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Introduction
The South African Breweries (SAB) has been operating since 1895 and holds 98% of the market share in the South African beer market. ... ” Graham Mackay, group chief executive of South African Breweries, has developed a strategic management strategy by encompassing the vision and mission statements into his plans for SAB’s future. Mackay is trying to move SAB from a more diversified South African conglomerate to a more focused global beer company.
Included in SAB’s portfolio is a careful balance of long-established, well-known brands such as its flagship Castle Lager. This accounts for over 50% of SAB’s sales. ... Amstel, which is brewed and sold under license from Heineken by SAB in South Africa, is the premium brand leader in South Africa. ...
By the end of 1999, SAB had become the fourth-largest brewer in the world by volume. Since SAB was a dominant force in Africa, one of SAB’s goals was to grow globally by expanding into other emerging markets. ... These include:
• Floods ravaging Southern Africa
• Civil Wars (Angola, Congo, Ethiopia, & Eritrea)
• Political Instability, Risk, & Volatility
• The rand & regional currencies plunging against US dollar
• SAB’s ratings on International finance market are affected
With these challenges in mind, SAB is aiming to increase globalization efforts, while making acquisitions, and competing in developed markets. One step to SAB has taken to succeed in these endeavors is moving its headquarters to London and listing its stock on the London Stock exchange.
Problems
The major problem facing SAB is how to become a focused global beer company while trying to reach the same growth in hard currency while competing with global competitors. ... (pg C-447)
Most Urgent Problem:
The most urgent problem facing SAB is whether to consolidate with other breweries or be acquired by another brewer.
Secondary Problems:
• Floods ravaged Southern Africa (Mozambique)
• Civil War in Angola – Wars (Congo/Ethiopia/Eritrea
• Political Instability (Zimbabwe)-Political risk & Volatility
• Rand (African currency) & Regional currencies plunged against US dollar
• SAB’s ratings on international finance market affected
In resolving the problems of this case it is necessary to take a careful look at the full scope of South African Breweries operations and strategic plan. ... In the 1940’s SAB expanded its brewing portfolio to include small hotels. In the 1960’s SAB expanded to provide a wider range of products and acquired a winery. ... During the 90’s SAB began to refocus on their core brewing activities. ...
Generic Need-“of every 50 beers that South Africans quaff, spill or
slosh over steaks on the braai, 49 are brewed by SAB” (pg C-451). ...
Core Technology- SAB’s core technology is in its brewing process.
Currently SAB has seven breweries with a brewing capacity of
31. ... Several of SAB’s core technological processes include:
• Addressing the “Greenhouse Gas challenge”
• Reducing carbon dioxide emissions
• Using carbon dioxide in the brewing process
• Reducing water consumption
• Reducing energy consumption
Differential Advantage- One of SAB’s core advantage over competition is that its distribution skills are regarded as second to none in South Africa. ...
• First –was in continuing to make incremental operation improvements in the short term, while making the fundamental changes required of SAB, in order to be successful in the longer term
• Second-was in balancing the demand to become international, and the need to be perceived as a leader by South African society.
According to SAB the company’s position is outlined as “notwithstanding our marketing and sales and distribution responses to these challenges, our long term defense will be critically dependent on our ability to simultaneously improve our product quality, brand portfolio, service excellence and cost leadership.
Size and Financial Resources
According to SAB’s 200 annual report and as seen in “Chart 1” on page 8, sales and adjusted earnings grew. At constant exchange rates SAB’s adjusted earnings grew 14% and they demonstrated the ability to add value by generating EVA (economic value added) of $220 million (US) during the year. ...
As SAB’s strategy to acquire and develop beer operations in selected international markets grows with earnings and volumes rising as seen in their annual report, the desire to merge becomes advantageous as a way to add profitable growth potential. ...
Current Marketing Strategies
Current marketing strategies according to Meyer Kahn, chairman of SAB, are choosing to give each emerging market consumer their own local, emotional, passionate brand. ... ” SAB had already acknowledged that investment in brand building was needed. ... SAB’s plan for global expansion can now target new and growing consumer populations in which terms of flavor, packaging and preference for location of beverage consumption (for ex: in a pub, restaurant or at home).
• Specialization in high-value areas of industries that were previously vertically integrated-by this specific advantage SAB was enabled to gain a greater market share making them a dominant player nationally and overseas.
• Benefits of intangible scale-competitive advantage are what every industry strives for. ... They will also focus on their strong points as well as viewing their past performance in the brewing industry.
Management Resources and Skills
SAB Executive Directors-Strategic Management Team
Ernest Arthur Grahm Mackay
Chief Executive Norman Joseph Adami
Managing Director, Beer South Africa
Nigel Geoffrey Cox
Financial Director Richard Llewellyn Lloyd
Director
Michael Hugh Simms
Managing Director, Europe Malcom Ian Wyman
Corporate Finance & Development Director
This management team is well suited to direct SAB presently and into the future as well. ... The first deals with continuing to make incremental operation improvements in the short term, while making fundamental changes by SAB, in order to be successful in the long term. ...
After conducting a major strategic review in 1989-90 the team realized two things: first they didn’t think it was appropriate for SAB to enter the first world market, they felt there was little growth and major competition from large well-established brewers. Secondly they felt the skills learned in southern Africa would serve SAB best in emerging markets. ... As they saw privatization coming to Africa SAB felt they would be able to re-establish its presence. ...
As far as emerging market regions SAB felt Eastern Europe would provide opportunities to buy positions, use their skills in production, in sales and distribution, and would create a sensible operation over time. ... One example is whether the consideration of merging with other brewers will help SAB reach their strategic goals.
Current Goals and Objectives
Profitability & Growth
According to SAB’s 2000 annual report:
• Sales and adjusted earnings grew. ...
Market Share
SAB currently holds 90% of the lager beer market and 98% of the entire beer market in Africa.
Social Responsibility
SAB has a social responsibility to address the “Greenhouse Gas” challenge. They can accomplish this by:
• Reducing carbon dioxide emissions
• Reduce water consumption
• Reduce effluent
• Reduce energy consumption
There are two main ways in which it is possible to reduce the CO2 emissions from SAB’s energy use by:
• Reducing direct emissions by lowering fuel consumption or changing to more efficient fuel (see process below E-1)
• Have a clear beer brewing process which involves:
a. ... sab. ... za
SAB has taken into account the issue of water conservation in all of their operations. ... SAB has also taken additional initiatives to reduce water consumption and they include:
• Accra Brewery, Ghana – water cooling tower installed to recycle pasteurized cooling water
• Botswana Breweries - pipe reticulation implemented
• Lesotho Brewing – bottle washer rinse water recycled to the crate washer
• Alrode Breweries, South Africa – installed a water recycling plant to reduce its water to beer ratio.
In all SAB sites, effluent is manager upstream generally by removing a large portion of the organic pollutants such as yeast and inorganic loading from the chemical cleaning processes.
Approximate Word count = 6386
Approximate Pages = 25.5
(250 words per page double spaced)
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