Board rigid with AB InBev, Disney and Apple’s director reshuffles

The world’s biggest brewer has finally admitted that Budweiser is a soft drink – tolerable only as a thirst quencher at a baseball stadium on a hot day after the third inning and a particularly spicy hot dog. At least that was my read of AB InBev’s decision this week to replace its chairman, Olivier Goudet.

Mr Goudet’s day job is running JAB Holdings, the investment group that has embarked on a blitz of acquisitions in recent years, from Pret A Manger to Peet’s Coffee.

The precise trigger for his departure is disputed. The Frenchman says he needs to devote more time to JAB, where he certainly has his hands full dealing with a vast array of coffee, sandwich, drinks and doughnut companies.

But there was also a feeling among his fellow directors that Mr Goudet needed to spend less time at AB InBev. Concerns over a conflict of interest were brewing and appear to have bubbled over when JAB acquired Dr Pepper Snapple last year.

Shuffling boards to resolve a conflict is not unusual. In 2009 Google’s then-chief executive Eric Schmidt left Apple’s board.

Last year Facebook’s Sheryl Sandberg and Twitter’s Jack Dorsey stepped down from Walt Disney. Now there is speculation that Disney’s Bob Iger will have to leave Apple.

In all these cases, problems emerged when once distinct businesses began to butt up against each other. In the technology sector, where rapid change is a feature, that is inevitable. As Apple’s then-chief executive Steve Jobs put it at the time, Google had strayed from its origin as a search engine and was building a directly competitive phone operating system and web browser. Mr Schmidt, therefore, would have to sit out so many Apple meetings that his “effectiveness . . . [would] be significantly diminished”.

The conflict is less clear between AB InBev, with its Budweiser, Stella Artois and Beck’s beers, and JAB, with its soft drinks brands, such as Canada Dry and 7Up. But the categories are blurring as consumer tastes change. By 2025, AB InBev wants 20 per cent of its beer sales to be no- or low-alcohol.

Other once indelible-seeming lines are being redrawn. It was hard to imagine a decade ago that tobacco and drinks manufacturers would be eyeing cannabis as the next big thing; yet many are now pivoting to pot.

Sometimes the redrawn lines are unconvincing. According to earnings call transcripts on S&P Capital IQ, “We are a technology company” is a phrase uttered in the past few years by executives at companies including UBS, which I naively thought was a bank; Live Nation, which promotes concerts, UPS, which delivers parcels, Royal Dutch Shell, which drills for oil, and Under Armour, which sells sports bras. If you really are a technology company, you probably don’t need to tell anyone.

When there is a genuine shift and emerging areas of overlap, companies can be too quick to evict potential rivals. It is reasonable to want to avoid a big competitor sitting around the boardroom table listening to your plans. But the threat can be overstated. Twitter and Facebook may have tinkered with video but they were hardly a real competitor to Disney. It is sometimes more useful to make use of directors’ expertise of tackling similar problems than to be too precious on supposed conflicts. Budweiser may taste like fizzy water but it isn’t really.

• Source: FT
• Tom Braithwaite
• March 9, 2019