Home News SABMiller ponders route to global brand

SABMiller ponders route to global brand

by Lesotho Times
0 comment 100 views


LONDON—In 2002, soon after acquiring Miller Brewing Co. from Philip Morris Cos., the newly formed SABMiller PLC unveiled its plan for world beer domination: It launched Pilsner Urquell — a premium Czech lager — into the US.

In so doing, SAB was breaking with its past. The UK-based brewer had become the world’s second-biggest beer company by stocking up on popular local brands in countries such as Ecuador, Poland and Tanzania. With Pilsner Urquell, it wanted to build a global beer brand.

SAB ended up spending $20 million on the US rollout of Pilsner Urquell, but it was a “total flop,” said Nick Fell, the company’s marketing director. And it was just one of several failed attempts by SAB in the early 2000s to cultivate a global beer.

“In the early days, we handled a global premium brand in exactly the same way as we handled a local brand,” Mr Fell said. “We put it into mass distribution, we pumped a lot of basic advertising and promotion behind it. And then we failed.”

More recently, SAB took a different approach to having a global beer brand: buying one outright, with a bid for Heineken NV. But in September, Heineken rejected the overture, which could have led to a deal potentially valued at about $40 billion. Heineken’s namesake lager brand is coveted because it is sold—often at premium prices—in more than 100 countries.

Now, SABMiller is back to the drawing board.

Beers with a global footprint are rare but have clear advantages over local labels. The tried-and-trusted marketing strategies and distribution channels of a world beer like Budweiser or Heineken make it easier to enter new markets, a key consideration. They can also be sold for higher prices than local brews.

SAB does have an alternative to spending billions on an established brand: It could expand one from its existing stable. Its big brands include Miller Genuine Draft, Grolsch and Peroni, an Italian lager that is the focus of SAB’s latest high-end expansion efforts.

SAB already owns a 49 percent stake in the world’s top-selling beer, China’s Snow. But Snow has limited appeal and distribution outside its homeland. Anheuser-Busch InBev SA, the world’s No. 1 brewer by sales, owns four of the world’s top 10 beers, including Budweiser.

For years, SAB’s local approach has contrasted with AB InBev’s focus on building global megabrands. Besides Budweiser, the Belgian brewer owns Bud Light and Stella Artois.

SAB has Club Premium, the top-selling lager in Mozambique, and St. Louis, Botswana’s favorite beer.

SAB executives say local brands are still its best route to success. “We remain convinced beer is a fundamentally local business,” Chief Executive Alan Clark said last year.

But the company’s recent Heineken approach—as well as expanded budgets and international distribution for Miller Genuine Draft and Peroni—suggests that SAB is modifying that view.

“The only thing that’s really missing on the scene, especially as [SAB] takes more of its brands across borders within regions, is a truly global beer brand,” said Chris Wickham, an analyst at Oriel Securities.

In part, SAB’s change of tack reflects increasing competition among brewers to sell in markets where beer consumption is relatively low, especially in Africa and Asia. Africa alone will have 65 million more legal drinkers by 2023, according to the African Development Bank. Another reason for SAB’s renewed interest in a world-wide brand: It would make the company less susceptible to a long-rumored takeover bid from AB InBev. Mr Clark last month rejected that theory, saying the move for Heineken was “assertive, not defensive.” AB InBev has declined to comment on the deal speculation.

Either way, buying Heineken seems an unlikely solution for SAB. The Heineken family owns a little over 50 percent of the parent company and has said it is unlikely to sell, meaning SAB might look elsewhere for a blockbuster beer brand.

Industry analysts have speculated that SAB could target Turkey’s Anadolu Efes , in which SAB already owns a 24 percent stake. Efes is Turkey’s No. 1 beer and has a strong presence in Russia, with the potential for expansion in Asia, experts say.

If SAB can’t buy a global beer, it plans another attempt at building one, company executives. In recent years, SAB has invested heavily in Peroni and given another push to Pilsner Urquell throughout Europe and the US

In the UK, Peroni has succeeded through a premium pricing strategy—a draft pint sells for around £5.50, or about $8.70—and by using ads that target women as much as men. UK sales of the beer, which SAB insists should be served in a bespoke Peroni glass, increased 15 percent in the six months through September. SAB said it doesn’t break out specific sales figures for its brands.

SAB has similar plans for Peroni in the US, already its third-largest market outside Italy. The brand is “growing strongly” and has the potential to take price increases, said Mr Fell, SAB’s marketing director.

“We want to behave as if we were Ferrari or Armani or Gucci,” he said. “We don’t want to attract 25-year-old plumbers who are quite happy being plumbers.” – WSJ


You may also like