South Africa Brewers Ltd.

By now it has become the second largest brewer by volume in the world. South Africa Breweries (SAB) has been in business for a century. The change in the political system in 1990 in South Africa, through the dissolution of apartheid, paved endless opportunities. In 1994, SAB was invited to participate in joint ventures with Tanzania, Zambia, Mozambique, Angloa to revitalize brewing industry – brewing 49 out of every 50 beers consumed in South Africa. They practically killed competition. (McQuade 2004)
In 1993, SAB expanded to Hungary and bought Dreher which opened the doors to Europe because it subsequently established operations in Poland, Romania, Slovakia, Russia, Czech Republic. In the 90’s SAB likewise entered into operations in China. In 1999, it got itself listed back in the London Stock Exchange to raise capital for expansion. SAB expanded to Central America in 2001 – thus, that year saw SAB as the 5th largest brewer in the world and the fastest growing from 1996 to 2000 with brewing operations in 21 countries and an output of 77m hectoliters of beer. McQuade 2004) 1998 strategy was to maximize its 100 years of brewing experience in South Africa and develop beer markets in emerging economies by investing significantly in its core business. So, it commenced brewing operations in 5 African counties, 3 Chinese provinces, 4 Eastern European countries since 1995. Therefore, SAB continued to develop South Africa; invest for growth in the international business; pursue incremental growth. Therefore since its global expansion in 1994 the trend in sales and profits grew steadily upward.
SAB categorically indicted in 2002 that emerging markets is its forte. Finally in July 2002, SAB successfully acquired Miller Breweing Co. the 2nd biggest brewer in U. S. A. by paying Philip Morris US$3. 6 billion in stock of the merged company and SAB assumed the US$2 billion debt of Miller. (McQuade 2004) This merger was decried by some analysts because the rationalization of strong growth business is not true but it is just that SAB wants Miller as a mature cash cow. And the merger in totality is losing market share. True enough – the share dropped to 18. % in 2003 in London trading. So, aggressive reforms were adopted – considering they unknowingly awakened to the truth that Miller is such a badly managed company the dragged SAB with it. (McQuade 2004) 2004 Strategic Posiiton: By end 2003, the rest of the African markets gave 3. 2% growth. In China, the organic growth was 5. 7%. In India, the first full 2003 operation returned a breakeven. The home base market South Africa saw mixed fortunes as consumer spending became erratic. The seesaw of growth and downturn average 4% per annum.

The North American US market went down 3. 7% from acquisition with its core brands losing market share. In Europe, exceptional profit growth showed 39%. Restructuring of the Central American business had to be undertaken due to depressed performance. SAB opted to continue the conversion of the company into a marketing focused enterprise with a strong portfolio of relevant brands in the region. (McQuade 2004) Therefore, SAB Miller opted that from 2004, they will adopt the following strategies to grow shareholder value thru: 1) driving volume and productivity ) optimizing and expanding existing positions through acquisitions 3) seeking value added opportunities to enhance position as a global brewer 4) growing brands in the international premium beer segment (McQuade 2004) Long Term Effect: From the result of 11% share growth for the financial year ending March 2003, there is still a big room to maneuver operational efficiency; strengthen regional brands and market positions; pursue acquisitive growth; pursue real value for shareholders. Brand management will a crucial focus through an the intensified role of a Group Marketing Director.
SAB believes that there are real opportunities to increase sales in growing international premium brands. (McQuade 2004) SAB is confident of its strong national and regional brands principally based on the mainstream segments of the market. The challenge further requires invigorating the said brands to sustainable health and position. With a all its brands stable and well positioned, SAB envision to sustain their continued growth befitting their prime position and prestige in the world’s brewing industry. (McQuade 2004) Recommendation:
It is indeed a crystal clear given that South Africa Breweries Ltd and its century old experience and its established brands and prestige stands solid – in its base operations, South Africa and the African Continent. Its global venture in the decade of the 90’s still favored them with the opportunities. They savored the rewards from those first steps. It still saw a sustainable trend until it acquired Miller U. S. A. There are some hidden waves in its other global, emerging ventures in the sense that they only saw sustained growth in Europe and the African markets.
China, India, Central America and U. S. A North America gave them the initial years of 2003, 2004 as dicey. True enough, it reckoned revitalizing brand management to be their stronghold focus. However, SAB and SAB Miller never mentioned anything in detail about inherent people management and operational management insights that will need a thorough study. What the case study reflected is that SAB brings in their technical and operational expertise into an acquired emerging market facility.
They presumably likewise brought in “South African professionals” to handle management of an entirely foreign operation in an entirely foreign land. The first and foremost consideration in global business is the profound cultural analysis of “where one is stepping its foot in”. The story goes that St. Agustine consulted St. Ambrose during his visit in Milan in 387 AD as to whether he should fast on a Saturday or a Sunday – the famous saying was born: “when in Rome, do as the Romans do”.
And knowing “how to do things the Roman way” will require thorough information and analysis and initial trial and error practice. Adopting and adapting to the local temperament and conditions is not just a matter of the ABC or 123 of their laws but more so of their norms and values. Managing share values of a company and brand strategy is beyond the arithmetic of the exercise. It is also appreciating that the workforce that will contribute to such share values and premium brand strategy require a most personalized and inherent approach.

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