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SABMiller plc Annual Report 2007

Our strategic priorities

SABMiller has a clear strategic focus, at the centre of which are the four priorities set out below and discussed in more detail within this section. Management use a range of indicators to monitor progress against these four priorities. Some of the most important measures used are identified in the accompanying table and are expanded upon in the Chief Financial Officer’s review.

Creating a balanced and attractive global spread of businesses

Our geographical spread of operations enables us to capture growth in total volumes in the developing markets, and value growth as consumers around the world trade upwards from economy to mainstream and from mainstream to premium brands.

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7%

organic growth in lager volumes

10%

group revenue growth (organic constant currency)

Developing strong, relevant brand portfolios in the local market

Our aim is to develop an attractive brand portfolio that meets consumers’ needs in each of our markets. In many markets, because the growth is fastest at the top end, we’ve been focusing on our international premium brands, such as Peroni Nastro Azzurro and regional brands such as Kozel in Europe.

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0.5m

barrels of Miller Chill sold in year one

11%

growth in premium volume in Europe

Constantly raising the performance of local businesses

Good operational performance has always been an SABMiller strength. While operational standards are already high we are continually pushing them higher as evidenced by growing EBITA and stable or rising margins.

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9%

EBITA growth (organic constant currency)

17.4%

consistent group EBITA margin

Leveraging our global scale

We are leveraging our global scale to grow the business. Our business platform enables us, for example, to distribute our international premium brands and build our regional brands. In addition we are using our scale to transfer skills, methods and our operational performance and efficiency.

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18%

revenue CAGR for the last three years

72%

international growth of Peroni Nastro Azzurro volumes

Principal risks

The principal risks facing the group, which have been considered by the board, are detailed below. The group’s well developed risk management process is detailed in the Corporate Governance section and our financial risks are discussed in note 22 to the consolidated financial statements.

The global brewing industry is expected to continue to consolidate. Should the group not participate in attractive value-adding transactions, this may inhibit its ability to leverage additional scale benefits. While participation in global consolidation provides opportunities to access scale benefits, enter growth markets and achieve benefits from the group’s best operating practices, there is the risk that expected benefits may not be captured or may be inadequate, such that an appropriate return on capital is not achieved over time. The group has continued to make significant progress during the period with regard to creating a balanced and attractive global spread of businesses, as set out in Strategic priority one.

The continued development of our marketing and growth of our brand portfolios positions us well to benefit from changing consumer preferences in both developed and developing markets. However, markets continue to evolve and competitor activity is increasing and should the group fail to ensure the relevance and attractiveness of its brands, and the enhancement of brand marketing, there is the risk that significant growth opportunities may not be realised. The group’s approach and progress this year in terms of developing strong, relevant brand portfolios in local markets is set out in Strategic priority two.

The group now operates on six continents and it is essential to develop and retain a global management capability. Failure to maintain this capability at a high level or maintain our effective organisational leadership process which can capture shared learnings and leverage global synergies and expertise, could jeopardise our growth potential. The group’s approach to leveraging its global scale is detailed in Strategic priority four.

In many countries, regulatory constraints and restrictions on alcohol products, including sales and marketing activities, continue to be under the spotlight, and management interacts with the relevant authorities wherever appropriate. An increase in such impositions or in excise duties can have an adverse impact on our business in those countries where such actions may take place. Details of the group’s activities regarding responsible alcohol consumption can be found in the Sustainable development review.

The supply of some brewing raw materials and packaging materials has been constrained during the past two years, leading to supply shortages and cost increases. Should the group fail to ensure an adequate supply of brewing and packaging raw materials at competitive prices, there is the risk that margins could fall. Mitigating factors for the risk of supply constraints and rising cost of raw materials are covered in Strategic priority three.

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