tie). But the atmosphere was tense and the volley of questions he faced was predictable.
“Most people wanted to know whether they’d be losing their jobs,” says one person who was there. “They all knew AB InBev’s reputation for cutting costs so they wanted to know whether they had a future.”
The fear was understandable.
AB InBev, the company headquartered in Belgium but controlled by the tight-fisted Brazilian private equity company 3G Capital, is notorious for taking over companies then slashing costs, staff and benefits. Fears were especially piqued since AB InBev had already said it planned to cut 3% of its workforce — 5,500 staff — to save $1.4bn after the deal.
Its reputation for frugality preceded it. Carlos Brito, AB InBev’s CEO, once boasted that “we all stay in the same place, we all travel the same class — strip down all the status symbols.”
Addressing students last year, he said: “We don’t have corporate jets. I don’t have an office. I share my table with my vice-presidents.”
Even having fun, it seems, isn’t especially encouraged.
By contrast, SABMiller has a corporate jet and its staff were given a monthly beer quota to take home (the sort of benefit that Brito ended at Anheuser-Busch).
The stage was set for a culture clash.
Though he’d only been in SA for a few days, the languid Tadeu (40) was unfazed — as you’d expect from someone with a master’s in law from Harvard.
He spoke reassuringly of how AB InBev had bought SABMiller (and its African operations) precisely because of its growth prospects. It wasn’t about slashing costs, he said. It was about improving processes — not reducing staff to sweatshop workers.
It wasn’t about replacing SAB’s iconic brands (Castle, Black Label, Hansa, Peroni) with those of AB InBev (Budweiser, Corona, Stella Artois); it was about giving each more space to grow, at home and further afield.
Besides, the competition commission had imposed conditions before green-lighting the purchase — among them, that the total number of staff in SA could not be cut in the first five years. This doesn’t mean, of course, that everyone will stay. Expect SAB’s staff to be composed of fewer managers than in the past; more blue-collar, lower-paid workers.
Staff will be wondering how they’re going to survive the new culture, which includes Brito’s gruelling zero-based budgeting discipline (which means every cost, including pens, has to be justified afresh).
“Those (SAB staff) who don’t perform to tougher, more exacting standards will come under pressure and may opt to leave. They’re in for a cultural sea-change,” warned another who has studied Brito’s tactics.
This warning is difficult for South Africans to comprehend, given SAB’s reputation as a tough employer with exacting standards.
But as Trevor Stirling, analyst with Bernstein Research, says: “Both cultures are very performance-orientated but the AB InBev culture is somewhat more numbers-orientated, much leaner and directionally more unforgiving.”
SABMiller’s decentralised management structure, which helped extend its reach globally, will offer cost-saving potential.
For Brito, the numbers will be all-important — and the fact that InBev’s operating margins are about five percentage points better than SABMiller’s will be instrumental.
Either way, the SA Breweries you knew — the one supposedly founded by Charles Glass in 1894 (his wife Lisa was the actual brewer), and the first industrial share to be listed on the JSE, in 1897 — is no more.
Instead, a new company, likely to be moulded in the uncompromising style of its new masters, will take its place.
So how did we get here?
SABMiller’s story is one with larger-than-life characters who dominated the business pages for decades, encapsulated in tales of derring-do. It is a tale of a local icon that made good on the international stage.
With the formal takeover on October 10, it came to a frothy end. For the first time in 119 years, reference to SA Breweries was extinguished from the JSE. In its place investors see the name AB InBev: its reward for clinching the third-largest corporate deal yet, worth $109bn (R1.5 trillion)……