Carlos Brito – Creating an Ownership Culture – [Founder’s Field Guide, EP. 21]

My guest today is Carlos Brito, CEO of Anheuser-Busch InBev. AB InBev is the world’s largest brewer of beer and maintains a portfolio of hundreds of beer brands across the globe. Our conversation focuses on AB InBev’s culture of ownership, how Carlos balances organic growth with acquisitions and managing disruption as an industry incumbent. I loved hearing about Carlos’ story from growing up in Brazil to now running one of the largest businesses in the world. I hope you enjoy my conversation with Carlos Brito. For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- This episode is brought to you by Tegus. Tegus has built the most extensive primary information platform available for investors. With Tegus, you can learn everything you’d want to know about a company in an on-demand digital platform. Investors share their expert calls, allowing others to instantly access more than 10,000 calls on Affirm, Teladoc, Roblox, or almost any company of interest. All you have to do is log in. Visit tegus.co/patrick to learn more. ----- This episode is brought to you by NetSuite. NetSuite allows founders to centralize their payment systems, ditch old spreadsheets and Quickbook tools, and finally gain visibility and control over their financials, HR, inventory, eCommerce - all in one place, instantly. Whether you are doing a million in revenue or hundreds of millions in revenue - see why over 22,000 companies are using NetSuite today. Schedule your free product tour at netsuite.com/invest. ----- Founder's Field Guide is a property of Colossus Inc. For more episodes of Founder's Field Guide, visit joincolossus.com/episodes. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @patrick_oshag | @JoinColossus Show Notes [00:03:12] - [First question] - His career path and how he got to where he is today [00:11:02] - Culture building lessons throughout his career [00:14:52] - Maintaining ownership of company culture as businesses grow [00:16:47] - How and why they avoid wasted resources [00:18:49] - Why conserving resources is so beneficial for a company [00:21:18] - Spreading culture into new members of a team [00:25:26] - Lessons from managing a large portfolio of different brands [00:27:58] - Biggest mistakes he has seen within brands [00:29:38] - Navigating changes/threats in the beer industry, starting with craft beers [00:32:56] - Lessons from the production and distribution side of the business [00:36:02] - How to assess and decide to move into a new market [00:37:12] - Role of data in deciding how to allocate resources and capital [00:40:34] - The evolution of marketing over his career [00:44:32] - Implementing the meritocracy to keep the right people in the company and move them around [00:47:59] - Feedback he needed to hear [00:49:16] - How other leaders can decide on whether to focus on inorganic or organic growth [00:51:41] - What he’s most proud of from his career [00:53:13] - Passion for the product [00:54:12] - Most memorable beer in his life [00:54:56] - Kindest thing anyone has done for him

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Patrick O'Shaughnessy?

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• 0:43Patrick O'Shaughnessy?

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• 1:28Patrick O'Shaughnessy?

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• 2:12Patrick O'Shaughnessy?

  the 22,000 other companies using NetSuite right now to save time and money for your business. Schedule your free product tour right now at netsuite.com/invest. That's netsuite.com/invest.

• 2:26Patrick O'Shaughnessy?

  Hello and welcome, everyone. I'm Patrick O'Shaughnessy and this is Founder's Field Guide. Founder's Field Guide is a series of conversations with founders, CEOs, and operators building great businesses. I believe we are all builders in our own way, and this series is dedicated to stories and lessons from builders of all types. You can find more episodes at investorfieldguide.com.

• 2:49Speaker 01

  Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

• 3:14Patrick O'Shaughnessy?

  My guest today is Carlos Brito, CEO of Anheuser-Busch InBev. AB InBev is the world's largest brewer of beer and maintains a portfolio of hundreds of beer brands across the globe. Our conversation focuses on AB InBev's culture of ownership, how Carlos balances organic growth with acquisitions, and how he and his team manage disruption as an industry incumbent. I loved hearing about Carlos's story from growing up in Brazil to now running one of the largest businesses in the world. I hope you enjoy my conversation with Carlos Brito.

• 3:44Patrick O'Shaughnessy?

  So Carlos, when I first heard your story, it was at a charitable event that my wife helped put on called Reach Prep here in Connecticut, and I was so interested in your personal story that while I don't normally start with someone's personal story, I think in this case, I'd love to do so. I'd love you to begin with just a thumbnail sketch of what got you here to this point in your career. I love the path that you've taken, the things that have mattered to you along the way. Introduce us to how you got here.

• 4:09Speaker 02

  I'm originally from Brazil, from Rio, Rio de Janeiro. That's where I was born and where I spent a lot of my early years. I come from a middle-class family. My dad is a doctor, medical doctor, physician. And my mom stayed at home, typical middle-class family. And I went to engineering school. I went to Jesuit school for twelve years. And then I went to a public university, Federal University of Rio. And it was for free. I mean, you pay like five hundred bucks a year for an engineering course. So I did mechanical engineering there. After that, I went to Germany. And I worked for Mercedes Benz, a car company, for a year. And that opened up my eyes to the world. Brazil in those days was a closed economy.

• 4:52Speaker 02

  The currency was very depreciated, so it was impossible to travel, to go anywhere, at least for a middle-class family. So we didn't know much about the world. It was the first time I got this scholarship. I went there. I mean, scholarship, it was a job. I went there. And I opened up my world. So when I came back, before I start doing something on a more permanent basis, I'd like to still go study elsewhere. When I came back from Brazil, I went to work for Shell Oil as an engineer. At Shell, it was the first time I heard the word MBA, the Masters. And it was one of my friends there, two guys actually, they were applying for an MBA in the US. And I said, you know what? That's something that could fit well, because I'd like to open my horizons for engineering a bit further.

• 5:35Speaker 02

  So I started the whole process. I didn't have the money to do it. My family, so I had to go for a scholarship. In Brazil those days, there were no scholarships, no loans, nothing, very high interest rates and all that. So I got a scholarship from the Rotary Association, Rotary International, to go to Wharton or UCLA, one of the two. And I was accepted by both, so I was all set to go to one of these two schools. But then at the very last minute, one of my friends from the Jesuit school, he had gone a year before to Stanford Business School. And he would call me and send letters from there saying, Brit, you have to come here. You're applying. You have to come here. I said, no, my scholarship doesn't cover Stanford. But because he insisted so much, I applied. And I applied to Harvard as well. So four schools I applied.

• 6:16Speaker 02

  Harvard did not accept me, and Stanford did at the very last minute. So I said, man, I'd like to go to Stanford because this friend of mine tells me it's great. And in those days, in the business school rankings, US News and Report, whatever, it was number one, I think. So it would only take a Brazilian, one Brazilian per year. So I decided to go. I tried to change my scholarship. Rotary said, too late, doesn't work. And then I said, man, I have to monetize this somehow. I have to get somebody to sponsor me. I knew through a friend of a friend of a friend, there was this banker in Rio that had an investment bank, a boutique investment bank, Roger Paulo Lemon. And he would finance employees of his at the bank, he would extend a loan to employees of the bank to go pursue MBA in the US. I was not an employee of the bank,

• 7:01Speaker 02

  but I decided to try to approach him and tell my story. So, long story short, I did, we had an interview. I was very nervous for one hour. He dedicated time to my story. And he said, you know, you're working for Shell, Shell's a client of the bank. Let me get some news about your career there and stuff, some info, and I'll call you back in a week. And sure enough, he called me back, said, yeah, I got some information. The bank cannot help you, but I'm gonna help you myself. I'm gonna give you a scholarship for my first year. I was shaking on the phone and said, well, Roger, I'm not gonna be able to pay you back. He said, no, no, it's a scholarship, you don't need to pay me back. So the first year, so the second year, you have to figure out how to do it. And he said, but I want three things in return. I said, okay, what are the three things? He said, the first one is that you keep me updated, informed. In those days, no email, nothing.

• 7:46Speaker 02

  I wrote a letter for him every month for two years, and he never wrote back, but he would call back every time. Every month, I would send a letter, report, I'm taking this class, I'm doing this, I saw this article, xerox copy attached. And he would call me back, we'd talk for two, three minutes, same thing next month and so on. Second thing he said is that he said, I'd like you to help people like I'm helping you in the future if you can. And I do. So, right after business school, I came back and started helping people pursue dreams like my own. And the third thing he said is that, you don't have any obligation to come work for me after the MBA is finished, but come talk to me before you select any full-time job. And, and I did that. But what really made a difference is that on the day I went to the bank,

• 8:31Speaker 02

  he signed everything. And at the end, when I was about to leave, he said, The one thing that changed my life, he said, have you ever been in an investment bank before? And I said, no, I'm an engineer, I'm into Mercedes Benz in Germany, Shell in Brazil. He said, when are you going to Stanford? I said, in three weeks' time. He said, why don't you come here for two weeks to get to know our people and our culture? I didn't even know at the time what the meaning of culture was, you know, but I said, okay. And that made the whole difference. Because when I was there for two weeks, going from area to area, it was a small boutique bank. And I compared to the other two companies that I worked for. That place was small, everybody was brilliant and fast pacing. Decisions are being made, calls and this and that. I said, man, I would love to be part of this group one day.

• 9:16Speaker 02

  And that stuck with me. And at the end of business school, like my colleagues, I participated in different interview cycles and all that. I had seven job offers. But the only people I spoke in Brazil was with George. That was the only guy in Brazil I spoke to. All the other offers were in letterhead paper, all formal. This is your salary, your training, you're gonna be doing this, your title is gonna be doing this. And then you ask in Germany. And from Brazil, I interviewed with him and his partners. He called me one day and said, Brito, we like you very much, why don't you come work for us? I said, okay, but what am I gonna do? He said, oh, I don't know, I mean, you got two weeks here, you know the people, you come, you see what you like, you settle, you do it. That's it. I said, okay, and I'm looking at all those offers and formal offers and paper and all that.

• 10:02Speaker 02

  And I had to make a decision because the timeline was going fast. And I said, I wanted to ask you about compensation. I didn't have the courage because the guy did so much for me and I was embarrassed to ask, but at some point I had to. So every time the conversation was going to the end, I would come up with the different things just to recover and see if you would talk about compensation. He wouldn't. So at some point I said, George, I know it's not important, but I need to ask you this. What about?

• 10:27Speaker 02

  Took a deep breath. What about, uh, what about compensation? He said, compensation means salary. I said, yeah, yeah, salary, bonus, that kind of thing. And he said, oh, it's twenty thousand dollars per year. That's thirty plus years ago. And the offers I had in front of me were between eighty and one hundred. Okay? And he said, wow, twenty. And I said, oh, twenty. Okay, twenty. I said, yeah, everything else is variable. Everything else is variable, but this is the fix for you to pay rent, gas bills and everything. I said twenty. And then Fernando saw that I was a bit surprised by that. He said, Jo, because he has to move from the US back to Brazil, let's give for the first year, another five to pay for the move. I said, okay, so twenty-five for the first year, then goes back to twenty.

• 11:08Speaker 02

  I said, okay, I'll take it. Then I hang up. I said, oh, my God, twenty-five. I have a hundred in front of me, eighty in front of me, ninety in front of me. I spoke to my dad, never told him the difference in salary, but just saying I was going back to Brazil in those days when Brazil was going through a crisis. Said, you're crazy, out of your mind, you know? And then made all the difference. That's where I met my wife, by the way. She used to work for the bank. So when I got back and started working for the bank, that's how we met. And we're still married years later. So four kids, so that's great.

• 11:34Patrick O'Shaughnessy?

  I absolutely love the starting story and the hard choice to make just to get into that culture. Culture is, I think, a big part of our discussion today. Obviously, the entire ecosystem around you is famous for its culture. You described a little bit with a few adjectives there, what it felt like for that two-week period. But I'd love you to talk about what you've learned about culture building as you've moved through your career and the distinct form of culture that you and your partners bring to bear at AB InBev.

• 12:03Speaker 02

  What I learned from my senior partners from day one is that companies are formed by people. It's an obvious thing, but people forget about it. So in a lot of places, you hear people saying, what are they gonna do? What's the company gonna do in this kind of situation we're facing? And people forget that companies are really a group of people that have a consumer mind, somebody who's gonna pay for your services and products at the end of the day. That's why you exist, because you solved their problems somehow. And a group of people that have some basic values that are important for them, relevant to them. And they work together as a group because they believe in the same values. And they're excited about the consumer mission. And they're consumer centric and all that. So we learned from day one that the only sustainable competitive advantage any company could have

• 12:47Speaker 02

  was really the quality and the talent and the engagement of its people. That's it. Everything else is accessory. And everything else is a product of these people and the values they have. And the values we call culture. So in our company, for example, we've always had what we call the ten principles in our website. And in short, it's about dream, people and culture. So we say life's too short for you to waste time with small things. Let's think big. Let's have a purpose in what we're doing. Let's do something that can be transformation, impactful. We can look back years from now and be proud that we're part of that group that did something meaningful. So think big is the first one. For you to think big and have big dreams, you need great people.

• 13:30Speaker 02

  Because only great people can take something that's a dream, an idea, and get it and realize it. Put it in practice. So this idea of invest time so you can attract the very best. And more important than attract, you can retain them because you create an environment where things that are important for them are there. So they can stay here for the long term. And that connects to the third piece, which is the culture summarized, which we call ownership. So this idea that owners make better decisions because it's their money, their company, as compared to executives and professionals. Owners join companies to get that dream and make it real. And professionals join companies to stay for three years to build their resume,

• 14:14Speaker 02

  not to build the company and its mission. So from day one, we said, okay, what's important are the people we can attract, retain, develop, deploy, and the values set, the culture that they all share. Because especially as the company grows, you cannot have oversight of all the operations around the world. That company has amazing products that consumers love is because the people in that company understand where consumers are going, what they need to make their lives better. And you get that insight and you transform that into a product or a service. If you're able to be very efficient is because the people that manage that process have operational accidents in mind as a value and they want to pursue that because they think that wasting resources is a bad idea.

• 14:59Speaker 02

  We have no planet B. We only have this planet we live in. And if you can be efficient, why be inefficient? But some people don't think about that. They just think about, okay, let's get this done no matter how we do it. And some of the people say, no, let's get this done with the best quality in the most efficient way we can so we don't waste precious resources and we minimize the impact we have in the communities where we operate.

• 15:24Patrick O'Shaughnessy?

  What have you learned about maintaining the ownership part of the culture as a company gets as big as yours is? I understand the ability to do so in the early stages of a business with an early partnership and everyone's truly an owner in size. What have you learned about keeping that concept alive as a business has many divisions? It's global, it's everywhere. How do you maintain the ownership culture?

• 15:48Speaker 02

  That's a very good point because we have 170,000 people around the world in all continents. But what we learned from day one is that what makes you an owner is not shares or equity or options that you get. Actually, only 1% of our people have equity participation in the company. We give us incentives. We like to think that 100% are owners and things are not perfect. There are people that don't feel like that. As time goes by, either they become an owner or they're not going to fit somehow. But ownership is this idea, is this mindset you have that this is our business, this is our company. I want to be proud of what I'm doing here. And you give people freedom to own the business that they're responsible and charged of.

• 16:32Speaker 02

  That gives people that ownership mindset because they are empowered to take decisions, to make decisions, to take risks and to manage that business as their own business with accountability, of course, with rules, of course, but with also freedom to operate within a framework. And many other things we do to get people that idea that this is our stuff. If somebody's not an owner, you can give them equity or anything, that person will remain a known owner. If the person is an owner, as the person progresses in the company, at some point you give them equity that reinforces an existing ownership mindset, but it doesn't create that mindset. So this is something that we have very present in our mind.

• 17:13Patrick O'Shaughnessy?

  I absolutely love the flipping of that order, right? You would think that getting shares makes you an owner, but I love that it reinforces it. It's so fascinating. The other key thing you said there, and it obviously is tied to the ownership mindset, is this concept of wasted resources. People will be familiar probably with zero-based budgeting, the idea of constantly assessing how you're allocating capital, how you're spending the company's money. This is a very unique aspect of you and your partner's business. Can you walk me through the how and the why of avoiding wasting resources?

• 17:43Speaker 02

  This is hand in glove with the ownership mindset. Think about this. When we deal with our own money, that's hard to earn. We all know that. It's hard to earn money. So when we deal with our money in our household, when we travel with our families, we always look at the cost benefit of things, right? We say, okay, should I go every day to a five-star, seven-course meal with my family? Or should I do this every now and then, but not every day? Should I stay in a five-star hotel? Should I fly first class? We do things if you can afford comfortably, but you always try to have that common sense of judging things. If the company is yours and you're an owner, you do the same thing at the company. The problem is that a lot of people have a dual life. They have a life when they get home

• 18:27Speaker 02

  and they are efficient with their resources because it's their money. But when they come to the company to work, to the office, the company is rich, the company is big. What difference it makes if I turn off the light? What difference it makes if I do this better? If I don't travel first class, I travel business or I travel economy for a tour trip? For the company, it doesn't make any difference. Well, it does. Because if everybody thinks like this, the moment you get people that ownership mindset, you start doing at the office what you do at home. And then efficiency comes naturally. The same way you turn off the light when you exit your bedroom at home, we expect people to turn off the lights when they leave the room. It's what you do at home. So we're not asking anything that's outside

• 19:09Speaker 02

  of this world, anything that's torture. No, we're just asking people to use common sense. And that comes with ownership. The moment you understand that this is our company, you do what you do at home. And then efficiency comes naturally.

• 19:22Patrick O'Shaughnessy?

  Are there tactics or strategies that help reinforce that behavior or show people that why that way of operating is not just better, but also frees up resources for growth elsewhere?

• 19:32Speaker 02

  You answered it. The moment to tell people, guys, we have to go where consumers are going. The more efficient we are with things that consumers don't value, are not buying, will not buy more of, will not pay a premium for, and put money behind things that they value. And that's the distinction we do, we make between non-working dollars and working dollars. Non-working dollars is everything you spend in the company, and you need some of those expenses that consumers don't care, are not willing to pay a premium for. Working dollars is everything that supports what you're doing that consumers value. So for example, if you're in a very luxurious office, this is something that will drag your resources, but consumers don't care because when they buy a product off the shelf,

• 20:17Speaker 02

  they don't care if your office is here, there, anywhere. So you're spending money that you could be putting towards sports that they love, music that they love, arts that they love, broadcasting things, streaming things for them, and you're wasting your luxurious office. Does that mean we have bad offices? No. That's totally the opposite. We're people that value how tough it is to make money. So when we spend, just like in our household, we spend with care. So offices are always very comfortable, very well located. But are they over the top? No. Why? Because we don't believe it's necessary. I remember when I was interviewing people many years ago when we came to New York.

• 21:01Speaker 02

  I remember I got a guy that read in our website that we're very efficient and cost-conscious. And the guy came to the interview and said, oh yeah, no, I understand that. Because the company I'm in these days, it's New Jersey, and our office is terrible. You know, the rugs are all tearing apart. We have a river that's not the best in our backyard and all that. I said, no, no, no, you're wrong. We're not cheap. We're frugal. It's very different. Our people here, look at our offices here. Everything we just described has nothing to do with the way our offices are set up. He said, no, yeah, you're right. It's very nice. I said, yes, because we like people to come here and stay for the long term. So we treat our people well, like we do at home. We try to have a home that's not any castle, but it's something comfortable.

• 21:44Speaker 02

  But we're not cheap by any means, but we're also not gonna throw money through the window. No, no.

• 21:50Patrick O'Shaughnessy?

  I love the concept of frugal, but not cheap. And it also makes me wonder, as the business has progressed and so many different brands have come together. I want to talk about brands in a few minutes, but first just to understand what you've learned again about when some new team is coming into the fold, how to effectively spread the culture that you've worked so hard to cultivate to these new parts of the team.

• 22:13Speaker 02

  When you look at our company, the last thirty years, we grew organically, but also inorganically through M and A and different business combinations, as we call it. Companies coming together. And the question always comes, well, you're gonna acquire this company that has sixty thousand people, thirty thousand people. They come from different culture, different background. How are you gonna make this thing work? And what we noticed, at least so far, lucky us, is that different than us that think the culture is very important and then we have this on the wall on the website, we talk about it every time, every opportunity. Most companies don't do that. And the companies we've integrated, they had something that was either a culture that was there, but was never formalized. Or they had a culture that was dependent on one person, the CEO or the founder, not our case.

• 22:59Speaker 02

  And the moment that person left because the company was acquired, there was a vacuum. And then we came with our principles and said, hey, let's adopt this. We're gonna learn from each other, best practice in this whole thing, for sure. And the best practice will win over the other ones. But in terms of principles, this is our principles, the big dream, best people ownership. Okay, let's use that. In our company, the culture is not my culture. It's everybody's culture. We designed from day one because we didn't want to have a dependency on one person or two or three. We said, no, no, it has to be everywhere in the company. To be truly a one company, one culture. And the distinction we make here is that as we operate as we do around the world in all continents,

• 23:42Speaker 02

  you have to be very clear about local culture and company culture. Local cultures are diverse, they're different, that's why we travel. We travel because when you go to Korea, to China, to India, to Brazil, to Germany, to Canada, people eat differently, they spend their free time in a different way, they dress differently, they have different stories or histories. That's what attracts us, that's why we travel, to see different things. We don't want to change that. But when you join us in any of these countries, you have to subscribe to our values that luckily are common sense values. I never met anybody who said, these things don't make sense, a big dream, best people, ownership. And we found that as we went to more and more countries, we had the question, will this culture travel well?

• 24:24Speaker 02

  Will people in different local cultures accept our company culture? And what we saw is that yes, because what we are proposing is what most athletes that are successful and students that are successful do. Students that are successful and athletes, what do they do? They have a big dream, they want to go to the best college, they have a best mentor for their PhDs. So they have a big dream, they know that to get there, they have to be great, but they have to surround themselves with great people because nobody gets there by themselves. And you have to own it, you can't be forced to do anything. Athletes that go to Olympics, if they want to go to the Olympics, they train 363 days a year. They take two days off, birthday and whatever, Christmas or something else, you know? But they train five hours a day.

• 25:08Speaker 02

  But not because you're forced to do it, it's because you have that big dream, you want to achieve it, and you own the process. You do it because you chose to. And you chose to sacrifice other things, since you can't have it all, to dedicate to that one thing that you're single-minded focus on. But this is very important, so that's why in any business combination. Between signing the deal and closing the deal, in our experience, there's always six months to nine months because of all the different jurisdictions you need to get it approved because there are multi-country deals. We use it very intensely. There are rules for what you can share or not, as two companies are in between the signing and closing. But we go, visit, we travel, we meet the people, we identify who the key people are, we talk about our culture, our values.

• 25:51Speaker 02

  We answer questions because when the signing comes, we want to be one company, one corporate culture.

• 25:59Patrick O'Shaughnessy?

  One of the things that's happening alongside these cultural integrations is the management of an ever larger portfolio of brands. And brands, certainly under this umbrella, are distinct things. They have rich histories, imagery, they connote certain things with the consumer, and they're different. As opposed to the culture which you want to be very aligned, brands have their own unique feel. What have you learned about managing such a large portfolio of distinct brands? Like, what does a well-managed brand mean?

• 26:28Speaker 02

  First, a well-managed brand is a brand that's consistent in its positioning. So it cannot be changing every year, what it means in consumers' minds. So it has to own a part of my brain because it's connected to the beach. It's connected to sophistication, it's connected to meals, it's connected to sports, it's connected to in-home occasions. So it has to be consistent. Second, that consistency and that positioning has to be grounded on consumer insights, something that's relevant to consumers and that we can deliver on a consistent basis. It has to be executed with guardrails. So you continue to reinforce that positioning with everything you do,

• 27:09Speaker 02

  the packaging, the experience, the event, the trademarking activities you have when you go shop at a grocery store. All these things have to reinforce that position in consumers' mind. So this whole idea that consumer insights what comes first. If you understand consumers, you're able to position the brand on something that's relevant territory for them, and you execute that brand with consistency with guardrails, given the positioning you have in consumers' mind. The other thing you learn, Patrick, is that consumers around the world are more similar than different. So when you talk about their needs and what they're trying to achieve in life, with one or two exceptions here and there, the ranking of needs and what they're trying to achieve is very similar, very similar.

• 27:51Speaker 02

  No matter what they drink, what they wear, what religion they have, very similar. So that also makes it easier. That's why you have global brands. More and more, in any business, you have brands that are global in nature. So they appeal to different consumers around the world because they tap into a need that a consumer has, or a pain point consumers are trying to solve in their lives, and you tap into that need, and that's a global need. So yes, you have global brands, but you also have local brands that have their roots and heritage in that one market. This combination of global, regional, and local is what makes a portfolio perform.

• 28:30Patrick O'Shaughnessy?

  What are the largest brand management or brand mistakes that you've seen, whether in your portfolio or outside?

• 28:37Speaker 02

  We've been in the business for 600 years, since our brewery in Belgium started in 1366.

• 28:44Patrick O'Shaughnessy?

  Incredible.

• 28:45Speaker 02

  So that's more than 600 years ago. And one myth that we saw, that we learned from time and again, is that brands have a life cycle, and at some point they'll disappear. And we believe that's a myth. What you have is that brands that lose touch with consumers, brands that are not consistent or don't have a sound positioning, a simple thing that consumers can't understand, they are poorly managed, and that's why they disappear. On the other hand, brands can grow or can shrink, and that's why you have a portfolio. And sometimes brands will shrink and then to grow again 20 years later because consumers are interested in the history, there's a throwback type consumer mindset, and all of a sudden consumers are valuing what was bigger 20 years ago, 30 years ago. And then it comes back.

• 29:29Speaker 02

  We've seen that time and again in all sorts of industries. So that's why it's good to have a portfolio of brands, because brands should not die, but if they are poorly managed, they could die. But in a portfolio, you have to accept that some brands sometimes are in growth mode, sometimes they're stable, sometimes they'll shrink until they find instability.

• 29:49Speaker 02

  But the fact that they are there and they have a role to play in that portfolio as consumers change and generations are new, that are new come to consumer products, that thing can become relevant again and will grow again. But if that thing disappears, then you're going to be at a loss because when that thing comes up again in terms of trend, you won't have that player in your portfolio to play that trend.

• 30:11Patrick O'Shaughnessy?

  I love Jeff Bezos's idea that you want to bet on things that won't change. And I love the 600-year-old history. Pretty confident in 100 years, people are going to like to drink beer and beverages. But even in something that is a low rate of change like your business, there are still always smaller changes that happen, threats that come. And there's two specific in the beer business that I'd love to hear how you personally and the company navigated or thought about navigating through. The first is the rise of craft brewing and the second is the rise of seltzer more recently, which you've worked on pretty aggressively. Maybe we'll start with craft brewing. What was it like to live through that interesting and exciting change to the global beer market? And how did you think about it as a company?

• 30:52Speaker 02

  It's exciting because again, if you start for the consumer, as you should always start, again, in our company, the mantra is you go where consumers go because that's where growth is. So the craft movement started, we as a company, we didn't have a craft portfolio because the portfolio we inherited in the US and other countries that were new to us, they didn't have a portfolio of craft. But in the US, as consumers or some consumers started migrating to that segment, that was an emerging segment, we started investing in that segment. And today, not only we grow way ahead of the craft segment, but we are one of the top players in the craft industry. And that's because we realized that instead of fighting with that trend, as people say, you should make trends your friend, we decided

• 31:34Speaker 02

  to invest behind it. And we took advantage of something that was growing the category, that was appealing to new consumers that were not necessarily in the category. So they joined the category. It was very profitable and it was growing. So it's beautiful for the category. Same thing with seltzer. Seltzer is a development that is different than beer, but has some beer cues, but has some other things that are different. And because it's a slightly different mix in what it offers, it attracted people from other beverages into beer and beer-like products like seltzer. And that brought more people to the category. Premium product, premium price point, great margins and growing segment. So again, it's all this idea about you have to observe where consumers are going because that's where growth is.

• 32:19Patrick O'Shaughnessy?

  So really, the key to having the right mindset around change and making change an opportunity, not a threat, is just the empathy for the consumer or understanding where the consumer is.

• 32:29Speaker 02

  One of the things we talk a lot about here in our company is the idea of the incumbent and insurgent. We built our companies a bunch of insurgents. When we started 30 years ago, we were not market leaders in our markets. But then we became market leaders and you became big. So one thing you have to fight every day in a company that's large and global is that people don't feel entitled to the business we have today. But we feel because it's true that we have to earn and re-earn it every day because consumers have choices. And this idea of change is one of those ideas. If you behave as an incumbent, you believe that change means risk, threat. If you're an insurgent, you believe that change means opportunity. Because this is a new technology or a new consumer trend or a new habit that's forming

• 33:14Speaker 02

  that you, if you embrace it, you can ride with it as opposed to against it. So this idea of embrace change, take measured risks, learn from it and continue to iterate. Easier said than done, but this is the right way to look at change.

• 33:28Patrick O'Shaughnessy?

  One of the things we haven't talked about that's happening behind the scenes is an incredible network of activity to get consumers the product that they love. We've talked about brands as far as the consumer knows. They go to the store or order it, they get it, they consume it. But to make that happen is an incredible coordination exercise in production and distribution. And I'd love to hear what you've learned in those areas. And obviously, it's a scaled up business. I think you're the largest buyer of rice in the world. What have you learned about the production and distribution side of the business that helps you fulfill this big dream?

• 34:00Speaker 02

  It's interesting you ask that because our business is a global business when you look at it, but it's a local business in its essence, in its DNA. 95% plus of what we sell, we produce and sell locally. So we get the water from the community. We get the farming products from the farmers, local farmers. We brew the beer in the community. We hire our people from the community and we sell back to consumers in the very communities. In a way, we're very tied to how well that community is doing. So if the community is doing well economically and thriving, growing, creating jobs, we tend to do well. If the community is doing well in terms of environment, and the environment is sane, is balanced,

• 34:43Speaker 02

  and there's water, there's good farming, high-quality farming, we tend to do well. Sustainability, we always say sustainability is not part of our business. It's not an add-on that we look from time to time. In our business, sustainability is our business. Very simple, no water, no beer, that's simple. Very simple, no farming, no beer. I don't have what to brew. So because of that, our four pillars of sustainability are totally connected to our business. They are water, farming, packaging, and energy. These are all things that we have to do every day, and we've done it for 600 years. Otherwise, there's no beer. But the way to do it in an efficient way, then it talks to sustainability. So today's sustainability made it cool to be efficient

• 35:29Speaker 02

  and to have less of an impact in the world around you. Because people value that. People understood that there's no planet B. We only have this planet, and resources are finite. We've always tried to use less water because that makes business sense, and it's good for the communities because we have to share the water with the community. We try to have the highest quality and most efficient farming, and we have rich sources from 30,000 farmers around the world. And we help them with better seeds, better technique, information about the weather, information when to plant, when to harvest, when to seed, when to do all those things. So we can have more quality and more efficiency in the way farming is being managed. Packaging.

• 36:11Speaker 02

  More than half of our products are sold in returnable packages, packages that will come and go. Consumers, you use that bottle, the bottle will return, we wash it, fill it again, send it back to the market. And the ones that are one-way, that people will dispose of after using, we want most of it to be of recycled content. Aluminum cans, right? The returnable bottles are glass bottles, cags for dry beer.

• 36:34Patrick O'Shaughnessy?

  I love the local aspect of it, which raises the question of how you assess and go after new markets. I'm sure this, a lot of this is done already. It's a very global brand, probably most places in the world. But as you have been progressing through your career and the company's gotten bigger and bigger, what have you learned about the art and science of deciding, you know, is it time now to try to go into Africa or into some other part of the world? What are the key things about assessing a new market and then rolling out a strategy to expand into that market?

• 37:03Speaker 02

  I think what's key for us is always this idea of, okay, the market's here today. Where is it going to be 10 years, 20, 15 years, 100 years from now? And that's how you start expanding. You have the map of world industries today, based on demographics, other trends. You try to map where the demand will come in years to come. And then you put it against your footprint today and you check where the gaps are. And either you start developing that organically, or you try to acquire a player that's active in those regions. But it's all based on that. Where's the industry today? Where it's going to be in 100 years from now? What are the gaps? And what are the gaps we need to fill organically and organically?

• 37:44Patrick O'Shaughnessy?

  How much role does data play in the way that you think about allocating capital in the business? Now that you have all these brands, all these different parts of the world, knowing where to invest the company's time and resources probably is a major part of what you think about. How much of that is qualitative, quantitative? Walk me through that decision process.

• 38:03Speaker 02

  You're right. The capital allocation these days, especially with the world we live today, where change is ever more present and faster. It's a very interesting exercise. Because think about this, you have a business to support the way it's defined today. So the way the business is defined today, you need support in terms of OpEx, in terms of CapEx, but you have emerging segments, things you need to start investing behind because that's where the trends and consumers are going. I'll give you an example. Five years ago, we founded a venture arm within our company called ZX Ventures. And we started investing things that were small five years ago, that our big company, our big machine, as we call it, would not be, you know, prioritizing five years ago. But we know those things could be big, given what was happening in other categories. Not because we're very smart.

• 38:47Speaker 02

  We look at other categories, said, this category is already there. Our category is not there yet, but of course we'll get there at some point. Let's start investing five years ago. So everything that has to do with craft on a global basis, not only in the US, with e-commerce, with direct consumer delivery, last mile solutions. During COVID, during the pandemic, because of all the lockdowns, all the restrictions that our retailers had, our consumers had, all those platforms went through the roof. So our B2B and B2C platforms grew in one year what we projected they would grow in three years. And luckily, we were there because we were investing five years on that. And luckily, we had platforms that could be scaled up quickly because they had good technology behind them. And we had an amazing group of people, of owners, that are resilient,

• 39:32Speaker 02

  committed, engaged, and passionate about what we do, which serve our retailers and serve our consumers so they have better lives. So during the pandemic, we had to use, for example, in a lot of Latin American countries, we use our, quickly transformed some of our platforms to be marketplaces for consumers and retailers that were in lockdown periods. So retailers had to survive, but couldn't open, but they could do delivery. Consumers were locked down, needed staples, not only our products, products in general. We put our technology to serve consumers and parks because we believe, Patrick, that businesses exist only because society allows them to

• 40:12Speaker 02

  exist. So COVID gave us an opportunity once again to show that we're a part of the solution to issues that the community is facing. So when the community needed an app, it was there. We had the water emergency program that we have on a global basis, Trigid. We use our plastic injection molds to do face masks. We use our trucks that were idle because volumes went down, because bars were closed, restaurants, traveling corridors were all closed, to help governments get staples where they needed to. We're helping hospitals to make makeshift hospitals. In six countries, we did that. So, I mean, we proved once again that companies like ours can be part of the solution, like we've always been.

• 40:54Speaker 02

  That's something that COVID really accelerated those platforms and also the very role of companies in collaborating with communities to solve common problems.

• 41:07Patrick O'Shaughnessy?

  I love the concept of pivoting the company's resources and the local focus. One of the things that we haven't talked about yet is, just like you're the largest buyer of rice, you're probably also one of the largest marketing organizations in the world. You mentioned earlier this really interesting idea of each brand having to own its own positioning in somebody's mind. What have you learned about marketing, generally speaking, especially how that has changed across your career as the world has gone digital? A brand like Bud Light, I think one in five beers consumed is a Bud Light, something crazy. For an iconic brand like that, but also for the long tail of the portfolio, what have you learned about the evolving nature of marketing?

• 41:44Speaker 02

  What's very clear today are two things. First, the way you touch consumers in terms of marketing messaging is very fragmented more than ever. So in the old days was the 30 second TV commercial and primetime TV, Super Bowl and the things. Today, these things are still important, but they are not the only game in town. You have tons of ways to get in touch with consumers and not interrupt their lives, but talk to them, interact with them. So that's one thing that changed. The other thing that changed is that consumers today, they think highly of brands that are connected to a purpose, not just brands that have glitzy marketing campaigns. That can even be bad for the brand, can be seen as empty. If you have a purpose, if you have something that your brand is connected to,

• 42:29Speaker 02

  that is something that really elevates a brand. I'll give you an example, Stella Artois. We have a partnership now for six years or more with water.org, where the co-founders being Matt Damon. And water.org, the idea they have is that in countries in Africa Asia, where some parts of the population don't have access to water because they're not connected to the grid, normally the women in that family will spend eight hours a day in search of water. So water.org and Stella Artois got together to give that time back to those women so they could do something productive, so their families could have a better life. And what we do is micro loans to those families at subsidized rates so they can get connection to the grid.

• 43:13Speaker 02

  And believe it or not, after many, many campaigns of Stella to us throughout its history, the campaign that was the most successful was the one that connected Stella to Water.org's purpose, which is to bring water to families that have no access. And it was very simple. It was you buy this chalice, we give a family five years of access to water. A lot of consumers, sometimes they want to do something to help others, but they don't know how to start. And when they see a brand they trust, and sometimes they say, I'm gonna give money to this entity and it's all gonna be lost in their bureaucracy. They have such a big overhead, big offices and stuff. One cent of every dollar of mine will get to the final recipient, to the one I'm trying to help.

• 43:56Speaker 02

  Stella to us said, you trust me, I've been with you forever. And Water.org, Matt Damon, he has his face, he's saying, he's dedicating part of his life to this. You buy a chalice, or you buy a six pack of Stella, this money will get a hundred percent to this family. And this has been very successful. And what was amazing is that Matt Damon and Mr. White, the two co-founders, came to us and said, you know what, we've been on the road for a long time. We had no idea what a brand could do to our cause. The moment we were just talking about water, about families in places nobody knows of, sometimes, or families, the people, they're not your friends, they don't leave behind you. It's kind of hard for you to understand their suffering.

• 44:40Speaker 02

  But the moment you connect that to a brand that people trust, and you brought that and said, hey, you wanna help people on the other side of the world? You buy my six pack and this money will go to that family, or part of that money. I'm here to guarantee that, that money will get there. That made the rate of adoption of their cause go through the roof because of a trusted brand. So brands are very powerful. They can get consumers to pay attention and engage.

• 45:04Patrick O'Shaughnessy?

  To do any of this, coming back to people again, it's obvious that you need incredible operators that are carefully aligned. What have you learned about implementing, I'm guessing, the meritocracy required to keep the right people there, we didn't go too much into it earlier, and moving on the right trajectory? My understanding is that, in some cases, the people that have tons of responsibility are very young inside the company. Say a bit about meritocracy and what that means.

• 45:31Speaker 02

  That's one of the hallmarks of our company is that, at a young age, if you're talented, you get to positions that in other companies would take years to get. Because in other companies, if you went ten years ago, you're going to be ahead of somebody who went five years ago. So the older generations, the more senior generations in the company will always be ahead of the more junior generations. Here now, the more talented people will be ahead of other people, no matter what generation or which year they join the company. And that's something that's very important for talented people, meritocracy. You're valued not by the year or the time with the company, you're measured by your potential, what you've done, by the teams you've built, and by the culture you embrace and your ambassador. That's what you're measured on.

• 46:15Speaker 02

  And if you're hit on all those cylinders, you're going to progress very fast, because you don't have to respect seniority necessarily to progress. What we learned is that great people like a couple of things. First, they like to work in a place where they respect the values and the purpose. The other things they like, meritocracy we just spoke about, they like informality, not the way we work in jeans, we're working multi-layoffs, anybody has access to me can walk to my desk, and that's informality. The other thing people like is candor. So informality is this idea, you can ask questions, you can challenge others in an open fashion, no hidden agenda. And candor is this idea that you want to have feedback, you want to have mentors that will give you feedback, because life's too short.

• 46:59Speaker 02

  You don't want people that just say you're great. You want people that say, hey, this and this and this, you're great, but let me tell you errors or opportunities or gaps you have, and let's work together. So you become even better, you progress even faster. And you evolve as a human being even faster. Feedback, the power of feedback, honest, constructive, respectful feedback is something that's very much part of our culture. And whenever I go to colleges, because we do that a lot, to go, ninety percent of the people we hire direct from college. So whenever I go, they had to talk about our business, our principles. I talk more than how we do things and what we do. That is important. I want people to self-select. People always ask you, what was important in your career?

• 47:42Speaker 02

  And I always say, other than the obvious things, doing something I love, meet the right place, working hard and all that. Luck as well, but also say the power of feedback. I was lucky that I always had bosses that were truly interested in my success. And because of that, they were willing to tell me what I needed to hear, not what I wanted to hear. In a respectful, constructive way, but tough, when they had to be tough. And I had many tough feedbacks and I still have feedbacks today, today, after thirty years in the company that are tough. Because we're never there. The requirements are always changing. The bar is always being raised. So what was good yesterday is not good anymore. And you have to adapt. You have to learn to reinvent yourself. If people don't tell you that, it's gonna take too long for you to conclude.

• 48:27Speaker 02

  It lasts too short for you to waste all this time. So power of feedback.

• 48:31Patrick O'Shaughnessy?

  What's an example of something that you needed to hear, feedback that you got?

• 48:36Speaker 02

  That I was not a very good, active listener. That I would listen, but not really. Years ago, when I saw something, I thought I had the solution or the, the actual plan to do it. I would just do it when I was more junior. And as you become more senior and the things you have to do are bigger, the gaps are bigger and the challenges are bigger. You need a team to do it. You can't do it by yourself. And if you have a team, you learn, at least I learned through the years, that it's worth to spend the time to bring the team with you. Also because you might not have the best solution, quite frankly, normally don't have the best solution. And interacting with the team and listening in an active way, you will get to a better place in terms of plans than just going with your own idea.

• 49:22Speaker 02

  It's always the case, ninety-nine percent of the times. But in order to do that, you need to take the time to listen. You need to take the time to inspire people and to unite people. So they all co-own the idea, ownership, as opposed to being told what to do, but not understanding why that's necessary for the best way to go, to proceed. It was that one time that I had to hear that. I had to hear that many years, many, many, many, many years, and I still hear that from time to time.

• 49:49Patrick O'Shaughnessy?

  You talked earlier about inorganic growth and then organic growth. For a long time, I think, early in your career, a lot of it was organic. And then you've been a part of some just enormous iconic acquisitions and M and A activity to create the company that exists today. What advice would you give other business leaders for learning how to decide whether to focus on organic versus inorganic growth, maybe with a special emphasis on M and A?

• 50:15Speaker 02

  What I learned time and again is that life is all about and, not about or. So it's not about organic growth or inorganic growth. Most business is going to be a combination, like anything in life. If it was only or, life would be easier. No, it's this and that. You know, a company, ninety-nine percent of the people or more are focused on the organic side of the business. But some people are focused on opportunities that might show up. And when they show up, we first will ask ourselves always the same question. Do we have the people to reintegrate these businesses? Are they willing to go places? Because this is in other countries or other regions. Does the culture, can the culture be implemented there? As much as we know with the public information we have, or interviews or stuff we do, does it make financial sense? Will it create value? I'm sure everybody

• 50:59Speaker 02

  has the same question. But we start from people. Because when we were in just a few countries, one or two, and we decided to start expanding to other countries, the biggest motivator was not size, was people. At that time, we were attracting so many great talent. We said, man, you're fully in one country. The career choices we can offer are not very appealing, because there's a big funnel. There's only one country head, one head of marketing at the end. And we're going to lose a lot of these people that we're investing so much back to the market. And then somebody thought, hey, if we go to a different country, we're going to have two paths, two country heads, two country marketing managers, two this, two that, and we're going to learn from different environments and feedback, and the feedback loop back and forth. So we started doing that. But we had doubts whether our culture would

• 51:44Speaker 02

  travel well. So we went to the first country, said, okay, we want to have one company, one culture. Does it travel well? Then we saw, yeah, it does travel well, because our stuff's about common sense. Our company became more attractive, because now you could develop an international and then global career. Within our company, growing every time you move. The company is its people and its culture. That's what defines the company. So if we're more attractive now to attract talent and to retain talent, the company has better prospects to the future.

• 52:14Patrick O'Shaughnessy?

  What are you most proud of in your career?

• 52:16Speaker 02

  I think this thing I'm most proud of, of the people we develop here. The people that I remember in a college setting, talking to them about joining our company. They came, joined us because they believe in what we're saying. And they prospered here. They blossom here. I think for me, that's amazing. And that because I've been here for thirty one years, I've had multiple chances of experiencing that. And that's one of the biggest pleasures I have. Is remembering that person, not that I hire everybody here. I was there at the very early stages of their career. In a mentorship position, we're just part of my team. We're just interacting in meetings or market visits. And then to see those people, I mean, that's a lot of time thinking about people in our company.

• 52:59Speaker 02

  So twice a year, we sit with our my team. And we talk about the top leaders of the company. Are they stretched? Are they motivated? Are they excited about the future? Are they rightly informed about their feedback loops and how their careers are going and stuff? What should be the next step? And how soon should that be? And so on and so forth. So we spend a lot of time, what we call the people chats. Because since we don't have career tracks, we have career options. There's no set path for you. If you joined here, tomorrow it could be elsewhere, unless you're a specialist. We have lots of people that will go from sales to marketing to supply chain to other things in the company, so they know the business. We need both, we need specialists and journalists as well.

• 53:41Speaker 02

  But going back to your point, that's what I take a lot of pleasure in seeing these people develop.

• 53:45Patrick O'Shaughnessy?

  Is there anything about the business that you think is central to its success and its distinctiveness that we haven't covered so far? That you think is important?

• 53:55Speaker 02

  Yeah, our love for beer.

• 53:57Patrick O'Shaughnessy?

  Yeah, it's a good one.

• 54:00Patrick O'Shaughnessy?

  Say a bit more about that. What's your favorite beer?

• 54:03Speaker 02

  Well, it's here on my shirt, Bud Light.

• 54:05Patrick O'Shaughnessy?

  There you go. Bud lighter, Bud heavy?

• 54:07Speaker 02

  Bud, traditional Bud Light, the red Bud. What I said here is so obvious. And again, as a company, we're far from perfect. We have gaps in many places and always learning. We build our company actually by getting inspiration from others. We try not to reinvent what's already available. But one thing that from day one, and it continues to amaze us that other companies don't do the same, is invest in people. That's the only sustainable competitive advantage. And everything in a company comes from the people you have and the culture they all subscribe to. That's it. Everything else is a consequence.

• 54:44Patrick O'Shaughnessy?

  Two fun closing questions for you. The first, is there an example of a beer that when you tried it for the first time is the most memorable to you?

• 54:52Speaker 02

  Oh, yeah. The draft beer we have in Brazil called Brahma, Brahma Draft.

• 54:56Patrick O'Shaughnessy?

  What's the memory? When did you first taste it?

• 54:58Speaker 02

  It was amazing because when I joined the company, I was not really a beer drinker. When you start to look at the process and the brewing process and the quality of the, and the care, and the history, and then at the end of all that, you drink a draft, fresh beer from the tank in the brewery. That's what's hard to forget because you're in the brewery, you go through the whole process, and then at the end you try the final product from the tank, fresh. That's amazing.

• 55:28Patrick O'Shaughnessy?

  You talk so much about ownership. I think that's a nice place to turn to my final question because I think the way you defined ownership, which I'll remember, is do you take pride in the thing that you're offering to the consumer? Are you proud that you were part of the process? And I love the draft straight from the tank is a great mental model for that. I ask everybody that I talk to the same closing question. That question is, what is the kindest thing that anyone's ever done for you?

• 55:52Speaker 02

  People that bet on me, people that believe that I could go places and decided to bet on me.

• 56:00Speaker 02

  I've always had mentors throughout my life and I always tell people when I go to college again to recruit, if there is one important thing in life is to have a great mentor. As you progress, you'll have different mentors, but to have great mentors, people that are willing to, that are truly interested in your success and they are willing to take the risk to tell you in a constructive, respectful way what you need to hear. This is invaluable. And if you find people that are interested in your success and willing to tell you what you need to hear, this is gold. Because most people are afraid of telling you what you need to hear because they don't have that kind of relationship with you, or they're not really interested in your success because you're afraid of competition, because

• 56:41Speaker 02

  they have a role, whatever. So people that are great mentors, they're gold. They're really gold. But I think the kindest thing is really my family and the people that put up with me every day at home, my wife and kids, my parents. I mean, they're the kindest people on earth.

• 56:59Patrick O'Shaughnessy?

  Carlos, this has been such a fun conversation. I think the principles that you've laid out are going to help anybody listening run their businesses better. Thank you so much for your time today.

• 57:08Speaker 02

  You're welcome. Have a great day.

• 57:10Patrick O'Shaughnessy?

  To find more episodes or sign up for our weekly summary, visit investorfieldguide.com. Thanks for listening to Founder's Field Guide.