A new approach

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Three months into his new role as InBev UK president, Colin Pedrick is set on turning things around for the company. Hamish Champ reports.Since...

Three months into his new role as InBev UK president, Colin Pedrick is set on turning things around for the company. Hamish Champ reports.

Since becoming InBev UK president on August 1, Colin Pedrick has wasted little time in initiating an operational overview that he hopes - expects - will reposition the brewer's UK operation as a leaner, more focused and more successful outfit.

Project Neptune, a strategic assessment of InBev UK's operations, will cut a swathe through the company's cost base, a move that will result in inevitable - though as yet unpublished - job losses. Mr Pedrick has also steered a new commercial initiative for the company's sales team that in his words will focus greater emphasis on investment and innovation.

Following last year's acquisition of Brazilian brewing giant AmBev, a new global wind is blowing through the old Interbrew structure, he says, and the consequences of the new order are both apparent and welcome. "Look at the strengths of Interbrew - its marketing, its brands, its consumer knowledge and its acquisition power - then look at AmBev, which has been fantastic in its approach to cost management, cost discipline and keeping its business incredibly simple," he says. "Putting those two strengths together and picking the best of both can be a compelling force for change."

Globally, InBev has seen first half organic beer volume growth rise 5.4 per cent, thanks to good performances in Central and South America. Closer to home, however, the company has some catching up to do. According to AC Nielsen's moving annual figures for the UK on-trade July 2004 to July 2005, InBev was down 8.4 per cent.

True, everybody is suffering at the moment - Carlsberg UK was down 6.6 per cent over the same period, Coors down 1.9 per cent, Scotco, the brewing arm of Scottish & Newcastle (S&N) down 1.4 per cent, and Diageo down one per cent - but Mr Pedrick will be aiming to effect a turnaround that amounts to more than a mere quick fix solution.

Addressing InBev UK's cost base is likely to generate the greatest short-term pain, with an announcement on the restructuring programme likely in weeks, rather than months. "We've been looking at and understanding our cost base, and we've looked at ways that we can be more efficient and more effective," Pedrick says. "We've been consulting with the staff for the past four or five weeks and it's not been an easy time. It will involve job losses and the staff are on board with that. People understand our business case and the rationale."

Mr Pedrick says it was important to address the cost base issue in 2005 "so that the organisation was on board with the challenges in 2006 and had the ammunition at its disposal for those challenges". The UK operation wanted to approach next year in a positive frame of mind "with people knowing that we can be successful because of what we've got behind us".

Still, hacking away at InBev UK's cost base is only one of the major tasks that lie ahead for Mr Pedrick. Achieving growth in a declining on-trade beer market heads a daunting shopping list. "I have to lead this business and the organisation through probably the most unprecedented of changes," he says. "I've got to build a new business from a pretty good base, but we have a big set of challenges ahead of us. Standard lager growth versus that of premium lager doesn't necessarily work to our current strengths. And we've lacked innovation in the past. We have to respond better."

A parallel project to Neptune will be rolled out among the company's sales staff in the near future, Mr Pedrick says. "It's as exciting a commercial plan going forward to 2006 as we've seen here for some years." Stella Artois will be revamped, while there will be "massive investment" behind the group's other key brands.

A repositioning of Stella Artois in the on-trade is promised, one which Mr Pedrick says will "take the product to a different place". Some might argue it is there already, but for all the wrong reasons. While still able to command a premium at the bar, "reassuringly expensive" Stella Artois has suffered considerably in the take-home market, with consumers able to buy cases of the premium lager from supermarkets for less than the price of a Sugababes CD.

"The challenge with take-home pricing is the same for most major brands, not just Stella Artois," Mr Pedrick says. "We've tried to hold our pricing over the last year and we're not looking to drive the price down. But supermarkets determine the price they are going to sell our products at."

Mr Pedrick says InBev has avoided some of the excesses of price-cutting that have had an effect on premium lager. "I suspect that in a four brewer model you're going to constantly get people who are under pressure reacting to a price ticket. That's something that we're going to have deal with. It's not something that InBev will lead. We will not drive the price down, but the market will get driven down from time to time by supermarkets and a brewer or two who are struggling at a particular time for market share."

Mr Pedrick says the approach to Stella Artois in the take-home market next year will reflect the type and level of investment and approach that InBev will be introducing in the on-trade, although he is not yet in a position to go into the detail.

On the group's other brands, Mr Pedrick says the repatriation of Beck's from S&N in the summer to the InBev stable is an exciting development, one that will figure considerably in next year's strategy. Support brands won't miss out either. "There'll be some innovation on Boddingtons and Castlemaine XXXX and we'll be maintaining the kind of big level investment we've been putting behind Tennent's in Scotland, which is clearly the one area in standard lager where we prevail."

Mr Pedrick says he's very comfortable with InBev's Scottish performance, "particularly when we consider what some of our rivals are prepared to spend to try and break in. We're comfortable with our position, but we're not taking it for granted. The levels of investment in Tennent's will be significant next year".

Other speciality brands are also earmarked for support. "We've got major investment around Leffe, we're continuing to support Hoegaarden and we've just won some significant distribution with a major UK customer which will widen the distribution further of both of those brands."

Mr Pedrick considers this area a strength to be exploited. "We have a lot more opportunity than many of our rivals because we have picked up genuine beer brands around the world through recent acquisitions. The job for us is to select those world beers that we feel can add to and enhance our portfolio, but not to just become a promiscuous launcher of brands."

Meanwhile, the question surfaces of how much smaller InBev UK will be following Project Neptune. Given the process is ongoing, Mr Pedrick is cagey. "It is difficult to say publicly at the moment. But it will become more disciplined and more focused. And we'll hit those things that are important to hit and use a lot of what we generate in terms of savings to invest in the brands to grow the top line. And that's good for everyone who works at InBev UK."

Colin Pedrick CV