Our Strategic priorities
The group has a strong record of year-on-year improvements in its operational performance. As a result, our standards are high, with operating margins that are typically ahead of the industry in most of our markets. We know, however, that we must keep improving to maintain our lead. Indeed, constant improvement is integral to our business.
Around the world, our manufacturing capability continues to improve in terms of its productivity, efficiency and flexibility and the quality of the end product. To help us progress, we've codified the group's best practice and knowledge in the SABMiller 'Manufacturing Way' – a set of tools and processes developed centrally but applied locally to raise standards across the group.
The year has brought further advances. Manufacturing efficiency has improved and, compared with the previous year, we consumed less water and energy for each hectolitre of beer we brewed, with notional savings of US$2 million in water costs and US$6 million in energy costs. We're continuing to produce more beer from given quantities of raw material while also improving the shelf-life and quality of our products. We've always been committed to quality and we've now formalised this commitment through a comprehensive set of quality standards to be followed by all our breweries.
We also have to win at the point of sale. Unlike manufacturing, this activity varies widely from market to market because local conditions are so different. The underlying skills, however, are the same – improving our distribution logistics, segmenting and analysing the channels to market, and ensuring the right conditions and consumer experience at the point of sale. These are basic activities, but each requires relentless, disciplined execution.
In China, for example, our priority is to streamline our route to market by reducing the many tiers between ourselves and the restaurants, bars, supermarkets, stores and street kiosks that carry our products. We're also capitalising on the huge popularity of the Snow brand to build closer relationships with our distributors. In addition, as we acquire further breweries in more places, the product has less far to travel – which is good for both costs and quality.
Our South American businesses, meanwhile, are developing their skills in segmented channel marketing. In Colombia – a country with around 340,000 outlets – we've broken down our channels by type of drinking occasion and analysed the outlets, consumption patterns and service needs in each case. This process enables us to focus resources, ensuring that each channel gets the right products in the right packaging, accompanied by the right brand messages and merchandising material.
We're also becoming more sophisticated at creating the right environment at the point of sale. This applies equally to retail outlets and to on-premise settings such as bars and restaurants. Our European businesses have led the way in creating 3D installations and 'beer theatres' with related promotions and events to lift the image of the product and create a more exciting experience for the consumer at large super and hypermarkets.
The Europe division has also formalised best practice when it comes to winning at the point of sale. This has led to the SABMiller 'Trade Marketing Way', a standardised process now being rolled out to other businesses.
When Miller in the USA became part of the group in 2002, its eight breweries were running well and the turnaround programme initially concentrated on the company's brand positioning and its sales and distribution. By mid-2003, however, it was clear there were opportunities to improve production as well – notably by implementing the SABMiller 'Manufacturing Way'.
Through a range of measures including better training for Miller's people and deploying them more flexibly and productively on the shop floor, the business has made considerable progress.
Under our OEE (overall equipment effectiveness) measure of efficiency, Miller's performance has risen from 62% in 2002/03 to 73% in the year just ended – an increase of 11%.
In total, Miller's greater production efficiency has saved about US$30 million since 2003. This figure, combined with savings elsewhere in the company, has exceeded the group's original expectations.
Miller Genuine Draft production line, Milwaukee Brewery, USA.
In South Africa, the informal taverns or 'shebeens' that serve the bulk of the population are in the process of being legalised. Once they become legitimate business owners, licensed taverners can borrow money against their properties and have an incentive to invest in, and upgrade, their premises.
For SAB Ltd, the change means we can now deliver straight to the point of sale, making our delivery and distribution more efficient. As the legalisation process progresses, we're expanding our distribution with the aim of reaching directly the 30% of outlets that account for 80% of volume within the sector.
We're also taking the opportunity to forge relationships with tavern owners, providing expertise and merchandising material to improve their premises and create a better experience for customers. Our Mahlasedi programme has now trained some 12,400 newly-licensed taverners in essential business skills
Newly-licensed taverner from our Mahlasedi programme.
Each of our European businesses now has a specialised trade marketing function to manage the way we invest at the point of sale. One of the successes of this new function has been BIBA (big idea, brilliant activation). The concept is that each brand embodies a 'big idea' and that brilliant activation at the point of sale brings this idea to life for the consumer. A key objective is to position the product as more than just a commodity.
A BIBA project typically involves an eye-catching display or piece of 'brand theatre'. In a recent example, the Polish business set up point of sale materials in 8,000 retail outlets to promote one of its upper mainstream brands, Dębowe Mocne. The displays continued the 'beer for men' theme of the brand advertising and its associations with reward following hard work. Tools were given away in the accompanying promotion under the message, 'Dębowe Mocne supports your hobby'. As well as strengthening relationships with participating retailers, the project contributed to a 9% increase in brand volumes in the past year.
Dębowe Mocne leads the strong beer segment in Poland.