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SABMiller plc Annual Report 2007

Strategic priority four

Leveraging our global scale

As a global organisation, we’re constantly seeking to harness the benefits of our scale. At the same time, we have to recognise that beer is essentially a local business and that local managers are in the best position to identify and exploit local opportunities. The question is how to generate maximum value and advantage from our size without becoming over-centralised and losing our relevance and responsiveness in each market.

One example of how we’re tackling the issue is through the SABMiller ‘Ways’. These address eight aspects of the business essential to our success (manufacturing, corporate affairs, operational finance and others) and provide tools, procedures and processes that encapsulate best practice in the group. Without being prescriptive, they set out how things are expected to be done and make it easier for essential knowledge to be retained, transferred and made available to others. Each Way is put together collaboratively. Local businesses contribute their experience and insights and are then responsible for applying the Ways in their own marketplace. A number of the Ways are up and running and the latest, the enhanced Marketing Way, will be rolled out during 2008.

We take a similar approach to innovation. This, again, is essential to our business, especially in a fragmenting marketplace where consumers are increasingly looking for novelty and difference. While the right innovation can generate enormous value (Miller Chill is a case in point), the process costs money and not every innovation succeeds. Effective innovation must be technically feasible, be an answer to known needs and be rooted in a thorough analysis of the marketplace.

Clearly, the more we can do to pool the relevant knowledge, the better our chances of succeeding. Rather than centralise the innovation process, we’re creating a virtual network to co-ordinate efforts around the group and harness the best new thinking wherever it exists. A tool known as SmartGate helps to standardise our approach to innovation, to manage the risks and to make the results widely available.

In all these Ways, we’re seeking to develop a collaborative, learning organisation that enables local businesses to compete more effectively while at the same time extracting full value from our global scale.

A pipeline of innovative brands

As Miller focuses increasingly on top-end premium brands, it faces a greater need to innovate and to offer the distinctiveness that consumers demand. One recent response is the creation of Miller Chill, a unique-tasting, chelada-style, light beer with a touch of lime and salt. This innovative brand exploits the growth in the light beer segment as well as the growing Latin influence on mainstream American culture and a greater willingness by consumers to pay a premium for distinctive brands. Launched in the USA in 2007, Miller Chill has beaten expectations in its home market and has now been successfully introduced in Australia.

Miller’s innovative skills are further demonstrated in the Miller Lite Brewers Collection, now being tested under the tagline, ‘Craft beer. Done Lite’. Combining the refreshment of a light beer with the flavour and interest of a craft brew, the collection potentially creates a new category in the competitive US market. A tasting panel from Modern Brewery Age Weekly described two of the beers in the collection as ‘superb in every respect’ and the blonde ale as ‘arguably one of the best light beers ever made’.

Other businesses, too, are successfully innovating. Of the many examples, South Africa recently introduced a new, uniquely flavoured premium beer, Hansa Marzen Gold. This has been followed by the highly successful Sarita apple-flavoured ale, its new variant Sarita Ruby Dry, and the flavoured alcoholic beverage, Skelter’s Straight.

Leveraging our local value chain

Wherever possible, we try to incorporate local suppliers into our value chain with a view to benefiting both the business and the communities in which we operate.

In recent years we’ve created opportunities for small-scale farmers in Uganda, Zambia, Zimbabwe and Tanzania to supply us with barley and sorghum. In 2005 we began testing a similar model in Rajasthan in India. The aims were to create a high-quality, domestic source of malted barley for the business and enable farmers to get better prices for their produce by becoming part of SABMiller’s supply chain.

Under the scheme, 6,000 small-scale farmers supply SABMiller India and have access to good quality barley seeds and relevant agricultural training. Since 2005, the yield and quality of the local crop have shown improvements and farmers’ income from their crop has improved. The programme is expected to grow to meet 50% of the barley needs of SABMiller India over the next five years.

We also involve small-scale entrepreneurs in our downstream activities. In Zambia, for example, we’ve created over 1,800 jobs by setting up local people with their own kiosks and wholesale outlets to distribute and sell our soft drinks.

The SABMiller Marketing Way

The SABMiller ‘Ways’ are at various stages of development. The enhanced Marketing Way, relaunched at the start of 2008, is a toolkit for helping businesses to ‘own the growth’ by sharpening their skills in analysing and segmenting their markets, identifying the profitable opportunities and deciding where and how to concentrate their efforts.

The process of compiling the Marketing Way showed the kind of collaborative learning that the group as a whole is working towards. Instead of the corporate centre laying down the rules or trying to manage the local marketing process, we took the best ideas and expertise from around the world and distilled them into clear principles, an end-to-end process framework and a set of tools for businesses to apply as appropriate. In this way, each local team retains its autonomy but can benefit from the learning and insight of SABMiller as a whole.

As the Marketing Way is rolled out, we’ll provide comprehensive training and support to help our teams to work with it effectively and embed it into their operations.

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