1. SABMiller plc: Case Study
Linda Tylečková, Andrew Carl Hansen
linda.tyleckova@gmail.com, ac.carl.hansen@gmail.com
Johan Winbladh
MBA 555 : Case Study
May 21, 2016

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BACKGROUND
SABMiller, in terms of size, is placed behind Anheuser-Busch InBev- the largest
multinational corporation (MNC) in the brewery and beverages industry. The industry is highly
competitive and SABMiller competes not only with InBev but also Heineken and Carlsberg.
SABMiller’s global reach does not insulate it from the need to maintain market share in each of
its regional markets because of the intense opposition it faces from rivals (Brewers Association,
March 31, 2015). SABMiller indentifies the issues in its annual report. The MNC faces the
challenge of a sluggish Europe and North American market where alcohol consumption is not as
male dominated and where people are more likely to try out different kinds of alcoholic
beverage. SABMiller maintains many regional brand name beers. It considers beer to be a
regional product where local tastes determine the type of preferred beer. An example is the liking
for ales in Northern Europe and Africa compared with lager’s global reach. Consumer
preferances are not the only factor that shapes the market. Excise duties, regional government,
trade areas, varying advertising regulations, NGOs that raise public awareness of alcohol related
health issues, in addition to direct competition, all contribute to squeeze profit margins
(SABMiller, n.d.).
The MNC can be considered the victim of its own history of relentless expansion and
acquisition of regional breweries. Its 1995 listing on the London Stock Exchange heralded a
relentless strategy of global expansion and SABMiller now operates in 80 countries. The MNC
now faces acquisition itself; from InBev, subject to US anti-trust findings (Jarvis, 2015). The
problem is how to increase the volume of sales given this ‘cocktail’ of inhibiting factors without
being over reliant on any region in particular.

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To analyse this problem and form recommendations the dominant issue of direct
competition needs to be understood. For this reason Porter’s Five Forces (Porter, 2011) is
deployed to map the industry in order to identify a possible strategy for SABMiller to adopt. Part
of this model is rivalry amongst competitors has already been assessed to be high.
RELEVANT DETAILS
Threat of new entrants: It is estimated that a new small brewery enters US market every 6
hours. Start-ups have better access to finance than ever before. However, volumes of scale and
established supermarket and outlet distribution protect MNCs from SMEs. Investment in
production facilities is a barrier to entry and government regulation can be an inhibiting factor. A
feature of new entrants is their foothold in premium and specialist and craft beers that prove
popular with customers. (Marketline, 2014). The threat of new entrants is moderate.
The bargaining power of suppliers: Ingredients, such as hops, are typically supplied by small,
local and numerous suppliers which drives down their ability to influence prices. Large
breweries can, in addition, acquire their own supply chain business through vertical integration.
Although raw materials are important for brewing and suppliers not only sell to brewers the
power of suppliers is judged as low. (Marketline, 2014).
The bargaining power of buyers: the distribution chain means that beer reaches the customer through
supermarkets and other retail outlets. Retailers need to attract customers with a wide variety of beverages
which can act to weaken barganing power given that beer has to be part of the choice offered to
customers. However, brewers need to sell through retailers who charge for premium shelf space. Despite
the presence of company-owned outlets, retail chains often have considerable buyer power, that
force down the prices that beer producers can obtain. In such a market, economies of scale work
for large breweries. Buyer bargaining power is judged to be high (Marketline, 2014).

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Threat of substitute products or services: US prohibition is highly unlikely to return but
governments can take direct action such as Indonesia outlawing the sale of beer through
convenience stores (Brummitt, 2015). Abstinence is a customer option. Wines are easier to store
and can compete on price and quality being the preferred beverage for special occasion and with
food. So called alco-pops and ciders are also a viable alternative. Soft drinks are a huge market
that caters for all customer ages and demographics. However, regional beers do have a loyal base
of customers. The threat of substitute product is judged as moderate.
RECOMMENDATIONS
The industry analysis points to SABMiller being locked into a highly competitive
situation from which it can neither escape nor ignore. Its history of acquisition and diverse
brands does point to a focus on competition rather than the customer. Profitability is directly
related to sales and market share on premium products. Customers need to be offered products
that are authentic and offer a unique experience. Specific marketing campaigns are necessary for
each of the following recommendations to take root and suceed:
 Offer a brand new premium beer in developed markets
 Offer a selection of world premium beers as speciality locally brewed foreign beers in
each region
 As part of corporate social responsibility (CSR) establish partnerships with governments
in developing markets to support infrastructure – clean water, power and argriculture.
REASONS FOR RECOMMENDATIONS
Above all, as SABMiller recognises, beer is local and customer preferences and taste
directly determine beer sales (SABMiller, n.d). The popularity of craft beer has placed taste at

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the top of customer perceptions of premium beer. Taste is a decisive factor in the justification for
the higher prices brewers want from the sales of premium brands. 34% of beer drinkers are
willing to pay more for craft or specialist beers and 59% want to be able to taste the difference
over cheaper alternatives (Wisson, May 20, 2015). Brand positioning though is all important and
perceptual maps can be helpful in mapping SABMiller’s own and rival brands either on sales
volume or price. The aspirational quadrant draws 62% of beer sales where products are highly
desirable ( Dawar and Bagga, 2015). At the moment its brands are too mainstream and there
clearly is a need for a more distinctive and aspirational brand in SABMiller’s stable. This is why
SABMiller needs a premium brand. The second recommendation is highly linked to the first. The
reason for brewing locally, where ingrediants allow, is to drive down importation transport and
tariffs in order to increase gross margin.
Sustainability also plays important part of SABMillers operations made even more
important by its 27% revenue from its market in Africa where resources, such as clean water and
infrastructure can be an issue. Given SABMiller’s roots in South Africa it is uniquely placed to
already have a stronger presence in Africa than its rivals. The current strategy is the $1.00
premium lager to appeal to local customers. However, this does not address social issues such as
the black market for illegally made alcohol (Kell, 2015). It is argued that loyality in this market
would come from long-term partnership with the World Heath Organisation and government
agencies to help provide Africa with better infrastructure – the sustainable way to ensure market
growth. It can be seen that although leveraging scale is a factor, convincing the customer can
bring greater returns as part of strategy.

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References
Brummitt, C. (2015, March 27). Beer Today, Gone Tomorrow: Muslim Indonesia Curbs Ale
Sales. Bloomsbury Business. Retrieved on May 21, 2016 from the Bloomsbury Business
website: http://www.bloomberg.com/bw/articles/2012-10-25/99-facts-about-beer-on-the-
wall-dot-dot-dot
Dawar, N., & Bagga, C. (2015, June 01). A Better Way to Map Brand Strategy. Retrieved May
21, 2016, from https://hbr.org/2015/06/a-better-way-to-map-brand-strategy#
Kell, J. (2015, March 10). Here's how SABMiller plans to tap into Africa's nascent beer market.
Retrieved May 21, 2016, from http://fortune.com/2015/03/10/sabmiller-africa-beer-
market/
Jarvis, Paul (16 September 2015). "AB InBev Approaches SABMiller in Record Industry
Combination". Bloomberg Businessweek. Bloomberg L.P. Retrieved 18 May 2016.
Marketline (2014). Global Beer: April 2014. Retrieved on May 20, 2016 from the Global Mint
database
Porter, M. E. (2011). The Five Competitive Forces That Shape Strategy. In HBR (Ed.). HBR’s
10 Must Reads: On Strategy. Harvard Business Review Press
SABMiller. (n.d.). SABMiller plc: Annual Report 2015. Retrieved on May 21, 2016 from the
SABMiller website: http://www.sabmiller.com/investors/reports
Wisson, C. (2015, May 20). Just how important is branding in the beer market? Our analysts
blind taste and find surprising results. Retrieved May 21, 2016, from
http://www.mintel.com/blog/drink-market-news/just-how-important-is-branding-in-the-
beer-market-our-analysts-blind-taste-and-find-surprising-results