1. MScIB 2011-2012
Principles and Practices of Global Business
Home Assignment
The Impacts of
Globalization on
Company’s Strategy
and Structure
By Lucas Pederzini
Budapest, December 2011

2. Agenda
Company Overview
Global Strategy
Market Analysis
Conclusion & Final Considerations
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3. Timeline and Company Consolidation
1999
2008
2004
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4. Global Market Information
 Leading global brewer - consolidation;
 One of the top 5 consumer products
companies in the world;
 Has 4 of the top 10 selling beers;
 Six operational zones;
 116 000 employees in 23 countries;
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Source: ABInbev business at a glance webpage - http://www.ab-inbev.com/go/about_abinbev/our_business_at_a_glance

5. Regional Market Share Breakdown
Asia C&E EU
13% 7% North America
NA
35% W EU  High Unemployment;
8%  Weakness offset by organic expansion.
LatAm
37%
Latin America
 New brewery in Brazil – 2012;
• Slow down in GDP growth.
Central-Eastern Europe • Inflation rate nearing minimum wage.
 Consumption increasing in Argentina;
 Projected growth of 10% in 2012. • Revenue growth remain strong.
Western Europe
Asia
 Minor growth in 2011 and expected for 2012;
 Annual Growth of 10%;
 High Competition – Low margins.
Source: ABinbev 3rd Q 2011 Results Presentation 5

6. Global Financial Information
ABInbev General Key Results (Million US dollar) 2011 2010
Revenue 18,955.00 17,501.00
Cost of sales (8,231.00) (7,830.00)
Gross profit 10,724.00 9,671.00
Distribution expenses (1,620.00) (1,375.00)
Sales and marketing expenses (2,540.00) (2,300.00)
Administrative expenses (990.00) (994.00)
Other operating income/(expenses) 239.00 208.00
Normalized profit from operations (Normalized EBIT) 5,813.00 5,210.00
Non-recurring items (104.00) (182.00)
Profit from operations (EBIT) 5,709.00 5,028.00
Depreciation, amortization and impairment 1,375.00 1,295.00
Normalized EBITDA 7,155.00 6,440.00
EBITDA 7,084.00 6,323.00
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Source: ABInbev 2011 Report – Period ended 30 June 2011

7. Financial Information – NA and LatAm
Key Results - North America 2010 2011
Volumes (hl) 65,180.00 63,462.00
Revenue 7,662.00 7,706.00
Cost of sales (3,535.00) (3,419.00)
Gross profit 4,127.00 4,287.00
Distribution expenses (387.00) (399.00)
Sales & marketing expenses (774.00) (834.00)
Administrative expenses (285.00) (268.00)
Other operating income/(expenses) 27.00 (31.70)
Normalized EBIT 2,709.00 2,805.00
Normalized EBITDA 3,155.00 3,233.00
Normalized EBITDA margin 41.20% 42.00%
Key Results Latin America - North & South 2010 2011
Volumes (hl) 72,329.00 71,917.00
Revenue 5,524.00 6,558.00
Cost of sales (1,877.00) (2,271.00)
Gross profit 3,647.00 4,287.00
Distribution expenses (585.00) (740.00)
Sales & marketing expenses (682.00) (766.00)
Administrative expenses (299.00) (278.00)
Other operating income/(expenses) 115.00 177.00
Normalized EBIT 2,195.00 2,680.00
Normalized EBITDA 2,526.00 3,101.00
Normalized EBITDA margin 45.90% 46.50%
Source: ABInbev 2011 Report – Period ended 30 June 2011 Amounts in USD Millions, except the ones in hectoliters. 7

8. Share Price – 5 Year Progression
 Share Price: 5 years activity.
• 24/11/2008 price reached rocky bottom: EUR 12.88;
• Actual trading price at EUR 44.90.
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Source: ABInbev online share monitor system - http://www.ab-inbev.com/go/investors/share_information/share_monitor.cfm

9. Strategic Pillars
Strong
Growth
Brand relationship Cost
Of
Strengthening with Efficiency
Revenues
Consumers
INOVATION
PEOPLE & ORGANIZATIONAL CULTURE
FINANCIAL DISCIPLINE
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Source: Author (2011) and ABInbev Mission and Strategy - http://www.ab-inbev.com/go/about_abinbev/dream_people_culture/mission_and_strategy.cfm

10. Chain Value
Procurement Purchasing of Raw Material, Supplies and Fixed Assets
Technological
R&D, Product Design and Processes Design
Development
Human
Recruiting, Hiring, Training, Developing and Compensating
Resources
Infra Increase on
General Management, Finance, Accounting and IT
Structure Gross Profit
&
Inbound Outbound Marketing
Operations Service Cost Saving
Logistics Logistics & Sales
initiatives
• Call-of to • Conversion; • Warehousing; • Channels to • Installations;
Suppliers; • Assembling; • Order Market; • Repairs;
• Material • Packing; Processing; • 5 P’s; • Training.
Handling; • Maintenance. • Picking; • Customer
• Warehousing; • Shipment; Value, Cost to
• Inventory • Delivery. Consumer, Conve
Control. nience, Communic
ation;
• Sales Force
Effectiveness.
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Source: Author (2011) and ABInbev Mission and Strategy - http://www.ab-inbev.com/go/about_abinbev/dream_people_culture/mission_and_strategy.cfm

11. Double Diamond Analysis
Brewering Industrial Structure
Resources, suppliers, and NA Customers &
Distribution Channels Diamond Market Conditions
Market Consolidation
Resources, suppliers, and LatAm Customers &
Distribution Channels Diamond Market Conditions
Brewering Industrial Structure
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Source: the Author (2011)

12. SWOT Analysis
INTERNAL
Strengths Weaknesses
 Strong Governance;
 Organizational Culture;
 Lean Value Chain;
 Leading Brands;
 Possibilities for Price and Brand-Mix;
 Market Share;
 Relationship with Retailers and
Consumers.
Opportunities Threats
 Business Development on Emerging  Special Crafted Premium Brands –
Markets – such as Brazil, China, Eastern strengthening on classes A and B;
of Europe.  “Big 4” competition;
 Brand-mix.  NGO’s campaigns and pressure against
alcohol consumption;
 Financial and economical crises.
 Price of commodities.
EXTERNAL
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Source: Author (2011)

13. Global Competitiveness Analysis
 Resources Availability;
CSA  Industrial Facilities and Distribution Setup;
 Emerging Market (LatAm).
 Market leading brand;
FSA  Largest market share;
 High Competitiveness.
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Source: Author (2011)

14. Global Competitiveness Analysis
Firm Specific Advantages
Weak Strong
1 3
Strong
Country Specific Advantages
2 4
Weak
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Source: Author (2011)

15. Market Analysis – Porter’s 5 Forces
• High Capital Requirements;
• Distribution Channels;
• Economies of Scale; Low
• Taxation and Regulations.
Low
New
Entries
• Global purchasing • Drinking based in
management with local occasions;
Competition • Distribution connected
suppliers; Supplier • High Consolidation; Buyer
• Hedge strategies may to Retailers.
Power • Increase with Power
reduce market volatility higher globalization. • Variable customers
for beer companies. segments on emerging
economies.
Substitute
Products
High
• Low switching costs –
leisure activities;
Med • Growing substitute
industry –
wine, cider, spirits and 15
Source: Author (2011) liquors.

16. PEST Evaluation of Brewery Industry
Political Economical Social Technological
1. Exchange rate
1. Changes on
fluctuation;
consumption patters;
1. Market 2. Slow down of developed 1. New Products;
2. Development of
liberalization; countries economies; 2. Development of
classes B and C;
2. Legal Policies. 3. Development of Techniques.
3. Increasing trend of
emerging countries
urbanism.
economies.
Changes on global Focus on economy of
Changes on global
consumption Market prospection strategy scale by applying
consumption
behavior, opening moving towards emerging leverage of the global
behavior, increasing beer
new markets for economies. scale sales and
consumption.
global companies. operations.
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Source: Author (2011)

17. Conclusion
 Market consolidation done with correct and proper timing;
• Good evaluation of Countries and Firms advantages in NA and LatAm;
• Focus on organizational culture;
• Lean and objective Value Chain;
• Healthy financial stability.
 Company focusing on Geographical Expansion in Emerging Markets:
• Brazil;
• China;
• Central-Eastern Europe.
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18. Final Considerations – Revenues and EBITDA
North America Organic Growth
Total Volumes -3.10%
Own Beer Volumes -3.20%
Revenue -0.30%
EBITDA 3.00%
Asia Organic Growth
Total Volumes 4.70%
Own Beer Volumes 4.70%
Revenue 17.00%
EBITDA 3.70%
Latin America Organic Growth
Total Volumes 5.70%
Own Beer Volumes 2.60%
Revenue 23.60%
EBITDA 25.20%
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Source: ABinbev 1st Semester 2011 Results Report

19. Final Considerations – Geographical Expansion
Brazil
 Launching of Budweiser in 2011-2012:
• Initial distribution and seeding in Sao Paulo and Rio de Janeiro in 2011;
• Full launch campaign and national availability in 2012.
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Source: ABinbev 3rd Q 2011 Results Presentation

20. Final Considerations – Emerging Markets
China
 Growth of focus brands;
 Best practices on revenue management;
• Revenue per hl +11.7% 3Q2011 – mainly driven by brand mix and price increase.
 Lead the premium segment;
 M&A.
• 2 closed acquisitions – Liaoning Dalian Daxue and Henan Weixue Beew Group.
• Greenfields: 1 opening – Sichuan.
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Source: ABinbev 3rd Q 2011 Results Presentation

21. Thank You!
Lucas Pederzini
MSc International Business
IBS – Budapest
lucasabrantes@gmail.com
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