The New King of Beers
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Holmes Report

The New King of Beers

Interbrew’s (Belgium) merger with AmBev (Brazil) was one of the most high-profile global transactions in 2004. The combined company was re-named InBev, and formed the largest brewer in the world by volume.

Paul Holmes

Interbrew’s (Belgium) merger with AmBev (Brazil) was one of the most high-profile global transactions in 2004. The combined company was re-named InBev, and formed the largest brewer in the world by volume. The $11.2 billion transaction changed the shape of the beer industry and was covered by media outlets around the globe. Additionally, the transaction was financially complex: both companies had a number of asset swaps among core shareholders and each had perception issues to battle.

Interbrew hired Brunswick in December 2003 and tasked the firm with developing and implementing the media and investor communications strategy related to the transaction. Brunswick was retained as the communication advisor until the deal’s closing in late August.

From the outset Brunswick’s objective was to strategically position Interbrew in a way that would advantageously explain the combination to key constituencies and establish the platform for the company to be recognized as a market leader. To do this, Brunswick provided seamless, around-the-clock, corporate and financial communications advice and tactical support in New York, London, Brussels and Sao Paulo.

There were a number of factors that made the program especially challenging: this transaction attracted excitement around the globe; therefore, communicating the extraordinary complexity of the deal proved uniquely challenging and careful planning was required to effectively reach different audiences and to ensure that the transaction was understood with complete accuracy in each country, the Interbrew CEO had recently stated that he was not looking to do a transforming deal and that the company would focus on organic growth.

Moreover, as the transaction was a combination of the two companies, it was important to AmBev that the deal be reported as a merger of equals in Brazil. On face value, the transaction looked like a takeover by Interbrew. [The Brazilian regulators would not have allowed Brazil’s national champion to be taken over by a foreign national.] As a result, Brunswick had to help explain the intricacies of the transaction to ensure the deal would be reported as a combination by the media and analysts.

Furthermore, it is necessary to understand Interbrew’s recent corporate history. Interbrew was perceived as having a history of failed acquisitions and a reputation among analysts and investors for over-engaging in badly executed, highly priced deals. About to engage in another sizable and complex transaction, the company’s reputation and the credibility of its management were on the line. 

Therefore, not only was the goal of the communications plan to generate positive media coverage and position Interbrew as a market leader, it was also critical for Interbrew to build in-depth relationships with sector reporters to communicate the corporate rationale behind this deal and highlight this strategy to the company’s investors.

Several complications arose after the deal was announced, including a high-profile lawsuit from FEMSA, Interbrew’s Mexican distribution partner for the U.S. market. Citing change of control provisions in the existing Interbrew/ FEMSA contract, FEMSA tried to prevent the Interbrew/ AmBev combination from proceeding. While this was a tactical ploy by FEMSA to force Interbrew to unwind the distribution relationship under favorable terms, Brunswick developed and implemented a media campaign to ensure that the litigation was seen as a sideshow and negotiating tactic, and not a risk for the deal as a whole.

Recognizing the impact of a widely publicized transaction of this type, one that would change the competitive nature of an industry, Brunswick counseled Interbrew’s management on the strategy and implementation of the communications campaign. As part of the strategy Brunswick: positioned the company as a leader in the beverage industry, concentrated on profile-raising tactics that would be beneficial to Interbrew’s corporate reputation and inspire understanding and support within its investor base and other followers, acted as a liaison between both merging companies, negotiated compromises on a daily basis to ensure a coordinated, seamlessly implemented announcement around the world, supported Interbrew’s business objectives, including those of each geographic region, such as being sensitive to various political and consumer constituencies that the transaction affected, planned for both best and worst case scenarios regarding the possible support for the deal.

The firm also created strategies and necessary supporting documents for each. Planning included protecting the company’s reputation, regardless of the outcome of the situation with AmBev. For example, Brunswick created a thorough leak strategy in the event that rumors of the deal hit the media before the companies were ready to announce. As it happened the transaction did leak and Brunswick contained the speculation while the companies finalized negotiations.

The Brunswick team wrote all the communications materials. It was crucial for these documents to address multiple audiences in addition to the combined companies’ shareholders – Brunswick addressed the regulatory issues that arose, coordinated with both companies’ legal counsels and executive management to agree on strategic action planning, addressed political concerns that existed in various countries around the world, proactively coordinated briefing interviews for executives with the media and dealt with inquiries from around the world in a consistent fashion.

Announcement Communications: Detailed rollout for days leading up to and during the announcement over an extremely fast-paced week that took place around the world in several geographic areas. This incorporated full-day press briefings, webcasts of investor and analyst presentations, and private media interviews in Brussels, London, New York, Canada and Sao Paulo to apprise global audiences of InBev’s corporate rationale.

External communications: Involved reaching agreement with AmBev on all written documents through the process of the deal including analyst, investor and media presentations, press releases, scripts for newswire calls, thorough journalist Q&As, speaker notes, key talking points and letter to stakeholders, key messages, letter to vendors, key figures documents, structure charts and road show rollouts.

Internal communications: Planning included employee webcast, an employee FAQ, internal talking points, employee letter from management, employee presentation and leak strategy. [All translated into 22 languages for international employees,] provided the media with access to key company executives and company advisors for briefings to manage issues before media publication, after having scripted each response and trained each executive in advance, translated necessary documents into over 22 different languages.

To ensure a seamless announcement globally, Brunswick placed international advertising in financial media to ensure awareness of transaction and name change and studies have shown that an acquirer’s shareprice typically falls by 3 percent upon announcement of an acquisition. Brunswick worked to ensure that media and analyst sentiment on announcement day was supportive, thereby resulting in Interbrew’s shares closing the day higher than at the open.

Attention from around the world resulted in positive media, investor and analyst interest. Successful communication of the deal’s logic and rationale, not to mention successful management of litigation issues that arose, has moved InBev’s stock price up 26 percent, from 23 Euros (as of the day before announcement) to 29 Euros (InBev’s current valuation). InBev’s Price-to-Earnings ratio has increased to sector-leader from a sector-laggard, from 14.3 to 22.5.

In terms of media coverage, Brunswick instigated and timed major profile-raising pieces on InBev to appear at closing, in publications such as Fortune and The Sunday Times that encompassed the success of the transaction. For example, Fortune identified InBev in the headline as, “The New King of Beers”, in reference to a competitor’s tagline. In addition, working with analysts resulted in positive institutional coverage of the deal.

The tight collaboration and coordination of the legal, financial and communications teams positioned the new InBev as a clear market leader (winner) and significantly improved the company’s overall corporate reputation and investment profile. As a result, InBev is now recognized as the largest brewer in the world and the only one with a truly global presence.

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