18th June 2012 Sérgio Beito, 53077
Executive Summary 3
In the year 2000 SAB Company, which had already moved their headquarters from South Africa to the UK, was placed 5th in world brewing production (around 3.5%). Ten years later and after several acquisitions and the MillerCoors LLC joint venture (USA) they were able to reach 2nd with almost 14% of world beer production. SABMiller focuses on two main financial drivers for driving success: (1) maintaining or improving margins, and (2) growth of revenues at a faster pace than competitors. They have grown their presence throughout the whole world in a multinational strategy for their global operation strategy. In terms of geographic businesses, if we exclude the more mature markets (North America and Europe), it can be observed that revenues have increased over the past years in the emerging markets - Latin America, and Africa and Asia. The market penetration strategy that SABMiller has pursued, consolidating several positions in important markets by buying out competitors gaining market power and overall efficiencies, has sustained their growth since they internationalized their company. 94% of their lager volumes come from markets where they have no. 1 and no. 2 positions.
SABMiller’s financial performance in 2011 was very strong and
quite impressive given the world economic conditions, which lead to an increase of 13 US cents (19%) in dividends over the prior year. Each of their geographical business markets improved its financial performance and delivered higher EBITA than the previous year: Latin America produced EBITA growth of 17% (sales volumes remained level with prior year) In Europe EBITA increased by 2% (volumes fell by 3%) In North America EBITA grew by 20% (sales volumes was down by 3%) In Africa, EBITA was up by 15% (volumes grew by 13%) In Asia, EBITA was up 31% (volumes increased by 10%) In South Africa EBITA grew by 21% (volume growth of 2%)
Despite the overall increase of EBITA for SABMiller’s operations, not every market had increase in sales volumes or growth in market share. This was clear in very mature markets, especially North America and Europe with heavy competition, but also in other markets. EBITA margins were improved through cost efficiencies (Latin America, Europe and North America), decrease in cost of raw materials (Europe and Africa), and increase in prices (North America and Africa). SABMiller focuses on two main financial drivers for driving success: (1) maintaining or improving margins, and (2) growth of revenues at a faster pace than competitors. The first is obtained through cost efficiencies, reducing cost of raw materials and increasing prices. The latter, by developing their geographic portfolio (expansion into fast-growing premium markets, like Argentina, China and Zimbabwe) and expanding their
production capacity (in countries with production cost benefits, China, Nigeria, Sudan, Angola, Uganda, etc.). The success of SABMiller’s global strategic expansion lies in the balance of industry pressure for global integration and local responsiveness. The understanding of the strong local roots of most beer brands while integrating and diffusing core corporate competencies and knowledge has enabled long-term value growth. High standardization and central control are imperative across international operations for higher efficiencies and economies of scale and high adaptation and decentralization are needed to sell customized products to differing markets. A transnational strategy expands into foreign operations by exploiting location economies and responding to key local conditions (Daniels, Radebaugh, and Sullivan, 2009). The group maintains a...