SAB, but not as you know it

Feel it, it is here. The creation of the ‘megabrew’ is almost complete. But there’ll be casualties of AB InBev’s unsentimental approach

The metamorphosis of SA Breweries, the homegrown company that conquered the world, is already under way — and there are plenty of jitters among its staff. On Friday, Anheuser-Busch InBev (AB InBev) sketched its plans for after it has digested SABMiller in the third-largest deal ever, worth US$103bn, in a circular that confirmed that everything you heard about the Belgian brewer being a tightfisted scrooge is entirely accurate.

As it turns out, 5,500 staff members of the combined company (about 3% of the global total) will have a lot more time on their hands, being deemed surplus to requirements.

Of course, job cuts are inevitable after such a big deal. And in this case, it was especially likely, given AB InBev’s reputation for being chillingly ruthless.

Fortune magazine says that once AB InBev’s owners have cut a deal, this is what to expect: “widespread layoffs, lower budgets, new levels of austerity, and a shift in the corporate culture”.

AB InBev’s top brass are proud of its “zero-based budgeting” model, which makes managers plan every year’s budget from scratch, as if not a cent had been spent the previous year. It’s the inverse of the SA Broadcasting Corp’s way.

(Which isn’t to say it isn’t open to the odd flirtation with profligacy. To get the deal done, the companies spent a mindblowing $1.96bn on advisers and fees. In rand terms, that’s R28bn in expenses — more than the market value of either Barloworld or Massmart.)

As we speak, the scalpel is being sharpened. The documents released on Friday reveal that AB InBev believes it can save $1.4bn in costs every year, from the fourth year.

Of this, $400m in savings will come from the “realignment of overlapping administrative costs” — one of the better euphemisms for job cuts, which suggests the cash it has been shelling out for public relations advisers wasn’t wasted.

So should the thousands of South Africans who work for SABMiller be fretting? In theory, no. As part of its deal with the SA government, AB InBev said it wouldn’t forcibly retrench anyone. And for five years it will also “maintain its total permanent employment levels in the beer and cider business in SA”.

But the devil, as ever, lies in the detail: keeping the same number of staff in SA doesn’t mean there isn’t going to be a dramatic and rapid overhaul of the local business. After all, you can still keep your job numbers unchanged while slashing costs, provided you replace older managers with younger, cheaper, less-skilled people.

This is the cultural shift Fortune hinted at: far fewer people in mahogany row and a brutally uncompromising performance culture at a wider bottom end.

“There may be a commitment to keep employee levels the same, but you can bet that the SA Breweries you see today will look radically different in three years’ time,” says one employee.

The Financial Times wrote last week: “Savings will mostly come from heavy job cuts at SABMiller, where overlapping staff and functions including headquarters will be the hardest hit.”

One of the brewer’s local employees describes the mood as “apprehensive, increasingly so”. This is apparently because though many of the thousands of staff in SA believed they’d be protected in the merger, it has become crystal clear this isn’t so.

Friday’s circular says bluntly: “The SABMiller executive directors and the current members of the SABMiller executive committee will become redundant (once the deal is done) and none of them will have long-term roles in the Combined Group.”

That may be just the first step, but it’s a harbinger of more culling to come in the top ranks.

It seems inevitable that despite calming assurances by AB InBev CEO Carlos Brito, the SA Breweries that conquered the world from its offices in Braamfontein won’t be around in its current form for much longer.