Nearly two decades ago, Jose Dedeurwaerder, chief executive of a small Belgian brewer called Artois Piedboeuf Interbrew, made a brash prediction: Interbrew would become one of the few truly global brewers in the 1990s.

"That is a tall order," opined The Wall Street Journal in 1990, noting the company depended on the small, stagnant Belgian market.

Consider the order fulfilled.

Interbrew's descendent, InBev, is the world's biggest and arguably most aggressive brewer. It has patched together an empire stretching from Russia to Brazil and Canada, with 200 brands and ever-growing ambitions.

In 2006, InBev sold one of every eight beers in the world; its 12.4 percent global market share outranked SABMiller of London, St. Louis-based Anheuser-Busch Cos. and Dutch brewer Heineken, according to Euromonitor International.

Now, the company is reportedly interested in laying out a huge takeover bid for Anheuser-Busch.

InBev's emergence as a global player able to dictate its own terms is a case study in aggressive management. InBev has turned the tables on the global beer industry, and shaken up St. Louis in the process.

HUMBLE BEGINNINGS

The company that now calls itself InBev traces its roots back 6½ centuries, to a Belgian brewery in 1366. Its move to the peak of the brewing industry took just a fraction of that time.

In 1988, Belgium's Artois and Piedboeuf breweries announced a merger to form Europe's No. 3 beer company. It was a defensive move to compete with bigger rivals such as Heineken and Carlsberg.

The maneuver was rocky. The next year, the company — which had changed its name to Interbrew — announced it was cutting its breweries from eight to two and planned to cut 1,000 employees by 1996. A strike shut down production at each of its breweries and disrupted communications at headquarters.

Meanwhile, Interbrew executives faced a defining question at the dawn of the 1990s: buy, or be bought? They chose the former.

Interbrew eyed partners in the United States, where the company's presence was slim; the national import manager for Stella Artois once complained to the Orange County Register that few drinkers knew about the beer, or even knew Belgium was a European country.

In 1989, the company tried to acquire Stroh Brewery Co., then the No. 3 U.S. brewer, but the deal fell through when Adolph Coors Co. bought the assets instead.

Between 1990 and 1994, Interbrew made runs at small breweries, buying up stakes in Belgium, Hungary, Romania and Croatia.

But InBev put all its chips on the table in 1995 when the company completed a $2 billion takeover of John Labatt Ltd., Canada's No. 2 brewer.

With one massive deal — the beer industry's largest ever at the time — Interbrew joined the big leagues, becoming the world's third-largest brewer.

The brewer's rise to behemoth status was accompanied by challenges. The past 20 years have been peppered by departures of chief executives who failed to meet the expectations of investors.

Interbrew stumbled badly when it tried to forge a partnership with Venezuela's Cisneros Group, a brewing and Spanish-language television conglomerate. The aggressive $2 billion deal, inked in November 1997, was designed to push into the fast-growing South American beer market.

But 10 months later, the two sides admitted they couldn't agree on a strategy. The deal crashed before it got off the ground.

EYEING SAB

But Interbrew didn't slow down. Three months after the setback in South America, the company said it was pursuing a possible acquisition of South African Breweries. The deal didn't happen, but the message was clear: an opportunistic Interbrew was on the prowl.

In late 2000, Interbrew went public, reaping $2.5 billion in Belgium's biggest initial public offering to that point. It instantly put its newfound money to use in deals big and small.

In its 30th acquisition in a decade, Interbrew slammed $1.58 billion on the table to buy the brewer that made Beck's, a famous German export beer.

But it was the merger of Interbrew and AmBev of Brazil in 2004 that finally allowed the company to vault over the industry's other giants. Overnight, the deal made the newly chartered "InBev" about one-quarter larger than Anheuser-Busch and 43 percent bigger than SABMiller. It became twice as big as archrival Heineken.

Interbrew's managers had staked their claim on brand-building and innovation. But the merger quickly gave rise to a class of Brazilian executives — including current chief executive Carlos Brito — known for their shrewd attention to costs. InBev started bearing the marks of its new masters.

One was Spartan cost-cutting. Employees all the way up to the CEO level now fly economy class for flights under six hours. InBev's budgeting system is designed to squeeze out waste when the company buys merchandise and advertising.

The concept is simple; implementing it, the company acknowledges, is "much more difficult."

InBev's management style does not always sit well with employees. In the last three years, InBev has been hit with strikes and labor protests in Belgium and Newfoundland over issues such as layoffs and the presence of outside security companies.

InBev's ambition to build a global business through buying sprees "has driven them to be one of the consolidators in the business," said analyst Marc Leemans with Bank Degroof in Brussels. Other brewers have been forced to react to the rise of global behemoths like InBev and SABMiller.

But even as InBev amassed breweries and brands at a breakneck pace, it managed to keep its corporate profile largely under wraps for drinkers at the corner pub. It prefers to use takeovers to weave a network of local brands and marketers such as motorcycle-riding Brazilian beer salesmen.

"They know all these local markets very, very well," said Wim Hoste, an analyst with KBC Securities. "They know the brands in the various markets."

One InBev beer in Argentina is literally wrapped in the country's flag: Its label bears Argentina's blue and white colors.

If brands are "winning in a market and consumers like them, why on Earth would we change that?" asked InBev spokeswoman Marianne Amssoms. The goal, she said, is to find "the right balance between global and local."

Interbrew's tag line in the early part of this decade — "The World's Local Brewer" — summed up its effort to play up its on-the-ground connections.

COSTS VS. BRANDS

But InBev faces skepticism that it is much more adept at slashing costs than at growing brands; analysts worry that aggressive cuts may prevent the company from investing enough in marketing.

InBev disputes that characterization, arguing that trimming "non-working" spending allows it to invest more efficiently behind its brands. Still, the company recently dialed back its publicized efforts to make the Belgian beer Leffe and Brazilian beer Brahma into global brands; Beck's, distributed in 120 countries, and Stella Artois, sold in 80, are now InBev's only global brands.

The company is intent on showing it can burnish its brands as well as it trims waste.

Its Siberian Crown beer has tripled its sales since 2001 and grown from a local brand in Western Siberia into a fully fledged national brand. Brahma beer is growing at a double-digit pace in Russia.

The company's growth last year indicated "a lot of brand-building capabilities, a lot of investment in the right people," said Amssoms. "Those are really the hallmarks of our business model."

Despite its size, the company has struggled to perform in some key markets. The company has virtually no presence in the steadily growing Mexican market, despite its strong position elsewhere in Latin America. It has lost market share in China, the world's biggest beer market.

InBev has lost part of its grip on the U.K. market, where it has three breweries. Its portion of the market has dropped to 16.9 percent from 19.3 percent in 2003, according to analyst Melissa Earlam of UBS.

"The record of the AmBev management team with the 'old Interbrew' business has been mixed," Matthew Webb, a London-based analyst with Cazenove & Co., wrote last week in a research note "Performance in the U.K., for example, has been very poor."

Dragged down by the struggles of the U.K. beer industry — problems shared by Anheuser-Busch and others — InBev's beer sales fell 5 percent in Western Europe last fiscal year; profits also slid.

But InBev is now primarily a Latin American company. The region contributed 41 percent of revenue and more than half of the company's earnings.

Until now, the United States — the world's most profitable beer market — has been a relatively small part of InBev's business. In late 2006, the company agreed to let Anheuser-Busch distribute and market many of its European beers in the U.S. Making a more aggressive move alone in the U.S., with strong competitors such as A-B and Miller Brewing Co., did not seem promising.

But Wall Street is now buzzing that taking over Anheuser-Busch might be InBev's top priority.

InBev is armed with a conservative balance sheet and has "firepower for acquisitions," said Hoste.

The inexorable logic of InBev's business model argues for a deal, said Earlam. The ability to cut costs declines as the business becomes more efficient; plus, higher costs for raw material are canceling out some cost savings. InBev is "under pressure" to make another big acquisition and aim its cost-cutting machine at another target, she wrote in a research note last week.

InBev is considering an approach to Anheuser-Busch "extremely seriously," wrote Webb. It "will probably put its plans into action."

jmcwilliams@post-dispatch.com

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