Brewing up a global brand

The South African Breweries factory in
Johannesburg, South Africa, produces
1.9-million litres of beer a day.
(Image: Chris Kirchhoff,
MediaClubSouthAfrica.com. For more free
photos, visit the image library.)

This article originally appeared on page
two of South Africa Now, a six-page
supplement to the Washington Post
produced on behalf of Brand South Africa.
(Click to enlarge.)

MEDIA CONTACTS
• Nigel Fairbrass
Head of Media Relations, SABMiller
+44 20 7 659 0105 or +44 77 9 989 4265
media.relations@sabmiller.com
• SAB Limited Media Relations
+27 11 881 8417

Kevin Davie

There is nothing in SABMiller’s history to suggest that it would become one of the world’s largest brewers with operations on six continents in 60 countries, brewing over 200 different beers at 139 breweries.

Established in 1895 as Castle Breweries, South African Breweries (SAB) had a largely southern African footprint until the 1990s. It then began an international buying spree which now sees it ranked as number-two brewer in the world by sales, second only to Belgium-headquartered Anheuser-Busch InBev.

It owns four global beer brands – Grolsch, Miller Genuine Draft, Peroni and Pilsner Urquell – as well as numerous local beers prominent in their own markets. Twelve of its beers, including Aguila, Castle, Miller Lite, Snow and Tyskie, are number-one sellers locally, with Snow, China’s top-selling beer, out-selling its leading rival by two to one.

While retaining its secondary listing on the Johannesburg Stock Exchange, where it all began, SAB set up its primary listing in London in 1999. This was the beginning of an ambitious US$17-billion (R116.5-billion) acquisition drive.

Its success over the past 10 years has been breathtaking, with employee numbers rising from 34 000 to 76 000 and hectolitres brewed from 53-million in 1999 to 239-million today. It has expanded its range from 21 countries to 60 and increased its number of brands from 80 to over 200.

SAB entered the FTSE with a market capitalisation of $5.3-billion (R36.3-billion), growing in recent times to $22.6-billion (R155-billion) – rising from number 88 in size to number 17 on the index.

But the strategy of the company, which changed its name to SABMiller in 2002 after acquiring the Miller Brewing Group, has been much more than buying up whatever is available.

SABMiller’s Bianca Shevlin says that since 1999 it has seen total shareholder return and share price “massively outperform its beverage peer group and the FTSE”. Profit in the same period rose from $746-million (R5.1-billion) to $4.4-billion (R30.2-billion).

This growth is partly because people are drinking more beer: world consumption rose from 22 litres per person in 1999 to 28 litres in 2009, a 21% increase led by Chinese consumption, which is up by 48%.

SABMiller has targeted this growth by acquiring interests in the emerging markets of Eastern Europe, South America, Africa, China and India. Its buying spree has coincided with the globalisation of beer, with four dominant companies acquiring 50% of total beer sales, up from just 23% 10 years ago.

SABMiller’s shareholding base has changed as dramatically as the business has. In 1999 over 80% of its shareholders were South African. South Africans are still the dominant shareholders at 40% of the total, but UK residents now own 31% of the company and Americans 23%.

Growth-orientated companies benefit from interests in emerging markets, but not at the expense of losing out on the world’s biggest market, the US. So, in October 2007, SABMiller announced MillerCoors, a joint venture with Molson Coors Brewing Company.

Cost savings have been key to SABMiller’s successful acquisition strategy. The MillerCoors venture has delivered a total of $481-million (R3.3-billion) in savings since 2008, and is on track to achieve $750-million (R5.1-billion) in savings by 2012.

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