- Creating a balanced and attractive global spread of businesses
Our acquisitions in recent years have given us a wide geographic spread with good exposure to emerging markets. We now span six continents with a portfolio of businesses that captures opportunities around the world without being over-reliant on any single region. According to some sources, we’ve recently become the world’s biggest brewer by volume – not something we deliberately set out to achieve, rather a by-product of creating a widespread, value-generating portfolio.
While geographic expansion remains part of the strategy, we’re looking increasingly to identify and exploit the opportunities for growth within the existing business portfolio. This can involve a range of activities from entering into local joint ventures or partnerships, to buying or building breweries, to acquiring local brands to help shape a full, local, brand portfolio. All are potential means of ‘owning the growth’ in individual markets.
- Developing strong, relevant brand portfolios in the local market
Most of our markets exhibit at least three major trends. One is premiumisation as consumers move up the scale from economy to mainstream and mainstream to premium beers in search of brands that offer prestige and differentiation. Another is fragmentation. Contrary to expectations a few years ago, consumers at the top end are varying their choices and becoming more interested in speciality brands, craft beers, foreign imports and other sub-divisions of the premium segment. And a third trend is the growing importance of female consumers.
Our central strategy is to identify the trends and dynamics in each market, then to create the right mix of brands to capture the opportunities in each location. We’re helped in this respect by having a huge and varied global portfolio of brands on which any of our businesses can draw – not to mention our ability to innovate as consumers demand new tastes, new presentations and new drinking experiences. The key is to deploy our brands so that each adds value through its own distinct positioning.
Managing full portfolios of brands in this way is more complicated than the single-brand approach. A premium beer with an unusual heritage will need different marketing to a mainstream brand – something more akin to viral marketing that gives consumers a sense of having discovered it for themselves. Brands targeted at the clubbing generation, of legal age drinkers, might be best communicated through new media such as the internet, as we’re doing with Miller Genuine Draft in Russia. Among the skills we need, we’re learning the best ways to communicate with multiple target audiences.
Around the group, businesses such as Miller in the USA and Kompania Piwowarska in Poland have continued to evolve their portfolios to match the opportunities in their respective markets. Panama and Botswana are two examples of businesses that have renovated mainstream brands successfully. The case of Miller Chill shows how an innovative premium product can fill useful gaps in more than one market – its success in the USA followed by an equally successful launch in Australia. In Poland and Russia, the strategy of marketing the Redd’s brand to women is generating good results.
- Constantly raising the performance of local businesses
While our operating performance compares well with that of the rest of the industry, we know we have to keep improving to stay ahead. Our efforts in the past year have focused on three main aspects of the business.
The first is to become more efficient, especially in our manufacturing. Because efficiency is part of our day-to-day management, we’ve already gone a long way down this route and the opportunity for further, large, cost-cutting projects is limited. Nevertheless, the rise in commodity costs compels us to do whatever we can to counteract the squeeze on our margins. We’ve seen good progress across the group, notably from Miller which again made important savings in its brewing operations while producing less waste and using fewer resources.
The second area of focus – and one that’s hugely important to our success – is to improve our routes to market, both to remove costs and to ensure that the right products reach the right outlets in the right condition, accompanied by the right messages and merchandising material. Colombia and South Africa are just two of several businesses that are working hard to re-engineer their sales and distribution structures to make them more efficient and effective. In markets such as the USA, where the business does not directly control its distribution, we’re making it easier for distributors and customers to do business with SABMiller and are looking for ways to add value to their operations as well as ours.
Thirdly, in our quest to raise local performance, we’re responding to the consolidation of the retail sector by forming mutually beneficial partnerships with major retailers. Our Polish business, for example, has forged a closer relationship with Tesco while Miller has done the same with chains such as Wal-Mart and 7-Eleven.
- 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 coordinate 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.