ABMiller Case Study

 

1.0 Introduction

A company that full understands the importance of strategizing is SABMiller, a leader in the global brewering

industry. Founded in 1895 as South African Breweries (SAB) Limited, SAB became SABMiller in 2002 by taking over

US’s second largest beer maker company Miller Brewing Company. SABMiller now operates in Europe, Latin and

North America, Africa, India and China. In achieving sustainable development, SABMiller is continuously motivated to

grow fast ahead of its competitors and grow in line with the requirements of the industry while also defending its

existing leadership position. This South Africa-originated company further embraces the enhancement of its value

proposition through its ‘owning the growth’ strategy. Further, SABMiller owns one of the most important elements of

value chain which is the brand, making the company the most plausible subject for the intents of this paper.   

 

2.0 Strategic Analysis of SABMiller

2.1 Strengths

2.1.1 Owning the strategy process

            Owning the growth process which is embedded on market and consumer intelligence is one of the key

strengths of SABMiller. SABMiller ensures that it can capture higher value of share compared to its competitors by

means of analyzing consumer trends and marketplace dynamics. Prior to introducing brands in the market, careful

consideration are engaged into such as the preferences, expectations and requirements of the market. Adhering to

consumer-centric trends guides the way SABMiller produces its brands.

2.1.2 Product differentiation

What makes this possible is SABMiller has the capacity to continuously innovate hence differentiating

products. Strong and relevant portfolios of brand are prioritized to compensate with the needs of each market

segment. As such, brands encompass various categories from economy to premium, local to international and

traditional to experimental. This brand mix caters to the needs of each market segment.  

2.1.3 Process optimization through localization

SABMiller boasts for its capability to widen economies of scope through penetrating markets and expanding

territories especially those markets that are economically-advantaged. SABMiller is consistent with its expansion

strategies of mergers, acquisitions and joint ventures. In each local market or business unit, optimization of processes

and localization of operation is achieved as the company believes in the peculiar set-up of each local business.

SABMiller believes in superior local execution.  

2.1.4 Effective supply chain management

Elements of the supply chain specifically manufacturing is controlled as well. Further, SABMiller also

possess the capacity to leverage global operations though collaborative schemes. Supply chain management also

functions to achieve both longer and shorter term objectives through maximizing the operations.  

2.1.5 Talented people

SABMiller also invests in its people as a value-adding activity thus critical to the success of the company.

The company maintains a strong culture of accountability and empowerment through educating the workforce.

Trainings and development intended for the employees are sought.

2.1.6 Commitment to corporate social responsibility and sustainable development

            SABMiller embraces the 10 social and environmental priorities and complies with these completely or is

planning to do so if possible. Such endeavour addresses the need to think of the community in which the business

operates along with the growth of the company.   

2.1.7 Stable financial operation

            Market capitalization, despite recent global financial challenges, continued to increase by 9.4% as evidence

by the improved ranking in the Top 100 companies. Volume growth in Europe is reported to increase by 8%, Latin

America with 5%, Africa with 6%, China with 15% and North America with 27% increase in EBITA. Based on these

figures, SABMiller is strategically positioned in key markets in the world. Further, the company was even able to

invest a total of US$2.0billion over the past 12 months.

 

2.2 Weaknesses

2.2.1 Letdown in national infrastructure

            Because of the tendency to focus initiatives on the growing markets, home-based infrastructures suffer.

SABMiller finds difficulties in leveraging operations compared to the extent of investment devoted to international

operations. Based on this, strategic decision-making within SABMiller could be considered as poor and inadequate.

SABMiller upgraded breweries, build new facilities and invest in new sales and distribution minus the initiative to

prioritize operations in the country origin.

2.2.2 Offsetting input costs through price increases

            Products of SABMiller are commodities which inherently rely on demands and supply in terms of pricing.

Nevertheless, raw materials are also consistently increasing affecting the retail prices of SABMiller brands. Oil prices

which impact transportation and packaging costs also contribute to operational expenses that are trickled down to

consumers.   

 

2.3 Opportunities

2.3.1 Penetrating other Asian markets, Africa including and Latin American market

            Economically, Asian markets are expected to incessantly strive in the coming years as more and more

powerful multinational companies offshore their businesses. Further, the resilience among Asian markets is one

aspect seen to be profitable.  

2.3.2 Disposal of businesses

            It was mentioned that SABMiller is currently pulling back from its non-core operations, which can be seen as

an opportunity to focus on core businesses. SABMiller intends to continue to reduce hospitality investments. In this

way, the company could further invest in markets where brewed products strive.

2.3.3 Consumer demands of wider product portfolio

            Consumers’ preferences change in accordance to their needs. In times where consumers are becoming more

ethical shopper than before, they typically require healthier drinks. Though this may be seen as a threat in alcoholic

and hard liquor drinks, SABMiller could view this aspect as an opportunity to further diversify the brand mix.

SABMiller could explore opportunities provided by wine coolers, pre-mixed beverages, flavored beers such as fruits-

based beers and malt beverages.  

2.3.4 Expanding target market

            Men are generally into beer drinking but the populace of women who drinks beer is also growing. In addition,

young adults, working or not, finds pleasures in drinking beers as well. These categories have a relatively moderate

to high spending capacity. Drinking brewed products only conforms to above 18 years of age limitation, while some

are 16.

 

2.4 Threats

2.4.1 Emergent substitute products

            It would be very easy for patrons and consumers to switch brands because of the growth in choices and

alternatives especially now that SABMiller offsets higher input costs through increasing the prices of the products.

2.4.2 Fierce competition in the brewing industry

            Consolidation is a common expansion strategy in the brewing industry which contributes in the intensified

competition. Competition at the retail level had been also strong because of the growing presence of brewing

products in stores and supermarkets, narrowing profit margin of brewing companies. Bars and restaurants lose

profitability over mom and pop stores. Moreover, SABMiller could witness market saturation in the following five

years.

 

3.0 Sustainable Competitive Advantage

Three among the strengths that could be sustainable for SABMiller are the extensive brand portfolio, the

‘owning the strategy’ process and the local responsiveness. The extensive brand portfolio has no direction other than

forward. SABMiller commits in building a spectrum of brands that will provide for the needs of the target market. For

them, stronger brands are the key to deliver better value proposition to the consumers. Because brewing market is

considered to be near-decline as products are not a necessity, the market share of SABMiller products is still stable.

Product innovations are also coupled with packaging innovations which are added values. For instance, the

introduction of new bottles and provision of fridges is not necessarily imitable.    

Aside from brand mix improvements, SABMiller also acquires sense of ownership of internal processes. In

making the beer category more appealing, the company taps the opportunity to concentrate on its core markets and

capturing higher value share on those markets. Moreover, SABMiller strategises through effective segmentation of

the market and investing in more effective and efficient selling and distribution despite the bias to develop markets

that the company already have established and advantageous positions.

SABMiller experiences no pressures on local responsiveness as the company understands that each market

has its own unique features. Its operational capability to both expand globally and locally is an aspect of strategic

management that could not be easily substitutable. Improvements in daily operation in existing markets are a priority

despite the fact that SABMiller is more tended on leveraging global scale. Nevertheless, development in the business

level is based on strategies at the corporate level of capturing best ideas and practices and dispersing to the groups

hence benchmarking.

 

4.0 Recommendations

SABMiller must converge into materiality analysis so that they can define their priorities and work from there.

There are several issues identified including environmental and occupational health and safety issues. If the company

is going to do this, then they could focus their energy and resources on most areas that are needed to be addressed.

Decision-making must pass through consensus so that they will acquire reactions and responses from their

stakeholders regarding their future plans that concern core operations. SABMiller should also engaged in both local

materiality analysis and international materiality analysis so that the needs from business levels to corporate level

could be consolidated and actions could be based in the findings of the analyses. The materiality could clarify issues

on how recent strategies could drive long term business value, identify and address risks surrounding the strategy

and build and maintain a strong brand and reputation further.

The second option for SABMiller is the evaluation of the internal environment through the MOST framework

where M is the mission, O is the objective, S is the strategy and T is the tactic. Importantly, the international market

environment is continuously changing and so the company must not settle in employing a single strategy or model.

SABMiller should also consistently assess the organization's fundamentals. Supposing that the company is faced on

conflicts in the business and the international levels, the company cannot employ the same strategy. Mission,

objectives, strategies and tactics must be customized to the needs of every business unit.  

A knowledge innovation zone, or better yet, every unit or department must be treated as knowledge

innovation zone should be a priority for SABMiller. SABMiller must conduct needs analysis for knowledge

management. Investing on knowledge functions could make SABMiller a knowledge organization whereby knowledge

concepts, goals and development outcomes will fully materialize. To accomplish this, there must be thematic groups

within the organizations. Thematic groups will act as the implementers of knowledge management programs within

the organizations. They could aid in identifying new knowledge resources and capturing those; establishing and

implementing new procedures and cleaning out obsolete ones; introduction of innovative practices and aligning the

supply and demand of knowledge within the organization.   

 

5.0 Conclusion

SABMiller was founded in 1895 and since then continues to penetrate global markets through its diversified

brand portfolio, owning of growth process and operational capability. Aside from these strengths, SABMiller also

boasts for its effective supply chain management, talented workforce, commitment to corporate social responsibility

and stable financial operation. On the other hand, there are weaknesses inherent for SABMiller such as failures in

South African infrastructure and compensating higher input costs through increasing retail prices. Opportunities that

SABMiller could explore are penetration of other Asian and Latin American markets, discovering new products

portfolio to cater to consumer demands and expansion of market segment. Threats include emergent of substitute

products and intense competition in the brewing industry.

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