AB InBev CEO on Adapting in the Face of Crisis

AI is transforming the world. And it starts with the right compute. ARM is the AI compute platform trusted by global leaders, proudly NASDAQ listed, Built for the future. Visit arm.com discover. Welcome to the hbr ideacast from harvard business review. I'm curt nicken. There's a common perception in business that scale slows you down, that it takes a long time to change the course of a big ship, which should be a disadvantage at a time like now, when a pandemic is forcing businesses everywhere to adapt quickly to new realities, to change course. But sometimes being a big ship gives you a view that smaller boats just don't have. Turns out that can be critical when the waters are really choppy. Our guest today is the CEO of one of the largest consumer goods companies in the world, Anheuser Busch InBev, the global brewer of Budweiser, Stella Artois, Corona, Beck's, Castle, Bramah and hundreds of other beers. Carlos Brito has been at the head of AB InBev since 2008, and he's here to talk about how he's leading it through crisis response and recovery and why seeing beer sales fall early on in China may have been one of the best things to happen to his multinational enterprise. Brito, thanks for speaking with us.

You're welcome. Thanks for having me.

One thing I didn't know before prepping.

For this interview is that the biggest market for Budweiser and Corona beers outside of their home markets is China, which was the first place affected by COVID 19. What would become a pandemic?

When did you know that you had.

A major challenge on your hands?

It was interesting to say that because in January this year, the first thing I did was I went to China. I travel a lot to visit our countries and I went to five different cities. I was there for a whole week and the first week of January and there was no talk of pandemic. Nobody was aware of it. Then I came back and 10 days later that whole thing started and the country got into a lockdown. When the Chinese New Year started, the last week of January, what did you.

First encounter and how did your operations there respond? Because as Chinese New Year happened, people started staying home on premise sales in bars, restaurants, stadiums, that kind of thing that must have dropped off.

Well, we saw, for example, in China that consumers went big time, even more to E commerce, that contactless delivery was the second one that consumers were requiring.

From companies because at home consumption was still there and rising, even.

Exactly, exactly. The occasions migrated to the homes so people could not go to Stadiums to venues, to bars, to restaurants, pubs. So all these things, or most of these things migrated to the in home occasion. And therefore the sales of our products in supermarkets went up because now instead of going out for dinner, people are having dinners at home. So the meal occasion, dinners and stuff became more prevalent at home. So that also has an implication in our product mix and SKUs and brands that people were buying during the pandemic and the lockdown. We saw consumers buy more big packs because consumers are going in and out of grocery stores. They wanted to have a quick trip in and out to be less exposed to possible infection, and they also wanted to buy bigger packs so they would have to come back for resupply less often. So we saw all that in China and we, we saw that the same thing would happen if the disease, the virus, would become a global phenomenon, which it did. So when it hit Europe, we were prepared for it. And then the Americas and Africa.

It's so interesting to talk about just one specific operational shift, right, which is changing the size of what consumers actually buy in a store and carry out. And that is something that often takes a long time to adjust, right? You're trying to supply the cartons that those go in. You're also working with the sales channels because the size of the shelves might need to be different. I know that you're a company that's famous for acting quickly and responding quickly, and you have a culture for action. But these are shifts in distribution and sales that often take companies a really long time. So how did you actually manage that?

The most important thing in our company, and we built our company based on those principles, is our culture. Our culture is all about having big dreams, hiring the best people out there, but more importantly, creating an environment that they come and stay and then provide these people an environment where they can, where the ownership mindset, as we call it, will be fostered, that people look at the company as their own company because we are the company. I always tell my colleagues that, myself and 170,000 colleagues around the world, we are AD in depth. There's no dark room with a company in there that tells us what to do. I mean, we are the company. So if we decide to do something because consumers want and we follow them or we predict where they're going, we go first. That's where the company's going. So our culture is one that thrives when urgency and action is required and whenever completely satisfied with our results. So we always want more and always focus on where consumers are going, because that's where growth is now.

A lot of this quick shifting still costs money, right at a time when, when, when revenue was dropping overall, even though yet you had growth in a lot of markets. How do you manage financial agility in such a fast changing time?

That's a very good point. So when the, when the, when the COVID crisis started, first we told our people what the five priorities were. First one, safety of our people. Second one, help the communities because we're part of the community. Third one was to stay in business to continue to operate the business because communities, most of them understood that in allowing us to operate, we could do way more than just sell our products. Even in places where we could not sell our products, we still help the community. The fourth priority was to prepare for a strong recovery. And the fifth priority was to try to understand more and more insights about what kind of consumer habits would emerge post Covid to be prepared again for it. And there was one more that was overarching one which was liquidity. So when this whole crisis started in a couple weeks, we increased our liquidity position. So now we're in a very comfortable liquidity position. So we could then go through the other five priorities which are more business related by having this priority is very clear. It helped us because then everybody in the company knew during COVID priorities were 1, 2, 3, 4, 5. And again, given that we're very action oriented, that was very important because in our company, once you show what the direction is, people really get together and.

Go, let's talk a little bit about.

This idea of business continuity. I've heard some places call this plan and act. You have to act in the moment and respond to what's happening, but you also have to plan for the new reality that's coming and the new market. Have you thought about this? Trying to respond to the crisis, but also trying to move out of it at a quick pace.

First, during the crisis we're totally focused on helping communities, safety of our people and business continuity, as you said. Then at the same time we're planning for a strong recovery. We said this lockdown will end one day and then consumers will come back to bars, restaurants, you know, traveling, all these things. And we need to be prepared for when that moment comes. And third point, we need to understand and have insights on how consumers lives will be different and how they will spend their free time and how that impacts our business. So we can be prepared for things like E commerce being more relevant, direct consumer delivery, contactless delivery being more important, bigger packs, but also social distancing in bars and restaurants and pubs when they would open. So, for example, we work with pub associations in the city hall of different cities to aligned with governance on pubs, having the license during the summer now to go and expand their footprint to sidewalks with tables, to squares, town squares, to pedestrian streets. And we try to help with other things, you know, in bars that cannot go to the sidewalks. We're working in physical separators like acrylic or plastic that can enable consumers to be closer to each other, but at the same time separated because of the physical barrier. Also, when our customers reopen after being locked down for two months, we're giving them a reopening kit with masks, hand sanitizers, gowns, gloves, because sometimes in some countries those are hard to find materials. But because again, we learned from China, we equipped ourselves, we bought on a global basis all these materials before they became scarves, because we knew it was coming and we knew those things would be in short supply.

And in some cases, you're making them too, like sanitizer.

Exactly right. We're making hand sanitizers. We're also making face shields because we have plastic injection equipment for our plastic bottles of soft drinks. So we turn them to many of those with the plastic face shields. And also we bought some equipment for mask making, the surgical masks, those blue masks. So we're also manufacturing those now in key regions of our business.

What have you been really surprised and excited to learn during this time?

Well, first, what we learned is that our partnerships and collaboration are essential, have always been, but in the crisis, even more so, we partner with communities to help in whichever way we could. Also, we partner with governments. There is a country in Latin America in which the president of the of the country went on national TV to talk about the steps that the government was taking to help the community and the citizens, and mentioned our company because we were involved in the logistics of getting medicine and food to more remote areas with our trucks that were idle, collaborating with our customers to help them weather the lockdown by, you know, putting on social media platforms that reach a lot of consumers. The option they had to support their favorite pub by buying a voucher at a discount, so when the pub reopened, they could redeem that for food and drinks. And the other thing is that consumers are also more and more interested in what companies and brands are doing for the world around us. So, you know, we have a very strong sustainability platform. And around water, farming, packaging and energy. And all those things, I think became even more relevant, like health and wellness. People said, hey, If I'm healthier and the pandemic like this hit, I have more of a chance of being more able to fight that thing. And the same with our world. I mean, if our world is a better world in the sense of being more sound environmentally speaking, that can only be good, you know, so if the water is clean and available, for example, think about water. Water is the first thing to do. I mean, if you don't wash your hands, you know, there's no way you can fight this pandemic. So. But water is not available to millions of people around the world. So one of our pillars of our sustainability goals is all about water stewardship. So making sure 100% of our communities in high stressed areas will have measurably improved water availability and quality. Yeah, and we do the same with circular packaging. We want our package to be recycled, mostly out of recycled material. And climate action, we want our purchase electricity to be 100% coming from renewable sources. And we are already at 60% only two years into this journey. Very proud of that. And I think consumers will have added that more and more.

What is the uncertainty hard for you or the company in any way? I mean, obviously no one likes uncertainty, but was there a time when it was too difficult or you weren't prepared to act quickly?

What we do always is that we try to focus on the things we can control and for the things we cannot control. Like I think most companies, we have scenarios and trigger points, right? So we have scenarios. For example, now everybody's talking about the V, shape recovery, a U or an L. So we also have scenarios for different markets because different markets will recover at different speeds. And so we have V, U. Well, scenarios and we have clear trigger points that will trigger different action plans. So, you know, for example, if countries start reopening in bars and restaurants are only 50% back, that triggers a whole set of actions. If 100% of the restaurants come back, but they are only with 50% occupancy, how can we help them stay in business that trigger another set of actions? So for things we control, we know what to do. For things we don't control, we have scenarios and trigger points.

I've heard you talk a lot about bringing consumers together and serving them in their new demands and just their daily routines. How have you managed that at a company level for your employees? Certainly in operations, you've had to limit how people work together. But you also have offices around the world and I haven't heard you mention that that transition's been very difficult. Has that been an issue for you?

No, first, I mean, our operations were running the whole time in the majority of our markets. So our supply and logistics people did an amazing job of being able to adopt protocols to be able to operate in a safe way. And we owe them a big gratitude because they were committed to our clients, committed to our consumers, committed to our company and trying to bring some normalcy so consumers could go to a grocery store and find the brands that they're used to buy. So in a very abnormal world, we thought our role was to bring some normalcy by having our brands available, you know, in the channels that consumers were shopping so they could feel a little bit like they could still access things that they like and they were important for them. So I think that was a big part of it in our offices. We, a lot of our offices around the world have already reopened, not all. And we reopened again from the learnings we had from China in a phased approach with sanitation, with separation social distancing, with fewer people so doing like shifts. So sometimes different functions will come to the office. Some other times other functions will come to the office. So again, safety of our people is number one. And one thing we were surprised is that with technology we're able to work at home during the lockdown in a very efficient way. Of course, it doesn't replace the office interactions, but I think like everybody else, we're all very surprised to see how technology was able to bridge the lack of physical presence and we're able to be in touch with our people to do town halls also help people because some people were becoming a bit depressed sometimes or becoming fearful of what was next. So we also put a lot of services in which people could access in terms of mental support because some people sometimes were not in their. They were expats, live in a different country and they were locked down. They didn't know exactly what to do. They were beginning to feel a bit fearful about what was next. And we tried to support our people the best way we could and technology was a big part of that.

What have you been learning now from this experience that tells you what that post Covid world is going to look like?

I think first it's important to say that we've conducted consumer research during the lockdowns and it's amazing to see that around the world. If you ask consumers what you intend to do once the lockdown is over, the answers are very similar. Everybody wants to see friends and family, be physically with them. Everybody wants to go to restaurants, pubs and bars. Their you know preferred places to go and have the experiences they so much miss. Everybody wants to go back to traveling, to get to know new places. Everybody wants to go back to venues, to sports, music, culture. And this is what we do as a business, our business to be there with our consumers in all those things, you know, so we think consumers are going to go back to some of their pre Covid habits. Of course they're going to be more careful, and we're trying to help our pubs and restaurants to open in a safe way. We think it will be some time for consumers go to a live concert where everybody's packed in the stadium, or to sports where everybody's very close to each other in the bleachers. Maybe it will take some time for travel to be 100% as it was pre Covid because again, some people that are more at risk will avoid planes and hotels and airports. But on the other hand, people want to have their lives back. We're not. We're social animals. We need to be together with other people. We need the physical contact. We need to go to that bar that we love to eat that food that we love. You cannot eat the same thing every day at home. And we need to travel. You know, everybody's tired of eating the same thing, you know, because we can only cook two or three things. And we need to travel, get to know different people, different places. So I think the human beings, the genetic makeup of a human being and the way we are wired will prevail, and consumers will go back to things we all love to do. But depending on which group you are, this will be faster or this will be more cautious, and it would be more of a delayed comeback. Until there is a vaccine or a treatment that people can rely on, people will continue to be more cautious. But what we see is that consumers want to go back to their normal lives and go back to the things they love. And that's where our business thrives, when they go back to things they love, because that's where our products interact with our consumers.

As a leader, how do you model behavior for the teams at the company?

Well, a couple of things. First, I mean, the way to spread our culture is by personal example. You have to do what you say. You have to live the culture that you ask other people to live by. So our culture is very simple. Our people is our greatest asset. We also foster this idea of ownership. So people are empowered to run the company as their own company.

Is that hard for you sometimes to.

There must be a part of you that wants to jump in and advise a decision or recommend a decision or help in some way.

I mean, we do talk a lot. I mean, being in touch with others is part of our culture as well. So we do talk a lot. So if somebody wants to pick somebody else's brain, that's totally okay. So if somebody wants to call me and say, britto, we're thinking about building a hospital with two other companies in Brazil and in other countries in Latin America. What do you think about? It's going to require this much people involvement, this much money, but it's something that community is in need. I say, okay, well, it's your decision. Go do it. I agree. I think it's a good decision. But again, the guy didn't ask me for permission. He was just speaking my mind on if there was a different angle to help the community or if I had learned from some other country in our footprint something new that could be applied there. But if it's something that I have nothing to add to or, you know, it's his or her decision to do it. The other thing is that we take no shortcuts. So we've been in business since 1366. So since the 14th century, more than 600 years in business, we intend to be another 600 years in business. And when you have that kind of idea that you want to be in business forever, you have to understand that at times you have to forget your P and l, you have to forget other metrics and do what's needed because it's a crisis. This crisis will only come every hundred years, we hope, but when it comes, everybody is in a tight spot. And if you have something you can do to help our people first, but then the community, then our customers, and then our consumers, we should do it.

Brito, this has been really great to hear what you've done. Thanks for coming on the show to talk about it.

Well, thank you for having me and have a great day.

That's carlos brito. He's the CEO of anheuser busch inbev. This episode was produced by Mary Dew. We get technical help from Rob Eckart. Adam Buchholz is our audio product manager. Thanks for listening to the HBR IdeaCast. I'm Kurt Nickish.

Sam.