MASTER CLASS FROM 'THE CFO 2018' EXAMINING BOARD: THE AB INBEV CASE STUDY

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CharterQuest
, 25 March 2018

Subtitle

The purpose of this article is to preview and summarise the 5 scenarios the teams entering the 2018 edition of The CFO (and The CFO Junior) Case Study Competitions will have to solve; written to guide the identification of the Knowledge areas that should inform the analysis of each scenario as well as how the marking grid will be applied. The 5 scenarios are the same in both competitions - but the level of detail, interconnectedness, and complexity are markedly different!

For 'The CFO Case Study Competition', the applicable knowledge base is integrated and multi-disciplinary – drawing mainly from, but not limited to: International Business, Strategic Management, Risk Management, Cost and Management Accounting, Financial Accounting and Reporting, Financial Management, Operations Management, Project Management, Industrial Relations and Human Resources Management. In the case of The CFO Junior, the applicable knowledge base is also integrated and multi-disciplinary – but drawing mainly from 4 key subjects in the High School curriculum: Accounting, Business Studies, Economics and Mathematics.

As the mission of the competition is to bring real-life business challenges into the classroom, we have painstakingly designed each issue to ensure any report that fails to apply the relevant knowledge (or theory) will not do as well. If a requisite knowledge area has not yet been covered at your University or High school, teams will be expected to do some internet research (Google) on it! Please avoid reproducing the theory; rather apply it in your analysis, to identify (and help the Board to solve) the main problem (s). This is extremely important, as our goal is to assess the extent to which the classroom knowledge you have gained can be meaningfully applied to solve some of the most challenging and intricate real-world global business scenarios you will most likely face upon your graduation! 

THE AB INBEV GROUP PLC CASE STUDY 

The AB InBev case, Researched, Designed and Developed (R&DD) by The CharterQuest Institute South Africa, is based on a real-world leading multinational business within the global beverage and brewery industry ('alcohol'). It simulates the strategic decisions its Group CFO and Board faced (or potentially faces). Just like the 2016 MCOM PLC and the 2017 AMANGO PLC case studies, the AB InBev group is faced with a complex interplay of strategic threats, weaknesses and opportunities, some of which are embedded with serious ethical dilemmas -involving compelling individuals and powerful stakeholders -that create a context for significant organisational change.

In particular, AB InBev, the world’s no. 1 brewery company, is a publicly traded company (Euronext: ABI) based in Leuven, Belgium, with secondary listings on the Mexico Stock Exchange (MEXBOL: ABI). It closed 2015 with a major takeover offer - for literally, the entire share capital of its fiercest rival and world no. 2 brewer, South Africa’s SABMiller, then, the largest company listed on the Johannesburg Stock Exchange (JSE) - for a cash amount of US$105.5 billion, to form a new entity and global brewery giant, ‘Newco.’ As earnings began to stagnate in the West, AB InBev determined that its future growth was to come from Africa –the world’s second largest continent (market), with a youthful and growing population, far too keen to indulge in beer, wines and spirits (alcohol)! 

The global rivals of AB InBev -Guinness, Heineken, and SAB Miller, had for long already been in Africa, reaping substantial profits –and here was AB InBev - the world’s no. 1, with neither an operating presence nor track record in Africa. This needed to be fixed - and fixed quickly -so, it decided to respond by launching, arguably, one of the world's Top 5 acquisitions in corporate history (and certainly 2015’s biggest). Accordingly, the Group CEO, Carlos Brito, closed that year, wondering,"Would Strategic Benefits Come Easily With Newco?" For the African youth, if only solving an alcohol business challenge was as sweet as the alcohol itself! Hmm! As AB InBev approached May 1, 2016, five (5) major interconnected scenarios, or -you call it issues, had surfaced, from which the Board had asked your team to identify and define the main problem(s); or, sub-questions within each scenario, prioritise -and evaluate each scenario (including any ethical dilemmas – where applicable), and offer strategic advice. The 5 scenarios include:

1. AFRICA DIRECT ENTRY VIA NIGERIA

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