AB InBev — man of steel

AB InBev president Stuart MacFarlane tells Phil Mellows about his determination to build brands and focus on being a global brewer.

In the week when it was announced that Tetley's was leaving Leeds, for one drinks industry blogger it was the decline of Bass that remained British brewing's "greatest shame". Whether it's as the world's first trademark, an iconic image for painters, or simply as a nice pint of beer, there are many who would agree.

So what about Stuart MacFarlane? Doesn't the president of Anheuser-Busch InBev UK (AB InBev), the man with the future of Bass in the palm of his hand, feel a twinge of dismay about what's happened to the brand?

Amiable, relaxed, easy to like, bespectacled and surprisingly youthful, at the mention of Bass there is a glint of steel in MacFarlane's eye. Suddenly you see why he was chosen to lead the biggest brewer in the world.

"I wouldn't say we've neglected Bass, nor Boddingtons," says the one-time Boddies brand manager. "Both those brands have a strong equity, there is an emotional attachment to them. But we don't see them in future growth, so they're not a priority.

"Through all the cultural changes I've been through from Whitbread to today, I've learnt that you have to act as a global brewer first, then put that into the local context, rather than the other way around.

"Our focus is on Budweiser, Beck's and Stella, and I'm not apologising for that. I'm happy to say to the regional brewers, you take control of the cask-ale business — you do it better!"

He laughs off the suggestion that might follow — that Bass could be sold to a brewer that could do it better.

"It's the world's number-one trademark!" is the obvious argument against that.

You have to concede that AB InBev is better at lager. The big brewers, though, are having to contend with increasingly tight margins, partly due to the buying power of the supermarkets and the pubcos.

"The margin challenge is massive," says MacFarlane. But he maintains a strict agnosticism when it comes to some issues that might affect it, like the pubco tie or minimum pricing.

"We'll work within the rules, whatever they are. My job is to sell beer, to build brands. The only thing I'd take a hard line on is taxation. That won't solve any of the issues; it can only make things worse. Axe the Tax was the best industry campaign for a long time — it's not often you can get the big brewers to come together with Campaign for Real Ale (CAMRA) on a common cause!"

MacFarlane insists strongly on that common cause, and believes it's the overriding problem all sides of the industry face.

"Everyone is getting squeezed and it's the Government that's doing it. The tax they have imposed on beer in the past couple of years is significantly greater than any supplier's increases.

"In 2008 there was an 11% duty increase passed on to pubs, and that must be three times more than any manufacturer's price increase. And in 2009 the duty increase was 2%, when inflation was pretty nearly negative!

"So that's the biggest contributor to this squeeze, and it's tough on everyone. There are a million jobs relying on the pubs and leisure industries and there's £10bn in revenue to the Government, and they'll destroy that if they're not careful."

Political lobbying aside, there are things, MacFarlane believes, that brewers and pub operators can do.

Focus on premiumisation​

He recognises that it's going to be difficult to reverse the volume decline in the beer market, so for AB InBev the focus is on premiumisation. And you've got to hand it to them for the job they're doing with Beck's Vier and Stella 4% — standard strength lagers that are able to command premium prices; the "core-plus" category as he calls it.

"This is the only country where premiumisation is based on alcoholic strength. We see how the rest of the world works, and it's about what a brand stands for. Now we're seeing here that the premium credentials of Stella and Beck's can give licensees a premium of 5% to 10% on the bar.

"It's a fact that, across the country, Beck's Vier averages a 9% premium over a core standard lager.

"It's a very deliberate strategy on our part. It's our role in the market to push premiumisation, and it's something pubs should be doing, too.

"If I were a licensee I'd focus on three things — cask ale, bottled ciders and core-plus lagers, products you can make a premium on. The amount you can put on the price will be different depending on the type of pub, but premiumisation and innovation represents an opportunity for all."

Isn't he worried that cheap supermarket prices are undermining that strategy?

"Our business is about balance. I sell beer to both the on and the off-trades and that means I need to be very clear that I provide brands and brand formats that are effective for our customers. We don't control price, but we can control pack format and brand priorities. We don't sell much Beck's Vier in supermarkets, for instance."

Pubs are "critical" to AB InBev's UK business, MacFarlane emphasises.

"At the moment we have an even balance between on-trade and off-trade. It's moving to the off, but that's been going on for years. And without pub distribution it's still extremely difficult to develop a new brand."

His company's global perspective can help the pub trade improve, he believes, not just in category management and premiumisation of long drinks, but in overall best practice. "We've seen what works around the world."

"But it's not all up to us," he continues. "It's as much up to pub operators. The pub industry has to raise its game."

Benchmark set by coffee shops​

Coffee shops and chain restaurants have set new benchmarks in standards, service and range, he argues, benchmarks that customers expect pubs to reach, too.

"Some are responding," he says. "There are some brilliant entrepreneurial licensees out there. Licensees have to determine what their pub stands for. To my mind the best development in pubs in the past 10 years has been the gastropub. I dine out in pubs now. Those entrepreneurs have taken a risk, but they know what their pub stands for.

"Some community boozers are doing well, too. But there are pubs that are doing nothing about responding to these turbulent times. They have got to understand, we're not just sailing through choppy waters, we're white-water rafting.

"I hope the pub trade will survive — and not just because my job depends on it. Nobody does pub culture like the British. I go all over the world, and from America to China the place to go is the British pub.

"It's the sociability and the community. The pub — and the post office — are at the core of the community in Britain and both are under pressure.

"For me the pub isn't just a place that sells beer, it's a meeting place, somewhere to meet and talk and have a laugh. So the threat is not just to the pub, it's to the whole community."

And for a moment, there, the steel softens in Stuart MacFarlane's eye.

My kind of pub​

"There's the kind of pub I'll go to with my wife, a pub with a separate restaurant with a good range of beers and great food, that's female and family-friendly, such as the Red Lion at Brafield, in Northamptonshire.

"Then there's the kind of pub I'll go to with the lads, to wind down. I've got the World Cup in mind. There has to be a great atmosphere and screens everywhere — even in the toilet — so I don't miss a minute of the game.

"Fortunately there's a pub near me that does that — the Sir Pickering Phipps in Northampton."

Key dates​

1992​ — After graduating from Sheffield University, MacFarlane joins Whitbread Beer Company as a finance manager, and later becomes brand manager for Boddingtons

1998​ — Brand director for Stella Artois

2002​ — Managing director for InBev in Ireland

2004​ — Managing director for off-trade

2006​ — MacFarlane joins InBev's global headquarters in Brussels, where he's responsible for the brewer's sales strategy worldwide

2008​ — A