Report of SABMiller Plc
(a) Overview of Operations
SABMiller plc is a holding company, which has brewing and beverage interests across six continents (SABMiller Plc Annual Report, 2013). The main business of the company - together with its subsidiaries - is to manufacture, distribute and sell beverages (Sonne, Koons and Lower, 2011). The company is the second-largest brewer after AB InBev, measured in terms of volumes. Its products occupy position one or two of the beer market across the world (Clark, 2014). Besides brewing, the company has also entered into strategic partnerships with Castle, Efes, CRE and the Coca-Cola Company. SABMiller Plc is one of the world’s largest bottlers of Coca Cola products (SABMiller Plc, 2014). The company has also a strategic investment in hotels and gaming. SABMiller plc is listed on the London Stock Exchange and Johannesburg Stock Exchange. The company has over 200 beer brands and more than 70, 000 employees working in over 75 countries across the world. Some of its common international brands include Pilsner, Urquell, Miller Genuine Draft, Peroni Nastro Azzurro and Grolsch (SABMiller Plc, 2014). Local brands include Aguila, Castle, Snow, Miller Lite, Victoria Bitter and Tyskie. The company has presence in Europe, Latin America, Africa, North America, Asian Pacific and South Africa.
Although the company is headquartered in London, it has no production plants in the United Kingdom. The company originated in South Africa in 1875. In the post apartheid era, the company embarked on an expansion program, mainly through acquisition of local companies both in developed and emerging countries.
(b) Industry
Beer is one of the largest consumer goods worldwide (McCaig, 2013; 2). It is one of the most consumed alcoholic beverage and the third most popular drink after water and tea. It is estimated that people started consuming bear as early as 5000 years ago (Jain, 2010; McCaig, 2013). In 2013 the global market for beer was approximately $514 billion (SABMiller Plc Annual Report, 2013; 5). The market is expected to maintain a steady growth reaching $607.8 billion (SABMiller Plc Annual Report, 2013; 5). In this global value AB InBev commands 18.3 percent of the global market share followed closely by SABMiller Plc at 9.8 per cent. Heineken is third at 8.8 percent and Carlsberg fourth at 5.6 percent (SABMiller Plc Annual Report, 2013; The Editorial Board, 2014). The basic ingredients of beer are water, starch like malted barley, sorghum and millet, yeast, and hops – but the combination may vary in different regions.
(c) Strategy and Assessment
(i) SWOT analysis
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Strengths (i) A Strong portfolio of brands (ii) Over 150 local brands (iii) International presence in over 75 countries across 6 continents (iv) Strong sales and distribution network (v) Lite beer taste (vi) Environmentally conscious (vii) Compete in volumes compared to other brands (viii) Conform to government rules in operating countries (ix) Draft taste in bottles and cans (x) A huge workforce totalling to over 70, 000 world wide (xi) Diversification to carbonated soft drinks |
Weaknesses (i) Battling perception of low quality (ii) Has no dark beer line (iii) Decline of brand identity over time due to inconsistent advertising (iv) Products not so strongly differentiated (v) Mass production affect assurance of quality (vi) Taste are assumed to be inferior compared to other brands such as Budweiser (vii) Allocate small budget for advertisement compared to market leader- AB InBev (viii) Use of preservatives is a concern to consumers
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Opportunities (i) Online marketing (ii) Emerging markets in both developed and developing countries (iii) Acquisitions of small brewers (iv) Ability to raise advertising budget
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Threats (i) Fierce competition (ii) Strict regulation of food and beverage industry (iii) Lower priced import a and local products (iv) Prone to sin tax (v) Pressure for healthy products (vi) Competition from other beverages like fruit juices (vii) Increased cost of acquisitions |
The SWOT analysis shows that the company has a lot of potentials. One of its greatest strength is its popular brands (Raice and Evans, 2014). In beer industry, brand identity is crucial. The company’s brand-driven growth is an indication of strong economic franchise (Kimberley, 2014). Furthermore, the concept of international and local brands is an indication of the company’s ability to produce products that take into account the taste and preferences of local consumers. Global presence also adds up to the strengths of SABMiller (Devine, 2011). This means that the company is in a better position to exploit the emerging markets.
At the same time, the company has few weaknesses that it needs to look at if it is going to maintain an upward growth. The company need to counter the perception that its brands are of low quality compared to competitor’s brands. At the same time, the company is challenged with the issue of affordability in developing countries where a low level of income is a reality (Peter, 2011). The shrink in beer and industry also means low growth potentials.
Nonetheless, the company has a myriad of opportunities that it can utilise to sustain upward economic growth. The wide penetration of internet is creating a platform where the company can continue to strengthen its brands (Euronomitor International 2010). In addition, the firm has opportunity to expand beer’s appeal in more markets by using styles and flavours that attract more consumers. The emerging markets also expand the company’s growth opportunities. The company’s strategic partnership with the Coca Cola Company, CRE, Castle and many more is a platform for growth.
In terms of threats, the company operate in an industry that has already matured (IBISWorld 2014). The maturity in beverage industry means low prospect for growth. At the same time, the company is operating at a time when consumers are shifting their loyalty to soft drinks like fruit juices. The shift to soft drinks is motivated by health concerns. Health practitioners have for a long time argued that excessive consumption of alcohol is harmful to consumer’s health. Due to this problem, under other related social problems, beer industry is heavily regulated by the government. The latest figure also shows that there is weak demand of the company’s products in China and Australia (Evans, 2014). Since SABMiller products are accounted in dollar currency, the company is faced with the threat of currency fluctuations especially in central Europe and Africa.
(i) Balanced Scorecard Analysis
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Ratings
