The Wehring Interview - StarBev CEO, Alain Beyens
This month, we sit down with the CEO of StarBev, Alain Beyens
It's almost two years since Anheuser-Busch InBev offloaded most of its assets in Central and Eastern Europe to CVC Capital for an initial US$2.2bn. Since the sale, CVC's beer business in the region, StarBev, has largely operated under the radar. High time, then, that we caught up with StarBev's CEO (and ex-InBev man), Alain Beyens. just-drinks deputy editor Chris Mercer flew to Prague to meet him.
It's possible that Alain Beyens bleeds beer. Not only is he Belgian, but he has worked in the brewing industry since 1987, having occupied various senior roles in Europe with what is now Anheuser-Busch InBev. It seems that he just can't leave the sector.
"When I left A-B Inbev at the end of 2009," he says, "I wanted to do something else. But that something else became beer again when [in early 2010] CVC Capital approached me to become CEO of StarBev."
When he joined StarBev, Beyens had 'form' in Eastern Europe, having had "quite an experience" as InBev's Moscow-based president for the region between 2006 and 2008. Returning to the region, I get the impression that Beyens relishes the rawness of CVC's StarBev project. "It was an attractive project, because it was not a company when I came in, it was just countries acquired by CVC," he says. "We had to build a company, we had to build headquarters. We spent a lot of 2010 sitting in spare offices."
If Beyens has a new lease of life at StarBev, then so does the brewer's flagship lager, Staropramen. "Of course, it was never a priority for A-B InBev, for the right reasons, Stella Artois, Bud and Becks had priority on Staropramen. We of course are convinced it has global potential," he says, before quickly curbing his own enthusiasm by exchanging the word 'global' for 'international', "to stay humble at the level that we are".
This sense of humility, however, lives side-by-side with bright ambition for the brand. In one breath, Beyens tells me: "We have been rolling it out in all countries in Central Europe, we have renegotiated agreements in the UK, we have found a new importer in the US, [and] as we speak we're working on 15 new markets around the world." Oh, and the brewer is "looking at Asia for 2012".
On those negotiations in the UK, why did StarBev plump for Carlsberg ahead of A-B InBev? "We decided in 2010 to go into a tender, or a beauty contest, whatever you want to call it, to see who would be the best partner to go forward. We came to the conclusion that Carlsberg offered us the best potential and they were closest to us in their thinking on the brand."
Is there also something in this about StarBev asserting its independence? Beyens says that the group is taking a pragmatic approach. "In mutual agreement with A-B InBev, we came to the conclusion that, in some markets, they were the best partner with which to work and continue to work, like in Germany, Russia and Ukraine. In other markets, we came to the conclusion that we might better separate and look for another route to market - Spain is another example."
Part of StarBev's attempt to broaden Staropramen's reach has also seen the company build an interactive visitor centre at its brewery in central Prague. The Czech capital welcomes 12m visitors per year.
CEO of StarBev, Alain Beyens
I confess my scepticism over the extent to which visitor centres can add to most businesses. "We invested a substantial amount of money and we're convinced we're going to have a real high traffic number in next few years," Beyens argues. "We believe we can generate more than 80,000 visitors per year in one to two years. If we can have a substantial amount of these tourists taking Staropramen back and talking about the brand, that pays off the investment quite rapidly."
Despite Staropramen dominating our conversation thus far, Beyens rejects any notion that StarBev is too reliant on one brand. "85% of our business is local brands," he says. "In all of our countries, we have mainstream core lager in the number one or two position in the country. On top of that, we have licence agreements for Stella Artois and Becks in Central & Eastern Europe and, on top of that, we have Staropramen. So, it's absolutely not the case that we're dependent on Staropramen."
To StarBev's core markets, then: Figures released last month by trade body Brewers of Europe show that beer consumption in Central & Eastern Europe has been hit particularly hard by the effects of the global economic downturn. A cynic could argue that A-B InBev got out at the right time.
"When the financial crisis hit," says Beyens, "these markets were of course impacted by measures - governments had to put austerity measures in place; there have been tax increases, VAT increases, currency has some impact." He thinks, though, that the region is past the worst. "2009 and 2010 were quite tough, but we now see a stabilisation of the beer industry, so we are pretty confident that, in the coming years, we will go back to having slight growth in our markets."
Still, I suggest that the economic outlook remains uncertain and point out that a number of StarBev's rivals have cut jobs in the region. How badly has StarBev felt the squeeze? "We haven't gone through any real big restructuring prgrammes," Beyens says, but adds: "We disposed of our maltings businesses because we clearly believe that it is not our core strength. Next to that, we closed down a plant in Romania, which was driven by decline of the Romanian beer industry in the last three years and, at the same time, productivity increases - we thought we could go further with one plant."
He stresses that, since its formation, StarBev has focused strongly on topline growth. "We have increased our marketing budget, increased our sales budget and increased innovation," he says. There is frothy excitement at the brewer over the early success of Staropramen Cool Lemon, a 2% abv flavoured beer launched earlier in the summer across Central & Eastern Europe.
"This year, we are going to sell more than 400,000 hectolitres of flavoured beer across Central Europe, which is quite big," he says. "In some markets, we're reaching up to 10% of volumes being new innovations in 2011, which also helps the industry. The Lemon beer is a big chunk of it. In all of our markets, it's growing double-digit." Will Cool Lemon go to the UK to take advantage of a new tax break for sub-2.8% beers? "It's too early to say."
However, he does believe that "flavours are definitely something that the consumer wants. We are convinced that we have not reached the full potential of our flavoured beer portfolio."
New products, he ventures, are key for Europe's brewers as they grapple with consumers switching out of beer and into wine and spirits. "Especially in Western Europe, the beer industry should look at itself and ask, why is it declining?" says Beyens. "Because it has been a very traditional beer market with very few innovations. Here at StarBev, when I came onboard, we clearly said that innovation is the way forward. We have to excite the consumer. We have to understand that young adults have different taste profiles today than 20 years ago.
"If you look at flavoured beer, we see that we only have 10% to 20% cannibalisation, so 80% is sourced out of other beverages, which is very good, because it means that there is an adult consumer out there who is open to new experiences."
It's inspiring stuff, but how does StarBev's private equity owner feel about all this investment in innovation? "We are very happy that CVC, as a private equity co, wants to invest in brands and people," says Beyens, naturally.
There is, however, always an endgame for private equity, which generally seeks to sell on a business for a profit within five years: We are two years down the line at StarBev. Beyens counters that "there is clearly no agenda or timeline on a potential sale of the business by CVC". But, he is realistic: "The way I look at it, whatever we do, we will strengthen the business today, so that with our actual shareholders or future shareholders we will continue to grow this business in a profitable way. That is also what CVC encourages us to do. We are growing a busines for the long-term."
He says that StarBev has "been growing our bottom line in 2010 in a declining market, and we are again exceeding expectations in 2011". Does this mean profits will rise in 2011? "Yes." By how much? "I know, but we don't talk about numbers." Well, it was worth a try.
He will say, though, that StarBev expects to return to volume growth in 2011. It sold around 10m hectolitres in 2010. "We're very happy with the results," Beyens adds.
Before arriving in Prague, I had intended to ask Beyens how he is adapting to the change of culture from public brewing behemoth to private equity. Sitting in shirt and smart jeans in StarBev's modest yet spacious offices next to the Staropramen brewery, it's clear that Beyens is enjoying himself and he talks about StarBev in terms often used to describe start-ups.
"On the similarities [with A-B InBev], we are cost conscious, we focus on cash, we focus on execution across the organisation," he says. "At the same time, being a smaller company, our communications lines are much shorter, which allows us to take much faster decisions and to react much swifter on evolutions in markets. CVC has a very fast decision process. Really only on a couple of hours basis, I can have a decision on an investment."
Officially, Beyens still lives in his native Belgium, which makes for a pretty long commute. At the same time, he appears to be revelling in the fresh start at StarBev. If it is beer in his blood, then Staropramen has got his veins pumping.
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