SAB Miller Case analysis

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UBMITTED TO: PROF. RASHMI MENON T
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SUBMITTED BY:
PIYUSH GAUR (35)

2. LEARNINGS
• Macro environmental influences, competitive structures of
markets (chapter 2 Environment),
• Organisational competences (chapter 3 Strategic
Capabilities),
• Stakeholder expectations (chapter 4 Expectations &
Purposes).
• How strategic options are formulated to respond to such
demands (chapter 7 Directions & Methods of Development),
• And the role and importance of environmental scanning
(chapter 2 Environment)

3. CORPORATE OVERVIEW
• SABMiller has shown a remarkable flexibility in its organisation and
operations since its inception.
• Its establishment in the Johannesburg gold fields was the result of
the recognition of the huge market potential that the mining
communities provided to the company.
• Over the subsequent decades it came to dominate the beverage
industry in South Africa and establish a very strong position in
Southern Africa.
• Parts of the development during this period showed a synergy
management logic – acquiring wineries and glass manufacturers
for example.
• Yet, as growth was further constrained by the external
environment, particularly by the sanctions campaign against
apartheid,

4. Corporate Overview Contd:
• This reduced the purely synergetic investment opportunities
for the business both regionally and globally.
• Consequently a shift from a corporate logic of synergy to
one of portfolio management occurred with SAB acquiring
the ownership of businesses as diverse as furniture and
safety matches, Hotel & etc.
• With the ending of apartheid a range of new growth
opportunities opened up and initial opportunities were taken
up in Southern Africa, markets which SAB already had
considerable knowledge of.
• The 1990s therefore saw SAB shift its corporate logic again
to one of parental development and a renewed focus on the
brewing business.

5. STRATEGIC POISITION
Business Environment
• SABMiller is now operating worldwide.
• Its growth has come through entering
developing markets, acquiring businesses and
brands, and growing them.
• The strategy has seemed to yield healthy
growth in the past in most of the markets in
which it has entered.

6. SOUTH AFRICA
• Original market for SABMiller
• Company has experienced mixed fortunes
• In 1992, Income of people spending on
beverages & tobacco has fallen.
• In 2001, Spread of AIDS/HIV.
• In 2003, Volume increased by 1% on 2002,
still 5% decline as compared to 1999.

7. AFRICA (OUTSIDE SOUTH AFRICA) & ASIA
• Growth of 3.2% with strong performance from
Tanzania.
• In 2002, Soft drinks volume growth was
15.3%.
• EBITDA growth in China was more than
doubled year on year.
• In India, Achieved Break Even in 1st Year.
• Acquisition of Rochees Brewery in Rajastan.
• Launch Castle Lager in Mumbai, Banglore &
Delhi.

8. NORTH & CENTRAL AMERICA
NORTH AMERICA (2003)
• US Beer industry affected by low consumer
confidence, lacklusture economy, recent
world events & poor weather.
CENTRAL AMERICA (2003)
• Decline in Sales & Operating margin.
• Restructuring in business.
• Merged back office operations across the
region.

9. EUROPE
• High profit with EBITDA growth of 39%.
• Debowe, A new Brand successful launch with
capturing 20% share in polish market.
• International premium brand Pilsner Urquell
perform well in export market of US, UK &
Germany.
• In Russia, Volume up by 9%, 27% growth in end
of the year.
• In Hungary, General price stability continued,
assisting overall industry profitability.

10. STRATEGIC CAPABILITY
• Competences in environmental scanning and
developing strategic options.
• Moving of corporate headquarters from London
to Johannesburg in 1950.
• The introduction of a non-discriminatory code of
employment in 1978.
• And the preparation of “complex defensive
investment structures” for deployment in 1985 in
response to economic sanctions.

11. • The emergence of the company onto the global
market, particularly with the acquisition of Miller,
has led to a reframing of what it means by
parental development.
• This indicates a competence that the company
has had to develop as it moves forward into the
21st century.
• Improve its abilities to manage the Western
money markets, by putting its competence in
terms that are understood in New York and
London, and acquiring businesses in markets
that interest it more.

12. • Company displays is a culture of flexibility
amongst its managers.
• SABMiller executives have faced a range
of challenges from micro to macro levels.
• They are unlikely to be fazed by the
challenges of emerging markets and have
maximised return on this competence and
reinforced it within the business by their
ventures in Eastern Europe and Asia.

13. • At the corporate level the company has developed
competences in the acquisition of breweries that allow it to
exercise the business-level competences that it has.
• SABMiller has demonstrated strong value-adding parenting
capabilities.
• These have been particularly apparent, as in reducing
inefficiencies in operations, including changing work
practices in Miller; & value addition in marketing.
• By the retention of existing brands in the breweries the
company has acquired in the region.

14. STRATEGIC OPTION & EVALUATION
Consolidation:
• Reducing the risks associated with the more developed
markets – South Africa, Europe and the US
• While ensuring as firm a base as possible in emergent
markets (reducing risk in vulnerable regions/markets,
improving efficiency further, etc.).
• SABMiller has made its major Western acquisition it is not
clear what further growth pressures may be put on the
business by shareholders, though the risk would remain
that if it fails to grow itself it may become a target for
takeover.

15. PRODUCT DEVELOPMENT
• New beer products and transference of beer
products and brands between markets.
• Launching new varieties of beer and developing
existing varieties.
• It has also been transferring brands across
different markets and regions.
• However, this too may not provide the company
with the sort of growth that is now being
expected of it and it may underestimate the
importance of brand loyalty across the world.

16. • Market development/Africa, i.e. entering further countries
and extending the penetration in existing countries.
• This certainly builds on past competences and success,
and is likely to be feasible.
• But it is not clear how well this might meet expectations
for growth.
• Once highly promising markets such as Zimbabwe are
looking extremely depressed now,
• The threat of HIV/AIDS to economic growth and political
instability in South Africa may also cause continent wide
economic disruption.

17. MARKET DEVELOPMENT ASIA & EUROPE
• Developing further the strategy already under way
to enter developing markets outside Africa.
• This builds strongly on the strategy that has been
followed over recent years.
• It seeks to apply the competences built up in
African developing markets to developing markets
elsewhere.
• It has been largely successful because it provides
an opportunity to improve efficiencies and
introduce better brand marketing.

18. MARKET DEVELOPMENT WESTERN MARKET
• Developing further presence in Western Europe
and America.
• While heavy expectations were put on SABMiller
following its listing on the London Stock
Exchange to acquire a major Western brewer.
• The initial foray into the US market has been
perhaps more trying than all anticipated.
• While it appears at the time of writing that the
company has succeeded in a turnaround of
Miller.

19. DIVERSIFICATION
• Move away from a reliance on brewing towards,
for example, distribution and retailing (the
company is already operating in hotels).
• This would certainly seem to have the resources
available to allow them to better utilisation.
• But it could confuse their investors, who would
see them slipping down the path of unnecessary
diversification in areas where they have little
competence.

20. JOINT VENTURE
• A joint venture with a major Western brewer.
• There is a case to be made for a joint venture with
an established Western brewer.
• The logic of such a joint venture, presumably, would
be that SABMiller could bring to bear its expertise
and position in developing markets to the benefit of
the Western brewer,
• The Western brewer could bring further entry points
for SABMiller brands into Western markets.
• Clearly this would build on existing competences and
resources.

21. SELL
By one of the other major brewers.
• Unlike most of the other major brewers (all
Western), SABMiller offers a market presence to
them and a set of competences that they do not
have.
• It would be a significant opportunity for a major
brewer to obtain a substantial position around the
world.
• It might also be attractive to investors, who would
see SABMiller realizing a healthy return for its
shareholders.

22. RECOMMENDATIONS
• It would be very unwise for SABMiller
to jeopardize its skills or position in
developing markets.
• But it does seem to need to gain a
greater presence in the West.

26. THANK YOU