Adding value to aquisitions fuels SAB Miller’s growth
Its 10 years ago this month that South African Breweries moved its main stock market listing to London, reflecting an ambition to become a global beer giant. And what a 10 years it has been. Especially when you remember this is a company that until the mid 1990s only really had a presence in Africa.
The SAB Miller growth story is a rare example of successfully not only buying businesses, but then adding value to them. Just check out some of these stunning statistics:
– Market Value today = £14.4 billion vs. £3.4 billion in 1999, +£11billion v
– Sales volume today = 239 million HL vs. 53 million in 1999, + 186 millon HL
– Profit today = $3.4 billion vs. $764 million in 1999, + $2.6billion
– FTSE position today = No 17, vs. no 88 in 1999
£11billion of extra market value!
I've been lucky enough to work with SAB Miller quite a lot over the
last 15 years, doing portfolio and positioning projects as they bought
local breweries in Poland, Slovakia, Hungary, Russia and Romania.
These CEE aquisitions were then followed by a series of huge deals to
buy Miller, Peroni, Grolsch, Pilsner Urquell and Bavaria (of Columbia).
Here I share here a few personal thoughts on what they done well:
1. Expertise in developing markets
SAB's strong footprint in developing markets, such as Russia and China, is a huge advantage, as these are the markets generating profitable growth. However, doing business successfully in these sorts of places is tough. There is often a lack of resources and infrastructure that many marketers take for granted, such as market share data, quality agency talent and mass market distribution.
SAB has learnt the hard way how to market in tough places, through experience in African markets like Nigeria. South Africans are also resilient and brave by nature; its in their cultural DNA! I saw this first hand when the devaluation crisis hit Russia in the late 90's, bang in the middle of a major project I was leading for Added Value there. The South African MD made a rousing speech to us. "We've been in markets that have suffered from famine, drought and civil war," he said. "We have never pulled out. And we're not pulling out here."
2. Proven model for adding value
SAB developed an effective model for adding value to the new businesses it bought. The key tools and processes were captured in an "SAB Way". And this approach was then rolled this out around the world. This combined 2 key things:
– Ship in expertise in product to up quality and cut costs. SAB really master the art and science of brewing, and were able to quickly up the quality of the local beers by applying this expertise, especially in terms of consistentcy
– Portfolio and positioning: a thorough programme of qual and quant research was the foundation to then create a portflio strategy, to give a clear role to each local brand. This was followed by work to clearly pin down the positioning for each brand, and then use this to develop a better mix
SAB is one of only a handful of public companies that have had the same CEO for over 10 years, in the shape of Graham Mackay. His length of tenure means he has not only bought the businesses, he has then stuck around. This means he and his team have a huge motivation to ensure the successful integration and improvement of the aquisitions.