Anheuser-Busch InBev’s marketing chief makes the case for diversifying its portfolio and says it will trim its use of agencies as it prioritizes performance

Michelob Ultra/YouTube

Anheuser-Busch InBev’s US chief marketing officer Marcel Marcondes chatted with Business Insider at the Cannes Lions Festival of International Creativity last week.
Marcondes, who was also named to Business Insider’s 25 most innovative CMOs list, said his focus is not only driving the company’s marketing, but also its innovation agenda.

As AB InBev emphasizes new products, it has launched an in-house agency and plans to use fewer outside agencies.
Click here for more BI Prime stories.

This March, Anheuser-Busch InBev took over the Long Center for the Performing Arts in Austin during the SXSW Festival, hosting a mass-meditation session for frenzied festival-goers.

The stunt to promote the company’s organic beer Michelob Ultra Pure Gold may seem like an odd fit for the beer brewer, but epitomizes its growth strategy, said its marketing chief.

"We want to go from being the industry leader to leading the industry," Marcel Marcondes, Anheuser-Busch InBev’s US CMO, told Business Insider at the Cannes Lions Festival last week. "Until now, we’ve been convincing people to buy what we make. Now, we’re trying to adjust what we make to offer them what they want."

AB In-Bev has been trying to broaden its product portfolio

As marketers play increasingly important roles in the C-Suite, Marcondes says that CMOs today must not only drive their companies’ marketing but also innovation. For AB InBev, that innovation has been driven by necessity.

Beer sales have plummeted, with some of the most established brands struggling as young people curtail or avoid drinking beer altogether. AB InBev has adapted its products to meet changing tastes.

The company has rolled out new products from the above-mentioned Michelob Ultra Pure Gold to the "premium" Bud Light Reserve, flavored drinks like Bud Light Orange and Bud Light Lemon Tea, as well as spiked seltzer like Bon & Viv. It’s put hefty spending behind some of these products — Michelob Ultra Pure Gold and Bon & Viv had their own Super Bowl ads this year.

"The industry has traditionally been based on a few companies, with each one of them playing with two, or three brands maximum," said Marcondes. "We have a very clear strategy to bring more brands into the game to address different consumer needs, demographics and price points. We are now playing a portfolio game."

The strategy has begun to show results. Global revenue grew 4.8% in 2018 to more than $54.6 billion. Its US market share is still declining but was at its best in 2018 since 2012, said CEO Carlos Brito. From 10%, AB InBev now accounts for more than 50% of the US beer industry’s innovation volume, with new products contributing more than $250 million in sales in 2018, Marcondes said.

"Marketing is not just a smoke and mirrors, or just something to address image but not results," said Marcondes.

The beer maker is changing how it works with ad agencies

AB InBev is also rethinking how it works with advertising agencies. Last month, the company launched an internal agency called Draftline, jumping on the trend of brands creating their own in-house agencies in search of speed, efficiency, and savings. The idea behind Draftline is to marry consumer data and creative more efficiently, be more agile, and scale personalized and local marketing.

"I’m not going to knock on Wieden + Kennedy’s door and ask them to support me on ten different pilots that we’re doing in ten different regions," Marcondes said. "Before we scale up for big markets, all of that is powered by Draftline."

Marcondes said Draftline does not pose a direct threat to agencies, but that the brewer plans to trim the number of agencies it works with. He said the goal isn’t to cut costs but work with fewer agencies than can make a big difference. AB InBev works with more than 50 ad agencies, including Wieden+Kennedy, FCB, David, and VaynerMedia.

"Every year, we’re streamlining the process, but we’re doing it in a meritocratic way, because that’s our culture," he said. "It’s based on the creative work that they put on the table and the results that they deliver."

Marcondes also said that he was pushing for more accountability from AB InBev’s agencies, with payment based on their results. He wouldn’t be specific, but said that the company was already trying a model with a variable compensation piece tied to performance with a couple of agencies, which he said have "very specific targets based on business results."

"I don’t believe in a model where they just get their retainer fees, and it doesn’t matter what they deliver because the money’s going to be there anyway," he said. "We need to be focused on driving results. We’re trying to design a model where we define a percentage of the variable compensation, and also percentage of overachievement."