"Buying out" in relation to employees.

I worked at Anheuser Busch when InBev bought us out about 8-9 years ago. There have been dramatic changes regarding retirement benefits, vacation time, raises were 75 cents a year under AB they are now 25 cents, medical insurance costs have quadrupled, workload has doubled, all of our extra benefits have been lost such as gift certificates to local restaurants and amusement parks, no more elaborate catered Christmas parties, morale is way down, I could go on and on about the changes.

 

I very good friend of mine and his wife worked side by side with the owner and his wife to build a successful brewery for 10 years under the impression that they would be taken care of. Well now the brewery is going to be sold.......whoops......nothing was in writing.

 

ABInbev pretty much said this was exactly what was going to happen after the AB aquisition.

 

I work in an industry where smaller fish are constantly being gobbled up by bigger fish and I have yet to see it work in anyone's favor but those at the tippy top of the house. I am all for a free market and all of that good stuff but I am concerned about where this is all going to lead and decades down the road we could have a situation where there just isn't much competition and of course that = bad for consumers.

 

A lot of these changes have been happening across all industries, even without mergers. Businesses are cutting costs and many of the costs are concessions given to employees over the years, partly to keep unions at bay. Now that unions are in a much weaker place than 30 years ago, those concessions don't seem as necessary and are an easy target for cost control. Other pressures include competition, imports, and medical costs. You will see this happening more visibly during a merger simply because they're aligning the benefits of the new, presumably smaller and more employee friendly company with the larger one which has often gone through cost cutting already.

Over the last 33 years I have worked at the same place, but through mergers, etc I have worked for six different companies. Every time there is a buyout, benefits change - new coverage, costs, providers, and retirement benefits change. And even with the same company, they keep "tweaking" benefits. There are economists that say that eventually most people won't work for companies, they will essentially be their own contractor, selling their skills and labor to whomever wants it, and you have to provide your own benefits. I don't see that happening, but things are changing.

 

Funny... That's almost exactly the opposite of what Goose Island and Four Peaks employees told me. They got raises (told that from GI, didn't talk to Four Peaks about salaries), safety measures have increased exponentially, more employees were hired allowing for shorter work days, funding for the breweries is way up, GI built out their huge barrel facility, put in an air vacuum system with sterile air filters to avoid cross contaminations, got a vastly improved yeast lab, a huge bottling line for their sours, etc. The employees there seem to really love it. I wonder what the reason is for the differences between how they treated craft employees vs. AB employees.

 

Here's an article on the topic that came out this week.
http://draftmag.com/working-for-a-brewery-that-sold-out/

 

I'd be curious what the profit margin on a bottle of BCBS or Sophie is vs. Budweiser. Obviously, they are going to crank out much, much more Budweiser, but the earning opportunity has to be slimmer on those cheaper beers. If AB can use their extra finances to insure that there are fewer high-dollar batches being thrown out of the high-profit beer, then they stand to increase their margins well with just a little investing.

Safety really is hit or miss across all industries. Big companies seem to have the resources to put together comprehensive safety teams, whereas safety is just encouraged at smaller companies where they don't have a paid safety team writing a plan, providing safety equipment evaluations, providing constant, updated training etc. I can say in the industry I work in, incident numbers are one of the first deciding factors we look at to see if we'll contract with someone, or should find someone else.

 

Hasn't happened to me personally, but through some contacts in the business I know that brewers at several of the breweries bought out by ABI were offered contracts with a 30-50k signing bonus, with the stipulation that they stayed and worked for ABI for a number of years. That seems like a nice bonus, especially since most brewers/cellar positions attend making much to begin with, but it's a drop in the bucket compared to what the owners/investors are getting in these buyouts.
It's what you'd expect, but it's shitty that the employees that are there day in and day out and helped make the brewery the success that got bought out will see little to nothing of the money, and some will most likely lose jobs due to consolidation when their beers start getting brewed at ABI facilities.

 

Weedy, it is my understanding that the workers at AB breweries are unionized and consequently well compensated in comparison to folks that work for small, independent breweries. Do you have more knowledge here?

It is my guess that when AB purchases a craft brewery they make attempts to more 'normalize' the wage structure for the workers.

As regards the existing AB breweries, it is my guess that after the InBev purchase they took whatever measures they could (within the existing contract structure) to minimize some costs. It is my understanding that one of Carlos Brito's strategies is to minimize costs (as result of his MBA background?).

Cheers!

 

Yes, all AB breweries are unionized and they are well compensated. At least before the buyout, not sure how it has gone but I've never heard any bad news regarding the breweries and contract negotiations.

 

I think it is every business owners' strategy to try and minimize costs.

 

Yes, there is some truth to that but in contrast there is the dictum of: you gotta spend money if you want to make money.

By concentrating on the minimize costs function you may not be making the proper investments for future growth. Some people think of of plant and equipment purchasing as regards business investment but there is human capital involved as well. If there is a really talented person who could make a substantial contribution to future growth of the business but you choose to not pay them what is required you did indeed minimize cost but at the expense of the potential for future growth.

Wise CEOs know how to approach business decisions holistically.

Cheers!

 

Trust me I understand. I am an accountant. I was just being a bit pedantic Perhaps a bit of a smartass too

 

There is a big difference between cost cutting and sustainable cost reduction. Most small businesses (including breweries) have little to no idea how to properly manage a P&L...which is why so many fail. Often the only way to stay afloat is to sell. Acquired businesses often have a change in benefit structure / productivity expectations, but they gain management resources, access to cheaper goods via leveraged purchasing contracts, more commercial avenues (distribution), as well as capital.

Small and private isn't necessarily better or worse than large and public. But it's certainly not the same, and it's foolish to expect otherwise.

 

I don't work in the industry but have experienced this same thing in my own industry where my firm was purchased by a larger firm. With any purchase there is always an elimination of duplicate positions and a consolidation of positions. Some things change with regards to insurance and benefits etc. It does vary firm to firm so best bet is to speak with HR and supervisors, they can best aid with detailed info and what to expect if this sort of thing does happen. Sometimes people really benefit and its a great merger, other times its not fun, all depends on the details.

 

I knew a brewery rep not so many years ago who sold a big Belgian brand. They actually tracked his movement via phone/computer weekly. He was a hardworking guy, pretty good at sales, but his paranoia completely ruined him. To my mind, if someone is a good producer that should be good enough. I have never worked for a big corporation for many reasons.

 

Dick, I have worked for nothing but BIG corporations since I graduated from college many decades ago.

It is quite the 'adventure'!?!

Cheers!

P.S. Would you like me to tell you about the "bring me a rock" game!?!