Anheuser-Busch vs Miller - Fighting the Crocodile | 6

Audible subscribers can listen to all episodes of Business Wars ad-free right now. Join Audible today by downloading the Audible app. It's summer 2003 and in Milwaukee, a man with a thick gray mustache is showing Miller's marketing team their latest TV ad. The ad's called "Cathite" and it lives up to its name. On the TV, two women are tearing off each other's clothes and fighting about whether Miller's life tastes great or is less filling. The team think it's great, not least because it sparked accusations of sexism that have got people talking about life for the first time in years. Demand hits the pause button on the DVD. He's Norman Atomy, the new South African boss of Miller. He's scowleds at the team. That is everything that is wrong about Miller's advertising. The controversy over this commercial is completely overshadowed the return of our taste great, less filling slogan. And it is putting customers off too. Sales have lighted down 3%. The marketing team says nothing. They're getting used to hearing hard truths from their new South African overlords. A year ago, the company South African breweries bought Miller for $5.6 billion. Now it's called "SAB Miller" and it's the second biggest brewery in the world. Only Anheuser Bush is bigger. A decade ago, few would have bet South African breweries was destined for world domination. Trade embargoes on a partate South Africa meant the brewery had no choice but to focus on dominating its own market. But since the end of a partate, it's been using the profits from its stranglehold on South Africa's beer market to fund a rapid global expansion. Its growth strategy focuses on buying failing breweries and turning them around. Miller is its biggest acquisition yet and Atomy's been sent to America to fix the business. So, after scorching the cat fight ad, Atomy suggests a new direction. There's a saying in South Africa, "If you're going to fight a crocodile, you don't do it in the water." Anheuser Bush is doing very well promoting Michelob Ultra as a low-carb beer. Yet Michelob Light has even fewer carbs. That is our dry land. That is where we will fight the crocodile of St. Louis. That fall, Miller Light goes on the offensive and its timing is perfect. The low-carb Atkins diet has reached peak popularity. What would you call a refreshing beer with more taste than Bud Light and half the carbs of the fastest growing imported light? Well, you could call it the ultimate light beer or you could just call it by its name. Miller Light, Miller Light, Good Call. The ads click. For the first time in years, Miller Light's winning-back drinkers, who defected to Bud Light and Coors Light. Direct criticism of Bud Light infuriates Anheuser Bush Chairman August 3rd. He's gotten used to seeing Miller as a "has been" not a threat. So he responds by ordering an all-out attack on Miller. SAB Miller's tweaked the crocodile's tail. And now it's going to bite back. Oh, well, I'm a little bit hungry and you know what it's about to eat. You're going to have a cold, so you can't have a cold. What do you think? Listen to music and then you'll find the crocodile's tail. Which one do you think will be the best? Listen to music. The crocodile's tail. And this is Business Wars. On the last episode, Anheuser Bush beat Miller into a distant second place with iconic ad campaigns. And new products like Bud Light. But now, change is a foot. A wave of mergers and acquisitions is giving rise to new beer empires headquartered outside the US. And they all see Anheuser Bush as the one to beat. It's March 2004. And though it's early morning, the sun is already beating down as workers spread out across the bush gardens grounds. The African-themed Tampa, Florida amusement park opened in 1959 as an advertising vehicle for Anheuser Bush. And now vacationers, thrilled seekers and local families are about to get blasted with a new company message. Anheuser Bush's latest salvo in the beer war. The workers paced posters by the River Rapids ride, pound in street signs by the rollercoasters and hammer plaques to restroom walls. They carry jingoistic messages like, "SAB Miller is not American." "SAB stands for South Africa and drink American, not Miller." There's no way any visitor will miss this message. Anheuser Bush is adopting similar tactics in newspapers. It's running full-page ads dismissing Miller as the South African queen of carbs and declaring Budweiser the superior "All American" king of beers. "SAB Miller laughs it off. It declares itself the president of beers and runs ads where Bob Odin Kirk, the future breaking bad and bitter-call Saul star, represents the Miller party in a TV debate." "Miller Light has one half the carbs of Bud Light, one third less carbs than quirk light." "Miller Time." "I'm not done. And Miller Light has fewer calories than both while still tasting great." "Miller Time's Up." "Ferthermore, stop speaking. How come you won't let America hear the whole story? Who's pocket are you in?" "True this, the king of beers is getting jumpy." Miller Light's been bubbling up just as Bud Light's growth is going flat. Budweiser has been in decline for 15 years and the craft beer boom is nibbling away at its market share. And to cap it all, Anheuser Bush has just been dethroned as the world's biggest brewer. The new king is Inbev, a company born from the $11 billion merger of Belgium's inner brewer and Brazil's Ambev. It's a brewer with global reach and the owner of major brands like Bex, Labat, and Stella Artois. And at the helm of this super brewer are the three Brazilian bankers who once invited Anheuser Bush to join them in building the Coca-Cola company of beer, a beer maker with a global presence and internationally popular brews. Anheuser Bush chairman August Bush III rebuffed their offer just as he did with most opportunities for global expansion. For August III entering the international market always seemed too risky and expensive. Much better he feels to focus on ringing more dollars out of American barflies. But the US beer market is saturated and shrinking. The first wave of millennials drink less than their baby boomer parents did at their age. There's fewer of them too. Anheuser Bush's provincial outlook is a liability. And that's why August III's 41-year-old son August IV is pushing for change. It's early 2006 and August IV's just entered his father's office in Anheuser Bush's St. Louis headquarters. It's a room that smacks of a bygone age. All mahogany furnishings and a desk dominated by pins and paper rather than a desktop computer. August IV is nervous. Oh, he might be head of Anheuser Bush's domestic operations and it's CEO and waiting. But his father still holds the real power in the company. August III glances up from his desk. What do you want? August IV is used to this treatment. His father's a gruff and demanding man. August IV wishes he could make his dad proud. He still keeps every well-done note. His father sends him in his briefcase. And they don't take up much space. In his first decade at Anheuser Bush, August IV got just five such notes. So he is not expecting this meeting to go very well. Chief, I think we should form a joint venture within Bav. Become their exclusive distributor in the US. Their CEO is keen to do it and I think it would be great for our distributors and our revenue. August III frowns. That is a really stupid idea. I've met those Brazilians before. You can't trust them. A joint venture will give them insights into our operations. They're not your friends. They're our competitors. Now, drop this idea and get out. But August IV doesn't drop the idea. Instead, he waits. Nine months later, his 69-year-old father finally retires, and lets him become CEO. And with dad no longer in charge, August the Fourth resurrects his plan to strike a deal with Inbev. He presents the deal to the Anheuser-Busch Board. His father, who remains on the board, criticizes it once again, but does nothing to stop the deal getting approved. But just as August the Third warned, the joint venture is a Trojan horse that gives Inbev an insider's view of Anheuser-Busch. And for Carlos Brito, the Brazilian CEO of Inbev, that view is a revelation. Anheuser-Busch is not the lean nimble rival he expected. It's a corporation as Ponchi is Homer Simpson. Brito sees waste everywhere. The millions lavished on corporate jets, the expensive stable of Clydesdale horses, the runaway expense accounts loaded with first-class hotels, free beers, and $1,000 dinners. In stark contrast, Brito treats unnecessary expenditures like an exterminator treats cockroaches. At Inbev, all employees fly coach, stay in budget hotels and buy their own beer. Brito included. In fact, the more he sees Anheuser-Busch frittering away its money, the more convinced Brito becomes that the St. Louis beer giant is ripe for a takeover. Its February 2007 and 100 of Anheuser-Busch's top executives are at the Ritz Carlton Hotel in Cancun, Mexico. They think August 4 brought them here for a fun strategy weekend. But what they're really in for is shock treatment and to supply the voltage. He's flown in two bankers from Goldman Sachs and Citigroup. The man from Golden Sachs goes first. As the executives watch, he brings up a PowerPoint slide showing how Bud Light is losing market share to Coors Light. So if Bud Light's losing share, where is your growth coming from? He clicks to the next slide, a photo of a six pack of Corona extra. Your growth is coming from Mexico, specifically the money you make from owning 49% of Corona Brewer Group O Mudello. Without them, you're not growing. The executives are stunned. They've fallen for their own all-American hype. It never crossed their minds that they were riding on the success of a Mexican brewer. Next, Citigroup's banker delivers another wake up call. You're right for a takeover. Your first and best defense against that is becoming a well-run and efficient business. Secondly, a big acquisition could make you too expensive a target. If you buy the rest of Group O Mudello, that should do it. But whatever you do, you'd better do it fast before it's too late. The executives cannot believe their ears. Anheuser bush at takeover target? They're the king of beers for crying out loud, the biggest beer maker in America. They thought they were safe. But the dire warnings go unheated. Some executives brush them off as fearmongering by bankers looking for a big payday. Then in October 2007, SAP Miller rocks the brewing world again with another mega deal. The South African giant is forming a joint venture with Canadian American brewer Moulson Coors, a US joint venture that will bring Miller and Coors together as Miller Coors. Suddenly, Anheuser bush is up against a rival that owns 29% of the US market. Anheuser bush is still way out in front with nearly 50%. But it now faces a significantly stronger challenger. A few days after the birth of Miller Coors, August the Fourth is having dinner at an exclusive restaurant in New York City. He's here at the invitation of Georgie Lemmon, one of the three Brazilian billionaires behind Invev. August the Fourth thinks this is a, let's get to know each other date. After all, their companies do work together now. And as they finish their main course, there's nothing to suggest. August the Fourth misread the invite. They swap tails congenially. The Wierry 68-year-old Brazilian shares stories from his days as a tennis pro. August the Fourth talks about his interest in the Korean martial art of Hapkido. Then, Lemmon takes a sip of water and brings up the real reason behind this dinner. The Miller Coors deal is an interesting development. August the Fourth smiles. We see it as an opportunity. There's going to be a transition as the two corporations merge. Their employees will be worried about their jobs too. The deal should mean Miller Coors is distracted for a year or so. The Brazilian looks August the Fourth directly in the eye. Might also be a good time for Anheuser-Busch and Invev to merge. Well, I think we're doing all right. So, do you want dessert? August the Fourth thinks Lemmon's suggestion was an offhand comment, but the Brazilian was dead serious. So, as August the Fourth keeps chatting away as if nothing happened, Lemmon reaches a conclusion. Anheuser-Busch will never be a willing takeover target. For years, Lemmon and his colleagues have aspired to own Anheuser-Busch, but every appeal they've made has been rebuffed, treated with suspicion or, as it was tonight, ignored. He now sees there's only one way to own Anheuser-Busch. And that's to take it by force. I'm Leon Nefak, best known as the host and co-creator of podcasts, Slow Burn, Fiasco, and Think Twice, Michael Jackson. I'm here to tell you about my show Final Thoughts, Jerry Springer, whose name is synonymous without rages guests, taboo confessions, and vicious onstage fights. But before the Jerry Springer show became a symbol of cultural decline, its namesake was a popular Midwestern politician and a serious-minded idealist with lofty ambitions. Through dozens of intimate and revealing interviews with those who knew Springer best, I examined Springer's lifelong struggle to reconcile his TV persona with his political dreams and aspirations. Named one of the best podcasts of the year by the New Yorker and Rolling Stone, Final Thoughts, Jerry Springer is a story about choices, how we make them, how we justify them to ourselves, and how we transcend them or doubt. Listen wherever you get your podcasts, or binge the whole series at free right now on Audible. Start your Audible subscription in the Audible app. It's June 11, 2008, and August 4th, and his top team are in the conference room of the Anheuser-Busch-owned Fenton Soccer Park in St. Louis. August 4th rarely bothers going to the company's downtown offices now. In recent months, this sports facility has become his preferred workplace. The rumor is, he's slipped back into his partying ways and that he spends much of his time here, watching movies while curing his hangovers with a hair-of-the-dog approach. But this morning, at least, he seems focused. As his team help themselves to the breakfast buffet, he gets down to business. We must identify as many ways as possible to trim expenses. We have a goal, $1 billion in savings. Now they are all well aware of why the pressure is on. Three weeks ago, the Financial Times revealed that InBev is preparing for a hostile takeover of Anheuser-Busch. InBev's confirmed the report, but so far, there hasn't been an actual offer. Anheuser-Busch's advisor's figure InBev might be struggling to find lenders due to the developing banking crisis. And before InBev can secure the financing to make an offer, August 4th hopes to create a billion-dollar savings plan he can use to convince stockholders to reject an offer from InBev. Breakfast finished, the team starts bouncing ideas around. You know, I saw this sport I'd never heard of on ESPN the other day. And we're the sponsors. We've got to be able to cut some sport sponsorship, surely. The executive leading the discussion scrolls the idea on the whiteboard and red marker. Another executive jumps in. What about packaging? Yeah, we could find cheaper suppliers or a streamlined range of packages. As the team brainstorms and assistant enters the room and hands August 4th a note. It says, Inbev CEO Carlos Britos is on the phone says it's urgent. August 4th knows what this means. The hostel takeover has begun. Half an hour later, August 4th watches as the soccer park's fax machine spits out Inbev's formal offer. And it's a whopper. 46 billion dollars in cash. It's far above Anheuser-Bush's market value and designed to appeal directly to the hedge funds and speculators who own the majority of the company's stock. There's only one hope. Grupo Modelo. If Anheuser-Bush can buy them, the company's market value will swell and that means Inbev will no longer be able to afford to take over Anheuser-Bush. So over the next few weeks, August 4th and his team hammer out a deal to buy the Mexican beer giant for $15 billion. And as the talks in Mexico City progress, Anheuser-Bush's board formally rejects Inbev's offer. Inbev responds by urging Anheuser-Bush stockholders to fire the board and bring in new directors to reconsider the offer. With so much cash on the table, this will be hard for stockholders to resist. With that threat looming, the Grupo Modelo deal needs to be done and fast. It's morning on Monday, July 7th, 2008. An Anheuser-Bush board members are arriving at the spirit of St. Louis Airport in corporate jets and private helicopters. Also here is the negotiating team who spent their 4th of July weekend finalizing the buy-out of Grupo Modelo. All they need now is the board's approval and Inbev can kiss its hopes of swallowing Anheuser-Bush goodbye. As the board and negotiators file into the boardroom in the Anheuser-Bush hanger, Anheuser-Bush to arrive bearing one final board member. Officially, he's no more than a board member now, but he still wields huge influence over the business. He still sits at the head of the boardroom's U-shaped table with the chairman and his son August the 4th at his sides. After August the 3rd takes his seat, the meeting begins. Anheuser-Bush's international boss Tom Santel takes the board through the agreement line by line. The agreed price for the remaining 50.2 percent of Grupo Modelo is $15.2 billion. The negotiating team feels pretty pleased with themselves. They think they've secured an independent future for Anheuser-Bush. Everything done? August the 3rd opens that ring binder he arrived with. He's also spent the weekend working, working on how he will torpedo his son's plan. He thums through his papers for a moment and then finds the page he's looking for. He raises his head and starts firing criticisms and questions at Santel like bullets from a machine gun. The barrage shreds the plan to pieces. August the 4th sits silently unwilling or unable to stand up to his father. By the time August the 3rd is done, the Grupo Modelo acquisition is toast. The board rejects the deal. Anheuser-Bush's fate is sealed. On November 8th, 2008, Inbeb buys Anheuser-Bush for $52 billion. It's the largest all cash transaction in U.S. business history. August the 3rd walks away with more than $400 million and never explains publicly why he killed the Grupo Modelo deal. Deal done? Inbeb renames itself AB in Bev and starts hunting for savings. By summer 2011, the company has erased two and a half billion dollars of costs from its new U.S. division, more than a thousand people lost their jobs in the process. The sun has set on the empires of the Gilded Age beer kings. Today, AB Inbeb remains the world's largest beer maker. It boasts annual revenues of $55 billion and a portfolio of more than 500 beers. It's also nursing a major debt hangover from its acquisition spree. And Miller Coors? Well, it's now fully owned by Moulson Coors, a company whose revenues are less than a tenth of AB Inbebs. The fierce battle between Anheuser-Bush and Miller-Bruing ended in defeat for both. By focusing exclusively on America, they wound up easy prey to foreign rivals who ultimately were hungrier, more ambitious, and more daring. The beer wars still continue, of course. But now, it's a conflict fought on a global scale, a war where battles in Eastern Europe or China matter just as much as those in the U.S. A war where big-name loggers like Budweiser and Miller-Light are just two chess pieces. In a much bigger game. Follow Business Wars on the Audible app or wherever you get your podcasts. You can listen to all episodes of Business Wars ad-free by joining Audible. From Wondry, this has been Business Wars. Hope you enjoyed this series. I'm your host David Brown, Tristan Donovan wrote this story. Karen Lo is our senior producer and editor, Emily Frost and Donna Highams, edited this story. Our editor and producer is Jenny Lauer Beckman, sound designed by Bay Area Sound. Our executive producer is Marsha Lewey, created by Ernan Lopez for Wondry. We're going to talk about the story. It's a story about the U.S. where the story is about the world's most beautiful and the world's most beautiful. Volkswagen, NAPPY Valinta, TAKUULA. Volkswagen.