Page 13 - AB INBEV 2018 Model Answer 2

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(parent company) could follow suit and another channel available to Ab In Bev
damage up to 18% of global sales. This is a - just like their stores.
risk that needs to be incorporated in the cost
of capital and could reduce the above NPV to
zero or negative!
Feasibility
(Can we execute this strategy?)
1. Do we have the money (financial YES –the total outlay before we start YES as no set up costs are required.
resources) to execute this? receiving benefits is US$1,515 million
(US$1030 + 485 –see appendix 3). We
have this cash in the balance sheet.
2. Do we have the technical IT YES –We have a proposal from an YES –as very limited technical IT
expertise to execute this? accredited supplier who seems ready to skills is required.
assist.
3. How quickly can we get on with Only 12 months from now! Immediately!
this?
4. Does it entail too much change The incremental sales is a lower at 10% The incremental sales is a lot higher
in the character of our based on 2019, it will need far less at 30% -although based on 2018
organization? organizational changes to meet the indirect projections; it will need far more
costs associated with meeting the sales. organizational changes to meet the
indirect costs associated with
meeting the sales.
5. Can we negotiate with and RELATIELY HARDER! They might see RELATIELY EASIER! They are more
incentivize supermarkets to use own sales as an attempt to cut them out as likely to be receptive of this as it is
their network of outlets/stores as middle men and may respond by cutting seen as less intrusive of their
pick up points for the online back shelf space as it seems Makro has business (or just another outlet).
orders? already initiated. Success of this may mean Success of this means AB Inbev will
manufacturers may follow suit in the long- still need third parties (supermarkets)
term and will not need supermarkets –this and some whom already have their
may be major threat for brick and mortar own ecommerce platforms anyway!
stores.

Recommendation: Launch our own –ecommerce platform, but delay it until a full-incentive strategy

to bring supermarkets along has been developed, and their buy-in secured!

Justification: Although the NPV is a lot lower, strategically, it is more suitable as it corrects our

internal weaknesses and exploit big data opportunities, whilst resolving the ‘B2B and Downstream
Supply Chain Strategy’ issue in Southern Africa. Going via third party platforms will not deliver these
strategic benefits –yet these strategic benefits, when quantified, will likely deliver an NPV that is
rd
considerably higher than that offered by 3 part platforms. We must delay it to avoid supermarkets
feeling our bigger size and venturing into direct retailing via e-commerce is a threat to their business!

Actions: Perdro Earp (Chief Disruptive Growth Officer), should contact the supplier of CloudCraze to

negotiate an agreement and Service Level Agreement for the e-commerce solution. A high-level
Project Steering Committee should be setup to ensure effective planning and delivery of the
CloudCraze solution. A detailed incentive plan needs to be developed and proposed to supermarket
customers –to demonstrate how the new e-commerce plan should add to their sales, revenues and

profitability, rather than threatening their business. Our network of depots and other retail outlets
offered by third parties should be investigated to determine if and how to use their facilities for pickups
of online orders. Focus should be on depots and retail outlets in areas deemed to likely host
entertainment activities that create occasions for drinking (or alcohol consumption) as it is at such

venues that instant online orders that require prompt deliveries will typically be placed. Invest in other
organizational capacity changes necessary to lift production to meet the increases sale.

Developed by The CharterQuest Institute for 'The CFO Case Study Competition 2018'
www.charterquest.co.za | Email: thecfo@charterquest.co.za