Interbrew S.A.

views updated May 21 2018

Interbrew S.A.

Vaartstraat 94
B-3000 Leuven
Belgium
Telephone: +32 (16) 24-71-11
Fax: +32 (16) 24-74-07
Web site: http://www.interbrew.com

Public Company
Incorporated:
1988
Employees: 25,500 (2000 est.)
Sales: EUR 7.303 billion (2001)
Stock Exchanges: Brussels Euronext
Ticker Symbol: INTB
NAIC: 312120 Breweries; 312111 Soft Drink Manufacturing

With operations on every continent on the globe, Belgiums Interbrew S.A. ranks second among the worlds brewing companies behind only Anheuser-Busch and first in its home country, with brewing operations in 26 countries and sales in over 120. The company emerged as a top European brewer in the late 1980s, when two Belgian brewing families merged their closely held, centuries-old interests to form Interbrew. Under the direction of a succession of CEOs, the firm advanced from the middle ranks of the global beer hierarchy to the upper echelon via the US$2.7 billion acquisition of Canadas John Labatt Ltd. in 1995. This was followed by other acquisitions, notably major U.K. brewers Bass and Whitbread in 2000, and major German brewer Becks in 2001. Also in 2000, the company issued an initial public offering (IPO) and began trading on the Euronext Stock Exchange in Brussels.

Interbrews strategy for growth has contrasted sharply with that of the beer industrys Big Three. Anheuser-Busch, Heineken NV, and Miller Brewing Co. all focus on pushing their flagship brands throughout the world, while Interbrew has grown by acquiring leading national and regional brands, then investing in production and promotion to increase those beers sales. In 2002, the companys stable of brands included Hungarys Borsodi Sor, Mexicos Dos Equis, the U.S.s Rolling Rock, Canadas Labatts Blue, the U.K.s Bass and Whitbread, and Germanys Becks, as well as a host of smaller brands from countries all over the world. Interbrew has been cashing in on this cadre of specialty beers by exporting select brews, including its own Stella Artois, from one region to another.

Origins and Development

Interbrew was formed through the 1987 union of the Artois Brewery, owned by the de Spoelberch clan, with the Van Damme familys Piedboeuf Brewery. Artois traced its history to the late 14th century, when the Den Horen Brewery was established in Louvain, Belgium. This business was acquired and renamed by master brewer Sebastien Artois in 1717. It is not clear when the de Spoelberchs assumed ownership of the company, which retained the Artois moniker throughout the remainder of the 20th century. The Piedboeuf family brewery, on the other hand, was established in 1853 and acquired by Albert Van Damme in 1920.

Both companies undertook programs of European expansion through acquisition in the late 1960s, and even joined forces in 1971 to effect the joint purchase of a third Belgian brewery. The multi-brand strategy developed over the course of three decades, as both companies bought competitors in the Netherlands, France, Italy, and Belgium, yet retained these new affiliates disparate brewing heritages and brands. This policy fostered the development of two families of truly distinctive beers. Stella Artois enjoyed a legacy that extended back to 1366, Leffe Blond was brewed in a tradition that could be traced to a mid-13th-century Belgian monastery, and Hoegaarden was a white beer with more than 500 years of history behind it.

When Artois and Piedboeuf merged in 1987, the joint owners hired Jose Dedeurwaerder to rationalize operations. A citizen of both Belgium and the United States, the new CEO shed inefficient plants, won concessions from organized labor, and invested heavily in the newest brewing technology. His efforts nearly tripled overall productivity, from 2.5 hectoliters (66 gallons) per hour in 1990 to 6.5 hectoliters (172 gallons) in 1995. In spite of these apparent successes, Dedeurwaerder abruptly resigned in early 1993. He was succeeded by Hans Meerloo.

Interbrew continued to pursue its strategy of growth through acquisitions in the early 1990s. The company achieved full ownership of Belgiums Belle-Vue Brewery and Hungarys Borsodi Sor brand beer in 1991. These acquisitions provided insight about Interbrews multi-brand strategy. The firm groomed Belle-Vue for export to the French market, targeting this cherry-flavored wheat beer at women. A reinvigorated advertising campaign helped sell 8 percent more Borsodi Sor in its first year under new management. Interbrew continued to penetrate Eastern Europe with the 1994 acquisitions of Rumanias Bergenbier and Croatias Ozujsko. Although some analysts viewed Interbrews burgeoning cadre of international beers as a liability, others noted that the companys connoisseur brands accounted for over one-fourth of its net income and only 13 percent of sales. While vital to Interbrews overall strategy, all the companys late 1980s and early 1990s acquisitions paled in comparison to the events to come.

Interbrew Emerges as a Global Brewing Powerhouse in the 1990s

By the early 1990s, Interbrew was Europes fourth largest brewer, with US$2 million in sales and distribution throughout 80 countries. While impressive, the companys owners and executives realized that its status as a middling brewer on the global stage threatened its profitability and competitiveness. Furthermore, the companys core European market was showing signs of decline. Specifically, per capita beer consumption on the continent slid 6 percent in the early 1990s as the result of health concerns and more stringent drunk driving legislation. Interbrews erratic fiscal results reflected this troublesome trend, as annual sales vacillated from a high of BFr 59.1 million in 1991 to 1992 to a low of BFr 48.7 million in 1993 to 1994. As a result, Interbrew started seeking a way to penetrate the all-important North American beer market. This was not an easy task: Anheuser-Busch and Miller commanded a combined total of two-thirds of the U.S. market, leaving the rest of the industrys competitors to fight over the dregs.

But Interbrew got a couple of very important breaks in the mid-1990s. First was a market trend that saw craft beers and imports chalking up double-digit sales increases as consumers sought out unique tastes. But even more importantly for Interbrew, an overall consolidation of the global beer industry put Canadas John Labatt Ltd. into play in 1995. Gerald Schwartzs Onex Corp. soon launched an uninvited attempt to take over Torontos John Labatt Ltd. for US$2.3 billion. Labatt CEO George Taylor put out a summons for a white knight that was answered with a personal response from Interbrew CEO Hans Meerloo. By midyear, Interbrew was able to bring a successful C$2.7 billion (US$2 billion) offer for Labatt, with particular interest in Labatts international holdings. The deal was also structured so that Labatts non-brewing enterprises, including broadcasting interests, could be sold off afterward; company spokesman Gerard Fauchey told Mcleans in June 1995: Were brewers, not managers of hockey or baseball teams or television stations.

Although some industry observers thought the price, at 14 times cash flow, was steep, Interbrew CEO Meerloo perceived several valuable factors in the deal. Chief among these was Labatts extensive North American distribution system, which could be used to peddle the parent companys trendy European brands throughout the United States and Canada, particularly the flagship Stella Artois brand. Labatts patented process for making ice beer held out the potential for increased brand differentiation, global licensing revenues, and cost reductions, not to mention the fact that Labatts flagship brand ranked second among Canadas beer labels, with a 45 percent market share. Significantly, Labatt was also Canadas most profitable brewer. Finally, the new subsidiarys multi-brand strategy (50 beers exported to 40 countries) meshed well with Interbrews own program. As then President Hugo Powell of Labatts told Mcleans in June of 1995: Right from our first two-hour meeting, we saw that our companies shared many values. We realized we had a chance to get a committed, patient owner who could provide great growth potential. The acquisition brought with it a 22 percent stake in Mexicos Dos Equis brand, which boasted a 45 percent share of that countrys market, as well as Americas Rolling Rock brand. The merger nearly doubled Interbrews annual revenues and advanced it from 15th among the worlds brewers to fourth.

Interbrew maximized the purchase of Labatt by spinning off what it considered extraneous activities that were significantly less profitable than the core brewery operation. These included Labatt Communications Inc., which encompassed a francophile sports network, the Discovery Channel, and BCL Entertainment (involved in concert promotion). The company also sold its 20 percent share of Canada Malting Co. to ConAgra Inc. and expected to divest itself of the Toronto Argonauts football team, the Toronto Blue Jays major league baseball club, and its 42 percent stake in the Toronto SkyDome. These sales of these assets was expected to net US$1 billion and helped reduce the US$1.6 billion debt accumulated in the friendly takeover. However, it was not until 2000 that Interbrew was able to sell the Toronto Blue Jays, when Canadian cable company Rogers Communications made a bid in July of that year. The deal closed with Rogers acquiring an 80 percent stake in the team, with Interbrew retaining 20 percent.

Company Perspectives:

We consider our brand portfolio to be our key asset. Brand image is a critical factor in a consumers choice of beer. Brand promotion and advertising are essential tools to build brand image, market share, and turnover. We strive to grow and maintain our market share by positioning and promoting our brands clearly and consistently as core, premium, or specialty brands across all their markets; although internationally we may position a brand that is a core brand in its home market as premium or specialty. Our main marketing objectives are to promote a domestic lager brand to be our primary brand in each market, to support this primary brand with at least one other brand in our portfolio, and to enhance Stella Artois status as an international brand. Brand cycles are very long with beer brands being built over the course of many years and brand strength often lasting for decades. We intend to continue to invest heavily to maintain and enhance our brands.

It seemed that CEO Meerloos two-year term in office had been highly successful. Not only did he elevate Interbrew to the upper echelon of the brewing industry, but he was also credited with more than doubling the corporations net margins via an early 1990s reorganization. The BFr 20 billion program cut costs and reinvigorated marketing across the board, thereby doubling profits from BFr 1.3 million in fiscal 1992 to BFr 2.7 million in fiscal 1994, despite a 17 percent reduction in annual revenues over the same period.

Notwithstanding these achievements, the Van Dammes and the de Spoelberchs were apparently unhappy with the Labatt price tag. Represented by board members Viscount Philippe de Spoelberch and Alexandre Van Damme, the families apparently blamed Meerloo, who resigned in the fall of 1995. A 1995 Forbes article asserted that Interbrew is now without a clear leader. Johnny Thijs in Europe and Hugo Powell in Canada are chief operating officers who report to Chairman Paul De Keers-maeker a crony of the owners. Some analysts have cited dissension among the de Spoelberch and Van Damme factions for the high turnover in the chief executive office.

Following the Labatt acquisition, Interbrew was reorganized into two primary divisions. One focused on Europe, Asia, and Africa, while the other concentrated on the Americas. Interbrew began importing its Stella Artois to the Peoples Republic of China via joint ventures formed in 1994 and 1996. The company hoped to establish a strong foothold in what was expected to be the worlds fastest-growing consumer market of the 21st century. The continuing decline of European beer consumption and subsequent price wars not only encouraged Interbrews expansion outside the Continent, but also fueled the divestment of some European interests. In 1995, for example, Interbrew sold its Italian affiliate, Moretti, to Heineken NV. The company also revealed its plan to divest its limited mineral water and soft drink interests and use the proceeds to reduce debt. In 1999, Interbrew revamped operations into one global structure.

Dominated by Labatt, the Americas division focused on rationalizing the newest operations into Interbrews global beer family. In his first annual report, Hugo Powell, now division COO, emphasized globalization, cost-cutting, fortification of brands, and capital investment as keys to this business future.

The Labatt purchase began an ongoing period of expansion through acquisition for Interbrew, as over the next seven years the company began buying breweries large and small, always with an eye toward that brewerys market share in its home country. These included a 67 percent stake in Bulgarias Bourgasko Pivo, 80 percent of Bulgarias Astika, 50.8 percent of Ukraines DESNA, 62.5 percent of Bulgarias Pleven Brewe, a merger with Russias Sun Brewing Ltd. to create Sun Interbrew, a majority stake in Bosnias Uniline, 81.4 percent of Ukraines Rogan, 40.8 percent of Slovenias Pivovarna Union, a full acquisition of Germanys Diebels, and several more. By the year 2000, the company had brewing operations in 23 countries, up from only four a decade before. Now Interbrews chief executive since 1999, Hugo Powell told the London Financial Times in September 2000 that The beer industry is consolidating fairly rapidly and will continue to do so. By operating as a local brewer and achieving the scale of an international business we get the best of both worlds. Interbrew at this point ranked third worldwide, behind Anheuser-Busch and Heineken. Also in 2000, Interbrew made its entry into Fortune magazines list of most admired companies in the beverages category, ranking at number 10.

During the same period, Interbrew turned its attentions to the North American market, introducing its Stella Artois brand in New York late in 1998. A subsequent rise in popularity in Belgian food and beer in general in New York City made conditions favorable for Interbrew to import its many specialty brands, encouraged at least in part by promotional efforts from the company itself, including one involving renown Belgian chef Herwig Van Hove in late 2000. Interbrews move into North America came at an opportune time; a 1996 article in Country Living magazine noted that the U.S. craze for microbrews in the 1990s had opened the door for foreign imports, which U.S. beer drinkers were now ready to try. It seemed that Interbrews strategy of buying specialty beers and shipping them around the world was perfect for such an environment.

Key Dates:

1717:
Sebastien Artois acquires and renames the Den Horen Brewery.
1853:
The Piedboeuf Brewery is founded.
1920:
The Piedboeuf Brewery is acquired by the Van Damme family.
1987:
The Artois Brewery and Piedboeuf Brewery combine to form Interbrew.
1991:
Interbrew acquires Belle-Vue Brewery in Belgium and Borsodi Sör beer brand in Hungary.
1993:
The company disposes of Coca-Cola Bottling SA subsidiary.
1994:
The company ceases operations in Africa, and makes several key international acquisitions; begins to sell Stella Artois in China.
1995:
The company acquires John Labatt Ltd.; CEO Hans Meerloo resigns.
1996:
Interbrew sells Moretti SpA to Heineken and Labatt Brewing U.K. to Whitbread Beer Company; forms joint venture with Femsa Cerveza SA de CV (Mexico).
1999:
The company acquires interests in Bosnia and Russia; Hugo Powell becomes CEO; Beer.com, a promotional web site, is launched.
2000:
The company acquires brewing operations of Whitbread PLC and Bass PLC; issues an IPO and begins trading on the Euronext Brussels exchange; is raided by the European Commission along with several other breweries in a cartel investigation.
2001:
Interbrew is fined for participating in a secret cartel from 1993 to 1998.
2002:
The company sells the Carling portion of Bass to Adolph Coors Company and closes the deal to acquire Becks.

Interbrews two major acquisitions, however, were the U.K.s Bass, and Germanys Becks. In early 2000, Bass had 25 percent of the U.K. market while Whitbread, a competing brand, had 15.8 percent. Both companies were up for sale that year; at the same time, Interbrew announced its plans to go public before the end of the year. By June, Interbrew had acquired Whitbreads brewing business for £400 million (US$590.9 million) and Bass brewing operations for £2.3 billion (US$3.5 billion). Both companies had elected to sell their brewing businesses in order to concentrate on leisure and hotel industries, leaving Interbrew with a controlling share in the U.K. beer market. For this very reason, however, the deal raised regulatory concerns, and the U.K. Competition Commission threatened to force the sale of Bass to a government-approved buyer in January 2001, not long after Interbrew issued its IPO. Interbrew sought a judicial review of the case, and was rewarded in May 2001 when the British High Court overturned the commissions decision, claiming that Interbrew had been treated unfairly. Nonetheless, Powell told the London Financial Times in June 2001 that We have assumed from January that we would be faced with a disposition and that the disposition would be Bass in the UK. The situation was eventually resolved when Interbrew agreed to sell Bass Carling brand to Coors, the U.S.s third-largest brewer, for £1.2 billion (US$1.75 billion). At the end of the shakeout, Interbrew retained a 20.6 percent share of the British beer market.

Another threat to Interbrews IPO plans was an investigation by the European Commission into alleged price-fixing by the company. In March 2000, inspectors from the European Commission raided the headquarters of several major European breweries, including Interbrews Netherlands office. The purpose of the investigation was to determine the existence of a cartel in the European beer market because, as a spokesperson for the Commission stated in the London Financial Times: There are a number of countries where the beer market is dominated by two or three big players, but it is not always the same players in each market. The move was part of a wave of new antitrust measures in various industries across Europe, prompted by the move to a single currency and, thus, a more unified market where price-fixing could have farther-reaching consequences. The Commissions antitrust commissioner, Mario Monti, was quoted in Business Week as saying, We now have a single market and need a new competition policy. In October the Commission accused both Interbrew and Alken Maes of operating illegal cartels, and in December 2001 fined both companies, as well as two others, for their participation in secret cartels from 1993 to 1998. Interbrews cooperation with the Commission, however, won it a reduced fine, from 10 percent of its turnover to EUR 46.5 million (US$30 million).

Despite these complications, Interbrew went through with its IPO, which allowed it to pursue a broader range of financing possibilities than would be available to a privately held company. The London Financial Times quoted CEO Powell in its April 26, 2000, edition: The listing will be the start of a new era. Access to external funds is a major advantage which will optimise Interbrews acquisition opportunities. In addition, proceeds from the IPO would help pay off the incurred debt from the Bass and Whitbread acquisitions. By November some details of the IPO were available: 88.2 million shares, or roughly 21 percent, would be made available in December. Chairman Paul De Keersmaeker was quoted in the November 9 edition of The New York Times as saying that expansion on the international level is vital for our company, as Interbrews strategy all along had involved the movement of local brews into other markets. The IPO, issued on December 1, 2000, was valued at US$2.5 billion.

Within six months, Interbrew had its eye on its next major acquisition: privately owned Becks. As one of Germanys biggest breweries, with 2000 sales of around US$800 million and operations in 120 countries, Becks represented an attractive opportunity for the rapidly expanding Interbrew. Although its Bass purchase was still in question, in July 2001 Interbrew emerged as the front-runner to acquire Becks, and in August beat out competing offers from Scottish & Newcastle and Anheuser-Busch with a deal worth £1.1 billion (US$1.58 billion). Powell called the deal a unique opportunity to buy a global brand in the London Financial Times, adding, We dont see any comparable brand being available for acquisition for the next three to five years. The deal met with criticism in the financial community where concerns were raised that as Stella Artois and Becks brands competed with each other, the new acquisition meant that Interbrew would be competing against itself. The deal also raised competition concerns similar to those attending the Bass purchase, this time from the European Commission which was already investigating the company for illegal price-fixing. However, the Commission cleared the deal in October 2001, and it was finalized in early 2002.

While Interbrew focused on new acquisitions, it also concentrated on local operations worldwide, including the opening of themed Belgian Beer Cafe bars. By mid-2001, 31 such bars were in operation across Europe and in the United States, Australia, and New Zealand. In September of the same year Interbrew took over distribution of Guinness and Kilkenny beers in France with an eye toward increasing Guinness market share in that country. At the same time, the company embraced a more global marketing strategy, including the launch of a non-brand-specific web site for beer lovers, Beer.com, in 1999. In 2001 the company announced its intentions to issue a compilation CD associated with the site with selections chosen from over 1,600 submissions received during that years Rolling Rock Battle of the Bands contest.

Interbrews strategy seemed to be working. In 2001 the company claimed a 63 percent rise in profits, to EUR 200.2 million (US$177.7 million), with a 56 percent rise in overall sales. Entering 2002, it looked very much as though Interbrew intended to continue its strategy of global acquisition and local branding as rumors circulated that its next purchase would be South African Breweries, an acquisition that, if completed, would make Interbrew the second largest brewer in the world behind Anheuser-Busch. By January 2002, Business Week had observed that Interbrew was now a serious contender with Heineken for the number two spot and was in second place in terms of volume.

Principal Subsidiaries

Astika (Bulgaria; 82%); Bass Beers Worldwide Italy; Bass Beers Worldwide Spain (34%); Bianca Interbrew Bergenbier (Romania; 51%); Borsodi Sörgyar (Hungary; 97%); Brasseries de Luxembourg (26.5%); Brasseries Stella Artois (France); Brauerei Diebels (Germany); Burgasko (Bulgaria; 74%); Cerveceria Cuauhtemoc Moctezuma (Mexico; minority share 30%); Chernigiv Brewery Desna (Ukraine; 51%); Guangzhou Zhujiang (China; 45%); Industrija Piva I Sokova Trebjesa (Yugoslavia; 64.8%); Interbrew Asia Pacific (Singapore); Interbrew Belgium; Interbrew Efes Brewery (Romania; 50%); Interbrew Nederland; Interbrew U.K.; Jingling Breweries (China; 60%); Kamenitza (Bulgaria; 70%); Labatt Breweries of Canada; Labatt USA (70%); Marina Hemingway (Cuba; 50%); Nanjing Breweries (China; 80%); National Distribution Company (Romania; 56%); Oriental Brewery Company Ltd. (South Korea; 34%); Prazké pivovary a.s. (Czech Republic; 77%); Proberco (Romania; 77%); Sun Interbrew Russia (34%); Staropramen Slovakia (34%); Uniline export-import d.o.o. (Bosnia; 51%); Zagrebacka Pivovara (Croatia;66%).

Principal Competitors

Anheuser-Busch; Heineken; Molson.

Further Reading

The Adventurous Life of the Belgians, The Economist, June 10, 1995, p. 56.

And the Winners Are , Fortune, October 2, 2000, p. 191 +.

Another Interbrew Purchase, East European Markets, February 16, 1996.

Barrington, Stephen, Belgian Brewer Interbrew Supports Beer Lovers Site, Advertising Age, November 1, 1999, p. 54.

Beirne, Mike, Interbrew Sings Praises of Beer.com, Brandweek, August 13, 2001, p. 40.

Belgian Blast, Cheers, November 2000, p. 14.

Belgians Take Off out West, Beverage World, June 1992, p. 10.

Big Brewer Comes Out of Shadows, Wall Street Journal, June 28, 2000, p. A14.

Bilefsky, Dan, Belgian Brewers Accused of Operating Cartel, Financial Times (London), October 3, 2000, p. 9.

, Interbrew IPO Is Four Times Subscribed, Financial Times

(London), November 30, 2000, p. 31.

, Interbrew Keeps a Clear Head: Regulatory Concerns Fail to Dent Brewers IPO Confidence, Financial Times (London), October 30, 2000, p. 38.

Brewer Wins Court Ruling, New York Times, May 24, 2001, p. Wl.

Brooks, Christopher, Country Living, July 1996, pp. 128-.

Buckley, Neil, Interbrew to Fund Deals with Listing, Financial Times (London), April 26, 2000, p. 30.

Bulgarian Beer Finds Buyers, East European Markets, June 9, 1995.

Business This Week, The Economist, June 17, 2000, p. 5.

Carlings Sale Signals the Start of Big Shake-Up for British Brewing, Grocer, February 9, 2002, p. 52.

Clarke, Hilary, Belgiums Strong Drinks, International Management, June 1992, pp. 62-64.

Commission Fines Belgian and Luxembourg Brewers for Market-Fixing, European Report, December 8, 2001, p. 345.

Consolidation in Beer Industry Increasing, Modern Brewery Age, July 10, 2000, p. 28.

Daykin, Tom, Miller Brewery Taps into Foreign Markets, Milwaukee Journal Sentinel, December 4, 2000.

Dombey, Daniel, Interbrew Still Assumes Forced Disposal of Bass, Financial Times (London), June 13, 2001, p. 24.

Dombey, Daniel, Adam Jones, and Bettina Sener, Interbrew Swallows Becks for GBPl.lbn, Financial Times (London), August 7, 2001, p. 23.

European Beer Market Consolidates, Beverage Industry, June 13, 2000, p. 6.

Freddy Heinekens Recipe May Be Scrapped, Business Week, January 28, 2002, p. 56.

Gibbens, Robert, Interbrew Sells Labatt Communications to Management-Led Group, Financial Times (London), July 18, 1995.

Gibbens, Robert, John Labatt Agrees to $2 Bill Takeover by Interbrew, Financial Times (London), June 9, 1995.

Guerrera, Francesco, and Daniel Dombey, Brussels Clears Interbrew to Swallow Becks, Financial Times (London), October 27, 2001, p. 17.

, Brussels Raises Concerns Over Interbrew Deal, Financial

Times (London), October 15, 2001, p. 29.

Guinness Deal, Marketing Week, September 6, 2001, p. 35.

Guinness Signs Distribution Agreement with Interbrew for France, European Report, September 5, 2001, p. 600.

Hargreaves, Deborah, Inspectors Raid Large Breweries, Financial Times (USA), March 25, 2000, p. 2.

Interbrew, Liquid Foods International, October 1999, p. 9.

Interbrew Acquires 40.8% of Pivovarna Union (Slovenie) After IPA, European Report, January 30, 2002, p. 600.

Interbrew Bags Ukrainian Brewer, Corporate Money, January 31, 2001, p. 4.

Interbrew Buys Beck, Beverage Industry, September 2001, p. 11.

Interbrew Buys 62.5% Stake in Bulgarias Pleven Brewe, European Report, February 17, 1999.

Interbrew Circles Over SAB, Grocer, December 1, 2001, p. 6.

Interbrew Co-operation Wins It a Reduced Fine, Grocer, December 8, 2001, p. 12.

Interbrew Develops Global Structure, Duty-Free News International, November 15, 1999, p. 13.

Interbrew Finalises Acquisition of Diebels, European Report, September 12, 2000, p. 600.

Interbrew Finalises Acquisition of German Brewers Beck, European Report, February 13, 2002, p. 600.

Interbrew Programme, Marketing Week, August 23, 2001, p. 28.

Interbrew Sells Carling to Coors for GPB1.2 Billion, European Report, January 9, 2002, p. 600.

Interbrew Still Thirsting for Fresh Acquisitions in Its Quest to Consolidate the Worlds Beers, Financial Times (London), September 27, 2000.

Interbrew to Take Counter Measures on British Ban, Xinhua News Agency, January 4, 2001.

Interbrew to Use Acquisition to Build Brands in Ukraine, Euromarketing, September 17, 1996, p. 2.

International Briefs: Interbrew to Invest in Russian Brewer, New York Times, April 6, 1999, p. C4.

Invasion of the Cartel Cops, Business Week, May 8, 2000, p. 130.

Jones, Adam, Interbrew Ordered to Sell Carling, Financial Times (London), September 19, 2001.

Kelly, Brendan, Rogers Makes Pitch for Blue Jays, Variety, July 24, 2000, p. 21.

Khermouch, Gerry, Interbrews Star, Stella, Makes Quiet N.Y. Entry, Brandweek, October 12, 1998, p. 8.

, Labatt Shuffles U.S. as Interbrew Charges In, Brandweek, June 12, 1995, p. 3.

Leaked SAB Bid Document Doctored, Africa News Service, December 3, 2001.

Macklem, Katherine, The Blue Jay Play: In the Name of Convergence, Ted Rogers Buys Torontos Ailing Baseball Team, Macleans, September 11, 2000, p. 34.

Meller, Paul, Anonymous Interbrew Takes on the Kings of Beer, New York Times, August 12, 2001, sec. 3, p. 4.

, Big Belgian Beer Maker Posts 63% Rise in Profit, New York Times, September 6, 2001, p. Wl.

Moreira, Peter, Coors Grabs Carling from Interbrew, The Daily Deal, December 24, 2001.

Munk, Nina, Make Mine Hoegaarden, Forbes, December 18, 1995, pp. 124-126.

Oram, Roderick, International Company News: Heineken Confirms Moretti Purchase, Financial Times (International), February 27, 1996.

Parker-Pope, Tara, Beer Consumption in Europe Wanes in Wake of a Widespread Recession, Wall Street Journal, February 21, 1995, p. A13.

Parry, Diane, Bass Sale Closes Brewing Chapter, Leisure Week, June 29, 2000, p. 8.

Raabe, Steve, Coors Officials Tout Potential of $1.7 Billion British-Brewery Purchase, Denver Post, December 28, 2001.

Ratner, Juliana, Francesco Guerrera, and Charles Pretzlik, Interbrew Eyes Whitbread and Bass, Financial Times (London), April 29, 2000.

Robertiello, Jack, New York Goes Belgian, Cheers, July-August 1999, p. 20.

Saigol, Lina, and Peter Thai Larsen, Interbrew Leads Race for Becks, Financial Times (London), July 24, 2001, p. 21.

Swift, Melanie, Whitbread Dumps Beer for Leisure, Leisure Week, June 1, 2000, p.l.

Symonds, William C., and Linda Bernier, A Belgian Brewers Plans Come to a Head, Business Week, June 19, 1995, p. 56.

Tagliabue, John, Still Growing, Brewing Giant to Sell Shares, New York Times, November 9, 2000, p. Wl.

Vlessing, Etan, Rogers Catches Blue Jays in $122 Million Play, Hollywood Reporter, September 5, 2000, p. 32.

Voyle, Susanna, and Charles Pretzlik, Decision Leaves Industry Shaken, Not Stirred, Financial Times (London), January 4, 2001.

, Interbrew Buys Bass Round for GPB2.3bn, Financial Times (London), June 15, 2000.

Whitehouse, Christine, and Simon Robinson, Biz Watch, Time International, December 10, 2001, p. 16.

Whitfield, Bruce, Timothy Wood: Global Market Report, Africa News Service, January 29, 2002.

Willis, Andrew, The Winning Brew, Macleans, June 19, 1995, pp. 44-45.

, A Bidding Battle: Labatts Sale of Hot TV and Sports Assets Draws a Crowd, Macleans, June 26, 1995, pp. 24-25.

April Dougal Gasbarre

update: Genevieve Williams

Interbrew S.A.

views updated May 23 2018

Interbrew S.A.

Vaartstraat 94
3000 Leuven
Belgium
+ 32(16)24-71-11
Fax: +32(16)24-74-07

Private Company
Incorporated: 1988
Employees: 13,237
Sales: BEF 81.4 billion (1995)
SICs: 2082 Malt Beverages; 2086 Bottled and Canned Soft Drinks; 5181 Beer& Ale; 5149 Groceries and Related Products, Not Elsewhere Classified; 6719 Holding Companies, Not Elsewhere Classified

With operations on every continent on the globe, Belgiums Interbrew S.A. ranks fourth among the worlds brewing companies and first in its home country. The company emerged as a top European brewer in the late 1980s, when two Belgian brewing families merged their closely-held, centuries-old interests to form Interbrew. Under the direction of a succession of chief executive officers, the firm advanced from the middle ranks of the global beer hierarchy to the upper echelon via the US$2.7 billion acquisition of Canadas John Labatt Ltd. in 1995. Interbrew continued to be privately held into the mid-1990s.

Interbrews strategy for growth has contrasted sharply with that of the beer industrys Big Three. Anheuser-Busch, Heineken NV, and Miller Brewing Co. all focus on pushing their flagship brands throughout the world, while Interbrew has grown by acquiring leading national and regional brands, then investing in production and promotion to increase those beers sales. By 1995, the companys stable of brands included Hungarys Borsodi Vilagos, Mexicos Dos Equis, Americas Rolling Rock, and Canadas Labatt Blue. Interbrew cashed in on this cadre of specialty beers by exporting select brews, including its own Stella Artois, from one region to another.

Origins and Development

Interbrew was formed through the 1987 union of the Artois Brewery, owned by the de Spoelberch clan, with the Van Damme familys Piedboeuf Brewery. Artois traced its history to the late 14th century, when the Den Horen brewery was established in Louvain, Belgium. This business was acquired and renamed by master brewer Sebastien Artois in 1717. It is not clear when the de Spoelberchs assumed ownership of the company, which retained the Artois moniker throughout the remainder of the 20th century. The Piedboeuf family brewery, on the other hand, was established in 1853 and acquired by Albert Van Damme in 1920.

Both companies undertook programs of European expansion through acquisition in the late 1960s, and even joined forces in 1971 to effect the joint purchase of a third Belgian brewery. The multi-brand strategy developed over the course of three decades, as both companies bought competitors in the Netherlands, France, Italy, and Belgium, yet retained these new affiliates disparate brewing heritages and brands. This policy fostered the development of two families of truly distinctive beers. Stella Artois enjoyed a legacy that extended back to 1366, Leffe Blond was brewed in a tradition that could be traced to a mid-13th century Belgian monastery, and Hoegaarden was a white beer with more than five hundred years of history behind it.

When Artois and Piedboeuf merged in 1987, the joint owners hired Jose Dedeurwaerder to rationalize operations. A citizen of both Belgium and the United States, the new CEO shed inefficient plants, won concessions from organized labor, and invested heavily in the newest brewing technology. His efforts nearly tripled overall productivity, from 2.5 hectoliters (66 gallons) per man-hour in 1990 to 6.5 hectoliters (429 gallons) in 1995. In spite of these apparent successes, Dedeurwaerder abruptly resigned in early 1993. He was succeeded by Hans Meerloo.

Interbrew continued to pursue its strategy of growth through acquisition in the early 1990s. The company achieved full ownership of Belgiums Belle-Vue brewery and Hungarys Borsodi Vilagos brand beer in 1991. These acquisitions provide insight in to Interbrews multibrand strategy. The firm groomed Belle-Vue for export to the French market, targeting this cherry flavored wheat beer at women. A reinvigorated advertising campaign helped sell eight percent more Borsodi Vilagos in its first year under new management. Interbrew continued to penetrate Eastern Europe with the 1994 acquisitions of Rumanias Bergenbier and Croatias Ozujsko. Although some analysts viewed Interbrews burgeoning cadre of international beers as a liability, others noted that the companys connoisseur brands accounted for over one-fourth of its net income and only 13 percent of sales. While vital to Interbrews overall strategy, all the companys late 1980s and early 1990s acquisitions paled in comparison to the events to come.

Interbrew Emerges as a Global Brewing Powerhouse in the 1990s

By the early 1990s, Interbrew was Europes fourth-largest brewer, with $2 million in sales and distribution throughout 80 countries. While impressive, the companys owners and executives realized that its status as a middling brewer on the global stage threatened its profitability and competitiveness. Furthermore, the companys core European market was showing signs of decline. Specifically, per capita beer consumption on the continent slid six percent in the early 1990s as the result of health concerns and more stringent drunk driving legislation. Interbrews erratic fiscal results reflected this troublesome trend, as annual sales vacillated from a high of BEF 59.1 million in 1991-1992 to a low of BEF 48.7 million in 1993-1994. As a result, Interbrew started seeking a way to penetrate the all-important North American beer market. This was no easy task: Anheuser-Busch and Miller commanded a combined total of two-thirds of the U.S. market, leaving the rest of the industrys competitors to fight over the dregs.

But Interbrew got a couple of very important breaks in the mid-1990s. First was a market trend that saw craft beers and imports chalking up double-digit sales increases as consumers sought out unique tastes. But even more importantly for Interbrew, an overall consolidation of the global beer industry saw Canadas John Labatt Ltd. put into play in 1995. Gerald Schwartzs Onex Corp. soon launched an uninvited attempt to take over Torontos John Labatt Ltd. for US $2.3 billion. Labatt CEO George Taylor put out a summons for a white knight that was answered with a personal response from Interbrew CEO Hans Meerloo. By mid-year, Interbrew was able to bring a successful US $2.7 billion offer for Labatt.

Although some industry observers thought the price, at 14 times cash flow, was steep, Interbrew CEO Meerloo perceived several valuable factors in the deal. Chief among these was Labatts extensive North American distribution system, which could be used to peddle the parent companys trendy European brands throughout the United States and Canada. Labatts patented process for making ice beer held out the potential for increased brand differentiation, global licensing revenues, and cost reductions. Not to mention the fact that Labatts flagship brand ranked second among Canadas beer labels, with a 45 percent share. Significantly, Labatt was also Canadas most profitable brewer. Finally, the new subsidiarys multi-brand strategy (50 beers exported to 40 countries) meshed well with Interbrews own program. The acquisition brought with it a 22 percent stake in Mexicos Dos Equis brand, which boasted a 45 percent share of that countrys market, as well as Americas Rolling Rock brand. The merger nearly doubled Interbrews annual revenues and advanced it from fifteenth among the worlds brewers to fourth.

Interbrew maximized the purchase of Labatt by spinning off what it considered extraneous activities that were significantly less profitable than the core brewery operation. These included Labatt Communications Inc., which encompassed a Francophile sports network, the Discovery Channel, and BCL Entertainment (involved in concert promotion). The company also sold its 20 percent share of Canada Malting Co. to ConAgra Inc. and expected to divest the Toronto Argonauts football team, the Toronto Blue Jays Major League Baseball club, and its 42 percent stake in the Toronto SkyDome. Company spokesman Gerard Fauchey told Macleans Andrew Willis that Its very simple. Were brewers, not managers of hockey or baseball teams or television stations. These sales of these assets was expected to net US $1 billion and helped reduce the US $1.6 billion debt accumulated in the friendly takeover.

It seemed that CEO Meerloos two-year term in office had been highly successful. Not only did he elevate Interbrew to the upper echelon of the brewing industry, but he was also credited with more than doubling the corporations net margins via an early 1990s reorganization. The BEF 20 billion program cut costs and reinvigorated marketing across-the-board, thereby doubling profits from BEF 1.3 million in fiscal 1992 to BEF 2.7 million in fiscal 1994 despite a 17 percent reduction in annual revenues over the same period.

Notwithstanding these achievements, the Van Dammes and the de Spoelberchs were apparently unhappy with the Labatt pricetag. Represented by board members Viscount Philippe de Spoelberch and Alexandre Van Damme, the families apparently blamed Meerloo, who resigned in the fall of 1995. A 1995 Forbes article asserted that Interbrew is now without a clear leader. Johnny Thijs in Europe and Hugo Powell in Canada are chief operating officers who report to Chairman Paul De Keersmaekera crony of the owners. Some analysts have cited dissension among the de Spoelberch and Van Damme factions for the high turnover in the chief executive office.

Following the Labatt acquisition, Interbrew was reorganized into two primary divisions. One focused on Europe, Asia, and Africa, while the other concentrated on the Americas. Interbrew began importing its Stella Artois to the Peoples Republic of China via joint ventures formed in 1994 and 1996. The company hoped to establish a strong foothold in what was expected to be the worlds fastest-growing consumer market of the 21st century. The continuing decline of European beer consumption and subsequent price wars not only encouraged Interbrews expansion outside the Continent, but also fueled the divestment of some European interests. In 1995, for example, Interbrew sold its Italian affiliate to Heineken NV. The company also revealed its plan to divest its limited mineral water and soft drink interests and use the proceeds to reduce debt.

Dominated by Labatt, the Americas division focused on rationalizing the newest operations into Interbrews global beer family. In his first annual report, division COO Hugo Powell emphasized globalization, cost-cutting, fortification of brands, and capital investment as keys to this businesss future.

Interbrew shifted the end of its fiscal year from September 30 to December 31 in 1995, and therefore counted 15 months in its 1995. This new accounting made it difficult to compare that years performance to either the previous years or future years results. Nevertheless, the company claimed BEF 81.4 million in 1995 sales, an 84 percent increase over fiscal 1994. Profits of BEF 3.5 million bested the preceding years mark by 29 percent.

Principal Subsidiaries

Interbrew Belgium; Interbrew Netherlands; Interbrew France; Labatt Brewing U.K.; Labatt Retail U.K.; Birra Moretti SpA (Italy).

Principal Divisions

Interbrew Americas; Interbrew Europe-Asia-Africa.

Further Reading

Belgians Take Off out West, Beverage World, June 1992, p. 10. Clarke, Hilary, Belgiums Strong Drinks, International Management, June 1992, pp. 62-64.

Khermuch, Gerry, Labatt Shuffles U.S. as Interbrew Charges In, Brandweek, June 12, 1995, p. 3.

Munk, Nina, Make Mine Hoegaarden, Forbes, December 18, 1995, pp. 124-126.

Parker-Pope, Tara, Beer Consumption in Europe Wanes in Wake of a Widespread Recession, Wall Street Journal, February 21, 1995, p. A13.

Symonds, William C, and Linda Bernier, A Belgian Brewers Plans Come to a Head, Business Week, June 19, 1995, p. 56.

Willis, Andrew, The Winning Brew, Macleans, June 19, 1995, pp. 44-45.

, A Bidding Battle: Labatts Sale of Hot TV and Sports Assets Draws a Crowd, Macleans, June 26, 1995, pp. 24-25.

April Dougal Gasbarre

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