Latin America

History

SABMiller first entered Latin America in November 2001 when it acquired the sole brewers and the bottlers for The Coca Cola Company in Honduras and El Salvador. The original owners of the Salvadoran businesses Agrisal held a 42% interest in the new regional business until November 2005 when SABMiller purchased the remaining shares in BevCo from Agrisal.  In El Salvador and Honduras, there has been a continuous focus on implementing the SABMiller ways of working. A full beer brand portfolio was designed and implemented and the marketing, channel segmentation and sales execution for the both the beer and Coca-Cola brands has been significantly upgraded. The full value chain from production through distribution to merchandising has been transformed across both beer and sparkling beverages, and combined between the categories to yield very significant profit synergies. SABMiller significantly grew its position in the region via the Bavaria transaction concluded in October 2005. The transaction gave SABMiller leading market share positions within beer in Colombia (Bavaria SA), Peru (Backus and Johnston), Ecuador (Compania de Cervezas Nacionales, Cerveceria Andina) and Panama (Cerveceria Nacional), in addition to sparkling and still beverage interests. Pepsi bottlerships in Costa Rica and Bolivia were also obtained in the transaction. SABMiller subsequently announced in June 2006 the sale of its juice interests in Colombia to Postobon SA.

Current business

The business in South America (Colombia, Peru, Ecuador and Panama) continues to benefit from good economic growth in the region. SABMiller leads the beer markets in which it operates in South America and has well established local brands such as Aguila in Colombia, Cristal in Peru, Pilsener in Ecuador and Atlas in Panama with strong brand affinity scores and historic leading market shares. However the brand portfolios are undifferentiated in both positioning and pricing and going forward the region represents an exciting opportunity for SABMiller with low per capita consumption of beer relative to other Latin American markets. El Salvador is now producing growth after a difficult period with more intensive competition in both beer and sparkling beverages and the levy of increased taxes on beer. Honduras continues to deliver strong revenue and profit growth.

Future strategy, profit drivers, outlook

In South America SABMiller is embarking on a programme to stimulate the long term development of the beer industry and grow per capita consumption in the region. The construction of a full brand portfolio will enable beer to satisfy more consumption occasions and allow the development of a meaningful worthmore segment in these markets. This work will be underpinned by a significant increase in marketing investment. Channel marketing and management is another area of significant opportunity with programmes to drive brand equity at points of purchase with marketing activities specifically designed for each brand and segmented channel. SABMiller will also deliver operating efficiencies via the transfer of best practise from other parts of the Group. At the time of the transaction SABMiller valued the cost savings obtainable at $120m. In Central America the main work of reconstructing the business has been completed and the focus going forward will be to continue to build full brands portfolios and invest in points of purchase to enhance consumption environments and drive volume growth.

* Plato Logic