Jozef Lievens is managing director of the Belgian Family Business Institute and an attorney with Eubelius lawyers.
In 2000, Interbrew put 35% of its shares on the stock market in an operation worth €3 billion. Yet the world's third-largest beer maker remains a company where the family runs the show
In the beer-lover's paradise of Belgium, Interbrew is a brewery with roots in the 14th century. But at the same time, the group is also the world's youngest beer giant. Interbrew was born in 1987 thanks to the merger of Artois and Piedboeuf. The founding de Spoelberch, de Mevius and Van Damme families of Artois and Piedboeuf still largely control the capital and the vision of Interbrew, even though they are no longer involved in the operational side of the business.
After the merger in 1987, Interbrew decided to change its focus from making beverages to being a brewer, and, as a result, sold off its cola, water and lemonade interests. By so doing, the company could fully concentrate on becoming 'the world's local brewer'. To further this aim, Interbrew took over Canada's Labatt brewery in 1995, which lifted it from 17th to fourth place in the world rankings. The Belgian brewer even laid claim briefly to second place, behind Anheuser-Busch. But the recent merger of South African Breweries (SAB) with Miller, the former subsidiary of tobacco giant Philip Morris, forced Interbrew back a place. The company continues to expand today, most recently acquiring the Beck's brand of Germany and achieving a net turnover for 2001 of €7,303 million.
There is no doubt that Interbrew has undergone a magnificent development in just 15 years. Chairman of the Board Pierre-Jean Everaert says: "If you compare the evolution on the basis of sales or volumes in the food industry over the last decade, you see that the food industry rose by eight percemtage points, but the
alcohol industry fell by one point. Six of our competitors rose by an average of nine points, while we went up by 28. Thus we performed three times better than our competitors."
Everaert and director/owner/family member Frédéric de Mevius attribute this success to the radical strategic exercise that was carried out in 1986. "This revolution in 1986 was undertaken out of sheer necessity," says de Mevius. "Growth had stalled. The year before we had paid the dividends with the earnings from Congo. So we were sitting in a pretty uncomfortable situation. In the first instance we had to return to profitability. The first major strategic decision was the merger of the breweries Jupiler and Stella Artois, which were two of our major brands. Furthermore, we wanted to concentrate on growing in the French and Dutch markets. However, that didn't succeed and so we went to Hungary and then Canada. That wasn't so much of a problem, because we had already applied the concept of being 'the world's local brewer'."
Thereafter followed a fundamental strategic exercise to help the company achieve its goal. "In 1986, the families thought long and hard about which strategy they, as shareholders, should implement for the future," recalls de Mevius. "Assisted by the former CEO and an independent consulting agency, they identified which business they wanted to focus on in the future. Then, on the basis of this business, they outlined a structure for governance. Finally, they searched for the right people to fit this governance structure."
In 1986, two family shareholders were still active in the group, but the new governance meant that family members could not assume operational tasks within the company. The exit of these two received extensive press coverage at the time.
"One family member withdrew because of specific personal circumstances," says de Mevius. "The other family member could understand the vision of family continuity and thought it was better to leave. But my fundamental conclusion is that this transition in 1986 was brilliantly implemented. When we traced out a new future strategy, we all sat down around the table as a family. That was one of the conditions for moving forward. That's all there was to it, really."
This strategic process and the reflection on the group's new future took about a year. Consulting firm McKinsey was also called on to help, but de Mevius and Everaert confirm that this wasn't all there was to the assignment: "You have to ask yourself every two weeks what the strategic future of the group is. You have to feed this process constantly in order to adjust the strategic view, allow it to filter up to the level of the family and translate it in a manageable way at the operational level. But this means that the development of a strategic vision is never finished."
Since 1986 the families have had a role outside the management, as shareholders. In this restructuring of Interbrew, a key role is played by the Dutch stichting administratiekantoor (share depositary foundation), where the family shares in Interbrew were placed.
A stichting administratiekantoor is a legal vehicle into which the shares of a family company are contributed in exchange for the issue of certificates. The administratiekantoor receives the voting rights, while the certificate-holder maintains the economic rights. In this way, the stichting administratiekantoor can retain the decision-making power, even if the shares are widely dispersed.
Interbrew's stichting administratiekantoor has working groups that are not just composed of members of the same family branch, but rather of persons having the same affinities. The members can, however, belong to different family branches.
"These working groups are the major reason why we were able to arrive at certain decisions quite easily," explains de Mevius. "These affinities also have to do with how we approach our business and the capital structure. The three working groups have a very different capital structure. This structure is also the way that the generation of 1986 makes it clear that the family remains a shareholder.
"There was never any talk of removing the family from the picture or pushing one of the families out. Each working group is entitled to two representatives in the management of the stichting administratiekantoor, and because all the groups are about the same size, it makes everything a good deal easier. These six representatives are also the six family members who sit on the Board of Directors."
"This decision to regroup in such a simple way made it possible to avoid the classic conflicts in family firms," adds Everaert. This is evident by the fact that there has never been any talk on the board about family politics, family branches or other family matters.
"Earlier it was different," de Mevius remembers. "We had a representation per family branch. And if one of these representatives wasn't competent, we had a problem. This danger has now been eliminated because the family directors from the stichting administratiekantoor are delegated by the working groups where they are chosen. Moreover, we have a safety valve. If one of the groups proposes a candidate who isn't satisfactory for the company, then the other members of the administratiekantoor can propose a different candidate."
The memorandum of association of the administratiekantoor also includes an expiry date to ensure that the groups do not stagnate. "After that there can be new regroupings," says de Mevius. "Families are very inert. Today it is not likely that there will be any major shifts, but who knows with the next generation?"
The family shareholders are represented on the Board of Directors by six representatives from the administratiekantoor working groups. Additionally, six non-family directors are on the board.
Part of the directors' responsibilities include visiting the plants and studying the market – a job requirement imposed by the families and one that seems to be good for the company. "We are just back from Korea where we visited plants, supermarkets and distributors," says de Mevius. "We saw the positioning of our products vis-à-vis those of our competitors. We could get a clear picture of the markets we are selling in. I believe it's important to be up close and personal in your job. This lets the family and outside directors get more feeling of what it means to be a brewer.
"It also means that we can indicate to management where certain opportunities lie. It is a condition we impose on the external directors and ourselves to get to know the markets. As a non-executive man, I devote around a quarter of my time to this. Fortunately, we have a very active Board of Directors. This is important, because a criticism you can make about many Boards is that they make decisions on matters about which they know absolutely nothing."
Furthermore, the families decided that the Chairman of the Board of Directors and the CEO must be external people and family members should have no contact with the operational level of Interbrew – they cannot form part of the management. "The reason for this is simple," explains de Mevius. "When a problem or a conflict arises, the family members all sit on the same side of the table. Therefore, the family members never have to point the finger at one another. After all, even a successful decision can entail some nasty consequences, not directly for the company, but for the family."
Everaert is the current Chairman of the Board and is a man with an impressive track record. He has worked in 14 countries, on four continents and at six multinationals. He is one of the few Belgians to have made a significant mark in the international business world. Hence, his background begs the question of whether he sees a major difference between family firms and other types.
"For me, a family firm is a public company of a very high level," says Everaert. "Interbrew is a normal company with the conventional structure of a listed company. Yes, there is a special dimension in family firms, that of a centuries-long continuity. This means that every day you look again at the steps you have to take to move forward. If you make decisions, you first ask yourself: 'What if my son one day reproaches me that I chose the wrong path?' As a family entrepreneur, you think along these lines.
"Moreover, it is the same continuity that also filters through to the level of the management. In its operational spirit, Interbrew is still a 100% family firm. But in terms of structure, it's not like that at all. When you compare Interbrew with, for example, Philips, then you see two identical companies. You see that by how the company is led, by the way the results are announced, by the manner of internal and external communication: Interbrew functions like a non-family firm. But the spirit of the family permeates the place, a spirit of looking ahead over the very long-term."
Opting for entrepreneurship
In recent years, Interbrew has experienced enormous expansion at a global level and, according to de Mevius, that proves once again that the families have opted for entrepreneurship: "In 1995 we carried out a major takeover of Labatt in Canada. Thus we have ambitions, but what are they? To be first in size or in volume? The message is clear: we do not want to be number one in the world in terms of volumes, but rather in terms of return.
"After all, tomorrow we could be the world's biggest, while in all countries we might not be among the top five. I don't think it makes much sense to fixate on rankings, which show only an average. Our ambition is to be the best qualitatively and to build up a market leadership in specific regions. We are active in a series of different markets and figures are not comparable: selling one hectolitre of beer in Ukraine is not always as profitable as selling the same quantity in the UK."
De Mevius stresses that the fact that Interbrew did not take over Miller, and thus slipped to third place in the world ranking, has nothing to do with a lack of ambition on the family's part. "No, the file didn't even make it to the board table. We're entrepreneurs who want to develop sound market positions. We want to be the leading brand in growing markets. Miller didn't fit into this concept.
"The necessity of growth presupposes piles of money and enormous entrepreneurial capacities. Our vision consists of implementing complete or partial takeovers or entering into an alliance with brewers who can give us pre-eminence in the sector. This happens not on the basis of volumes, but rather on the basis of return – industrial return, that is.
"This technique allows us to take over a brewery and after a year or 18 months make it pre-eminent in terms of brewing beer. This is a pure vision that has been cultivated among the entrepreneurial families of Interbrew for centuries. That is quite exceptional, given that the group counts about 250 family shareholders. For Interbrew, 1986 will go down in history as the year that the family shareholders redefined the business. Since then it has profiled itself as 'the world's local brewer' and limits itself to that one core business."
Above all, though, remains the fact that Interbrew is a family company even though the family is not involved on an operational level. The family works hard to keep its entrepreneurial spirit alive within the company at all levels. Everaert agrees: "It is convinced of this long-term vision, of this determination to leave behind a legacy for the next generation."