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Monday, July 07, 2003 |
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Oligopoly brief: SABMiller SABMiller, the #2 beer brewery in the world, was founded in 2002. It is the product of the sale of Miller Beer from Philip Morris (now Altria) to South African Breweries, a 108-year-old company. Although its origins are in South Africa, the worldwide company is managed mostly from London. (How many Americans now realize that Miller is a foreign-owned brew?) South African Brewers was a small, provincial concern until the 1990s. Because of the boycott of the apartheid regime, the company was confined to that country. Aside from beer, it dabbled in soft drinks, hotels, glass, textiles, food service and other businesses. After apartheid ended in the early 1990s, the company was poised to expand. First, it bought brewery operations in a number of African nations, where it spread its Castle Lager brand. It also started buying breweries in the newly emerging Eastern European market. In 1998, it purchased it first famous international brand, Pilsner Urquell from the Czech Republic. The firm made moves into China (where it is now the biggest foreign-based brewing company) and in India. It also went into Central America. The big move came with the 2002 purchase of Miller Brewing, the number two American brand, after Budweiser/Anheuser-Busch. What's truly remarkable is that the company raised the $5.6 billion to buy controlling interest in the company. (Altria, the ex-owner, still has a considerable stake in the Miller operation.) This past May, the company showed it still had money to play with. It purchased the Peroni Brewery, the largest Italian brewery. That is its first beachhead in Western Europe. It is now one of the main players in Eastern Europe, from Poland to Russia to Romania. Reportedly, the company is still looking for acquisitions, according to CEO Graham Mackay in SABMiller's annual report, "expanding through acquisitions remained one of the group's four central elements of its strategy to grow shareholder value." According to an article, he said SABMiller continues "to believe in the further consolidation of the global beer market due to economic development, converging consumer taste and lowering of trade barriers. " The annual report states: "Currently the four leading brewers account for around only 33% of the global market, compared to between 50% and 80% for other consumer sectors. Companies with a global footprint will benefit from the economies of scale that consolidation will bring and will, we believe, deliver greater shareholder value in the medium to longer term." In other words, there is a fast concentration in the industry, and SABMiller needs to swallow or get swallowed. Although the company is fighting to buy breweries with rivals like Heineken, Diageo, and Interbrew, and it's locked into a major market competition with Anheuser Busch in North America. These competitions are definitely "friendly rivalries." For example, SABMiller sells Guinness and Kilkenny (Diageo) in Hungary, Budweiser (Anheuser Busch) in Italy, Amstel (Heineken) in South Africa. These dominant companies have set up their own territories (Heineken sells Interbrew brands in Italy, for example). They can be oriented toward picking up share by buying or ruining local breweries and by growing beer consumption in undersold markets, so it's not worth the effort to compete full-bore against each other. SABMiller has deep pockets and a drive to acquire. It's non-beer properties (now just hotels and soft drinks in Africa) take a back seat. The Chinese beer market has the potential to be the world's biggest, and SABMiller is strategically positioned.
7:22:00 PM 
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Last update: 9/4/2007; 8:53:35 PM .
