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Honors Theses, University of Nebraska-Lincoln Honors Program

Spring 2023

A Strategic Audit of a Company in the Alcoholic Beverages

Industry: Anheuser-Busch InBev
Ava Dunne
University of Nebraska - Lincoln

Patrick Malec
University of Nebraska - Lincoln

Andrew Shank
University of Nebraska - Lincoln

Elizabeth Foral
University of Nebraska-Lincoln

Hannah Rethmeier
University of Nebraska - Lincoln

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Part of the Strategic Management Policy Commons

Dunne, Ava; Malec, Patrick; Shank, Andrew; Foral, Elizabeth; and Rethmeier, Hannah, "A Strategic Audit of a
Company in the Alcoholic Beverages Industry: Anheuser-Busch InBev" (2023). Honors Theses, University
of Nebraska-Lincoln. 628.
https://digitalcommons.unl.edu/honorstheses/628

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A STRATEGIC AUDIT OF A COMPANY IN THE ALCOHOLIC BEVERAGES INDUSTRY:
ANHEUSER-BUSCH INBEV

An Undergraduate Honors Thesis

Submitted in Partial fulfillment of
University Honors Program Requirements
University of Nebraska-Lincoln

by

Ava Dunne, BS
Management
College of Business

Elizabeth Foral, BS
Economics
College of Business

Patrick Malec, BS
Finance and Management
College of Business

Hannah Rethmeier, BS
Economics, International Business
and Spanish
College of Business

Andrew Shank, BS
Actuarial Science
College of Business

May 10, 2023

Faculty Mentor:
Dr. Tammy Beck, PhD, Organization and Management Studies
ABSTRACT

This strategic audit provides a comprehensive analysis of Anheuser-Busch InBev, the world's

largest brewer. The audit examines the company's business model, competitive position,

financial performance, and future growth prospects. It also assesses the impact of external

factors such as changing consumer preferences, government regulations, and technological

innovations on the company's operations. The audit identifies key strengths and weaknesses of

Anheuser-Busch InBev, as well as potential opportunities and threats in the beer industry.

Based on this analysis, the audit provides recommendations for strategic actions that the

company can take to enhance its competitive position, achieve sustainable growth, and

mitigate potential risks. Overall, this strategic audit aims to provide valuable insights into

Anheuser-Busch InBev's strategic direction and potential for long-term success in the global

beer market.

KEY WORDS: Anheuser-Bush InBev, Alcoholic Beverages Industry, Strategic Management,

Strategic Audit, Case Study

Strategic Audit Report
EXECUTIVE SUMMARY

AB InBev (known better as simply “Anheuser Busch”) is a multinational brewing company that

manufactures and distributes dozens of household name beers like Budweiser, Corona, and

Stella Artois, amongst other consumer packaged goods. The unparalleled success of the

company lies in its unique strategic positioning, which it has now sustained for over 100 years.

This report will examine and analyze the unique values, environments, resources, and

capabilities that have formed AB InBev into the industry powerhouse it is today.

From its foundation in the 19th century, Anheuser-Busch was reinventing the way beer was

brewed, stored, and sold to the masses. That spirit of innovation continues still, with the

company diversifying to other fields that support or compliment their original beer

manufacturing goal. These days, the strategic leaders of AB InBev have a broader mission: “To

bring people together for a better world”, including a special focus on sustainability.

These goals influence how AB InBev interacts with its external environment, which is teeming

with opportunities and potential pitfalls. Post-Covid economic recovery is creating countless

opportunities for the brewery to increase revenue and hold market share steady. However,

within the US brewing industry, consumer tastes are turning away from traditional beer and

malt beverages. Overall, it is expected that these two effects will balance each other out,

slightly increasing revenue for AB InBev in the future. The company’s internal assets will help

poise AB InBev to capitalize on this.

The firm’s established economies of scale, along with controlling most of the value-added steps

in their supply chain, enables AB InBev to provide a consistent product for a lower price than

most competitors. Superior management and marketing support the typical production

activities. This is how the company makes certain their core competencies are dynamic and

adapting to their current threats.

AB InBev continues to exceed its performance measurements, capturing a wide majority of the

market share in the US brewing industry. The company also meets its metrics relating to

employee compensation, circling back to the firm’s core values.

Anheuser-Busch professes strong corporate values, and this analysis shows that the company’s

passion for innovation seeps into all areas of its strategic planning. When presented with

industry-wide changes, AB InBev turns external threats into opportunities to diversify. By

expanding into new markets, acquiring smaller, innovative companies, and taking strategic

risks, Anheuser-Busch has been able to maintain control over more than 50% of the highly

competitive US brewing industry. Between its myriad of brands and functions, the AB InBev

brand continues to find new ways to bring people together and create a better world.

AB InBev is currently competing in the global alcoholic beverage market as a cost leader. They

aim to provide value that is like their competitors but at a lower price and with more

convenience for the customer. To accomplish this business-level strategy, AB InBev uses
extensive vertical integration and more efficient production. This corporate strategy allows AB

InBev to leverage economies of both scope and scale.

The company has high a degree of both forward and backward integration, meaning that they

have a sphere of influence in all parts of the supply chain, from the raw materials to the

distribution of finalized products. Most of their revenue comes from selling beer; however,

those sales are geographically diversified; AB InBev sells products on all six habitable

continents.

AB InBev has engaged in several mergers and acquisitions in the past 5 years, most recently

with the Craft Brew Alliance. In this acquisition, Craft Brew Alliance joined AB InBev’s Brewers

Collective after AB InBev acquired the majority shares. AB InBev has acquired several other

small brewing companies recently as they attempt to break into more niche markets through

an acquisition-based strategy.

AB InBev’s Board of Directors are paid both on a fixed and share-based system to incentivize

the directors to steer the company towards success. The current Board of Directors for AB

InBev has 15 members, but their CEO, Carlos Brito, is not a member of the Board. Divided into 4

committees, the Board ensures the company adheres to its own Code of Business Conduct and

Code of Dealing. AB InBev is its own primary shareholder.

The company’s organizational structure uses a matrix-style organized by geographic and

product-based business lines. The building blocks of their organizational structure are

specialization, formalization, centralization, and hierarchy.

AB InBev is actively making strategic investments. For one, the company recently made

significant investments into American facility upgrades, demonstrating their firm commitment

to maintaining efficient assets. This aligns with the firm’s core competencies, and therefore we

support this decision.

FIRM SELECTION

History

Anheuser-Busch was originally founded by a partnership between German immigrant Adolphus

Busch and his father-in-law Eberhard Anheuser. Their first offering was German lager beer, the

famous Budweiser, a unique product in America. Adolphus Busch was an inventive brewer,

being the first to make use of pasteurization, mechanical refrigeration, refrigerated railroad

cars, and widespread bottling. To rapidly expand from a local brand to a nationwide one, the

company developed a very sophisticated marketing system. They mastered the use of

giveaways to familiarize new consumers with the company’s products. Throughout the early

1900’s the company became one of the leaders in the American beer industry. They rapidly

developed their product lines and by 1917 they were selling seventeen different products.
Even during prohibition in the United States, Busch developed new products like malt vinegar

and ice cream. In 1936, they adopted the use of metal cans to package beer, which proved a

great success for the company and demonstrated their commitment to innovation. By 2004,

Anheuser-Busch had become the world’s largest brewer with global reach and influence;

however, they were soon surpassed in size by InBev. Shortly thereafter, in 2008, InBev

conducted a hostile takeover of Anheuser-Busch and formed Anheuser-Busch InBev. Following

this restructuring the company rapidly diversified into several new fields, including aluminum

recycling, real estate management, malt and rice processing, and label printing. This continues

to the current day, where Anheuser-Busch continues to innovate and find ways to apply their

core competencies to new fields.

Business Model

Most Anheuser-Busch’s profits come from beer sales across the globe, principally in the

Americas. Sixty-nine percent of their global sales volume comes from North, South, and Middle

America, along with 71% of its global sales revenue. These beer sales include several new beer

brands, including non-alcoholic versions of their staple products. In addition, they are using the

stable revenue from their beer sales to fund a wide variety of additional projects to improve the

company. “Beyond Beer” is a rapidly expanding part of their portfolio strategy and further

shows the company’s ability to innovate. Finally, they are using their extensive fermentation

knowledge to expand into artificial food production.

This strategy ties in well with their mission statement, “Bringing People Together for a Better

World”, which coincides with their innovations in sustainable and healthy technologies. In

addition, their commitment to beer is seen by the company as bringing people together, being

a key part of many social gatherings. Their new line of products also encourages customers to

try new drinks with their friends and continue to experience new things.

STRATEGIC LEADERSHIP

CEO: Michael Doukeris

Michel joined AB InBev in 1996 and since joining the company he has held several roles in South

America and Asia. He has several degrees, spanning across multiple disciplines like marketing,

chemical engineering, and business strategy.

CFO: Fernando Tennenbaum

Fernando has been a part of AB InBev since 2004 and has held roles in treasury, investor

relations, as well as mergers and acquisitions. He has experience in industrial engineering as

well as an MBA.

CPO (People): Nelson Jamel

Nelson joined AB InBev in 2001 and has several degrees in industrial engineering. He has held

several roles with AB InBev in several different countries like the Dominican Republic, Brazil,

and several countries in Europe.

CMO (Marketing): Marcel Marcondes

CSO (Supply): Pete Kraemer

CSO (Sustainability): Ezgi Barcenas

CGO (Growth): Ricardo Tadeu

General Counsel: Katherine Barrett

VALUES AND GOALS

Mission: Our dream is to bring people together for a better world.

Vision: There are no shortcuts. We believe in taking responsibility and owning the results. That’s why

we’re constantly raising the bar and are never satisfied with good enough. We know that together we

can achieve our Dream of a Better World.

Values:

- We dream big.

- Our greatest strength is our people.

- We recruit, develop, and retain people who can be better than ourselves. - We are a company of

owners.

- We are never completely satisfied with our results.

- The consumer is our boss.

- We strive to be the best at serving and partnering with customers.

- We believe in common sense and simplicity.

- We manage our costs tightly to free up resources that will support profitable top line growth.

- We never take shortcuts.

The forefront goal of the near future for AB InBev regards sustainability. AB InBev introduced

their 2025 Sustainability Goals in March of 2018. The goals are attempting for “holistic

environmental and social impact and drive transformational change across our entire value

chain.” According to their corporate website, these goals are designed to keep AB InBev

churning out a quality product and customer experience for the next one hundred years.

Already, they are currently using completely recycled electricity for their brewing in the UK.

More specifically, these goals revolve around more ethical and renewable packaging, water

stewardship, and climate action.

In terms of renewable packaging, AB InBev plans to have 100% of their packing be made from

recycled contacts. They refer often to the “Reduce, Reuse, Recycle” circular packaging, and

have taken this mentality to their bottling and sourcing processes. They have been more and

more focused on returnable bottles, which are eight times less carbon harmful than one-way

bottles.

The safe use and treatment of water is also among the 2025 Sustainability Goals for AB InBev.

The use of water is essential to the business processes that AB InBev boasts, and they have

made a firm commitment. Their specific goal is that 100% of their high stress communities will

have improved water quality.

Lastly, their carbon footprint reduction goal is to reduce their carbon emissions by 25% across

their value chain by 2025. More specifically, they plan to have 100% of their electricity brought
in through renewable sources. All these ethical sourcing goals are based on the

recommendations from the Intergovernmental Panel on Climate Change. In terms of strategic

intent, all the goals listed previously are not just limited to securing a better environment for

the future. AB InBev is aiming at securing a new generation of ethical consumers. The goals are

just as much about establishing a presence in younger customers as much they are about being

environmentally sound.

EXTERNAL ANALYSIS: GENERAL ENVIRONMENT

AB InBev primarily operates in the “breweries” industry, defined by the IBIS World industry

report as producing “alcoholic beverages made from malted barley and hops such as beer, malt

liquor and nonalcoholic beer”. This industry definition notably “excludes wine, brandy, cider

and distilled beverages such as vodka and rum”. This audit focuses especially on the US

breweries industry.

PESTEL Analysis
Looking at the general environment for breweries in the US, there are many opportunities for

industry growth. In the political sphere, the excise tax on beer being lifted in 2022 is an

opportunity for the industry because of a lower cost to consumers. Meanwhile, the country is

at a strong currency relative to others, making US exports more expensive for other countries.

Consumers tend to spend the same on beer whether during economic downturns or not,

according to the IBIS World report. Per capita income in the US is increasing, giving consumers

more disposable income to spend on these products. Brewery operations find low technology

change and low-tech changes from consumers, making current operations sufficient for future

performance. If wielded correctly, the environmental trend of food shortages and lack of access

to clean water can be made into an opportunity for an industry already in the food space. And

as the legality of being in-person and attending events transitions back towards pre-Covid

norms, more consumers will be able to consume brewed beer and malt liquor.

EXTERNAL ANALYSIS: INDUSTRY ENVIRONMENT

Porter’s Five Forces

Power of Suppliers - Moderate

Beers and malts are made from commodities like corn, wheat, and soybeans, which are

undifferentiated and therefore gives no supplier a high concentration of power. However,

manufacturers of cans or bottles do hold supplier power over firms that cannot bring their

container production in-house. Violent fluctuations in glass and aluminum prices can eat away

at industry profit margins.

Power of Buyers - Moderate

The industry has countless customers (different liquor stores, supermarkets, wholesalers, and

restaurants), so there is very little centralized power of buyers. However, US consumers have

demonstrated low switching costs between beer and other alcoholic beverages, indicating the

industry could be threatened by large-scale shifts in buyer preferences.

Threat of Substitutes - High

Consumer tastes are shifting away from beer/malted beverages and towards “ready-to-drink”

cocktails or seltzers (which contain distilled spirits, not malt liquor). These substitutes are

popular with young consumers, the industry’s most important demographic for growth.

Threat of New Entrants - Low

Brewing and packaging processes have high setup costs and therefore large barriers to entry.

Small breweries are currently trending with consumers but are typically either 1) acquired by an

industry leader, or 2) unable to compete with large-scale firms in the industry and therefore

fail.

Intensity of Competitive Rivalry - High

The industry is highly concentrated between a few large-scale breweries who also compete

with regional and craft breweries on local levels. The astonishingly wide variety in consumer

preferences for beer creates a highly competitive industry that sees frequent acquisition and

innovation into other industries.

Limitations of Porter’s Five Forces

When conducting an industry environment analysis, the Porter’s Five Forces (PFF) tool provides

a useful snapshot of current strategic roadblocks in each industry. However, when it comes to

making strategic recommendations, it is crucial to consider how general environment trends

will change that snapshot to prevent firms from taking unnecessary strategic risk. For example,

the threats of low switching costs and changing preferences identified in the PFF above may be

dissolved by the upcoming decrease in the excise tax on beer (as described in the PESTEL

analysis). Rather than make drastic strategic recommendations based on industry concerns

found through a PFF analysis, it is best to focus on an integrated General/Industry perspective

and consider how the two environments may amplify or negate concerns.

Profit Potential Evaluation

IBIS World reports the total profit potential of the US brewing industry to be $1.2 billion for

2022. The report predicts an increase in total industry revenue of 1.5% over the next five years,

with profit margins increasing slightly for large firms. This modest growth prediction is

appropriate for the industry because the positive economic conditions described in the general

environment analysis will likely be tempered by the changing consumer tastes evaluated in the

industry environment. The US economy will financially recover from the Covid-19 pandemic,

but ready-to-drink cocktails, alcoholic seltzers, and wine will likely become more common

substitutes for beer and malt liquor.

INTERNAL ANALYSIS

Company’s View of Environment

AB InBev has an optimistic view of the general and industry environments, typically identifying

an opportunity to counteract each threat encountered. The company’s 2021 Annual Report

contains a thorough “Risks and Uncertainties” section that identifies, for example, how

“changing consumer preferences” could threaten the firm’s profitability in the beer market. AB

InBev has a reasonable understanding of the threats it faces, including all those listed

previously in this strategic audit.

The 2021 Annual Report additionally highlights the opportunities from which AB InBev is

currently working to capture value. The “Letter to our Shareholders” section describes

initiatives like “Beyond Beer”, their drive to innovate and distribute spirit-based seltzers and

other liquids that are outside the typical brewing industry. Rather than simply mitigate the

threat of changing consumer preferences, AB InBev saw this as an opportunity to expand into a

burgeoning market. Overall, the company has a positive view of its external environment

because, as seen in the firm’s Annual Report, it can manage threats and capitalizing on

opportunities.

Customer Identification

AB InBev’s customers are supermarkets, liquor stores, wholesalers, and restaurants in the US

and across the globe (divided into five regions: North America; Middle America; South America;
Europe, the Middle East, and Africa; and Asia Pacific). The company’s secondary customers are

the consumers themselves, who drive the demand from retailers and intermediaries.

AB InBev attracts demand by offering a reliable drink experience for a low price. The company

owns countless brands that range in perceived luxury and quality; however, the sheer scale of

the company allows AB InBev to keep costs low while still providing a consistent product with

dependable delivery. Much of the appeal of AB InBev drinks lies in their homogeneity and

universality, which creates loyal consumers and happy business-to-business customers.

Resources & Capabilities

AB InBev has engaged in over 15 mergers and acquisitions, which plays a role in their available

resources. Their total assets sit at $212.4 billion with over $7 billion in cash and cash

equivalents. Property, plant, and equipment make up 12% of their total assets around the

globe. Leadership reports that “their greatest strength is their people” and they employ an

estimated 169,339 employees. Backed with capital, they can lead the market in innovation and

sustainability. Anhueser-Busch does not possess a secret beer recipe; they instead have built a

reputation of making it “inclusive, natural, and local.” We see this through their economies of

scope as product lines differ in each country. The company has also leveraged technology to

create financial solutions for their customers. Their primary platform, Donus, has helped over

270,000 small to medium sized businesses invest, partner, and grow their products. The

company is exceptional at adjusting their portfolio to serve different market segments.

VRIO Framework

AB InBev teeters between a temporary and sustainable competitive advantage as their

resources are valuable, rare, imitable, and organized to capture value in the variety of markets

they serve.

AB InBev breeds a feel-good culture with iconic brands that fare well in America and other

developed countries. In a world of “cancel-culture'' and aesthetics, this company is meticulous

about designing a can that catches the eyes of consumers. They invest heavily in their

reputation through marketing campaigns which offsets the threat of other companies capturing

share in the beer market. A large portion of their market even looks forward to their

commercials each February during the Super Bowl. It’s also notable that they exploit

opportunities in developing countries by leveraging their technological capabilities. Local firms

in developing countries like Nigeria may not possess the finance knowledge and available

technology to reach the consumer as fast as AB InBev.

A resource is rare if only a few firms possess it. The ingredients in beer are not rare. In fact, the

market for beer is so large because the ingredients are simple. What AB InBev is exceptional at

is mergers and acquisitions and restructuring the company around it. In February, High End and

Brewers Collective sales teams merged and Chief Commercial Officer Kyle Norrington

announced they are now fully integrated to “drive growth of [their] high-end portfolio.” The

teams made rapid adjustments to set new benchmarks after leadership initiated the change.
AB InBev brews over 40 different beers and malt liquors. While this number may catch the eyes

of competitors, it is difficult to replicate the size and scope without a similar financial portfolio.

One barrier the company uses to counteract substitution and imitation is systematically setting

expectations for future product lines. The limited-edition Busch Apple took off in U.S. markets a

few years ago because the company positioned the product as a disruptor in the flavored beer

space. AB InBev announced they are officially retiring the product at the end of this season, but

not without starting discussions about a potential peach flavored beer replacing it. The

continued conversation with consumers creates a path dependence that inhibits other

competitors in the alcoholic beverage space.

From “seed to sip,” the company captures value in its supply chain. They brew and operate in

over 50 countries investing in relationships with farmers through mutual collaboration. The firm

is active in each community they serve through impactful partnerships that advocate for road

safety and “Smart Drinking”. Their relationships also play a factor in reaching the end-

consumer.

As a company in business for over a century, InBev has learned to pivot and reallocate their

capital to maintain their competitive advantage despite external pressures.

Core Competency

Core competencies are unique strengths, embedded deep within a firm, that are necessary to

sustain competitive advantage. At the heart, AB InBev achieves this through “low operating
costs, high investment in marketing and sales, and leverage of synergies between all global

units to optimizer costs and revenue” (Mokuolu).

Strategic Activity Analysis

The value chain is an important tool when dissecting the internal and external processes of any

firm. It comprises two specific parts - primary and supporting activities. They act how they may

sound, with primary activities adding value directly to the firm, while supporting activities add

their value indirectly. Primary activities would include, according to the textbook, sales,

operations, supply chain management, and distribution. Supporting activities would include

research, HR, and accounting.

For AB InBev, there are several key primary activities that consistently deliver positive results

on their behalf. On the internal side, they have Busch Agricultural Resources. They are the

largest purchaser and user of hops for brewing in the world. They purchase nearly five million

pounds of hops every single year from farmers in several states in the United States. The figures

are similar for corn, barley, and wheat, all of which are used in the production of beer. The

company values their relationships with farmers in all the states in which they operate, like

North Dakota, Montana, Idaho, Oregon, and Washington.

In other internal production efforts, their bottling is increasingly becoming a multi-use system,

where bottles can be returned and reused. Not only does this help with their 2025

Sustainability Goals, but it also reduces their cost margins and can bring about tax benefits.
Another primary activity that bears fruit for AB InBev is their intensive marketing. For such a

wide variety of products, AB InBev does a stellar job of hitting the niche for each one of its

products in terms of market production. They can sell products that are different with their

effective marketing campaigns. For example, they can market Bud Light as a cost-effective and

social beer, and then market a similarly made product like Budweiser as a quality and tasteful

product. They can repeat this process for their different beers in each country and other

products like seltzers as well.

It would be rather dismissive not to mention their operations as a primary activity. There are

over 100 breweries worldwide, and all these breweries are primary activities as they produce

the main line of goods that AB InBev. There are also several supporting activities that make AB

InBev so effective. One of them for example is their sustainability policies and goals. Their

policies regarding sustainability guide their operations and add value each step of the way.

Their sustainability goals like reducing the carbon footprint and adding water value to their

stress sites allow AB InBev to think much longer term about their operations, which is a key

advantage in terms of fighting off the competition.

Another supporting goal would be their Management Trainee Program. It is an intensive post-

grad program that supplies them with some of the best and most strategic minds the industry

has to offer. Through rigorous training and intensive learning courses, AB InBev prepares their

future leaders in the most effective ways possible to ensure that the company's values, mission,

and vision stand the test of time.

AB InBev is doing the most possible to create a future in its own eyes, and is doing so through

quality process, effective and vast operations, strategic sustainability, and futuristic recruiting

of the top talent every year.

SWOT Analysis

Strengths:

AB InBev has a wide variety of products that vary depending on location and other market

factors. All these different products like Budweiser, Bud Light, Modelo, and other foreign beers

allow AB InBev to compete in several different markets. They offer a more quality beer to those

who desire a finer taste, as well as more inexpensive light beers to those who want beer at a

lower price.

This wide variety of products leads into their next strength, which is their outstanding brand

management. All their products, while under the same parent company, are branded in

completely different ways. For example, Budweiser, one of their most iconic brands, is

marketed in a way that is distinctly American. Several times a year, they will run promotions

that highlight the American spirit. On the flip side, they also run interesting promotions on the

Modelo brand. They market it for those with a fighting spirit and those who boast their work

ethic. Lastly, Bud Light is branded as a more “social” beer, being portrayed as a good time beer.

All these brands are managed by AB InBev but are done so differently.
Lastly, their presence in the international beer scene is quite impressive. They have global

beers, like Busch and Corona, European beers, like St. Pauli Girl, Asian beers, like Cass and

Double Deer, and North & South American beers like Michelob and Bud Light. All this

diversification has laid the roots down for AB InBev to continue its domination in the world beer

trade for years to come.

Weaknesses:

Despite all their market presence and brand recognition, there are a few shortcomings for AB

InBev. One of these examples, noted by many beer drinkers, is that despite all their brands they

lack a product with a higher degree of status. Despite their best efforts with Budweiser and

other European beers, many common drinkers notice that AB InBev lacks this type of quality

beer.

Another shortcoming for AB InBev is their oversaturation of the beer market. They have

hundreds of different products, and while these products may be attempting to hit different

markets, they often fail. For example, Michelob Ultra and Bud Light may now be seen as

competitors, as they both may fall into the social light beer category. While a choice between

two of the same company’s products may seem to be an initial luxury, this may be an issue

down the road in terms of high costs with production.

Opportunities:

Initially, an obvious opportunity for AB InBev is the seltzer industry. According to Acumen, the

world seltzer market is expected to grow by nearly 20% by 2030. This is a unique opportunity

for AB InBev due to their already massive size. They have some of the largest production

powers in the entire beverage industry and a pivot move to producing more seltzers would be

much easier for AB InBev compared to that of a local brewery.

Another unique opportunity is the foreign market. AB InBev already has a massive presence in

the Americas and Europe, and their markets are only growing in countries like India and China,

which are the two largest countries in the world in terms of population. Getting a foothold in

these countries as well as Africa early would be key to the long-term goals of AB InBev. They

would be able to develop right alongside these countries, and even make good on their

sustainability goals by investing in these countries.

Threats:

One of the threats that AB InBev is facing is the increased number of competitors within the

beverage industry. Plenty of new brands of beer and seltzers have emerged in the past few

years, leaving consumers with plenty of choices. With more and more small-time breweries

offering their own brews and a rise in the preference of customers to choose locally produced

items has left AB InBev scrambling to meet customer preferences. These competitors may

switch any consumers who are not sure on their preferences, which could leave AB InBev

hurting in the coming years.

There has been a shift in consumer preferences the past few years. There have been several

factors that have led to these changes in consumer preferences. One of these factors has been

the switch to health focused consumerism. Products like hard liquors and seltzers have had an

enormous amount of success in being seen as healthier options, being the lower calorie

options. AB InBev has tried to follow with seltzers of their own and calorie counting campaigns,

but a major emphasis may be needed for more healthy options in the long run.

PERFORMANCE ANALYSIS

AB InBev has held a large share in the industry for many years, making consumer expectations

for the firm’s performance higher than others. Even with high expectations, they are

performing to the same standard. In 2021, their top line growth was 15.6%, far exceeding the

IBIS World projection of a 4% growth in the industry. During the year, the company expanded

products and markets all over the world while making sustainability-minded changes along the

way. It is clear their growth stems from both diversification and maintaining and renovating the

brands they already have as their annual report lists their annual goal as “In 2021, we continued

to meet the moment and built on our momentum to deliver a great year as we look toward the

future.” Their direct-to-consumer platform helped them fulfill 67 million online orders in 2021,

more than double that in 2020.

Throughout their annual reports, AB InBev focus is often on employee and customer

satisfaction through creative diversification, recognizing their employees’ strengths, and areas
where they can create value. When talking about who they are, they state “We dream big. We

are building a profitable growth company” (p. 13). When talking about their areas of growth,

they list quality culture, brand superiority, and company reputation rather than mentioning

revenue. If you look to find out about them on their website, they focus on the excellent value

creation to enhance consumers’ lives. They utilize words like “future,” “together,” “moments

that matter,” “excellence,” and “beloved” to make consumers feel a part of the story and more

important than the financials.

AB InBev has many sources of competitive advantage over its competitors in the alcoholic

beverages market. It has a price to earnings ratio of 19.81, the third best in the industry of the

companies the analytics website CSIMarket examined. It also has a price to sales ratio of 1.7,

the fifth best in the industry. These metrics indicate a positive valuation of the company, and

the price to sales ratio indicates investors place a large amount of value on AB InBev’s ability to

generate sales. This likely has to do with its dominance in the alcoholic beverages market.

According to the National Beer Wholesalers Association, AB InBev made up 46.9% of beer

brewing in the United States and 38.6% of beer importing. This market share is not matched by

any other brand in the country, with Molson Coors coming in second with only 28.4% of beer

brewing.

There are other ways to demonstrate the competitive advantage AB InBev possesses. Given

their wide influence and the company’s strategy of leveraging their expertise into what they call

“core supremacy”, it makes sense to examine metrics which compare their costs of operation
to other businesses to determine if their expertise gives them a cost advantage over their

competitors. Net profit margin is one such metric and comparing them to Molson Coors shows

a definitive advantage for AB InBev. As of Q2 2022, AB InBev has a net profit margin of 9.99% as

compared to Molson Coors’ 6.92%. A difference like this gives Anheuser-Busch an undeniable

advantage over their largest US competition and shows they have turned their core

competency of brewing expertise into a real-world asset.

It is important to examine the structures by which AB InBev incentivizes exceptional effort from

its employees. According to Form 20-F filed by AB InBev with the Securities Exchange

Commission, there are three primary share-based compensation plans used by the employees

of AB InBev. For different levels of employees there are the “RSU Plan Directors”, the “Shared-

Based Compensation Plan”, and finally the “LTI Plan Executives”. The RSU Plan Directors plans

entitle their holders to several Restricted Stock Units, which have a fixed gross value per year

and are automatically vested into one AB InBev share after five years. This is not dependent on

any sort of performance criteria and should be considered as fixed compensation. The Share-

Based Compensation Plan on the other hand is partially performance dependent, with

participants receiving additional RSUs if they meet certain targets within their role. The LTI Plan

Executives is only available to employees who management has determined to have met

certain performance targets. In addition, there is explicit mention that special compensation

will be given separate of these plans for any exception performers.

As a concrete number of how much of the compensation for the executive leaders, according to

Form 20-F the CEO will earn a fixed income of 1.42 million dollars with an on-target bonus

percentage of up to 340% of the base salary. Other members of the executive committee

earned an aggregate of 1.80 million dollars with an on-target bonus percentage of up to 200%

of the base salary. As an example, in 2019 the CEO earned 2.93 million dollars in performance-

based bonuses, while the executive committee earned an aggregate 2.8 million dollars. This

shows that for executives there is a very large incentive to perform beyond expectations. Fifty

percent of this additional compensation is based on the organic net revenue of the company,

promoting the importance of increasing the firm’s basic performance. Overall, this strategy of

heavily encouraging high level employees to perform is consistent with the firm’s expectations

of an elite force of leaders to guide such a large company.

COMPETITVE DYNAMICS

Industry Concentration

The US brewing industry is highly concentrated, with just two firms responsible for 79.61% of

the market share in 2021. The four-firm concentration ratio is just 82.67%, which demonstrates

that the industry is dominated by two major players competing only against each other on the

large scale. It is worth noting that those two large firms still compete with approximately 9,500

other businesses on regional and local scales.

This concentration ratio indicates two things. Firstly, economies of scale and economies of

scope are key to sustained competitive advantage in the US brewing industry and they are

effective isolating mechanisms for capturing market share. The second insight is that there is
some demand for unique goods in the industry because 9,500 other firms can sustain enough

competitive advantage to remain in business, even when operating at such comparatively small

scales. Overall, the takeaway is that competition in this industry is reliant on a combination of

scale (which creates low prices and homogenous goods) and some amount of differentiation

(which can only be achieved through small-scale production or product line diversification).

Competitor Analysis

One competitor AB InBev faces in the seltzer industry is Mark Anthony Group, a privately held

Canadian company known for selling White Claw seltzers and Mike’s Hard Lemonade. These

companies compete for shelf space at retailers in the U.S., Germany, Switzerland, and Sweden.

However, Mark Anthony has yet to expand its developing countries’ markets unlike AB InBev.

White claw commands more than 60 percent of the market share, while Corona Seltzers only

capture nine percent. These companies are not direct competitors as AB InBev’s strategic focus

is premium beer. Seltzers capture only a glimpse of their array of differentiated products.

Strategic Action Examples

In recent years we have seen many changes in the alcohol industry making breweries in the

United States like Anheuser-Busch consider new strategies and discover more value. Molson

Coors is the top competitor to Anheuser-Busch (with 24.9% of the market share of US

breweries) but has not made many diversification or sustainability strategies to combat these

changes. For example, to combat the surge of craft beer in smaller competitors, we can see a

difference in the actions of our firm, Anheuser-Busch, and its largest competitor Molson Coors.
While Anheuser purchased smaller craft beer companies to expand that line, Molson Coors did

not and ended up losing a part of their share (2%) between 2020 and 2021 possibly because of

this. Anheuser-Busch’s strategy of purchasing the smaller, innovative companies has paid off

hugely for their growth and revenues, as we have seen earlier.

BUSINESS-LEVEL STRATEGY

Differentiation

AB InBev pursues a cost leadership strategy, which can be defined as providing value to

customers at a more attractive price than the competition. AB InBev utilizes several factors and

mechanisms to hold this position.

AB InBev uses their economies of scale in terms of production power, based on the theory that

an increase in production of a product leads to the lower cost on average for a single product.

AB InBev’s economy of scale revolves around their enormous production efforts: they can

produce much more than their competition for a cheaper price. Their production efforts

brought AB InBev to a plurality in the beer market, with over 31% of the total market share.

They boasted over 580 million hectoliters of beer produced, double the next closest

competitor. High production lowers the cost on average for popular products, and AB InBev can

offer a lower priced product to its consumers in return.

Vertical integration is an essential factor in keeping prices low for consumers. Vertical

integration is the owning of several stages of the production process that a certain product may
require. AB InBev is involved in several stages of their production process. Starting with the raw

materials, AB InBev has recently started a SMART agricultural initiative where they partner with

internal agricultural teams in thirteen different countries to produce all six of the essential

crops for their wide variety of products. AB InBev is also involved in the canning process, where

they create and form the metal for their cans. Having a vertically integrated supply chain allows

AB InBev to ignore the fees that can arise from dealing with outside distributors. Having a hand

in the different phases of the supply chain also offers AB InBev a sense of freedom to lower

their prices, further hitting on the goal of cost leadership.

AB InBev offers a wide selection of differentiated products to the public. On a global scale, AB

InBev differentiates their products on a geographic basis. While they may offer some of their

more general products like Budweiser or Stella Artois in several parts of the world, AB InBev

sells regionally specific beer as well. The company offers several different products that are

slightly differentiated based on taste, style, brand, and price. For example, consumers who are

willing to pay a higher price for a “classier” beer may opt to purchase Modelo brand alcohol,

while those who may just be looking for a cheap beer may opt for Busch Light. However, both

are AB In Bev products and are meant to be sold to different consumers. Even within the same

realm of competition, AB InBev offers a variety of choices. For example, the light beer genre has

plenty of AB InBev products like Michelob Ultra, Corona, and Busch Light. All these options are

slightly different in terms of taste and price, but still hammer the light beer market. The

strategy here is to give consumers as many AB InBev choices as possible, regardless of which

one it may be if it is an AB InBev product.

Approach to Market

AB InBev’s approach to the world alcoholic beverage market is broad. There are several

demographics, like class, geographic location, and preference, all of which are broadly targeted.

AB InBev sells on every habitable continent and in most countries.

The company’s most popular products are marketed broadly, while other products are based

on global location and regional preference. On the Business-Level Strategy Map (Diagram 1), AB

InBev lies squarely in the “Cost Leadership” region, with a competitive advantage in cost and a

broad approach to the market.

Diagram 1: AB InBev’s Strategic Position (right)

Performance of Strategy

In terms of leveraging appropriate cost drivers, through employment of a cost leadership

strategy, AB InBev is attempting to leverage both their economies of scope and economies of

scale.
Economies of scale means that as the number of a single product being made goes up, then the

cost on average to make this product will go down. AB InBev uses their economy of scale by

utilizing their existing significant production capacity and abilities to lower prices for all its

products.

The theory behind the economies of scope is that as the number of different products

produced and offered by a firm goes up, then the average cost of production and distribution

trends downward. By utilizing their already existing manufacturing power and vertical

integration process, the cost to create, market, distribute, and sell new products becomes

much lower over time. For example, if AB InBev wants to create a new Modelo brand product,

then they can use existing Modelo manufacturing and branding to successfully launch the new

product.

Advantages and Disadvantages

There are both positives and negatives associated with the business-level strategy AB InBev

follows. One advantage of a cost leadership strategy is the attractive price for consumers. If

price is the only factor in the mind of a consumer, AB InBev has an advantage as the relatively

cheaper option. Another advantage for AB InBev is that the alcoholic beverage business seems

to be steady, even in times of recession. During economic downturn, many consumers turn to

inferior goods rather than the products they are used to. For AB InBev, this can be a positive

because they are cost leaders in both inferior and regular goods.
There are drawbacks, however, to the cost leadership strategy. The largest risk is that as the

alcoholic beverage industry expands further into seltzers and other spirits, AB InBev’s beer sales

may suffer. A broad cost leadership strategy requires many sales to support the low-cost efforts

and low profit margins. If consumer preferences change, AB InBev may find their economies of

scale and scope put at risk.

CORPORATE-LEVEL STRATEGY

Vertical Value Chain

AB InBev is a highly integrated firm, possessing firms and divisions all along the value chain. This

means they have engaged in both forward and backward integration, to capture as much value

as possible. They maintain control over nearly every step of the alcohol production process,

from farm to bar. According to FoodDive and shown in Diagram 2, they own many farms for

rice, malt, hops, and all other agricultural products they require. This gives them great control

over the quality of ingredients used and allows a lot of experimentation to perfect their recipes.

For the second step on the value chain, according to MatesichBeer, AB InBev owns over a dozen

breweries in the United States and more across the world. This represents their primary

product and is subsequently the centerpiece of their operations. All other elements of their

value chain in some way benefit this step, either by lowering costs or allowing greater control

of the product.

The third step on AB InBev’s value chain is packaging, which they are involved in via the Metal

Container Corporation (MCC). MCC produces a significant amount of aluminum cans and
bottles for all sorts of liquids packaging. Integration in this step lowers costs of production for

all the company’s main products. Finally, AB InBev partners with over 600 independent

distributors. They also wholly own 13 wholesale distributors. Such a wide and integrated

network allows for heightened flexibility in spreading their products. AB InBev can sell to

individual bars and shops via independent distributors while still maintaining stock grocery

chains across the globe thanks to their wholesale distributors. Finally, the integration of AB

InBev’s production and sales network allows new products to be created and distributed

rapidly. This is part of the reason they can have hundreds of individual brands.

Diagram 2: AB InBev’s Vertical Value Chain

Other Diversification

Outside of its vertical integration, we can see that AB InBev is solely focused on alcoholic

beverages, earning 70-95% of its revenue from that market. Therefore, AB InBev is pursuing a

dominant business strategy of corporate diversification. AB InBev is pursuing this strategy

primarily to take advantage of the economy of scale generated by such product concentration.

When this approach is combined with their integrated value chain, it creates several cost
savings and quality improvements that would be otherwise unavailable. They are also beginning

to leverage their core competencies, especially their expertise in fermentation, to apply to new

fields of agriculture. They are attempting to use their knowledge to create high-nutrient plants

which can serve as a meat substitute, as part of their “Beyond Beer” initiative.

The company is highly diversified geographically, selling its product on all six inhabited

continents. They have gone fully global and spread their branches across hundreds of countries.

AB InBev has succeeded in this by taking advantage of a unique part of the cultural distance

between nations. Virtually every country has a tradition of alcohol, and by using a transnational

strategy, AB InBev adapts their products to match the expectations of local markets. Such a

strategy sidesteps many of the CAGE distance issues experienced by other firms. Each

geographic division is responsive to the region’s demands, part of the reason they have so

many unique brands of alcohol. In addition, AB InBev’s large network of subsidiaries gives them

great flexibility in implementing their strategy.

MERGER AND ACQUISITION STRATEGIES

Recent Mergers and Acquisitions

AB InBev has acquired over 20 companies with three occurring in the past five years:
 Diagram 3: Acquisitions in the last 5 years, source Mergr.com

Craft Brew Alliance (CBA) is a craft brewing company that brings to market "world-class

American craft beers." After a partnership spanning 25 years, CBA joined InBev's Brewer's

Collective (Busch's craft business unit) in November 2019. Under the deal, Widmer Brothers

Brewery and Redhook Brewery had been selling minority stakes to InBev in exchange for access

to their distribution network. AB InBev purchased the remaining portion of CBA in 2019 at

around $220M. CBA shareholders approved the expanded business partnership as over 98% of

votes cast demonstrated broad support for the initiative.

Based in San Francisco, California, Hiball provides "premium, refreshing, sparkling energy

waters and organic energy drinks." This investment was part of AB InBev’s latest strategy of

growing in the "beyond beer" segment. The company saw sparkling water and energy drinks as

a fast-growing place and wanted to advance its position in the non-alcoholic space.

Wicked Weed Brewing is a craft beer brewery that offers barrel-aged and open-fermented sour

beers. While the major beer maker may see the Asheville-based company as a competitor,

nothing changed due to the acquisition. "This was a decision we made to move the company

forward because we thought it would be the best thing for the people and the brand," Walt

Dickinson, Wicked Weed Co-founder, said. As part of the deal, this purchase did not interfere

with the brewery's creative freedom.

AB InBev also underwent two divestitures in 2019. On April 1, O-I Glass purchased Nueva

Fabrica Nacional de Vidrio, S. de R.L. de C.V. for $188 million. This plant supplied nearly 300,000

tons of glass containers to Modelo brands produced by four furnaces at the facility. On July 11,

Blackstreet Capital Management LLC acquired Northern Brewers from AB InBev for an

undisclosed amount. Northern Brewer is a retailer that markets winemaking, brewing supplies,

and beer kits to consumers. The multichannel marketer sells its products at three retail stores

and online.

Due to AB InBev's size, its market position, and contractual limitations, the company has less

flexibility to carry out further acquisitions and integrations. Unless AB InBev identifies suitable

candidates that agree to the terms and conditions, the firm will not enter additional transitions.

Because of the company's size and position, it is difficult to find appropriate investment

opportunities that do not pose antitrust and regulatory risks.

Stock Value Changes

AB InBev’s stock value increased post-acquisition in all cases except its combination with Craft

Brew Alliance; this had a -13.6% change in stock price. Diagram 4 outlines the changes in stock

price for the publicly traded companies involved in the acquisitions. AB InBev did pay a

premium for its acquisition of CBA in 2019. Hiball and Wicked Weed Brewing are privately

owned companies that did not disclose their share price nor the value of the purchase; it is

unclear whether AB InBev paid more than what these companies were worth to acquire them.
 Diagram 4: AB InBev and Subsidiaries Stock Price Changes

Strategy Performance

The firm's acquisition strategies were successful. The company's stock price generally increased

post-acquisition signaling favorable prospects for the company. Compared to AB InBev's

acquisition of SABMiller in 2016, the company avoided massive amounts of debt by acquiring

smaller, privately owned companies. This strategy also helped the company avoid intense

regulatory oversight. AB InBev achieved its purpose of combination by expanding its craft beer

and beyond beer business units. These acquisitions also benefited the acquired companies' C-

suite and employees as AB InBev strategically placed leaders in managerial positions and hired

existing CBA employees after combining in 2019. In 2016, however, 1.2 million fewer barrels

were made in the craft beer segment due to acquisitions by large beer companies, according to

the Brewer's Association. Overall, the decisions over the past five years proved more successful

than past acquisitions.

CORPORATE GOVERNANCE

Board Compensation

AB InBev’s directors receive both fixed and share-based compensation. To drive performance

and align Board decisions with shareholders’ interests, AB InBev emphasizes share ownership

and variable pay for directors, rather than salary or fees.

In 2020, directors received an annual fee of $93,032 for attending a required 10 Board

meetings. Similarly, the Chair of the Board and the Chair of the Audit Committee were awarded

their flat fees of $290,399 and $145,200 respectively. At the annual shareholders meeting in

2019, it was decided that no additional attendance fee would be awarded for attending more

than 10 Board meetings or for attending Committee meetings. The median fee awarded for

Committee roles in 2020 was $11,084.

Members of the Board of Directors also receive share-based compensation in the form of

restricted stock units (RSUs) with a fixed gross value of $227,764. Similarly, the Chair of the

Board and the Chair of the Audit Committee receive RSUs valued at $626,352 and $398,587

respectively. These RSUs will vest after five years and entitle their holders to one AB InBev

share per RSU. The current RSU plan for directors was enacted in 2019, replacing the company’s

previous long-term incentive stock option plan for directors.

AB InBev’s payouts to its Board of Directors for the year 2020 can be seen in Appendix 1.
Board Composition

AB InBev’s corporate governance charter dictates the company’s Board of Directors must be

composed of between three and 15 directors. Three directors must be independent, while the

appointment of the other positions is determined by majority shareholders. As of 2020, there

are currently 15 directors, three of whom are independent.

The current Board of Directors are geographically diverse, representing the global interests of

AB InBev. The directors were born in or are citizens of America (four), Brazil (four), Belgium

(three), Mexico (one), China (one), Colombia (one), and Italy (one). This is appropriate due to

the company’s foundations in Brazil, Belgium, and America, and their distribution network

across the globe. The Board is only 33% female; however this is in-line with consumer

demographics that show that men are more likely to drink alcohol, especially more likely to

drink beer, and are more likely to drink larger quantities and more often. The directors carry a

wide breadth of experience and degrees, as well as current appointments to related

directorships.

AB InBev’s Chief Executive Officer (CEO), Carlos Brito, is not a member of the Board of

Directors, but is appointed by and reports directly to the Board. In place of a “Lead Director”,

AB InBev’s Board of Directors appoints one independent director to be the “Chair of the Audit

Committee” that executes the same roles.

AB InBev’s Board of Directors has four committees. Their current roles and members are

described in Diagram 5 below.

Diagram 5: Board of Directors Committee Structure and Functions

Code of Ethical Conduct

AB InBev has a written Code of Business Conduct and a Code of Dealing, both of which apply to

all employees and principal officers. The Code of Business Conduct covers everything from the

company’s core principles and reporting expectations to responsible drinking and digital ethics.

The table of contents of AB InBev’s Code of Business Conduct can be seen in Appendix 2. The

Code of Dealing ensures that no AB InBev employee or executive abuses the confidentiality of

insider information during business transactions. The topics included in AB InBev’s Code of

Dealing can be seen in Appendix 3. In summary, AB InBev codifies its definitions of ethical

conduct in two ways and files both publicly with the SEC in Form 20-F. This is important in
setting expectations for employees and maintaining consistent processes, which are crucial for

maintaining legal compliance and strong governance.

MAJOR SHAREHOLDERS

As of 2020, the controlling shareholder of AB InBev is the company’s foundation, which is

incorporated as a “stichting”, a specific kind of foundation under the laws of the Netherlands.

The AB InBev Stichting owns 33.62% of outstanding AB InBev shares and represents the now-

combined interests of the founders of “Interbrew” and “Ambev”, the respectively Belgian and

Brazilian companies that were merged in 2004 to create “InBev”. The Belgian families are

independently represented by EPS Participations S.à.R.L and Eugénie Patri Sébastien (EPS) S.A.,

which own 6.62% and 0.01% of shares of the company. The Brazilian founders are represented

by BRC S.á.R.L., which own 2.02% of shares.

Two firms hold significant quantities of restricted shares: Altria Group, Inc. (9.39%) and BEVCO

Lux S.à R.L. (4.91%). It is worth noting that AB InBev’s current Chair of the Board of Directors,

Martin J. Barrington, is the retired CEO and President of the Altria Group.

The degree of stock ownership among employees is low. The entire Board of Directors and

Executive Committee own less than 1% of the company’s 2 billion outstanding shares. However,

members of the Committee are required to hold shares equivalent to two years of base salary,

so they are financially invested in the success of the company. On a broader level, only senior-

level employees qualify for share-based compensation plans and are offered a modest
company match. Diagram 6 (below) shows that many shares are owned by the company itself,

an no other shareholders come close.

Diagram 6: Major Shareholders of AB InBev Stock 2020, as a percent of total shareholders

Recent Issues Shared Through a Proxy Statement

AB InBev shareholders met in April 2022 and voted on routine issues like approving new

directors to the Board and appointing statutory auditors. One unique proposal was to authorize

the Board of Directors to issue additional shares up to 3% of existing shares outstanding. This

could indicate some concern about the necessity of additional capital to run the firm or could

simply be viewed as a conservative fallback option. Overall, the recent shareholder vote does

not raise any major problems in the firm’s recent actions or governance.

According to their financial reporting, AB InBev is experiencing friction due to differing business

laws in foreign markets. Several nations (including Brazil, India, and the United States) have
antitrust investigations into the company, and Brazil’s tax regulations on foreign firms have led

to several fines against AB InBev. While none of these issues have made significant impact on

the company’s financial or corporate structure yet, it is important to note this may be a

recurring issue for the governance of the firm, specifically in South America.

ORGANIZATIONAL STRUCTURE AND CONTROLS

Organizational Structure and Evaluation

AB InBev operates under a matrix structure, where they organize according to their small

business units, subsidiaries like Anheuser-Busch Companies and Cervecería Modelo de México,

as well as by geographical regions where they operate. Diagram 4 (below) depicts AB InBev’s

matrix structure by geographic region and five largest subsidiaries. Appendix 4 shows the

structure of all their subsidiaries.

Diagram 7: AB InBev’s Matrix Structure including their five largest subsidiaries.

Since AB InBev pursues cost leadership, managers utilize a mechanistic, centralized structure

for production to create competitive advantage and reduce costs and organic organization for

marketing and strategy. The building blocks of AB InBev’s organizational structure are:

Specialization: Production is highly specialized with strong division of labor and specified tasks.

In the matrix structure, Diagram 7, the functional working divisions are listed as well. Ideation

and planning of the company’s production and goals is more organic with flexible divisions and

a “bigger picture” focus. AB InBev won Creative Marketers of the year at Cannes Lions 2022

which their CEO attributes to “our strategy which is very simple, focused, and most of all the

objective is to drive organic growth.”

Formalization: Deep expertise and technical knowledge is needed for quick and efficient

production, while domain expertise and clear understanding of core competencies are needed

in leadership and strategic planning. Marcel Marcondes, Global Chief Marketing Officer of the

company said, “We need to grow organically and therefore brands are the most important

assets. We need to drive the business with creativity and come up with creative solutions for

problems.”

Centralization: Decision power is spread between the top of the main corporation, AB InBev,

the subsidiaries, and individual production sites. Both vertical and horizontal communication

are used.
Hierarchy: Although there is clear organization between subsidiaries, again the production

sections operate more mechanistic and have taller structures than higher level leadership.

Board of Directors Structure and Evaluation

Business-Level: Cost Leadership. The firm’s business-level strategy of cost leadership is pursued

at each of the four building blocks listed above. The rigid, mechanistic structure of production

and on-the-ground operations of the company align with the firm’s goal of reducing costs

through economies of scale to create core competencies and competitive advantage. The dual

functionality of more creativity at higher leadership in the subsidiaries and companies allows

for creative ideas to drive production of competitive products.

Corporate-Level: Vertical Integration. Their corporate-level strategy allows them to be highly

integrated at every level and subsidiary, allowing for each subsidiary to support the others

through integrated and closely related-linked product lines. The parent-subsidiary relationship

is eased for AB InBev because of their strategy to acquire international businesses as

subsidiaries more frequently than extending their current business into international markets.

International: Transnational. The matrix organizational structure is highly aligned with

transnational strategy because it allows for subsidiaries to strategize and operate specific to the

cultures and tastes of the country. Operating through subsidiaries allows them to utilize

economies of scale, location, experience, and learning benefits while maintaining the

company’s culture and strategy.

The structure of the Board of Directors, as discussed in the previous section (Diagram 5), is

functional and with clear divisions, like the functional structure divisions of the organization

when it comes to production and operations rather than strategic management. Committees of

Audit, Nomination, Finance, and Remuneration divide the Board of Directors to allow for

specialization based on the members’ backgrounds and education, as previously listed. These

allow for the promotion of the cost leadership structure because they are aligned with reducing

costs, reviewing financial statements, compensation for worker services, and appointment of

strategic leaders.

Firm Performance Analysis

AB InBev outlines the control systems used to monitor firm performance in their Form 20-F,

Item 15, submitted to the SEC each year. Here they conducted a review of their control systems

and concluded they were effective in disclosing information required by the Exchange Act and

effective in communicating the results to management in the company.

Their internal control over financial reporting is designed and supervised by the Chief Executive

Officer and Chief Financial Officers, who also ensure the reliability of the financial statements

according to GAAP. Their internal control over this reporting is described in the form and

follows GAAP procedures as well. They describe the possible risk and inherent limitations of

misstatements and effectiveness of internal control as well, but that in this current assessment,

their internal control over financial reporting was effective.

RECENT STRATEGIC MOVES

Last year AB InBev announced that the company would be investing one billion dollars over two

years into updating their American facilities. As reported on the Williamsburg Yorktown Daily,

this money will go towards new technologies, facility renovations, and brewery improvements.

This reinvestment into their existing capital shows a commitment to maintaining their existing

assets and protecting efficiencies that create economies of scope. In particular, the investments

to improve the brewing process can be seen as part of maintaining their core competency of

brewing expertise and large-scale production/distribution. From this context, our team

supports this decision by AB InBev’s leadership. The maintenance of their breweries is of critical

importance to enacting their current business- and corporate-level strategies, and a willingness

to reinvest shows the decision makers understand this principle.

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states#:~:text=In%20the%20United%20States%2C%20more,

%2C%206.7%20liters%20for%20females
Cannes Lions, “What is AB InBev’s strategy that made them ‘Creative Marketers of the year’?”

https://bestmediainfo.com/2022/06/what-is-ab-inbev-s-strategy-that-made-them-crea tive-

marketers-of-the-year-

Cision, “Craft Brew Alliance And Anheuser-Busch Finalize Expanded Partnership”

https://www.prnewswire.com/news-releases/craft-brew-alliance-and-anheuser-busch-f inalize-

expanded-partnership-301140451.html

Community Initiative- Our Farmers https://www.anheuser-

busch.com/community/initiative/our-farmers/

CSI Market Industry Valuation https://csimarket.com/Industry/Industry_Valuation.php?ind=501

Edgar Data, SEC

https://www.sec.gov/Archives/edgar/data/1668717/000119312521087552/d106470d20f.ht

m#tx106470_36

Europe Careers AB InBev https://europecareers.ab-inbev.com/about-us

Forbes, “Anheuser-Busch InBev Completes Acquisition Of Craft Brew Alliance”

https://www.forbes.com/sites/chrisfurnari/2020/09/30/anheuser-busch-inbev-complete s-

acquisition-of-craft-brew-alliance/?sh=6936da7f2a8a

Forbes, “Are Alcoholic Beverages Recession And Inflation Resistant?”

https://www.forbes.com/sites/bill_stone/2022/06/29/are-alcoholic-beverages-recession- and-

inflation-resistant/?sh=4d440eab6a0e

Food Dive, “Farm to pint: How Anheuser-Busch cultivates its ingredients amid a changing

climate and consumer” https://www.fooddive.com/news/farm-to-pint-how-anheuser-busch-

cultivates-its-ingr edients-amid-a -
changing/570993/#:~:text=Newman%20said%20Anheuser%2DBusch

%20is,is%20critical%20to%20beer%20production

IBIS World Report, Our Goals, AB InBev https://www.eclipse.ab-inbev.com/our-goals/

https://www.ibisworld.com/united-states/market-research-reports/breweries-industry/

Locations, AB InBev https://www.ab-inbev.com/our-locations/

Matesich Distributing Co., Anheuser-Busch

http://www.matesichbeer.com/anheuser-busch/

Merge High End and Brewer’s Collective https://www.brewbound.com/news/a-b-to-merge-

high-end-and-brewers-collective-sa les-teams/

Mergr, AB InBev Transactions

https://mergr.com/company/84813/transactions

National Library of Medicine, “Gender And Alcohol Consumption: Patterns from the

Multinational Genacis Project” https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2844334/

SEC, AB InBev Form 20-F

https://www.sec.gov/Archives/edgar/data/1668717/000119312521087552/d106470d20f.ht

m#tx106470_70

Statista, “Global market share of the leading beer companies in 2021, based on volume sales”

https://www.statista.com/statistics/257677/global-market-share-of-the-leading-beer-co

mpanies-based-on-sales/

Statista, “The world's leading 10 brewing groups in 2021, based on production volume”

https://www.statista.com/statistics/227197/leading-10-brewing-groups-worldwide-base d-on-

production-volume/
Stock Comparison, Macro Trends https://www.macrotrends.net/stocks/stock-

comparison?s=net-profit-margin&axis=mul tiple&comp=BUD:TAP

Sustainability, Ab InBev https://www.ab-inbev.com/sustainability/

The Bitter Tale of the Budweiser Family

https://www.npr.org/sections/thesalt/2012/12/22/166493220/the-bitter-tale-of-the-budw

eiser-family

USA Today, “Anheuser-Busch snaps up North Carolina craft brewer”

https://www.usatoday.com/story/money/nation-now/2017/05/03/wicked-weed-brewing-

anheuser-busch-partnership/309733001/

Williamsburg Yorktown Daily, “Anheuser-Busch Announces $20 Million Investment into

Williamsburg Facility” https://wydaily.com/news/2022/09/30/anheuser-busch-announces-20-

million-investm ent-into-williamsburg-facility/

Yahoo Finance, Anheuser-Busch InBev SA/NV (BUD)

https://finance.yahoo.com/quote/BUD?p=BUD&.tsrc=fin-srch
APPENDIX
Appendix 1: AB InBev’s payouts to its Board of Directors for the year 2020 (adapted from AB

InBev’s Form 20-F 2020, pages 140-141)

Appendix 2: Table of Contents, AB InBev Code of Business Conduct

Appendix 3: Table of Contents, AB InBev Code of Dealing

Appendix 4: AB InBev’s Subsidiary Structure from their Form F-4