Case Study: sab Miller (Colombia – Grupo Bavaria)

Company Background: sab Miller

SAB Miller is the second largest alcoholic beverages company in the world behind global leader, the Dutch/American conglomerate, Anheuser-Busch Inbev. The company generated net revenues and net income of $34.5 billion and $3.5 billion respectively in fiscal 2013 (SAB Miller, 2013a). It was formed from the combination of SAB and Miller Brewing.

South African Breweries (SAB) was established in 1895 and has grown to become a global player. It is primarily listed in the United Kingdom on the London Stock Exchange (LSE) with a secondary listing on the Johannesburg Bourse, JSE. It has a strong presence in its regional market, Africa with a market presence in 15 countries and an additional 21 through Castel.

The company acquired Miller Brewing Company in 2002 and thus became SAB Miller after the consolidation of the two firms. Market segmentation has been divided into five regions; South Africa, Africa, North America, Latin America, Europe, and Asia Pacific (SAB Miller, 2013a). SAB Miller usually consolidates its acquisitions into the corporate entity.

SAB Miller is the most dominant brand in its home market with net revenues of $5.5 billon. This was a 5% decline largely influenced by the downward spiral of the rand. The Asia Pacific region is a strong market for the company especially after consolidating Fosters into reported revenues which surged 62% to $5.7 billion (SAB Miller, 2013a).

Africa growth was boosted by strong demand in key markets; Nigeria and Tanzania achieving an overall organic growth rate of 5% to $3.8 billion. Europe also grew by a similar 5% margin with net revenues hitting $5.7 billion with Latin America has strong demand in Panama, Honduras, and Peru rising 9% to $7.8 billion (SAB Miller, 2013a).

The group’s signature brands include; Castle, Peroni, Miller, Coors, Fosters, Carlton Dry, Victoria Bitter, Pilsener, and Águila. They form part of the 200 brands in the group’s product portfolio which is targeted at local tastes in the regions that it operates. In the earlier years, SAB Miller grew organically but since the early 2000s, it has been aggressively acquiring.

SAB Miller is also the largest bottler for Coca Cola with operations in 20 countries through a strategic partnership with Castel. It also has a partnership with rivals, Diageo and Heineken known as Brand House. The partnership serves to manage their portfolio of premium spirits, rum, vodka, and cream liqueur in the South African market.

It has outgrown its original homeland to become a formidable multinational with market reach in all the continents and subcontinents. SAB Miller continues to scout for new opportunities to consolidate its business in-line with the industry approach. Revenue growth has been robust rising 10% with an EBITA margin of 18.6% (SAB Miller, 2013).

International Expansion

SAB Miller embarked on an aggressive expansion strategy in the African market acquiring stakes in domestic firms. It initially acquired stakes in companies such as Tanzania Breweries where it has a 57.54% stake and Zambia Breweries. This has seen it expand to a cumulative 36 through direct market access and exports.

The company has brewing operations in 15 African nations and exports to a further 21 countries through an affiliate, Castel (SAB Miller, 2013). Internationally, SAB Miller has mainly expanded through acquisitions and joint-venture deals. It acquired 100% of Miller Brewing to form the consolidated group, SAB Miller in 2002.

It presently has six key subsidiaries in; South African Breweries, Bavaria Brewery (Cervecería Bavaria), Miller Brewing Company, Peroni Brewery, Foster’s Group, and Kompania Piwowarska. SAB Miller entered the European in 1995 with the acquisition of Hungarian firm, Dreher and later on acquired Royal Grolsch BV in 2007.

The company became the first large multinational brewery to enter the Latin American market with the acquisition of Honduras –based brewery, Cerveceria Hondureña in 2001. It expanded its market in the region through Grupo Bavaria. It has adopted a multi-domestic approach to its regional markets seeking to take advantage of local knowledge.

In North America, it expanded its market penetration with the establishment of a joint-venture arrangement known as MillerCoors. The group has since been merged into the corporate organization. SAB Miller paid $10.2 billion in a hostile takeover of Australian brewing giant, Fosters in 2011 strengthening its market presence in the Asia Pacific region.

The multi-domestic approach has ensured that the company supports local brands in home markets without imposing other brands. It has strong associates in India and China which are underpinning the robust growth in those markets. In most instances, SAB Miller has aimed at wholly-taking over an acquired firm.

This has enabled it to establish management practices that suit its operating model. It enables it to quickly leverage on scale while taking advantage of existing market positions to consolidate operations. The approach was illustrated by the hostile takeover of Fosters resulting in the company become a wholly-owned subsidiary of SAB Miller.