InBev cost-cutting measures set for U.S. export

By Philip Blenkinsop - Analysis

BRUSSELS (Reuters) - Economy flights, enforcement of double-sided printing and fewer staff with mobile phones.

Belgian-Brazilian brewer InBev is likely to export its belt-tightening to the United States to squeeze out up to $1.4 billion of costs if it succeeds in taking over U.S. peer Anheuser-Busch.

"Zero-based budgeting" is central to InBev's business model in which departments have to justify all spending, rather than just changes in their budgets.

Brought in from Latin America when Belgium's Interbrew merged with Brazil's AmBev to form InBev in 2004, it has been applied across the company's regions -- North America from 2005, western Europe from 2006 and eastern Europe and Asia from 2007.

Employees and union officials describe the tightest of budget controls: mobile phones taken back and returned only to employees who justified a need for one; new pens given out only in return for used ones; and an elevator at the global headquarters closed for several months.

The elevator is back in use now, although signs in the lobby read: "Why not take the stairs?"

InBev says many such measures, and notably larger water and energy conservation efforts, also serve sustainability targets and that its cost-saving push is simply one pillar of an overall strategy also focused on boosting beer volumes.

Even InBev critics acknowledge that the rules apply just as much to Chief Executive Carlos Brito as to the workers and that good performance is rewarded.

The plan typically cuts costs by 10-15 percent in year one, 5-10 percent in the second year and enough to offset inflation in the third.

In the first year in key home market western Europe, InBev laid out restrictions on 15 areas from travel to utilities that reaped 118 million euros ($186.3 million) of savings.

REVENUE BOOST, LIMITED OVERLAP

InBev has given scant details of its $46.3 billion takeover offer and so far stressed only its vision of boosting revenues by making Anheuser's Budweiser a flagship global brand beside its stable of Beck's, Stella Artois and Brahma.

In its defense, Anheuser has set out $1 billion of cost cuts, principally the result of reducing the workforce by between 10 and 15 percent by 2010 and speeding up price hikes.

InBev would be looking for more, analysts say. The beauty of the deal is adding Anheuser's near 50 percent share of the profitable U.S. market to InBev's global empire, but the limited overlap means little scope for wide-ranging cuts.

The two already have a deal for Anheuser to distribute InBev's European beers in the U.S. market.