Globalization Working Both Ways

Continuing our brewing series, with shared lessons for all.

For a brewer, entering a new market takes upward of 18 months, but with stagnating mature markets, brewers must increasingly look outwards for expansion to please their shareholders. All of the major brewers have embarked on programmes of expansion into new markets. The challenges that this presents stretch way beyond the financial.

AB InBev, for example, had a presence in 23 countries, employing 116 thousand ‘colleagues ‘around the world – and that was before its recent acquisitions. The company’s ambition for its Budweiser beer brand is for it to become ‘the first truly global beer brand’. Budweiser sales by volume grew by 3% globally last year, but over 40% of the brand’s sales now come from outside the U.S., compared to less than 30% just three years ago (source: 2011 financial results).

In a similar vein, in order to expand Molson Coors brand portfolio, the company established Molson Coors International (MCI) in 2008 with three regional markets: Asia, Europe, and Latin America & the Caribbean. Unusually, the company also targets the UAE – the middle East is traditionally ‘dry’.

One of our own recent online polls revealed that 83% of companies are seeing a trend for more business with ‘Eastern’ (Asian) countries (India, China etc). Brewing is no exception, with many looking to Asia: growing beer markets such as China, India and Vietnam, boast growth economies which are proving relatively resilient to global recession. With growth populations, rising disposable incomes, and currently relatively low beer consumption per head, small wonder that the brewing companies are attracted. SAB Miller, for example, is now India’s second largest brewer.

But whilst the traditional big brewers are entering new territories, these growing territories are also expanding outwards.

The Tsingtao Brewery, the largest of approximately 600 breweries operating in China, has grown from four breweries in 1996 to 48 today and is sold in more than 50 countries worldwide – including the US. (The brand accounts for more than 50 per cent of China’s total beer exports, and claiming to be the number-one branded consumer product exported from China.) Japan’s Kirin Group has an established foothold in the North American market, and Molson Coors’ Indian beer brand Cobra is now recognized worldwide – a global brand.

Meanwhile, Eastern Europe and the Baltics are seen as fertile ground for brewing growth by many, although success in the region has proved variable.

The most obvious challenges within companies expanding into new markets are practicalities: time zones, travel, meetings and such, but the biggest, and equally immediate, challenge, is cultural difference. People need new skill sets to manage these differences, whether they are managing, or working for, others in the new region.

This in turn presents ‘structural’ issues: how much autonomy is local, how much should things be standardized across the organization? Brewers are adopting a variety of approaches.

Carlsberg’s products are sold in more than 150 markets worldwide, employing 43 thousand people. It is attempting to centralise procurement activities, and is rolling out a ‘GloCal’ approach. In the process, it is attempting to standardize and implement global processes for performance and talent management, employee engagement and mobility. It has also introduced a new standardized approach to performance management for senior leaders, and has a new ‘global engagement’ approach combining an annual global employee engagement survey with a periodical manager–employee follow-up programme.

AB InBev is handling the issue by placing store in its ‘Industry-Leading Reach and Resources’ and uniform processes that ensure consistency globally. Japan’s Kirin, meanwhile, is looking at its management structures and is focussing heavily on hiring, training and positioning global personnel.

In any organization, significant business time, energy and effort is wasted through misunderstandings and miscommunication caused by failure to understand and resolve the differences between national, corporate and functional cultures at work.

People find themselves working in new teams, having to cope with change and many will find themselves working in ‘virtual teams’ by mere dint of being in different countries. The skills required for virtual working are additional to the skills that many team members/leaders have, butdifferent to those need ed when working in the same office or building, and should not be underestimated. Whilst many staff will see this as a career opportunity – a chance to gain visibility and to cross into new areas and define their own career – not everyone will enjoy working in this way. It’s incumbent upon companies – a responsibility – to ensure that team members are equipped with the tools and skills to cope.

The attempt to find the right balance between working closely globally, whilst valuing local brands and encouraging local initiatives is a leadership challenge that can’t be solved with an organizational chart (although these may prove useful in specific areas). Specific changes are unlikely to be permanent as these fast moving markets change and present ever shifting challenges that companies need to react to.

More important by far is the mindset and the skills of the people affected which are crucial to success in this new, increasingly global environment.