A-B InBev Layoffs Include Marketing Jobs

Cost-Conscious Brewer Completes New Round of Layoffs

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Anheuser-Busch InBev has completed another round of layoffs at its U.S. division that include marketing positions.

The brewer confirmed the layoffs in a statement to Ad Age. "Following a detailed business review, we are reorganizing certain work that displaces some positions," said VP-People Jim Brickey. "Most of the employees impacted were notified recently. The reductions were minimized as much as possible by using open positions." He added that "we are enhancing our severance program during this time to assist those impacted as they transition out of the company."

The brewer declined to elaborate on the number of layoffs or positions involved. But a person familiar with the matter said the cuts included some brand marketing positions spanning several brand teams. Trade publication Beer Marketer's Insights, which reported on the layoffs on Wednesday, noted that there were a "number of marketing folks" involved.

A-B InBev has been known to be a financially focused, cost-conscious operator ever since the company was formed in 2008 after the acquisition of St. Louis-based Anheuser-Busch by Belgium-based, Brazilian-run InBev. The number of employees in the brewer's North American division has fallen from 21,871 at the end of 2008 to 16,852 as of the end of 2013, according to financial filings.

"This is just what they do," Eric Shepard, executive editor of Beer Marketer's Insights said about the recent layoffs. "They are constantly reassessing and one option that they have is moving people and getting people out. You would think they would eventually get to a place where that is not an option, but maybe it's always an option in a company that large."

The latest layoffs come after the brewer reported disappointing third-quarter earnings results.

In the U.S., its beer sales to wholesalers fell by 3.7%, while sales-to-retailers dropped by 1.9%, the company stated. Meanwhile, U.S. earnings before interest, taxes, depreciation and amortization fell by 7.1% in the quarter, which the brewer stated was driven by "higher distribution expenses due to increased freight rates and increased investment behind our brands."

As expected, the brewer recently eliminated jobs within its in-house media unit known as Busch Media Group, according to a person familiar with the matter. Earlier this year, A-B InBev outsourced media buying to WPP's MediaCom, which also took over media-planning duties from Publicis Groupe's Starcom, which won the assignment in 2011. Previously, A-B InBev had handled all media duties in-house.

In the statement about the layoffs, the brewer stated that "we will always be challenging ourselves to find better ways to run our business. As all businesses do, we assess our resources and workforce to assure they reflect our current business strategies and needs that will drive long-term growth. That includes the development of our new high-end business, which will help us grow in this segment of the market."

On that front, the brewer has established a Chicago office to oversee premium craft and imported beers, which have been a bright spot in the overall sluggish U.S. beer industry. The brewer has named Ricardo Marques, formerly the global ad director for Budweiser, as the new marketing VP for the high-end portfolio, which includes brands such as Goose Island, Shock Top and Stella Artois.

But the brewer's fate still rests largely on its mainstream portfolio of brands including Bud Light and Budweiser. Bud Light sales to retailers fell by 2% in the third quarter and it lost market share, the company reported. But the brand "continues to make good progress," the company stated, adding that Bud Light gained share in the "premium light" segment, which includes brands such as Miller Lite and Coors Light.

On the Oct. 31 third-quarter earnings call, one analyst noted that nine-month global volume growth was up less than 1% "despite a 100-basis-point increase in marketing and sales expenditure." Then the analyst asked CEO Carlos Brito, "How disappointed are you with this?"

Mr. Brito replied that the company increased marketing spending because "we continue to see our brands with great opportunities for them to be bigger." He also cited heavy summer spending on Bud Light, which has traditionally focused its investments in other seasons because of its tie-in with sports including the National Football League.

"The biggest brand in the U.S. was never supported in the summer … but this year, we decided to support it in the summer and guess what, the results are there. We gained one full percentage point within the the premium light segment," Mr. Brito said, referring to Bud Light.

The brand dedicated much of the summer money to its "Whatever USA" program that included taking over a town in Colorado for a weekend, which Mr. Brito characterized as a "major success."

Mr. Shepard said A-B InBev continues to spend money behind its brands in a move to boost sales volume. But when "you've got a portfolio that broad in 2014 in beer … I don't know if there is enough money or expertise out there to lift the whole boat," he added.

On the earnings call Mr. Brito offered his first extensive comments on the decision to outsource media buying, saying A-B InBev "inherited" Busch Media Group from the "old company." While BMG was "very, very good at buying sports and traditional media on TV," he suggested that it was "not as well equipped" for buying new media. WPP, he said, buys "at a better price, especially the new digital and alternative medias compared to Busch Media Group."

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