Fight for market share
And it has paid the price.
Brandhouse gains ground
Though the recession has constrained beer drinking, figures from ACNielsen show that in the year to February 2010 consumers drank 2.2% more Brandhouse beers than in the previous year. Its market share rose to 11.3%.
SABMiller's results for the year to March confirm this - its lager volumes in SA declined for the second year in a row. Globally the group managed to hold lager volumes stable in the face of a patchy recovery.
Globally earnings before interest, tax and amortisation (Ebitda) rose 6% to US$4,3bn, mostly through price increases and cost efficiency.
These results don't tell the whole story about work under way at SAB.
Competition is on
What some people forget is that CEO Norman Adami is a master at restructuring and works best in a competitive environment - in fact, he loves it. In 2003, when he took over as CEO of Miller, he found a company that had been in decline for 15 years. Its flagship brand, Miller Lite, had been sidelined by consumers for 10 years and the gorilla in the market, Anheuser-Busch, seemed unstoppable with Bud Light.
Within three years the Miller team had reversed the decline by acting boldly and decisively. Though the situation is reversed in SA and SAB is the gorilla in the SA market, Adami says there are similarities.
Like Miller, SAB was in a state of inertia and on a negative trajectory.
Its competitors' momentum was generated by the consumer move towards premium beers like Amstel and Heineken. SAB's portfolio was heavily weighted in mainstream brands.
"The prevailing conditions and trends indicated that things would only get worse," says Adami.
The first step in the battle was to confront and communicate the reality.
"At Miller, only a handful of people even knew that we had been in decline for 15 years ... but it obviously got their attention when they heard the news."
Weakness to strength
Another step was to turn weaknesses into strengths. At SAB its lack of a premium beer was perceived as a weakness. "We tried to fill the gap with the launch of new products [like Hansa Marzen Gold], but in retrospect, we should have intensified our efforts to truly differentiate our big 'power' brands, while carefully seeding our priority international premium brands."
To support these and other initiatives the company increased its marketing spend and shifted the majority of this investment back into Black Label and Castle Lite, its local premium offering.
The net competitive effect, says Adami, is that SAB's mainstream brands are no longer giving easy volume away to its premium competitors.
And while this has not yet translated into positive results for SAB, it seems that the competitors' free lunch may well be over.
Source: Financial Mail
Source: I-Net Bridge
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